Ofcom sets wholesale charges for Openreach

07 March 2012

Price reductions expected for landline and broadband customers

New prices that Openreach, BT's wholesale access division, can charge communications providers for access to some of its main wholesale telecoms services were today set by Ofcom.

Ofcom last month notified the European Commission of the prices as part of a new consultation process. The final prices remain unchanged from those notified to the European Commission last month.

The prices are regulated by Ofcom because BT has been found to have significant market power in the delivery of these services.

Competitive landline and broadband markets

Ofcom expects its prices to lead to real term price reductions for consumers, as communications providers pass on savings to their landline and broadband customers.

Today's prices relate to wholesale charges for telephone and broadband services delivered to homes and businesses over BT's copper network in two ways:

  • Local Loop Unbundling (LLU), which allows communications providers to install their equipment in Openreach's telephone exchanges to provide broadband and telephone services to their customers; and
  • Wholesale Line Rental (WLR), which is used by communications providers to offer telephone services to consumers using lines rented from Openreach. These wholesale products underpin the competitive provision of broadband and landline services in the UK. LLU can be supplied alongside or in combination with WLR, providing choice and flexibility for consumers.

The number of 'unbundled' lines has increased from 123,000 in September 2005 to over 8 million today. There are also over 6.2 million WLR connections in the UK, enabling a range of communications providers to offer landline voice and broadband services to residential and business customers.

New prices for sustainable competition

The price controls are designed to protect the interests of consumers while providing BT and communications providers with the appropriate incentives to continue to invest in networks and services.

Ofcom has confirmed the following controls on annual rental charges (which are expected to run until 31 March 2014):

  • A fully unbundled line to a property - where a communications provider takes over the line to provide broadband and telephone services.

The price currently charged by Openreach is £91.50. Under Ofcom's decision this will be set to £87.41 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -5.9%.

  • A shared unbundled line to a property - where a communications provider uses a proportion of the line only for the provision of broadband.

The wholesale price today is £14.70 per year. Under Ofcom's decision this will be set to £11.92 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -15.9%.

  • Wholesale line rental - used by communications providers to offer telephone services to consumers using lines rented from Openreach.

The price today is £103.68 per year. Under Ofcom's decision this will be set to £98.81 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -7.3%.

These new prices will come into effect on 1 April 2012.

The statement can be found here.

ENDS

NOTES FOR EDITORS

  1. Ofcom published draft prices on 6 February 2012 which were notified to the European Commission, the Body of European Regulators for Electronic Communications (BEREC) and other equivalent EU Member State national regulatory authorities. This change to the consultation process is as a result of the revised European Framework that was transposed into UK law in May 2011.
  2. This is the third time that Ofcom has set wholesale prices for these services.
  3. A major component of how Ofcom calculates the charge controls is the cost of Openreach's network of underground ducts which are used to carry copper lines to homes and businesses.  BT Group carried out a re-evaluation of the Openreach duct network in 2010. Ofcom's statement includes decisions on the appropriate value of ducts to be reflected in LLU and WLR charges.
  4. Openreach was created in January 2006 after Ofcom accepted legally-binding Undertakings from BT Group plc. This resulted in the creation of Openreach as an operationally separate business unit which provides wholesale access telecoms services to all communications providers on an equivalent basis.