Ofcom wants the cost of switching provider to tumble
Communications regulator Ofcom has proposed a number of changes to the UK’s superfast broadband market, designed to make it cheaper to switch broadband providers, and improve their service, installation and repair times.
The proposals could cut 80 percent off the cost of switching, and also shorten the minimum length of contract to as little as one month. They come as part of a major review of wholesale telecoms services which Ofcom says will promote competition among superfast broadband providers in the UK.
It should be noted that most of the proposals at aimed at the wholesale market, but Ofcom hopes to prompt some significant changes flowing through to British consumers and businesses with lower retail prices and more flexibility.
The changes mostly affect BT, as it owns, runs, and maintains the overall telephone and broadband network in the UK. Other ISPs can of course use BT’s network to offer their own service offerings to customers, via a process known as ‘virtual unbundled local access’ (VULA).
So what is Ofcom suggesting that needs to change from the current status quo? Well, the most noteworthy proposal for many customers is Ofcom’s suggestion of significantly reducing the wholesale cost (which the customer often has to pay) of switching from one superfast broadband supplier to another. Ofcom is aiming to reduce this charge by as much as 80 percent, as currently if a customer wants to change their provider, the company they are moving to must pay a £50 fee to BT Openreach. Ofcom is proposing to cut this switching fee to between £10 and £15.
Another significant element is the reduction of the minimum length of the wholesale contract between BT and the switched customer’s new supplier. Ofcom wants to reduce this from a year at present, to just one month.
The third major proposal concerns the service level performance of OpenReach, BT’s network access division, which maintains and upgrades the underlying network. BT Openreach vans are the customer facing division that deals with customer installations, connections and repairs to the British telephone and broadband network.
Ofcom wants to improve the service levels of BT Openreach, by creating clear targets for fault repairs and the installation of new telephone and broadband lines. This follows concern from some communication providers over the time it is taking BT Openreach to install new lines (typically nine days) and repair faults. BT service levels for repairs has been hampered in recent years due to the spate of bad weather (floods, snow etc) that the UK has experienced.
Ofcom proposes to strengthen reporting requirements on BT Openreach, so as to make it clear how well the BT unit is performing.
No Price Changes
Finally, Ofcom made clear that its consultation proposes does not set controls on the wholesale price of virtual unbundled local access (VULA), thorugh which other providers deliver broadband over BT’s local loop.
Ofcom’s decision here could be a disappointment to ISPs such as TalkTalk, which has previously complained about BT’s alleged abuse of its dominant position with its fibre network. However TalkTalk welcomed today’s Ofcom’s proposals, and told TechweekEurope that the main thrust of its complaint about BT was more to do with “margin squeeze”.
“Ofcom believes the price of fibre broadband is currently constrained by the availability of standard broadband services, and by competition from Virgin Media’s superfast cable network,” said the regulator. “Ofcom is also concerned not to undermine the investment case for rolling out fibre. Instead, Ofcom proposes to maintain a requirement that BT’s charges for access to its fibre network are fair and reasonable.”
The Ofcom proposals have been broadly welcomed by BT. Ofcom decided not to rule that BT should change its prices for access to fibre products – which the telecom giant regards as a “big win”.
“We are pleased that Ofcom is maintaining pricing freedom for Openreach’s fibre products,” said BT in a statement. “BT has already accepted a long payback period for its fibre deployment and its wholesale fibre prices – which are amongst the lowest in Europe – reflect this.”
Regarding the other proposals, TechweekEurope understands that BT regards the migration charges as something of a side issue. Apparently BT was already looking at reducing switching charges but had decided to wait to see what Ofcom proposed. It also welcomed Ofcom’s proposals about sharing its service-level performance data with businesses, as it already offers strict SLG (service level guarantees).
“Openreach is committed to delivering high levels of customer service,” said BT. “Openreach is already highly transparent in its service level reporting to industry and agrees this detail should be shared with consumers and businesses.”
Ofcom also announced that later this month it will issue a further consultation on its approach for setting any future charge controls on ‘wholesale line rental’ products, i.e. local loop unbundling and telephone services from other ISPs over BT lines.
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