The central pillar of UK telecom regulation for some thirty years has been to increase competition and regulate the pricing that BT charges, either at the wholesale or retail level. A large degree of freedom was afforded to the BT Group and Openreach when the fibre based broadband roll-outs started in 2009 and the price of the FTTC services or equivalent products in the areas where FTTP is the native option has pretty much remained static, while the retail pricing has slowly crept down, offset in part by the increases in voice line rental.
Now that fibre based services are popular to the extent of some 2.7 million connections on the Openreach network Ofcom is making moves to ensure that the BT Group does not manipulate pricing so that competitors cannot compete. Effectively what we will see is the price of BT Retail fibre based services kept high so that TalkTalk and Sky can undercut them.
Today’s proposals preserve that pricing flexibility, while seeking to ensure that BT does not set prices in such a way that prevents other operators from competing profitably for superfast broadband customers. In May, Ofcom announced its intention to set out proposals on this issue.
Ofcom is proposing to put in place a regulatory condition requiring BT to ensure that the margin between its wholesale VULA charges and its retail superfast broadband prices is sufficient for rival operators to compete and make a profit.
Extract from Ofcom announcement