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OFCOM wants to force BT to slash costs of rural broadband

# 24 January 2011, 09:49 by Chris T

OFCOM is pushing for major price cuts for broadband customers in up to three milllion homes in rural parts of the UK.

The regulator’s proposal is for wholesale prices to fall by up to 15% below inflation, every year for three years. The measure would apply to customers on any telephone exchange where only BT Wholesale has installed broadband equipment.

In most exchanges around the UK, other internet service providers (ISPs) have installed their own equipment – a process known in the industry as ‘unbundling’ – allowing them to sell their own fully-developed broadband products direct to customers and to set their own prices.

In many less profitable locations only BT equipment is installed. Other ISPs can sell services to customers connected to these exchanges, but in these circumstances their offering amounts to little more than a re-branding of BT’s own broadband product and their scope for varying the price of their service is limited.

Where competition exists, broadband prices are on average £7-£10 a month lower than in places where it does not.

BT has acknowledged OFCOM’s concerns but warned that it must not deter investment.

“As the UK’s main investor in rural broadband, we will engage fully in the consultation process which follows to make our case,” a spokeswoman said.

OFCOM has the power to enforce its proposals. Any such move would come in the summer, following a consultation process it has now launched.

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