Openreach and Ofcom fight over broadband and phone price cut

The telecommunications regulator in the UK, Ofcom wants to reduce the cost of using only a broadband line from 14.70 Pounds to 11.92 Pounds per year. So also the cost of using a broadband and a telephone line should drop from 91.50 Pounds to 87.41 Pounds per year.

A spokeswoman from Ofcom said that such measures are necessary to make available the broadband and land line service to consumers at a cheaper price. She added that now the charges are being reduced which means that BT was over charging users in the past.

BT’s wholesale division, Openreach is charging other companies for using their lines and it is the third time Ofcom is interfering with the charges.

Though proposals for the reduction have been submitted to the European Commission, Ofcom has to wait for one month to get their comment. If the proposals are approved, Ofcom believes that the price change could be implemented from April onwards.

Ofcom controls the prices charged by BT’s wholesaler, Openreach, because it has a prominent position in the communications market. One of the communications providers who use Openreach lines, TalkTalk welcomed the price changes.

In a statement BT told BBC that they are not in agreement with the charge reduction proposed by Ofcom and they are not happy with the intervention of Ofcom in determining the charges. As a firm, a fair rate of return of our investment should be ensured. Then only we will be able to make further investment in the communications infrastructure in the UK. The firm is ready to consider all options available to it including appealing once Ofcom confirms its decisions.

Ofcom said that the reduction was partly based on an assessment of the cost incurred by Openreach for running the network to properties. Matt Howett, Industry expert from telecommunications analyst firm Ovum told BBC that it was due to the pressure from Europe to reduce pricing, proposals were made by the regulator. The European Commission was very specific about bringing down the cost for alternative operators. He added that BT is at liberty to take up its concerns about the charge reduction to Ofcom before the final decision is taken. Openreach says that any price revision that affects the fair return would have significant effects on future investments.