Ofcom to cap BT charges: Openreach faces "material reductions" from regulator plans

Oliver Gill
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A lineman for the county: But will Openreach remain the only firm still on the line?

The UK's telecoms regulator is planning to impose a cap on the amount BT's infrastructure arm can charge rivals for accessing telegraph poles and underground cables.

Ofcom today published a proposals to limit the amount Openreach can bill telecoms firms to put in their own lines.

The aim of today's plans is "to increase certainty and predictability for investors". The watchdog has previously highlighted a desire to make "it cheaper and easier for competing providers to connect their own fibre broadband directly to homes and offices".

Specifically, Ofcom is consulting on the calculation methodology Openreach uses for its charges.

Ofcom said: "We anticipate this would also result in material reductions for the majority of rental charges."

Read more: BT set to reveal flat earnings, underpinned by profitable Openreach

An Openreach spokesperson said the firm would consider the proposals before responding formally, adding: "We’re encouraged that Ofcom doesn’t expect Openreach to cover all of the upfront investment in ducts and poles for other companies.

Our ducts and poles have been open since 2011 and Ofcom recognises we’ve taken big steps to encourage more companies to use them.

The spokesperson continued: “We recognise that further improvements might be needed over time, but the economics of network investment remain challenging."

Tight rope

Shares in BT were largely unmoved by today's announcement. Hargreaves Lansdown senior analyst Laith Khalaf said despite facing a "hefty price cut" it is hard to put a figure on the impact of the plans on BT's finances.

He said: "The watchdog is walking a bit of a tight rope here between providing incentives for BT to invest in developing its infrastructure while encouraging competition from rival providers and ensuring consumers aren’t burdened with huge costs."

The plans are the latest round of an ongoing ding-dong between the regulator and the former nationalised telecoms giant BT.

The pair came to a settlement over a legal separation of Openreach from BT earlier this year. Shortly afterwards Ofcom slapped BT with its largest ever fine – some £42m – for service failings to internet providers, such as Vodafone and TalkTalk.

Openreach makes almost double the profit generated by other similarly sized divisions of BT, such as its consumer and business arms.

Read more: Openreach says it will take until 2021 to remove two letters

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