UK Edition
Ofcom eases price controls on Openreach broadband
Telecoms watchdogs have eased price controls on BT’s broadband network Openreach to encourage more investment in upgrades to faster and more reliable fibre-optic lines.
Ofcom said the monthly wholesale charge for a basic 40 megabits per second broadband package on its existing copper network will be reduced gradually to hit £11.92 in 2021. The decision represents a partial reprieve for Openreach, which had been in line for a stricter £11.23 price control.
It means BT’s rivals including Sky and TalkTalk, which rely on wholesale access to the Openreach network, face higher charges than previously proposed, with the change likely to be passed onto consumers.
BT estimated the new charge controls will cut Openreach profits by as much as £120m next year. It also said it may have to voluntarily cut the prices of faster broadband packages too encourage Sky and TalkTalk to upgrade customers, threatening a further blow to returns.
However it said Ofcom's announcement will provide certainty on pricing for the next three years. BT shares were up 2.8pc in early trading.
The regulator has backed off amid complaints from BT that it has not been allowed to make a fair return on earlier broadband infrastructure investments. It warned that its ability to spend billions on forthcoming “full fibre” networks would have been undermined by Ofcom’s earlier plans.
The Government also took the unusual step of writing to Sharon White, the chief executive of Ofcom, to voice fears that “price suppression could reduce demand for better services, such as fibre, and so will disincentivise investment in the network”.
BT is now likely to face renewed pressure to expand its full fibre plans as Britain’s broadband infrastructure continues to trail other major European economies, with only 3pc of households able to connect to a full fibre network. Openreach has so far agreed to upgrade only three million lines by 2020.
Less strict price caps on Openreach will also be welcomed by Virgin Media, CityFibre and other infrastructure investors. They argued that a very cheap basic broadband service that currently meets many households' internet access requirements undermined their business cases for building better networks.
While Ofcom eased off on price caps it increased the pressure on Openreach with measures designed to make it cheaper for rivals to lay their own fibre optics.
A package of new rules that force Openreach to let others piggyback on its underground ducts and telegraph poles will be strengthened. Openreach will be ordered to make space by clearing blocked ducts and ensuring there is capacity for new cables on poles.
Ofcom also said it would tighten rules on repairs and installations. Openreach will be required to fix 88pc of faults within two days, up from 80pc today.
Matt Hancock, the Culture Secretary, said: “Full fibre is vital to build a Britain that's fit for the future. Ofcom's measures will be instrumental in supporting full fibre roll-out by promoting competition and ensuring widespread availability of these services.
“The whole telecoms sector must now come together - in the national interest - to invest in the digital infrastructure that the UK needs and become a model of great customer service.