Ofcom proposes new wholesale prices for Openreach

31 March 2011

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 proposed by Ofcom.

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

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

Competitive landline and broadband markets

Today's consultation relates 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 7.59 million today and there are 6.14 million WLR connections in the UK, enabling a range of communications providers to offer landline and broadband services.

Proposed new prices for sustainable competition

The proposed prices strike a balance between providing incentives to invest in networks and ensuring that broadband and landline prices are affordable for consumers.

Ofcom is consulting on the following controls on annual rental charges which are expected to come into effect later this year and will 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 regulated wholesale price today is £89.10 per year. Under Ofcom's proposals this will decrease in real terms by between RPI-1.2% and RPI-4.2% every year.

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

The regulated wholesale price today is £15.04 per year. Under Ofcom's proposals this will decrease in real terms by between RPI-11.6% and RPI-14.6% every year.

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

The regulated price today is £103.68 per year. Under Ofcom's proposals this will decrease in real terms by between RPI-3.1% and RPI-6.1% every year.

Ofcom aims to publish a statement in autumn 2011. The consultation can be found here: http://stakeholders.ofcom.org.uk/consultations/wlr-cc-2011

ENDS

NOTES FOR EDITORS

1.       This is the third time that Ofcom has set wholesale prices for these services.

2.       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 consultation includes proposals on the appropriate value of ducts to be reflected in LLU and WLR charges.

3.       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.

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