Wholesale fibre price cut to benefit broadband users, says Ofcom

Ofcom is to cut the wholesale price that Openreach can charge other service providers for its fibre-based broadband products

Ofcom has announced a number of measures designed to bring down the cost of broadband services for users, and to promote investment in fibre broadband networks.

Among the changes being made by the regulator are targeted wholesale price cuts for so-called superfast broadband services, and pricing flexibility for ultrafast and full fibre-to-the-premises (FTTP) broadband networks to encourage investment and promote competition in the market.

Ofcom is proposing to slash the wholesale price that Openreach is allowed to charge other communications services providers (CSPs) for its up to 40Mbps broadband products.

It said it expected these savings to be passed on to residential customers through cheaper services, promoting competition in the slower but more prevalent fibre-to-the-cabinet (FTTC) broadband space while CSPs construct their own FTTP networks.

Based on its own analysis of the market, Ofcom has decided that Openreach’s 40Mbps download, 10Mbps upload product is likely to be the one that most consumers will consider as the need for faster and more reliable connections to support new online services becomes more acute over the next couple of years.

The price will therefore fall from £88 per annum today to £52.77 by 2021.

At the same time, it will also impose tougher quality of service requirements on Openreach to repair faults and connect new broadband lines more quickly.

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Ofcom said it proposed to maintain its current policy of pricing flexibility for Openreach’s fastest FTTP and incoming G.Fast products because it expected the 40/10Mbps cap should be enough to protect competition and provide an incentive for rivals to invest in FTTP.

“Our plans are designed to encourage long-term investment in future ultrafast, full-fibre networks, while promoting competition and protecting consumers from high prices,” said Ofcom competition group director Jonathan Oxley.

“People need reliable phone and broadband services more than ever. We’re making sure the market is delivering the best possible services for homes and business across the UK.”

In terms of how faults are fixed, Ofcom has suggested that Openreach will in future be made to complete 93% of fault repairs within one to two working days, compared to 80% at present; complete 97% within a week; provide an appointment for 90% of new line installations within 10 working days, up from 80% in 12 today; and to install 95% of connections on the agreed date. These will need to be met in full by 2020/21.

“By placing no such cap on prices charged for ultrafast (variously defined as speeds exceeding 100, 300 or 1,000Mbps, depending on who you ask), investment in these faster technologies will be positively encouraged,” said Dan Howdle, telecoms analyst at Cable.co.uk.

“Ultrafast will thereby take on the role of premium service – a spot currently occupied by standard fibre, and by that token become the more expensive option for consumers who wish to be at the cutting edge.”

Openreach being pushed towards public service

Howdle said that taken in conjunction with the tightening of rules around fault fixing, it appeared as though Ofcom was pushing Openreach further towards the role of public service following its legal separation from BT, and away from being a profit-making concern.

Mark Collins, director of strategy and policy at CityFibre, which builds its own wholesale fibre networks, was also supportive of Ofcom’s proposals.

“This review is a major step forward,” he said. “It provides the incentives for investing in full fibre networks that compete with BT. In addition to the measures announced today, we urge Ofcom to follow through on its proposals to improve access to BT's ducts and poles, and if Ofcom gets that right it will give us the tools and incentive to continue our investment in full-fibre infrastructure across the UK, and deliver it further and faster.”

The consultation period for Ofcom’s proposals, which form part of its Wholesale Local Access Market Review from April 2018 to March 2021, will be open until June this year, with new rules taking effect on 1 April 2018, a year from now.

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