This statement confirms Ofcom’s proposal, set out in its March Consultation document, to allow Retail price controls (RPC) to lapse on their expiry on 31 July 2006. This is a landmark decision and affirms Ofcom’s intention to withdraw from regulation as soon as competitive conditions allow.
RPCs have been in place since 1984 when BT was privatised. These controls have delivered substantive benefits for consumers and have protected them by securing year on year price reductions in real terms in markets where competitive pressure alone has until now been too weak. These price reductions for telephony services mean that the UK now has some of the lowest prices for residential telephony among developed countries1.
Reductions in prices have been accompanied by a significant increase in the choices available to consumers and reflect an increased level of competition in the retail markets which continues to strengthen and grow. This competition has been facilitated by the improved effectiveness of regulation of the wholesale telephony markets. At the same time consumer protection measures have been enhanced through changes in other regulation including BT’s Universal Service Obligation (USO).
Ofcom notes that retail price regulation can have an impact on the wider market (e.g.possibly restricting tariff innovation) and therefore, allowing the RPC to lapse means that from August 2006 the market, rather than regulation, will determine the price of retail telephony services. BT will be in a similar position to all other communications providers and will have the ability to set the price of their services in response to competitive conditions in the retail markets.