Rural parts of the UK could receive better value broadband services under proposals published by Ofcom today.

Ofcom has proposed significant reductions in the prices that BT Wholesale can charge internet service providers (ISPs) in parts of the country where it is the sole provider of wholesale broadband services - mainly in rural areas.

The proposed price reductions are between 10.75% and 14.75% below inflation.

As a result, Ofcom expects competition between retail ISPs, who will benefit from the lower wholesale prices, to lead to reductions in retail prices which will benefit consumers. The changes may also lead to better quality services by enabling ISPs to allocate more bandwidth per customer which could deliver faster broadband services, it says.

This could benefit nearly 12% of UK households or around 3 million homes and businesses. These are mostly in rural areas including parts of Scotland, Wales and Northern Ireland as well as the South West of England, Norfolk, Yorkshire, Cumbria, Northumberland and other areas.

In other areas of the country where there is some wholesale broadband competition delivered by local loop unbundling, Ofcom is not proposing any charge controls.    

Lower prices
Ofcom’s proposed charge controls could narrow the difference between prices that consumers in rural and urban areas are paying for broadband services. This difference is due to the absence of local loop unbundling (LLU), the more limited set of bundled offers available and the higher costs of delivering broadband to customers in rural areas.

Ofcom’s aim is to incentivise BT Wholesale to continue to improve its efficiency. This could make it cheaper for other communications providers to roll out services and should ultimately benefit consumers in those areas through lower prices.

Faster broadband
The charge controls could also improve broadband speeds in rural areas in two ways.

If wholesale broadband costs are reduced, ISPs should be able to buy more capacity for their customers without increasing their costs. This could result in faster broadband for rural areas.

Ofcom also proposes to exempt ADSL 2+ technology from charge controls. This should encourage BT Wholesale to invest in this new technology where it is cost effective to do so.

ADSL 2+ is capable of supporting faster broadband speeds than ADSL, with maximum possible speed of 24 Mbps over the copper network.

Lifting wholesale regulation where competition is effective
Today’s announcement follows a decision by Ofcom in December to lift wholesale regulation in more areas of the country where it concluded that broadband competition is working well for consumers.

Today, some 78% of UK households are now served by effective competition in mainly urban or densely populated areas, following the continued success of LLU. This has increased from around 69% of households in May 2008.

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