OFCOM wants to force BT to slash costs of rural broadband

**Chris** · 24-01-2011, 10:29

http://www.cableforum.co.uk/article/...ural-broadband

Quote:

OFCOM is pushing for major price cuts for broadband customers in up to three milllion homes in rural parts of the UK.

The regulator’s proposal is for prices to fall by up to 15% below inflation, every year for three years. The measure would apply to customers on any telephone exchange where only BT Wholesale has installed broadband equipment.

Ignitionnet · 24-01-2011, 12:37

Curious and deters investment. Needs to be done with extreme caution given the potential to tip some areas into loss making territory.

The threat of being forced to cut prices isn't a big selling point to getting companies to spend the initial capital providing to underserved areas.

**Chris** · 24-01-2011, 12:41

That presumably is an argument against pursuing such a policy too broadly, rather than against the whole premise. Such a policy, correctly applied, would presumably only have an effect in areas where companies have no intention of spending any capital.

Ignitionnet · 24-01-2011, 12:46

Quote:

Originally Posted by Chris

That presumably is an argument against pursuing such a policy too broadly, rather than against the whole premise. Such a policy, correctly applied, would presumably only have an effect in areas where companies have no intention of spending any capital.

No it applies equally everywhere, unless areas plan on either being on ADSL for ever or waiting for government handouts.

There is going to be a need for capital to be spent at some point. Where the capital expenditure is higher the return should be higher. I'm interested in Ofcom's reasoning behind this, it strikes me on first impression as populist and socialist.

danielf · 24-01-2011, 12:48

Chris: Do you have a link for this (other than a CF news article)?

**Hugh** · 24-01-2011, 12:54

Here you go - BBC, and the source OFCOM

**Chris** · 24-01-2011, 12:56

How very dare you. We're a reputable news source I'll have you know.

Here, this is Ofcom's own announcement of the consultation: http://stakeholders.ofcom.org.uk/con...ontrol/summary

... although at least one broadsheet has carried the story in the last 5 days. If you look hard enough you'll find it.

danielf · 24-01-2011, 13:08

Ah. So they plan to force BT to lower their wholesale prices...

That wasn't clear to me from the news article and makes a bit more sense.

**Chris** · 24-01-2011, 13:19

Quote:

Originally Posted by danielf

Ah. So they plan to force BT to lower their wholesale prices...

That wasn't clear to me from the news article and makes a bit more sense.

The headline does say that it's BT that would be forced ...

danielf · 24-01-2011, 13:25

Quote:

Originally Posted by Chris

The headline does say that it's BT that would be forced ...

Yes, but it doesn't mention wholesale prices (so I took it to mean consumer prices). Perhaps I'm having a dense day, but it didn't really make sense to me.

**Chris** · 24-01-2011, 14:01

I've added the word 'wholesale' to 'prices' in para.2.

Ignitionnet · 24-01-2011, 14:05

The bummer is you guys aren't going to be seeing any price drop as a result of this - BT Wholesale services already have a discount on them in some areas and only ONE ISP that I can think of actually passes it on.

danielf · 24-01-2011, 14:11

Quote:

Originally Posted by Ignitionnet

The bummer is you guys aren't going to be seeing any price drop as a result of this - BT Wholesale services already have a discount on them in some areas and only ONE ISP that I can think of actually passes it on.

Presumably, the whole idea is to increase competition by making it more attractive for other (cheaper) ISPs to get into the exchange rather than for ISPs to pass the discount on to their customers.

Ignitionnet · 24-01-2011, 14:16

Quote:

Originally Posted by danielf

Presumably, the whole idea is to increase competition by making it more attractive for other (cheaper) ISPs to get into the exchange rather than for ISPs to pass the discount on to their customers.

I don't know what you mean?

If you mean it'll make other ISPs more inclined to offer services on the exchanges it doesn't work that way, they could offer them, via BT, anyway.

If you mean by placing their own equipment in the exchanges it makes that less economically viable.

**Chris** · 24-01-2011, 14:19

If they're targeting the wholesale price that BTW charges other operators who have customers on non-LLU'd exchanges, they will be hoping that will give those operators more room to cut prices and compete against each other.

---------- Post added at 14:19 ---------- Previous post was at 14:17 ----------

Quote:

Originally Posted by Ignitionnet

I don't know what you mean?

If you mean it'll make other ISPs more inclined to offer services on the exchanges it doesn't work that way, they could offer them, via BT, anyway.

If you mean by placing their own equipment in the exchanges it makes that less economically viable.

I don't see anything in OFCOM's proposal that suggests they intend to encourage more LLU. Rather, they seem to be throwing the towel in on that, so far as the remaining non-LLU exchanges are concerned. The aim of this exercise seems to be purely and simply to lower the subscription cost to the end user of taking a BTWholesale product, whether directly from BT or via a branded reseller like Virgin.net.