Ofcom, the UK’s telecoms regulator, is slashing the price BT’s infrastructure arm Openreach is allowed to charge other firms in the sector for the delivery of superfast broadband services.
Announcing the price changes this morning, Ofcom has planned this move as part of a wider package of plans that also includes more stringent requirements to be put on Openreach to iron out their faults and install new broadband lines at a faster rate more. As a result, shares in BT fell nearly two per cent in opening trading.
The decision by Ofcom to crack down on Openreach for fault and installation failings follows a mere week after the largest ever fine in telecoms was levied on Openreach for its failure to correctly compensate internet firms for delays in rectifying problems.
The sum of the Ofcom fine was £42 million, with the firm also having to fork out around £300 million to compensate the internet firms they owed. 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.
The decision has not touched upon the price Openreach can charge for its fastest broadband speeds, extending to greater than 40 megabits per second. Ofcom’s explanation for this is that it will encourage competition at the higher end of the spectrum. In particular, there is a desire among regulators for competition with Openreach, and for firms to start laying more of their own infrastructure.
Openreach is the owner and operator of the majority of the UK’s telecoms infrastructure. Other internet providers, such as Sky, TalkTalk and Vodafone, are mandated pay Openreach to use the network.
It is because of Openreach’s market dominance that Ofcom dictates the prices the BT subsidiary can charge other firms. In that vein, the watchdog expects price cuts on broadband services of up to 40 megabits per second, to be passed down to consumers.
The regulator warned of a further imposition of fines on Openreach lest it fails to meet the higher standards introduced by it today.