Ofcom plans to cut BT Openreach's prices: Lots of people want to have their say on the topic...

 
Oliver Gill
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Openreach agreed plans with regulators to separate itself from BT earlier this month

This morning Ofcom, the UK's telecoms regulator, released details of how much BT's infrastructure arm can bill other internet firms for using its lines.

Ofcom has to dictate the pricing because of Openreach's dominant position in the market. Outside of Virgin Media and Kcom (in Hull), hardly any other firms own the necessary infrastructure.

This means the likes of Vodafone, Sky and TalkTalk are dependent on Openreach to deliver their internet services.

Openreach calls them "communication partners".

What has Ofcom proposed?

Ofcom's provided three pretty clear messages this morning:

  1. Superfast savings: For broadband up to 40 megabits per second, Openreach must drop what it is charging. And the regulator wants communication partners to pass on these savings to customers.
  2. Come and invest in infra: For the more fancy super-duper fancy speeds, prices will stay the same. Why? Because Ofcom wants to entice new entrants to the telecoms infrastructure market to stay laying down cabling and provide better competition to Openreach.
  3. Tough talking: After slapping its largest ever fine on BT on Monday, Ofcom said it is ready to get even tougher on the FTSE 100 giant's infrastructure arm if it fails to do what the regulator tells it to do.

Here's what some of the key players had to say about it all.

Openreach

The firm queried whether Ofcom's plans would attract new players to the market.

"On first viewing they do not appear to incentivise more investment in ‘full fibre’ networks," a spokesperson for Openreach said.

The UK needs a regulatory framework that encourages investment and rewards risk. Building digital infrastructure is very expensive with long payback periods and we won’t recover our more than £3bn investment in fibre until after this charge control period.

“We want to invest in more ‘full fibre’ infrastructure, and we’ll be consulting with our communications providers customers to develop new business models and support to achieve that.

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

“Improving service is our number one priority and while we have been making great strides over the last year, we are determined to go even further in meeting our customers’ rising expectations.

“We support the ambition of higher service targets and we want to work closely with the rest of the industry to make sure these are the right measures and that they’re achievable.”

The government

Ministers are often loathed to put their two penneth-worth in when regulators signify their plans. But today, digital and culture minister Matt Hancock decided he'd offer his opinion. He said:

"We want everyone in the UK to have access to fast, reliable, and affordable broadband, and Ofcom's proposals are good news for consumers, businesses, and the country.

"They will help drive the commercial investment we want to see in full fibre networks, as well as lowering the cost of superfast broadband and improving Openreach's customer service standards."

Measures like these that reduce everyday costs and bills, and ensure consumer markets work in the way they should, will help us build a Britain that works for everyone.

Labour

Across the other side of house, shadow digital economy minister Louise Haigh piled in with her views. She said:

This is good news for consumers; many of whom are sick of paying through the nose for their superfast service.

While this move will level up the playing field, the fact is many millions still struggle to access speeds anywhere close to superfast at all.

"That's why Labour fought and won an amendment to the Digital Economy Bill which will give consumers a legal right to superfast; it's time the government backed it and brought swathes of Britain up to speed."

Rival

TalkTalk's chief executive Dido Harding was none to impressed about how long it will be before the prices kick in. She said:

We welcome moves to cut prices and improve Openreach's service, but consumers will be frustrated that they have to wait a year before they benefit.

"Ofcom’s decision to only regulate some products also risks entrenching a speed divide, with customers having to make a false choice between fair prices or higher speeds.

Read more: BT boss: We can "hire and fire" Openreach board

"Ensuring consumers enjoy low prices on all superfast products is the best way to maximise take-up and encourage investment in the pure fibre infrastructure of the future."

The City

Shares in BT flopped nearly two per cent in the first few minutes of trading. They're now bounced back and are slightly up on yesterday's close. But Jerry Dellis, an equity analyst at Jefferies, concluded Ofcom's plans were a "hard-hitting outcome for BT". He added:

"Today's wholesale local access consultation is a difficult outcome for BT.

Whilst Ofcom remains committed to competitor fibre investment, today's proposals also reframe Openreach incentives to coerce more investment in [greater than 40 megabits per second broadband]... today’s proposals make establishing a BT cash flow floor difficult. We remain cautious.

The voice of the consumer

Richard Neudegg, head of regulation at uSwitch said: "Ofcom's proposals to cut the wholesale price Openreach can charge retail providers for its up to 40 megabits per second superfast fibre for the first time should lead to the price of these services coming down for consumers from 2018."

Read more: BT retains control in Openreach separation

Mark Collins, Director of Strategy and Policy at CityFibre said: “Ofcom is finally delivering its promise to support full fibre investment and competition that will help close the UK’s embarrassing fibre gap.

This review is a major step forward. It provides the incentives for investing in full fibre networks that compete with BT.

Hannah Maundrell, editor in chief of money.co.uk, said: “Suppliers must pass on the savings to their customers so everyone gets access to cheaper and better broadband. This country is woefully behind in its access to super-fast internet and I’m hoping this move will help get us up to speed."

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