Ofcom mulls Openreach price caps to boost UK broadband competition

Ofcom may introduce wholesale price caps on BT as part of new measures to promote competition in the UK’s broadband market.

The proposed measures would cut the wholesale prices that Openreach can charge telecoms companies for its superfast broadband service offering up to 40MBps.

The UK regulator intends to reduce the charges for the package from £88.80 per year today to £52.77 per year in 2020-2021.

Under the proposals, pricing flexibility will be maintained for Openreach’s fastest products, including those based on its own investments in full fibre and G.Fast.

Ofcom argued the cap on wholesale prices would see savings passed on to residential customers through lower prices, promoting competition in the superfast broadband market.

It also said that it would impose binding quality of service requirements on Openreach, requiring it to repair faults and install lines more quickly.

These will be underpinned by fines should Openreach fail to meet the targets.

Jonathan Oxley, Ofcom’s Competition Group Director, said: “Our plans are designed to encourage long-term investment in future ultrafast, full-fibre networks, while promoting competition and protecting consumers from high prices.

“People need reliable phone and broadband services more than ever. We’re making sure the market is delivering the best possible services for homes and business across the UK”

Ofcom has opened consultations on the plans as part of its Wholesale Local Access Market Review.

The deadline for responses is 9 June 2017, with Ofcom set to publish its final decision in a statement in early 2018 and the measures to come into force on 1 April 2018.

Kester Mann, Principal Analyst at CCS Insight, said the announcements were the latest challenge to a BT already “under-fire” from a recent accounting scandal and Ofcom’s efforts to create a legally separate Openreach.

“It also again reinforces the regulator’s determination to maintain a competitive UK retail broadband market and stimulate further investment,” he said.

“The news is likely to be welcomed by Openreach customers such as Sky, which have long campaigned for better access and end consumers, which could see a reduction in their bills.

”Tougher new targets for Openreach to fix faults and more quickly install new lines indicate that BT remains firmly on Ofcom’s radar.

“The threat of a full structural separation remains if BT cannot improve performance.”

A Sky spokesperson: “A significant reduction in Openreach’s fibre charges is an essential step in bringing faster broadband to many more consumers.

“We look forward to working with Ofcom in establishing the appropriate level of these important charges.”

Ofcom recently hit BT with a £42 million fine after Openreach failed to provide adequate compensation for late installations.

It also recently announced plans to force providers to automatically issue a cash payment or credit an affected consumer’s bill in the event of disruption to service.

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