Ofcom consults on reduction to wholesale broadband prices
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|
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otherwise the UK will continue to be the cheapest place for internet connectivity, but we will be blessed with slow and out of date connection methods.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.