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Ofcom reveals proposed charges for LLU and WLR till 2017
Thursday 11 July 2013 09:55:56 by Andrew Ferguson

Update 20th August 2013 Ofcom announced corrections to some of the figures, so we have updated the table to include the new figures.

Anyone who actually looks at their telephone bill will have noticed the steady creep up in the cost of the basic telephone line rental over the years, which is largely the opposite of the charge controls imposed on the various elements of BT due to their significant market power in this area. This is thought to be partly down to the bundling of entry level calls packages, along with a shift to bundles where the telephone calls and line rental can subsidise broadband pricing.

In previous years Ofcom has used an RPI-X formula to limit the pricing, but Ofcom is now proposing to move to use the Consumer Price Index (CPI) and the ONS has the following to say on using CPI compared to RPI "an advantageous property of the geometric mean is that it can better reflect changes in consumer spending patterns relative to changes in the price of goods and services".

Service 2011/2012 Revenues Current Cost Proposed 2014/2015 Base case for 2015 to 2017
Ofcom corrections in bold
MPF Rental (Full LLU) (monthly) £451m £7.02 £7.13 (£6.98) CPI-0.75 (CPI+4% to CPI-4%)
(CPI-3% (CPI-0% to CPI-6%))
SMPF Rental (Shared LLU) (monthly) £43m £0.81 £0.77 (£0.75) CPI-7.75% (CPI-6% to CPI-21%)
CPI-10.25% (CPI-8% to CPI-12%)
MPF single migration £31m £30.65 £29.91 (£29.15) CPI-4.75% (CPI-1% to CPI-8%)
CPI-7.25% (CPI-4% to CPI-11%)
MPF new provide £58m £45.54 £41.88 (£40.83) CPI-10.25 (CPI-7% to CPI-14%)
CPI-12.5% (CPI-10% to CPI-16%)
SMPF single migration £8m £30.65 £29.91 (£29.15) CPI-4.75% (CPI-1% to CPI-8%)
CPI-7.25% (CPI-4% to CPI-11%)
SMPF new provide £25m £30.65 £28.13 (£27.41) CPI-10.5% (CPI-7% to CPI-14%)
CPI-12.75% (CPI-10% to CPI-16%)
WLR Rental (monthly) £2,042m £7.77 £7.55 (£7.38) CPI-2.5% (CPI-0% to CPI-6%)
CPI-5.0% (CPI-2% to CPI-8%)
WLR Transfer £13m £3.39 £4.83 (£4.67) CPI+40.25% (CPI+36% to CPI+45%)
CPI+35.5% (CPI+31% to CPI+40%)
WLR Connection £68m £47.11 £42.59 (£41.46) CPI-11.75% (CPI-8% to CPI-15%)
CPI-14.25% (CPI-11% to CPI-17%)
WLR+SMPF Simultaneous Provide N/A £65.51 £29.91 (£29.15) CPI-4.75% (CPI-1% to CPI-8%)
CPI-7.25% (CPI-4% to CPI-11%)

Ofcom has the full detail on the proposed changes as part of its Fixed access market reviews. The big winner appears to be the simultaneous provide which is set to halve in price next year to bring it in line with an MPF provide and thus may encourage wider adoption of the product which gives people broadband and telephone working on the same day as part of a new line install, where the line is not fully unbundled.

Update Friday 12th July While it is clear that the wholesale costs are coming down a lot of the press is suggesting that will mean cheaper retail level pricing. We very much doubt that, as there are many other costs involved in providing the services and some of the cheapest price models at the retail level almost rely on these reductions at the wholesale level to turn their product from a break even position to returning a profit.

Comments

Posted by jumpmum over 3 years ago
Andrew , I think you have a typo on the last line, WLR+SMPF sim provide. I thought price would be same as MPF provide at £40.83 not as the SMPF single migration at £29.15 ?
Posted by andrew (Favicon staff member) over 3 years ago
Copy/paste from Ofcom page is
WLR+SMPF Simultaneous Provide N/A 65.51 29.15 (30.12 to 27.98) CPI-7.25%
(CPI-4% to CPI-11%)
Posted by zyborg47 over 3 years ago
i bet the public will not benefit price wise, we never do.
Posted by GMAN99 over 3 years ago
Nor will future investment in broadband services I suspect
Posted by ryant704 over 3 years ago
GMAN99 do you ever post a positive comment?

There are some nice reductions there to be honest, I'm sure we will get more 'freebees' then a price reduction in the future.
Posted by zyborg47 over 3 years ago
You mean like more Sainsburys gift cards, which is a tax fiddle for the Isps that are doing that.

As I said above, the public will not benefit. I am so glad I made the decision I did last year

Posted by ryant704 over 3 years ago
Correct zyborg :)
Posted by GMAN99 over 3 years ago
ryan, sure I do. In the UK we already have some of the cheapest broadband deals in the world yet we struggle for investment in future broadband services.

Will this help the latter? Of course not
Posted by chrysalis over 3 years ago
all these will do is boost profits. I dont have a big issue with that as long as it doesnt affect openreach business case for investment, but ofcom are a bit niave if their aim is to manipulate retail prices.
Posted by themanstan over 3 years ago
I'd prefer prices to remain the same and OFCOM mandate an additional level of infrastructure investment... i don't see any likelihood of consumers seeing better pricing...
Posted by GMAN99 over 3 years ago
Naive indeed, you get the likes of TalkTalk offering broadband for the price of a few happy meals, the rest of the market follows and prices reduce. Then years later TalkTalk cry they can't make a profit anymore so BT get squeezed further. Then people will be complaining about lack of investment in new tech and products, hmmm wonder why
Posted by GMAN99 over 3 years ago
People also wonder why things like FTTP/FTTPoD are expensive and have long contracts, no doubt BT are wanting to get as much of their costs back a.s.a.p. because Ofcom will force them to reduce costs in a few years.
Posted by JNeuhoff over 3 years ago
GMAN99: There is virtually no FTTP in the UK, well below 1%, and hardly ever will be with BT.
Posted by GMAN99 over 3 years ago
" and hardly ever will be with BT." I believe BT pass 100,000 homes with it, who passes more?
Posted by andrew (Favicon staff member) over 3 years ago
http://www.thinkbroadband.com/news/5668-199-000-homes-passed-by-ftth-networks-in-the-uk.html

Figures of course have increased since then
Posted by themanstan over 3 years ago
@JNeuhoff

Have you ever wondered why there is no residential FTTP?

The market has been open to any company that wishes to FTTP without competition from BT prior to 2008.
Up until then BT spent not one penny in the residential fibre as they were forbidden by OFCOM from operating in that market.
So in the time before that why were there virtually no deployments of fibre? What was stopping them given the market was effectively underdeveloped in 50% of the country?
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