New proposals to ensure competition for superfast broadband customers

19 Jun 2014 03:45 PM

Ofcom has today proposed new requirements on BT to promote competition in the growing market for superfast broadband customers. 

The rules would mean that BT has to maintain a sufficient margin between its wholesale and retail superfast broadband charges to allow other operators profitably to match its prices.

Different operators currently retail superfast broadband over BT’s network, using a process known as ‘virtual unbundled local access’ (VULA). BT has flexibility to set the wholesale price for providing this access to its network.

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.

BT currently provides BT Sport free to its superfast broadband customers, and the proposed new rules would take into account the costs and revenues of these sport channels.

A growing market

When Ofcom introduced the requirement for BT to offer other providers access to its fibre network, there were fewer than 100,000 superfast broadband connections provided this way. That number has now risen to 2.7 million, and take-up is expected to increase further over the coming years.

According to recent Ofcom research, one in four UK residential fixed broadband connections is now ‘superfast’, offering a headline speed of 30 Mbit/s or more.

Ofcom’s proposals are aimed at ensuring that different operators can compete in the growing superfast broadband market in years to come, so that consumers benefit from competitive prices and high-quality, innovative services.

Today’s consultation closes on 28 August 2014. Ofcom expects to publish a final statement on its decisions regarding BT’s superfast broadband margin later in the year.

Competition Act investigation

Separately today, Ofcom has announced its provisional decision in relation to an investigation opened in response to a complaint from TalkTalk last year.

TalkTalk had alleged that BT failed to maintain a sufficient margin between its VULA wholesale and superfast-broadband retail prices.

Ofcom has investigated TalkTalk’s complaint under the Competition Act 1998, and has provisionally decided there are no grounds for action. This investigation is separate from the rules which Ofcom is proposing today for BT under the European framework for telecommunications.