BT review could push up broadband prices

 

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Posted on 6 Feb 2008 at 12:11

A review of the way BT charges rivals for access to the local loop could lead to an increase in broadband fees.

The move comes as part of its consultation with Ofcom over concerns that Openreach, the independent division BT created to ensure operators had access to its network, is not meeting financial expectations.

"Openreach is allowed a 10% return and at the moment we're not making that," says a spokesperson for BT. "We need to find a way of ensuring that we make a certain level of return, whether that's through pricing or finding new efficiencies. No specific proposals have been discussed - this is part of our ongoing consultation with Ofcom."

Analysts suggest this could lead to BT increasing its Local Loop Unbundling charges. However, Tiscali believes BT needs to look closer to home first.

"This review doesn't necessarily mean any price increases are on the way. There's an ongoing project to look at Openreach's efficiency and the margins there, and you can't talk about price increases without looking at that first," says Jodi Haskayne, spokesperson for Tiscali.

Ofcom admits it's looking at the situation, but claims that Openreach has been a success for all parties so far.

"We are in the process of reviewing these charges as part of our regular programme of regulation review," says a spokesperson. "We are aware that BT has raised issues with respect to the expected future returns on the regulated products but note to date Openreach has achieved reasonable rates of returns on these services."

The news comes just days after a survey by uSwitch revealed that broadband prices had dropped by a third over the past four years.

Author: Stuart Turton