BT share price falls after Ofcom plans to force Openreach to charge lower prices for broadband

Oliver Gill
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Regulators fined BT Openreach £42m earlier this week

The UK's telecoms regulator will cut the price BT's infrastructure arm Openreach can charge other firms in the sector for delivering superfast broadband.

Ofcom announced the price changes this morning as part of a wider package of plans that also included stricter requirements to be put on Openreach to repair faults and install new broadband lines more quickly.

Shares in BT fell nearly two per cent in opening trading.

Read more: Watchdog Ofcom slaps BT with largest fine in UK telecoms history

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.

The price Openreach can charge for its fastest broadband speeds, greater than 40 megabits per second will remain untouched though. Ofcom's logic for this is to encourage competition at the higher end of the spectrum. In particular, regulators want competition with Openreach and firms to start laying more of their own infrastructure.

Openreach owns and operates the majority of the UK's telecoms infrastructure. Other internet providers, such as Sky, TalkTalk and Vodafone, must pay Openreach to use the network.

Because of Openreach's market dominance, Ofcom dictates the prices the BT subsidiary can charge other firms.

Stricter rules

The watchdog said it expects the price cuts, to broadband services of up to 40 megabits per second, to be passed down to consumers.

Read more: BT on the naughty step: Will it need to cap its dividend growth?

The decision by Ofcom to come down hard on Openreach for fault and installation failings comes less than a week after it levied its largest ever fine on Openreach for failing to correctly compensate internet firms for delays in rectifying problems.

Ofcom fined Openreach £42m and the firm will have to find around £300m to repay the internet firms the compensation owed to them.

The regulator said it will impose further fines on Openreach if it fails to meet the higher standards it today is introducing.

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