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Ofcom Measures To Reduce Wholesale Prices

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Ofcom has today announced measures designed to promote investment in new fibre networks and ensure that customers are protected from higher prices.

Ofcom released a statement today, “We are proposing to maintain our policy of pricing flexibility for Openreach’s fastest broadband products, including those based on BT’s own network investments in full-fibre and its new G.Fast technology.

We plan to protect broadband customers and promote competition, by cutting the wholesale price that Openreach – the part of BT responsible for its network – can charge telecoms companies for its popular superfast broadband service, which has a download speed of up to 40 Mbit/s.

We would expect these savings to be passed on to residential customers through cheaper prices. This promotes competition in the superfast broadband service most used today by consumers, while companies construct their own full-fibre ultrafast networks to compete with Openreach.”

The new rules would also include stricter requirements on Openreach to repair faults and install new broadband lines more quickly.

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”

Andrew Ferguson, editor of thinkbroadband.com, says, “The proposal by Ofcom to start regulating the Openreach VDSL2 portfolio will be welcomed by many, since a £2 price decrease in 2018 will come at a time when far too many bills are still creeping up while wages aren’t keeping pace. Though there is a high chance rises in other costs for suppliers may erode the price cut – for example, as we stream more TV, the cost of providing the service increases.

“In terms of Broadband Britain, it’s unclear whether the entry level superfast products of the dominant wholesaler will encourage more full fibre roll-out from competitors. It seems probable that millions will be encouraged off of ADSL2+ onto the entry level up to 38 Mbps product. However, with what looks likely to be a big step up in price to faster services, we may find consumers reluctant to upgrade to faster options and this will include competitors to Openreach since the majority of people care little about the technology and a lot more about the basics like will they be able to stream TV, shop online and use social media.

“One area of confusion is that Ofcom is only regulating the Openreach 40/10 VDSL2 product, and thus people in native FTTP areas may end up paying more, and operators making use of the 18/2 and 40/2 will see no regulated price cuts. Perhaps the regulator is hoping that Openreach will self-regulate.”