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Ofcom consults on reduction to wholesale broadband prices
Thursday 31 March 2011 09:08:07 by Sebastien Lahtinen

Ofcom has this morning announced a consultation with the aim of introducing new controls which would result in lower wholesale broadband and telephone line rental prices from Openreach, the BT subsidiary which operates most of the national telephone network.

This move is likely to result eventually in minor reductions to retail prices for customers on many ADSL services. The consultation is available here.

Price in 2008/2009 Price for 2009/2010 Price until 14th October 2010 Price until end of March 2011 Proposal for March 2011 onwards
MPF - Full LLU £81.69 £86.40 £90.46 £89.10 £89.40 - £92.00
SMPF - Shared LLU £15.60 £15.60 £15.63 £15.04 £13.50 - £14.00
Prices are all annual and exclude VAT

The proposals when viewed in respect to the Retail Price Index which was 4.1% for the 12 months ending February 2011, represent a reduction a price for both MPF and SMPF products, but even if the RPI is ignored it seems that shared LLU services are set for a price cut, though the amount may be only 10p per month.

While full LLU as used by providers like Sky and TalkTalk is not dropping in price in relative terms compared to the cost of line rental from BT Retail full LLU is significantly cheaper at a starting price of £7.45 a month, and also undercuts the price of the voice only WLR product.

The price controls from Ofcom have done a lot to encourage the take-up of LLU services, but there is a danger to forcing prices down continually. The industry as a whole is looking at a number of years of investment, otherwise the UK will continue to be the cheapest place for internet connectivity, but we will be blessed with slow and out of date connection methods. Consumers are getting used to broadband costing £3.49 or £6.49 a month, thus encouraging them onto alternate networks will prove very difficult, and we don't just mean Openreach's FTTC/P products, but the various community solutions appearing and larger alternatives like Digital Region in South Yorkshire.

One other side effect of price pressure on Openreach, is that they appear much keener to raise charges for things like customer side faults (that may or may not exist) when investigating line problems. In the past the higher rental costs meant that everyone to some extent chipped in towards network maintenance and costs of retaining an engineering team, if the price pressure from Ofcom continue at a time when things like fuel costs continue to escalate we will see Openreach offering 'insurance' for phone lines ala the water and electricity companies, or charging a base price for any engineer visit.

Comments

Posted by AndrueC over 6 years ago
Well yeah. That's just what the market needs. Lower prices. We don't want to see anyone getting a return on their investment now, do we?
Posted by andrew (Favicon staff member) over 6 years ago
I am digesting the proposals and comparing to current pricing to see what the actual effects would be.

Low cost BB makes it harder for new services that naturally cost more for the first year or two.
Posted by andrew (Favicon staff member) over 6 years ago
I have updated Seb's original article at 10:07 31st March, including an old table of prices and further comments.
Posted by shaunhw over 6 years ago
"
we will see Openreach offering 'insurance' for phone lines ala the water and electricity companies, or charging a base price for any engineer visit.
"

Hmmm.. This insurance idea is appropriate if one owned the line outright. But if one "rents" something, then the owner of the item rented is responsible for the correct operation of it as part of the contract.
I certainly wouldn't expect to have to insure something I did not even own when I was paying a "rental" charge for that something which was supposed to work correctly.
Posted by Btcc22 over 6 years ago
Pretty much bang on there, Shaunhw.
Posted by andrew (Favicon staff member) over 6 years ago
Correct operation of an Openreach line requires

Supports voice calls
Supports functional internet access of 28Kbps (yes Kilo bits per second).

Posted by c_j_ over 6 years ago
@Andrew@Shaunhw: What other examples of utilities or rented services are there where the customer pays extra for fault diagnosis and restoration?

Electricity/gas/water? No. "Insurance" is different, check the small print.

Electrical appliance rental? No.

Mobile phone rental? No.

Car hire/lease? No.

Outsourced IT? No.

I'm struggling to think of any comparable examples. Suggestions welcome.
Posted by c_j_ over 6 years ago
"Correct operation of an Openreach line requires"

I'm confused here. If voiceband stuff is all that's required for correct operation, howcome Openreach can charge money for the DSL proportion of the line rental? What service is that money covering?

BT's network architecture has never had any meaningful fault management capability even though it's built in to the DSLAMs and modems. Now BT want punters to pick up the consequences of their lack of foresight. Marvellous.
Posted by AndrueC over 6 years ago
@c_j:It's covering the cost of a port on the DSLAM I suppose. If a line can be proved to be incapable of carrying an ADSL signal then maybe it should be possible to opt out of that portion.

Then again most people's line rental includes an amount for things they don't use - at least not all the time. But it's an interesting point.

Andrew is obviously quoting the legal requirements from BT's USO.
Posted by chrysalis over 6 years ago
right, so the uk's problem is due to too low retail pricing it is hard to justify investment. Ofcom's solution? drop prices further.
Posted by andrew (Favicon staff member) over 6 years ago
If 'insurance' is the wrong word, and not use of quotes in article, perhaps the longer version is similar to water firms sending out 'take out our maintenance plan to avoid unexpected bills for repairing pipework from mains into your property'.

In Openreach case, take out an extra plan to avoid being charged for engineer visits when looking at intermittent faults etc
Posted by chrysalis over 6 years ago
on the subject of line rental it is simply to maintain revenue, BT will already get a fee for the dslam port from the isp. VM play the same game, they bump their price if line rental isnt taken up as they know full well without it hardly anyone would order a line now days.
Posted by chrysalis over 6 years ago
for what its worth I can see tbb's prediction coming true on engineer charges, openreach are already halfway there with the most recent changes.
Posted by m0aur over 6 years ago
@andrew
Hard to compare another BT money grab with water pipework insurance.
Anything before the meter is the responsibility of the water company. Anything after is down to the owner, though that does not stop Water companies trying to screw insurance with a tenant mailshot. Phone should be the same. If you rent a line, the owner should look after it up to the master socket.
Posted by GMAN99 over 6 years ago
" Phone should be the same. If you rent a line, the owner should look after it up to the master socket. " that is already the case? The article talks about customer side faults, beyond the master socket or damage to the master socket is what I'd class as customer side
Posted by camieabz over 6 years ago
@shaunhw

My first thought was car or van hire. Insurance is needed to use that (usually included in the cost).

It is fair that a company can charge people if they have damaged or interrupted the service, but the line providers have to provide a 'fit for purpose' product.

It sounds as if the costs of making those old telephone lines good for BB are catching up, and the providers don't want the bill.
Posted by m0aur over 6 years ago
@GMAN99
"The article talks about customer side faults"
I realise this. My point was, that I did not think anyoune would be silly enough to pay for insurance, or a fortune for a BT callout, when a simple connection to the master, or use of an extension would determine which side of the box was a problem····But then again··
Posted by AndrueC over 6 years ago
@camieabz:'Fit for the purpose'. You mean voice calls and data rates up to 28k?
Posted by New_Londoner over 6 years ago
@m0aur
"I did not think anyoune would be silly enough to pay for insurance...a simple connection to the master, or use of an extension would determine which side of the box was a problem"

You have to ask yourself what % of the total population are even aware that their wiring, other phones, faulty electrical equipment etc could have any impact on the speed of their broadband line.
Posted by GMAN99 over 6 years ago
@m0aur, its not that simple though a presence of voice on an extension would not help determine issues/the causes of poor broadband speeds or disconnections
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