Ofcom plans for cheaper, more flexible fibre contracts but won’t regulate cost of Openreach fibre access like it does for copper
Ofcom plans to reduce the cost of switching providers on BT’s Openreach fibre network by cutting connection fees and shortening the minimum length contract between BT and wholesale providers, but it has no intention of regulating the cost of access.
Both the Openreach fibre and copper networks are available to providers such as Sky and TalkTalk on a wholesale basis, but while the cost of access to the copper network is regulated to promote competition, Ofcom has no such control over Openreach’s superfast network.
The communications regulator says there is simply no need for regulation at present because the cost of access is already constrained by competition from copper and Virgin Media’s cable network. This likely to annoy TalkTalk, which has long called for greater regulation in the superfast broadband market, but Ofcom is confident its other measures will benefit consumers.
Currently, when a customer wants to sign up for a new provider, the new company must pay a £50 fee to Openreach – a cost that is often passed onto the consumer. Ofcom plans to reduce this to £11 in an attempt to reduce startup fees. Similarly, the minimum contract length in the event of a switch is one year. Ofcom plans to reduce this to one month, allowing wholesale operators to offer more flexible deals.
Speaking of copper price regulation, Ofcom has also proposed new charge controls that would take effect from 1 July 2014 until 31 March 2017.
The cost of shared unbundled lines, which allow telecoms providers to install their own broadband equipment in BT’s exchanges but not for voice connections, would be reduced from £9.89 a year to £5.54 and fall by the Consumer Price Index (CPI), which measures inflation, minus 33.4 percent every year until March 2017.
The cost of fully unbundled lines, which allow providers to use its equipment for both broadband and telephone services, would actually increase by real terms from £83.92 per year to £86.10 and again by CPI minus 0.3 percent each year. Wholesale line rental, where providers rent lines from Openreach, would fall from £93.32 per year to £91.04 and then by CPI minus 3 percent each year.
The draft proposals form part of Ofcom’s Fixed Market Reviews, a set of decisions that must be reviewed every three years and are required under the European telecoms framework. These will be submitted to the European Commission for review and it is expected that the final versions will be published in June.
Ofcom has also finalised new targets for Openreach to repair and install new lines. Eighty percent of faults must be fixed within two working days and 80 percent of all new installations must be completed within 12 working days.
Openreach must report publicly on its performance and could face sanctions, including fines if targets are not met – although events beyond its reasonable control such as extreme weather will result in some leniency.
These new targets were first proposed in December and BT appears to have listened. Earlier this week it announced plans to recruit 1,400 new engineers and pledged to publish regular reports on its progress.
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