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Ofcom moves to cut superfast broadband prices

  
Ofcom has today announced measures designed to promote investment in new fibre networks and ensure that customers are protected from higher prices.
 
They are proposing to maintain their policy of pricing flexibility for Openreach’s fastest broadband products, including those based on BT’s own network investments in full-fibre and its new G.Fast technology.
 
Ofcom plan to protect broadband customers and promote competition, by cutting the wholesale price that Openreach – the part of BT responsible for its network – can charge telecoms companies for its popular superfast broadband service, which has a download speed of up to 40 Mbit/s. They would expect these savings to be passed on to residential customers through cheaper prices. This promotes competition in the superfast broadband service most used today by consumers, while companies construct their own full-fibre ultrafast networks to compete with Openreach.
 
The new rules would also include stricter requirements on Openreach to repair faults and install new broadband lines more quickly. These will set higher binding quality standards on the company’s performance. Should Openreach fail to meet the new targets, Ofcom has the power to impose fines.
 
Jonathan Oxley, Ofcom’s Competition Group Director, said: “Our plans are designed to encourage long-term investment in future ultrafast, full-fibre networks, while promoting competition and protecting consumers from high prices. 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”
 
 
Ofcom wants to provide incentives to invest in ultrafast networks, while promoting competition and protecting consumers from high prices. BT is required by Ofcom to allow competing broadband companies to use its network to sell broadband services to people and businesses. Openreach offers fibre packages of varying speeds, and levies a different wholesale charge to providers for using each one.
 
As more people continue to take superfast broadband over the coming years, Ofcom’s analysis shows that the most important package will be one offering a 40 Mbit/s download speed, and 10 Mbit/s upload speed.
 
Until now, BT’s ability to raise prices has been constrained by people’s willingness to consider cheaper, standard broadband as an alternative. However, this constraint is weakening, as people require faster, more reliable connections to support a new generation of online services.
 
So Ofcom intends to reduce Openreach’s charges for its ‘40/10’ Mbit/s broadband package, with the price falling from today’s level of £88.80 per year to £52.77 in 2020/21.1 We would expect much of this reduction to be passed through by retail providers to their customers, resulting in lower bills.
 
Ofcom is not proposing to cap Openreach’s wholesale charges for its higher-speed packages including its planned new G.Fast network, as we expect the cap on the 40/10 Mbit/s package should be sufficient to protect competition and protect consumers from higher prices.
 
Regulating the price of the 40/10 Mbit/s package would help BT’s rivals to compete for customers. Our proposals also provide an incentive for BT’s rivals to invest in their own ultrafast networks for the longer term. Standard broadband delivered over Openreach’s copper network will continue to be subject to a charge control with the price remaining broadly stable.
 
Service problems can occur at the telephone exchange, on the lines that connect homes and businesses, or be due to factors outside Openreach’s control, such as faulty equipment in the home, or poor customer service (see graphic below). The whole sector – not just Openreach – has a role to play in delivering significantly better quality of service than it does today.
 
Where faults fall on Openreach to fix, Ofcom is proposing that it will in future be required to: complete 93% of fault repairs within one to two working days of being notified, compared with 80% today; complete 97% of repairs no later than six or seven working days; provide an appointment for 90% of new line installations within 10 working days of being notified, compared to 80% within 12 days currently; and install 95% of connections on the date agreed between
Openreach and the telecoms provider, up from 90% today.
 
These new requirements would need to be met in full by 2020/21. Ofcom has also proposed transitional targets to ensure progressive improvements in service before then. Ofcom will monitor Openreach’s performance closely and step in if the required standards are not met.2
 
Today’s proposals are part of a range of measures designed to allow telecoms providers to compete effectively and to ensure that they provide the quality of service that customers expect.
 
Separately, Ofcom is already consulting on plans to offer broadband and telephone customers automatic compensation when things go wrong. We will also shortly be launching new performance tables on quality of service, identifying the best and worst operators on a range of performance measures so that customers can shop around with confidence.
 
Openreach fixes faults with the wire, and some problems at the exchange. Other providers fix the Wi-Fi router and some problems at the exchange and in their own network.
 
These measures form part of Ofcom’s Wholesale Local Access Market Review for the period from April 2018 to March 2021. The consultations close on 9 June 2017, and Ofcom expects to publish its final decisions in early 2018, with new rules taking effect on 1 April 2018. As part of this market review, Ofcom will also consult soon on detailed plans to open up BT’s network of telegraph poles and underground tunnels to competitors. This should further promote competitive investment in full-fibre, ultrafast networks.
 
 
 
 

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