Ofcom wholesale price plan unlikely to lead to cheaper rural broadband, ISP exec warns

By Derek du Preez
25 Jan 2011 View Comments

Trefor Davies, chief technology officer for business ISP Timico, has questioned whether Ofcom's recent proposal to cut BT's wholesale prices will boost fast broadband coverage in rural areas.
Last week, Ofcom said it could force BT Wholesale to lower the price it charges other ISPs to use its infrastructure.

The regulator is proposing price reductions of 10.75 per cent to 14.75 per cent below inflation for areas where BT is the sole provider of wholesale broadband, which is mainly in rural areas.
The aim is to reduce the price charged to end-users for these services, and Ofcom said that around three million homes and businesses could benefit.

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However, Davies said that while he welcomed the move, it is likely that the cost reduction will never actually reach the people living and working in rural areas, and a bandwidth cost reduction would be more beneficial.

Davies blogged the following warning to those living in rural areas:

"I'm not quite sure that it will achieve what Ofcom thinks it will achieve though. Yes we might find retail ISPs lowering their prices marginally for customers in these areas. Consumer ISPs already charge rock-bottom prices so a cut of 15 per cent off a low number won't make much difference.

"A big chunk of the cost [for ISPs] is in the bandwidth used so whilst a reduction in line rental is good, a reduction in bandwidth costs would be better. We may find that competition does drive down the cost to the end-user a little in these cost-reduced areas but there is also a fair chance that ISPs will just pocket the additional margin and maintain homogenous pricing policy across the whole country. More packages mean more complexity and ultimately more cost."

Ofcom plans to publish a statement in the summer, after which the proposals will take effect.


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