Ofcom allows BT to raise rivals’ prices by 11%

More bad news for BT customers coming by the looks of it. BT could charge other telecoms carriers up to 11% more for using its network under long-awaited pricing proposals published this morning by Ofcom, the telecoms watchdog.

Ofcom announced in May that it would formally consider letting BT’s Openreach division raise the prices it charges competitors for wholesale access to local exchanges and has today issued a new range of tariffs.

The biggest increase would come in fully unbundled lines — when a rival takes over BT’s line to provide broadband and telephone services — where annual rental charges could rise from £81.69 today to a maximum £91, or 11 per cent, for the 12 months beginning April 1.

For shared unbundled lines, where a rival shares the line with BT for the provision of broadband only, and residential wholesale line rental, the maximum proposed increase is 4 per cent — from £15.60 to £16.20 and from £100.68 to £104.40 respectively.

For business wholesale lines, Ofcom has capped next year’s prices at £110, their current level.

The regulator said the tariffs “are designed to promote coninued competition in the provision of voice and broadband services and to ensure that Openreach has the appropriate incentives to invest in delivering the services required by customers”.

BT had vigorously lobbied Ofcom over Openreach because its costs have increased alongside greater competition in broadband from local loop unbundlers.

However, today’s proposals are seen as broadly neutral for BT rivals, such as Carphone Warehouse which offer “free” broadband based on the current charges whose profitability relies heavily on savings made by unbundling.

Dan Gardiner, an analyst at Teathers, the stockbroker, notes that the mid-point of Ofcom’s proposed prices increase is 53p a month, which is in line with his expectations of a 50p rise.

Openreach was created by BT in January 2006 as a standalone business to avoid an enforced dismantling of its network ownership and the services other BT divisions use it for. The “functional separation” model that emerged is being pressed on other nations’ regulators by the European Commission.

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