BT forced to cut rural broadband wholesale rates

BT forced to cut rural broadband wholesale rates

Summary: Ofcom has decided that BT must cut wholesale prices for up-to-8Mbps services in many rural areas, arguing that this will lead to cheaper and faster broadband for homes and businesses

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TOPICS: Broadband, Legal
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Ofcom has forced BT to charge ISPs less for wholesale broadband service in regions where it has the only network, a move that could lead to cheaper broadband prices for consumers in rural areas.

On Wednesday, the regulator said BT must cut its wholesale service fees in those regions by "12 percent below inflation per year". With the move, it delivered on a plan outlined in January to compel the company to drop charges by between 10.7 percent and 14.7 percent.

According to Ofcom, the wholesale price cut should bring down retail prices for businesses and consumers in rural areas, due to increased competition between retail ISPs. The areas likely see a price drop are parts of Scotland, Wales and Northern Ireland, as well as the south-west of England, Norfolk, Yorkshire, Cumbria and Northumberland, it said.

The changes "may also lead to better-quality services by enabling ISPs to allocate more bandwidth per customer, which could deliver faster broadband services. This could benefit around three million homes and businesses", Ofcom said in a statement. Service providers could increase bandwidth because the wholesale cost is cheaper, it argued.

BT said it has already factored the cuts into its financial plans. The wholesale price controls only affect BT's up-to-8Mbps ADSL products, not its up-to-24Mbps ADSL2+ products or faster fibre services. Both ADSL and ADSL2+ are based on BT's legacy copper network.

The decision should give BT an incentive to upgrade its rural broadband networks to ADSL2+, as such services are not charge-controlled, an Ofcom spokesperson told ZDNet UK.

Move 'will not encourage competition'

However, Trefor Davies, the chief technology officer of Timico — an ISP that is a BT Wholesale customer — argued Ofcom's move may not have the effect the regulator intends. While it might drive down some service providers' prices, it "will not encourage any competition", he said.

If the pricing is being driven down, it makes the business case for [investing in] LLU a lot harder.

– Trefor Davies, Timico

The changes only affect places where there is no local-loop unbundling (LLU) — that is, where no ISP has equipment installed in BT's exchanges to control the line between the exchange and the customer.

As LLU involves investment, and as rural areas tend to give ISPs a poor return on investment, providers operating in rural areas usually go for the cheaper option of being wholesale customers of BT.

"If the pricing is being driven down, it makes the business case for [investing in] LLU a lot harder," Davies explained.

Responding to Ofcom's announcement, BT said it did not expect to lose much money because of the cuts.

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"This outcome is in line with the proposals that were widely reported on earlier this year," the telecoms giant said in a statement. "The impact on BT Wholesale will be non-material."

While pointing out that it would be up to retail ISPs to pass on the savings to their customers, BT implied in its statement that BT Retail — itself a customer of BT Wholesale — may not lower its own prices in rural areas.

"Unlike many other providers, despite the higher costs involved, BT Retail's consumer broadband products have always been priced the same in rural areas as in urban areas," the company said. "This ruling is therefore of more relevance to those ISPs who currently charge a supplement in rural areas."

A BT spokesperson told ZDNet UK it is reviewing the details of Ofcom's announcement.


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Topics: Broadband, Legal

David Meyer

About David Meyer

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't pay the bills. David's main focus is on communications, as well as internet technologies, regulation and mobile devices.

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3 comments
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  • 'The wholesale price controls only affect BT's up-to-8Mbps ADSL products, not its up-to-24Mbps ADSL2+ products or faster fibre services. Both ADSL and ADSL2+ are based on BT's legacy copper network'

    BT's wholesale 'faster fibre services' -BT Infinity type products are also based on BT's Legacy Copper network using VDSL2, so its not just ADSL and ADSL2+, but also BT's wholesale 'faster fibre services' are based on BT's legacy copper network, as these are FTTC.

    I'm unaware of any BT Wholesale products that aren't reliant on BT's Legacy Copper Network. None of their FTTP is currently wholesale, only FTTC. Though there are FTTP Trials.

    The BT Wholesale Roadmap is viewable here by registering.
    http://www.btwholesale-inspire.com/bt-product-roadmap-view-roadmap-broadband?tid=1

    'Unlike many other providers, despite the higher costs involved, BT Retail's consumer broadband products have always been priced the same in rural areas as in urban areas'

    This is very much a half truth by BT. Obviously BT aren't including plus.net in their 'retail' operations.
    Plusnet Pricing Small Print.
    * Plusnet Value: If you live in a low cost area it costs £6.49 a month. If you live outside one of these areas it costs £6.49 a month for the first three months, then £10.79 or £12.99 a month depending on where you live.

    ** Plusnet Extra: If you live in a low cost area it costs £11.49 a month. If you live outside one of these areas it costs £11.49 a month for the first three months, then £15.79 or £17.99 a month depending on where you live.


    FTTP-Fibre to the Premises.
    FTTC-Fibre to the Cabinet.
    SoapyTablet
  • 'The decision should give BT an incentive to upgrade its rural broadband networks to ADSL2+, as such services are not charge-controlled, an Ofcom spokesperson told ZDNet UK'

    The idea that ADSL2+ (upto 20Mbps) technology is going to improve rural broadband is fundamental to a giving false hope. It can be seen as 'pretty much a joke' to anyone in the know.

    Length of lines and Quality/Maintenance issues of the cabling rurally, plus the use of aluminium cabling, means for the vast majority on a rural exchange they would see no benefit from the installation of ADSL2+ technology in their exchange, over ADSL.

    A limited number near the exchange would benefit, but the topology of housing, means most would see very little, if any improvement, and might actually increase problems on poor quality lines.

    If you live in a Notspot, you will still live in a Notspot with ADSL2+.
    ADSL / ADSL2+ have very similar connection speeds 3.5km by cable from the exchange, so if you live approx 2.5km from the exchange - it offers no discernible benefit over ADSL.

    Ofcom are giving false hope to Rural communities in promotiing ADSL2+ as a solution. It really isn't, and they should be condemned for even recommending it.

    Flippantly put- It's basically a stop-gap for the 10 people that live next to the rural exchange, forgetting that there are another 1000 living in the outlying area.
    SoapyTablet
  • I find it hard to understand how, if BT's income from rural broadband is lower, cutting its income provides an incentive to spend more. Surely the reverse is true. Maybe this is this some upside-down version of capitalism that only Ofcom knows about.
    Manek Dubash