Ofcom proposes new wholesale charge controls for Openreach
Ofcom has notified the European Commission of provisional new charge controls that will apply to certain services provided by Openreach, BT's wholesale access division. Ofcom will adopt the new controls, subject to the outcome of the European Commission's new consultation process*.
The prices are regulated by Ofcom because Openreach has been found to have significant market power in the delivery of these services.
Ofcom is publishing its draft decision to provide transparency of the European Commission notification process as this is the first time this new procedure has been used for a major regulatory decision on telecoms in the UK.
Provisional new prices
Ofcom is proposing the following controls on annual rental charges (which are expected to run until 31 March 2014):
- A fully unbundled line to a property - where a communications provider takes over the line to provide broadband and telephone services.
The price currently charged by Openreach is £91.50. Under Ofcom's draft decision this will be set to £87.41 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -5.9%.
- A shared unbundled line to a property - where a communications provider uses a proportion of the line only for the provision of broadband.
The wholesale price today is £14.70 per year. Under Ofcom's draft decision this will be set to £11.92 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -15.9%.
- Wholesale line rental - used by communications providers to offer telephone services to consumers using lines rented from Openreach.
The price today is £103.68 per year. Under Ofcom's draft decision this will be set to £98.81 for financial year 2012/13 and decrease further in the next year in accordance with the formula RPI -7.3%.
Ofcom expects to publish a final decision in early March.
NOTES FOR EDITORS
- * Under the revised European Framework that was transposed into UK law in May 2011, Ofcom is required to submit charge control proposals to the European Commission for their review. The European Commission has one month to review the draft decision during which it can comment and/or initiate further examination. The Body of European Regulators for Electronic Communications (BEREC) and other equivalent EU Member State national regulatory authorities also have the opportunity to comment during this one month period.This is a change to the previous process under which Ofcom consulted with UK stakeholders and the EU at the same time. Following the changes, Ofcom is now required to consult the EU after having undertaken a UK consultation. In this case, Ofcom carried out consultations in March and November 2011 to obtain the views of stakeholders including Openreach, its customers and its competitors. The provisional prices being notified to the EU by Ofcom already take account of the outcome of these consultations.
- A major component of how Ofcom calculates the charge controls is the cost of Openreach's network of underground ducts which are used to carry copper lines to homes and businesses. BT Group carried out a re-evaluation of the Openreach duct network in 2010. The draft decision sets out, subject to the European Commission's review, Ofcom's consideration of the appropriate value of ducts to be reflected in LLU and WLR charges.
- This is the third time that Ofcom has set wholesale prices for these services.
- Openreach was created in January 2006 after Ofcom accepted legally-binding Undertakings from BT Group plc. This resulted in the creation of Openreach as an operationally separate business unit which provides wholesale access telecoms services to all communications providers on an equivalent basis.
- Under section 3 (1) of the Communications Act 2003, Ofcom's principal duty is to further the interests of citizens in relation to communications matters and of consumers in relevant markets, where appropriate by promoting competition.
- Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications, wireless communications and postal services.
- For further information about Ofcom please visit: www.ofcom.org.uk. Ofcom's news releases can be found at: http://media.ofcom.org.uk/.