Ofcom to raise price of BT's local loop to rivals

With its ITC global domination plans in tatters, BT has turned its attention on its home market.

It has threatened to refuse to invest in fibre build-out in the UK's access network unless Ofcom raises the price it can charge rivals to access its copper local loop, according to the Financial.

BT's investors, who are still reeling from two terrible quarters in a row, are concerned about the costs upgrading the national broadband infrastructure, which is one of the government's high priorities in the interests of competitiveness.

Ofcom warned in a statement, "If companies like BT don't invest in high speed broadband, others certainly will and are already doing so." It has already proposed that the market, not regulation, should dictate pricing for fibre networks, rendering the comparison with regulation of BT's existing network inappropriate, the FT says.

Last Friday, ahead of imminent consultation, Ofcom proposed BT should be able to raise the prices it can charge competitors for access to its broadband network, which is run by BT's Openreach business unit.

BT will be able to charge companies such as Carphone Warehouse and British Sky Broadcasting between 4.1% and 11.4% more for full local loop unbundling. A more modest price increase was proposed for residential wholesale line rental. The rises are in line with analysts' expectations and are likely to go ahead when Ofcom makes its final ruling in April 2009.

The increases would bringing BT an additional £18 million (€20.9 million) annually. Rivals will have to pass them onto residential customers, a tricky proposition in a credit crunch.

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