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UK's BT: Ofcom's wholesale superfast broadband price slash will hurt bottom line

Part of plans to boost country's woeful full-fibre investment

Ofcom has slashed the price BT’s Openreach can charge operators for superfast broadband, in a package of measures BT said will hit its bottom line to the tune of £120m next year.

The proposals are part of broader measures intended to boost broadband investment in the UK, including plans to increase current full-fibre penetration in the country from 3 per cent to 20 per cent by 2020.

Ofcom is also forcing Openreach to introduce stiffer quality of service standards (installations and repairs), and open up its cable ducts to rival ISPs.

However, it decided not to regulate the prices of Openreach’s fastest wholesale superfast broadband products to incentivise operators to build full-fibre networks.

Under the plans, BT must make its telegraph poles and underground tunnels open to rival providers, making it quicker and easier for them to build their own full-fibre networks directly to households around the UK,” it said. It said that could halve the upfront costs of laying fibre cables to £250 per home.

To prevent BT from stifling new investment by rivals as network competition emerges, the former state monopoly will not be allowed to make targeted wholesale price reductions in areas where rivals are starting to build new networks, it said.

While Ofcom wants to improve Blighty’s woeful full-fibre penetration, it is also keen to ensure affordable access to superfast broadband, or fibre-to-the-cabinet. As such it will cut the wholesale price that Openreach can charge telecoms companies for its basic superfast broadband with speeds of up to 40 Mbps, and upload speeds of 10Mbps.

The current rental charge is £88.80 per year, which will be reduced to £59.04 by 2020/21.

Ofcom also wants to ensure that Openreach installs new lines on its existing network, and fixes faults, more quickly in the meantime.

Openreach will be required to: complete at least 88 per cent of fault repairs within two days, up from 80 per cent today; complete 97 per cent of repairs within seven days; and install 95 per cent of connections on the date agreed with the telecoms provider, up from 90 per cent today.

These new requirements must be met by 2020/21.

Jonathan Oxley, Ofcom’s competition group director, said: “Full fibre meets the country’s future broadband needs, as demand for data soars.

“Ultrafast speeds will allow people to download entire films, or businesses to share huge files, almost instantly. Full fibre will also underpin exciting technology like remote healthcare diagnostics, 5G mobile and connected devices.

“The measures we’ve set out today will support the growing number of companies who have already announced plans to build full-fibre networks, and open the way for even more ambitious investment around the UK.”

In a stock market update BT said: “Today's statement from Ofcom gives us certainty on the pricing of key products for the next three years.

"BT estimates that the price changes in today's Ofcom WLA draft statement, for the directly charge-controlled products, will have a year on year adverse financial impact on Openreach's revenue and profit in 2018/19 in the range [of] £80m to £120m.” ®

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