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Ofcom may cap Openreach prices

March 31, 2017

Ofcom is consulting on plans to cut the price BT’s Openreach can charge other telecoms companies for access to its network by up to 40 per cent. Openreach would also face stricter deadlines for repairing faults and installing new lines and face fines for non-compliance.
Ofcom said it expects operators to pass the lower access costs on to residential consumers through cheaper prices, boosting competition as players build their own fibre networks to challenge Openreach’s dominance. Openreach faces fines if it fails to meet the new targets set by the regulator.
BT is required by Ofcom to allow rivals to use the its fibre network but at present Openreach provides packages of varying speeds and charges providers different wholesale prices for using each one. Ofcom has published two consultation documents setting out its proposals for the future regulation of the wholesale local access market and a third will follow. The deadline for responses is June 9th 2017, and the regulator expects to publish its final decisions in a statement in early 2018.
The regulator believes the key segment for future competition is services offering 40Mbps download and 10Mbps upload speeds and it plans to cut Openreach’s annual charges for these products from the current £88.80 (€103.60) to £52.77 in 2020-21, a 40.5 per cent reduction.
On service, Ofcom wants Openreach to complete 93 per cent of fault repairs within one to two working days of notification, compared with 80 per cent at present, and complete 97 per cent within six or seven working days. The company would also be required to provide an appointment for 90 per cent of new line installations within 10 working days of notification, compared to 80 per cent within 12 days as at present.

According to Kester Mann, Principal Analyst, Operators at CCS Insight, the announcement represents the latest challenge to an increasingly under-fire BT, which remains on the back-foot from an accounting scandal in Italy and Ofcom’s efforts to create a legally separate Openreach.

“It also again reinforces the regulator’s determination to maintain a competitive UK retail broadband market and stimulate further investment. The news is likely to be welcomed by Openreach customers such as Sky, which have long campaigned for better access and end consumers, which could see a reduction in their bills,” he advised.

“Tougher new targets for Openreach to fix faults and more quickly install new lines indicate that BT remains firmly on Ofcom’s radar. The threat of a full structural separation remains if BT cannot improve performance.”

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