Ofcom publishes final Local Loop Unbundling charges

16 December 2004

16 December 2004

Ofcom today announced final connection and rental charges for Local Loop Unbundling (LLU) services. The charge reductions follow previous consultations on 13 May 2004 and 26 August 2004 and will come into effect from 1 January 2005 .

Ofcom has now completed its Review of the Wholesale Local Access market which started in May this year, when Ofcom outlined its proposals to increase effective and sustainable competition in broadband.

LLU enables operators to connect to the consumer via BT's copper local loops. Ofcom believes that development of the LLU market, to allow operators to target infrastructure investment and to develop scale in the creation of high-speed data services, will be critical in ensuring a fully competitive and innovative telecoms market for the long term.

Ofcom's decisions

Ofcom has decided to reduce connection charges for fully unbundled lines further than was proposed in August. The adjustments reflect more recent cost data and minor changes to Ofcom's approach.

Compared with charges as they were in May 2004, the final charges for fully unbundled connections will deliver:

  • Reductions of 60% for transfer of an existing line;
  • Reductions of 36% for providing a new line.

For shared access the connection and rental charges will be reduced by 70%.

A fully unbundled line gives operators the exclusive use of the copper line. A shared access line only gives operators the use of the broadband channel and will also be used by the customer's fixed-line voice provider.

The table below sets out:

  • LLU charges in May 2004, before BT's voluntary price reductions started (Column A);
  • Current LLU prices reflecting BT's progress on price reductions to date (Column B);
  • Final LLU charge ceilings that will apply from 1 January 2005 (Column C);
  • Comparison of the final LLU charge ceilings with May 2004 prices (Column D).
 A: Old B: Current C: Final D: % Change from A to C
Shared access  
Connection £117 £37.00 £34.86 70%
Rental £53 £27.12 £15.60 71%
Fully unbundled  
Connection (transfer) £88 £88 £34.86 60%

Connection (new provide)

£265 £223.33 £168.38 36%
Rental £119 £105.09 TBD N/A

Ofcom is not determining the fully unbundled rental charge ceiling at this stage. A high proportion of the costs for this service are determined by the cost of laying and maintaining the copper loop between the Local Exchange and the home or business premises.

Ofcom is currently consulting on the appropriate way to value BT's copper access network. Stakeholders have until 11 February 2005 to respond to this consultation.

Ofcom's final proposals on copper costs will be published in spring 2005. Ofcom will subsequently determine the rental price ceiling for fully unbundled local loops. In the meantime, BT's voluntary price reduction to £105 p.a. rental for such loops remains the applicable price.

Ofcom Chief Executive Stephen Carter said: "This year has seen lot of progress on local loop unbundling."

He added: "This has been achieved through a combination of industry investment, regulatory review and, importantly, constructive engagement from BT."

Telecoms Adjudicator and LLU progress

Since Ofcom announced its LLU price proposals in August 2004, the number of unbundled lines has risen to over 26,000. In May 2004 there were 12,000 unbundled lines. The independent Telecoms Adjudicator has targeted 1 million unbundled lines by summer 2006. Further information on the work of the independent Telecoms Adjudicator is available at www.offta.org.uk

Separately today, Ofcom is proposing that for certain LLU services during 2005 the regulator should NOT require BT to provide advance notification of changes to existing services and the details of new services.

Requirements for advance notification of up to 90 days are part of standard Significant Market Power (SMP) conditions. The Telecoms Adjudicator and BT have both raised concerns that for LLU processes and LLU backhaul leased line products, these standard requirements could delay progress.

The full consultation is published on Ofcom's website at www.ofcom.org.uk and the closing date for responses is 17 January 2005.