UK broadband prices to fall as Ofcom prioritises high speeds

The regulator plans to cut wholesale connections by 40 percent by 2021.
Matt Brian
M. Brian|03.31.17

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Matt Brian
March 31st, 2017
NurPhoto via Getty Images
NurPhoto via Getty Images

Ofcom says millions of UK broadband customers could soon pay less for superfast broadband under new plans to limit the amount Openreach charges other ISPs to access its fibre network. The communications regulator said today that it wants to slash the cost of new connections for lower tier fibre services (up to 40Mbps) from £88.80 pounds a year to £52.77 in the hope that providers, like BT and TalkTalk, will pass those savings on to customers.

The new price caps won't cover faster connections, which can reach 78Mbps and above thanks to G.Fast technology. However, the move is expected to benefit as many as 3 million customers, adding up to around £100 million of savings. The plan is to introduce a series of yearly savings from April next year, which will be completed by 2021.

The idea is simple: if Openreach makes less money from lower-tier broadband packages, it will be forced to invest in new technology and expand its G.Fast network to more of the country. "Our plans are designed to encourage long-term investment in future ultrafast, full-fibre networks, while promoting competition and protecting consumers from high prices," said Jonathan Oxley, Ofcom's Competition Group Director.

Openreach doesn't agree, however. In a statement, a spokesperson said: "Ofcom have proposed a number of ways to address fibre pricing and service so we will be reviewing these in detail, but on first viewing they do not appear to incentivise more investment in 'full fibre' networks."

"The UK needs a regulatory framework that encourages investment and rewards risk. Building digital infrastructure is very expensive with long payback periods and we won't recover our more than £3bn investment in fibre until after this charge control period. We support the ambition of higher service targets and we want to work closely with the rest of the industry to make sure these are the right measures and that they're achievable."

The announcement has been welcomed by BT's rivals, but there are some reservations. In a statement, TalkTalk said that it supported price cuts and the continued commitment to improving Openreach's service, but bemoaned the fact that customers must wait a year to see some savings and that only the slowest "superfast" speeds were included: "Ofcom's decision to only regulate some products also risks entrenching a speed divide, with customers having to make a false choice between fair prices or higher speeds. Ensuring consumers enjoy low prices on all superfast products is the best way to maximise take-up and encourage investment in the pure fibre infrastructure of the future."

Earlier this month, BT confirmed that it will finally split Openreach off into a separate company, following pressure from Ofcom to do so. It will continue to be part of the BT Group but it the new entity will be governed by an independent board, manage its own staff and set out its own strategy.

As part of the agreement, Openreach will also need to consult with Sky, TalkTalk and Vodafone regarding future "large-scale" investments and the BT logo will be removed from all Openreach branding in order to reduce public confusion.

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