Ofcom cuts broadband rates – will consumers benefit?

BT will have to slash its charges to broadband and phone providers by up to 19 per cent and keep cutting until 2015.

The question is: will the savings be passed on to subscribers or shareholders?

Media regulator Ofcom has decided that BT Openreach is still charging broadband and phone providers too much to use its telephone exchanges and cables to consumers’ homes and businesses.

That’s despite an investigation of BT Openreach’s business in 2010 which saw Openreach’s charges dictated by Ofcom for two years.

Ofcom said it expects its prices to lead to real term price reductions for consumers, as communications providers pass on savings to their landline and broadband customers.

In a statement, Ofcom added: “The price controls are designed to protect the interests of consumers while providing BT and communications providers with the appropriate incentives to continue to invest in networks and services.”

The savings are:

• For a ‘fully unbundled’ line supplying both broadband and phone, a drop from £91.50/year (£9.15/month inc VAT) today to £87.41/year (£8.75/month inc VAT) from April 1 (4.5 per cent), and next year following the Retail Price Index minus 5.9 per cent.
• For a shared unbundled line for broadband only, a drop from £14.70/year today to £11.92/year from April 1 (19 per cent), and next year following the Retail Price Index minus 15.9 per cent.
• For a wholesale line rental for phone calls, a drop from £103.68/year (£10.39/month inc VAT) today to £98.81/year (£9.88/month inc VAT) from April 1 (4.7 per cent), and next year following the Retail Price Index minus 7.3 per cent.

We’ll be asking some of the major broadband providers what this will mean for their costs.