OFCOM sets BT Broadband Wholesale Prices

OFCOM announced today that it will require BT to reduce the cost of wholesale broadband to areas of the UK in which it is the only provider of fixed Internet access. The price reduction is another important step in the process to provide more broadband access to rural areas in the UK. The government has set a target date of 2015 for the rollout of 90% of the next generation of superfast broadband in the UK.

BT offers wholesale broadband to Internet Service Providers who often bundle and reuse the broadband in their consumer offerings. OFCOM has set the pricing now to 12% below annual inflation for just under 12% of the country where BT is the sole provider – or monopoly – in certain areas of the country (see here for a map of broadband competition in the UK). OFCOM hopes that the price cuts will encourage more competition in regional broadband markets.

This is clearly good news. OFCOM’s remit as a regulator is to manage monopolistic issues in the telecoms and Internet sectors. By setting wholesale pricing lower, one would expect to see more competition or at least new entrants into markets in specific regional areas. But this proposal alone can’t spur on rural broadband coverage.

OFCOM needs to complete negotiations with BT on duct and pole pricing. Negotiations between BT and other ISPs have been going on for months now with no sign of agreement. Allowing for the use of ducts and poles owned and used completely by BT for the laying of fibre by other companies would only boost competition in rural broadband. This would also dispel any fears that BT might not make future investments in rural broadband infrastructure because the lower wholesale pricing would bring in less income and, thus, less money to invest. Fujitsu, for one, is prepared to lay even more fibre if these negotiations can come to a reasonable agreement in the near future.

And of course the spectrum auction is happening in early 2012. More spectrum purchases by mobile carriers will hopefully mean more options to use either fixed or mobile broadband in rural areas. With any luck, this time next year we will see a competitive race to roll out both fixed and mobile Internet to rural areas which, in turn, will drive down the costs to consumers. So over the next 12-18 months we should see better options for consumers in rural areas. The OFCOM announcement today is a good start.

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