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PostSubject: Broadband Price Cut Proposed   Fri Jan 21, 2011 1:07 pm

Quote :
Broadband costs could fall by nearly 15 per cent below inflation for three million homes under new proposals from communications regulator Ofcom.

Ofcom is suggesting that in areas where broadband infrastructure is solely provided by BT Wholesale, prices should be cut by between 10.75 per cent and 14.75 per cent below the rate of inflation. The measure is an acknowledgement that, in rural areas, competition has not driven prices down.

BT Wholesale sells broadband services to a range of internet service providers who then sell it directly to customers. Ofcom hopes that lower prices will both encourage competition and allow existing providers to provide a better service at current prices.

BT said it understood Ofcom's desire to move to a more formal wholesale broadband pricing control in rural parts of the country but that it must not deter investment.

"It is key that the details strike the right balance between control and incentives to invest in rural areas," a spokeswoman said. "As the UK's main investor in rural broadband, we will engage fully in the consultation process which follows to make our case."

The spokeswoman added, however, that Ofcom's decision would not have a material impact on the company.

Ofcom says the new pricing could benefit nearly 12 per cent of UK households, mostly in rural areas including parts of Scotland, Wales and Northern Ireland as well as the South West of England, Norfolk, Yorkshire, Cumbria and Northumberland.

The regulator claims its proposed charge controls could narrow the difference between prices that consumers in rural and urban areas are paying for broadband services.

Charlie Ponsonby CEO of impartial broadband comparison service Simplifydigital.com, said that “If these proposals go ahead it is great news for rural broadband customers, who typically pay about £7 to £10 a month more for their broadband than those in highly competitive broadband areas.”

“Broadband has become a hugely price competitive market, which has served consumers very well. Ofcom is trying to ensure that this intense competition is felt more strongly in rural areas," he said.

In urban areas, BT has “unbundled” many exchanges, already allowing other providers to install their own equipment and set their own prices. In some of these areas, Ofcom has judged that competition is working so effectively that it can now adopt a lighter touch to regulation.

Any changes to charges would be imposed after a consultation and come into force in the summer.
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