Better value rural broadband
July 20, 2011
Millions of homes and businesses in rural parts of the UK could receive better value broadband services by the end of this year. This follows Ofcom’s decision to reduce significantly the prices that BT Wholesale can charge internet service providers (ISPs) in primarily rural, less densely populated areas.
The price reduction will be 12%* below inflation per year and will apply to services provided using BT’s wholesale broadband network.
Ofcom expects these price cuts to generate more competition between retail ISPs and to lead to cheaper retail prices which will benefit consumers. The changes may also lead to better quality services by enabling ISPs to allocate more bandwidth per customer which could deliver faster broadband services.
This could benefit around 3 million homes and businesses. These are mostly in rural areas including parts of Scotland, Wales and Northern Ireland as well as the South West of England, Norfolk, Yorkshire, Cumbria, Northumberland and other areas.
Ofcom expects the level of the charge control to incentivise efficient investment by ISPs to roll out their own networks in these areas and enable them to compete with BT Wholesale. It will also incentivise BT Wholesale to upgrade services where it is efficient to do so.
Ofcom’s charge controls could narrow the difference between prices that consumers in rural and urban areas are paying for broadband services. This difference is mainly due to the more limited set of offers available which is a result of the higher costs of delivering broadband to customers in rural areas.
The charge controls could also improve broadband speeds in rural areas in two ways:
- if wholesale broadband costs are reduced, ISPs should be able to buy more capacity for their customers without increasing their costs. This could result in faster broadband for rural areas ; and
- Ofcom has also exempted ADSL 2+** technology from charge controls. This should encourage BT Wholesale to invest in this new technology where it is cost effective to do so.
ADSL 2+ is capable of supporting faster broadband speeds than ADSL, with a maximum possible speed of 24 Mbit/s over the copper network.
The charge controls will come into effect by mid August 2011 and apply until 31 March 2014.
Recently, Ofcom published interactive online maps of fixed broadband which show a picture of broadband speeds, take-up and availability of super-fast broadband in each area of the UK. The maps can be found here.
Lifting wholesale regulation where competition is effective
Today’s decision follows action taken by Ofcom in December 2010 to lift wholesale regulation in more areas of the country where it concluded that broadband competition is working well for consumers.
Some 78% of UK households are now served by effective competition in mainly urban or densely populated areas, following the continued success of LLU. This has increased from around 69% of households in May 2008.
Today’s statement can be found here.
NOTES FOR EDITORS
1. * This does not include the cost of the final connection to the customer. When this is included the reduction is approximately 11% below inflation.
3. In December 2010, Ofcom decided that charge controls were needed in parts of the country not served by wholesale competition. Ofcom’s December statement on Wholesale Broadband Access can be found here.
4. Local Loop Unbundling (LLU) enables operators to connect directly to the consumer by adding their own equipment in BT’s exchanges to offer broadband and other services. Ofcom sets charge controls on Openreach for access to their copper network in this way.
5. **Asymmetric Digital Subscriber Line (ADSL) is a technology that turns an ordinary copper phone wire into a high speed digital line, capable of delivering broadband speeds of up to 8 Mbit/s. ADSL2+ is a further improvement on this technology which increases speeds to up to 24Mbit/s.
6. Under section 3 of the Communications Act 2003, Ofcom is required to further the interests of citizens and consumers, where appropriate by promoting competition.