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Commenting on Ofcom's proposal for a new wholesale price for Openreach, Brian Potterill, director in PwC's telecoms strategy team, said:
"Ofcom's latest consultation proposes a reduction in the prices that BT can charge for use of the 'final mile' or unbundled local loop. These charges are paid by broadband providers, such as TalkTalk Group and Sky and Ofcom therefore expects these reductions to be passed on to customers. Ofcom's aim is to strike a balance between encouraging lower prices for consumers and maintaining prices at a level that provides incentives to invest.
"After accounting for inflation these proposals may result in some small price reductions for broadband services, which are already pretty cheap by international standards. However, the real impact will be on the roll-out of fibre. BT has already announced plans to cover two thirds of households with its fibre service; more than in any other major economy, and provides copper based broadband to the vast majority of the country.
"Other broadband providers reach 90% of households by unbundling BT's copper infrastructure. As Ofcom lowers the prices that BT can charge for this, BT has greater incentive to invest further in fibre on which it has more pricing freedom. But, BT still believes that there is no commercial case for fibre beyond its planned two thirds of the population. Ofcom's proposals will certainly improve the case.
"If demand for fibre services grows, Ofcom's proposals may start to tilt BT's commercial case for more fibre investment earlier."
Technology, Telecoms, Entertainment, Media, Hospitality and Leisure, PR Manager, PwC
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