Ofcom acts to cut home phone and broadband prices

  Ofcom wants to reduce the cost of connections provided by Openreach The cost of home telephone and broadband services could come down after telecoms regulator Ofcom moved to reduce the wholesale price. It has revised the list of rates that Openreach, which manages BT's network, can charge other providers for using its services.
In some cases, the wholesale price could fall by more than 10% per year.
The move could benefit companies such as TalkTalk and Sky, but not Virgin Media which uses its own cable network.
Under Ofcom's proposals the prices of two of the ways that BT's rivals get access to its network will come down.
The first, called Local Loop Unbundling, allows telecoms firms to site their equipment in BT exchanges and take over lines to customers.
Ofcom wants the price Openreach charges when an operator takes over these lines completely to drop by between 1.2 and 4.2% every year. Where lines are shared it wants prices to drop by between 11.6 and 14.6% every year. To illustrate the potential numbers affected, Ofcom said there were about 7.6 million unbundled lines in the UK.
The second, called Wholesale Line Rental, involves telecoms firms simply renting lines from Openreach. Ofcom wants the prices of these to drop by between 3.1 and 6.1% every year. There are about 6.14 million WLR lines in the UK.
The price changes are to be applied after taking inflation into account. This might mean that some prices creep upwards if inflation rises.
"Ofcom expects its proposed prices to lead to real term price reductions for consumers, as communications providers pass on savings to their landline and broadband customers," it said in a statement.
In response, BT released a statement which said: "BT invests more than any other company in the UK's communications infrastructure, so it is critical that it is able to achieve a fair rate of return in order to continue its investment in copper and fibre-based services."
It added: "Upon initial review, we are encouraged by Ofcom's recognition of this fact, but would question some of the underlying assumptions being used."
The communications watchdog said its proposals were the start of a consultation process that would end on 9 June. BT said it would raise its concerns with Ofcom during the consultation process.
The conclusions of the consultation will be published in the autumn.
Any price changes that result would come into effect towards the end of 2011 and be in place until March 2014.

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