BT objects to broadband price cuts

BT has said it disagrees with price cuts ordered by the telecoms regulator, The Independent reports.

Ofcom said BT should cut the prices it charges rivals to use a broadband line by about 4.5% to increase competition.

The watchdog said the price of a fully unbundled line to a property, where a communications provider takes over the line to provide broadband and telephone services, would drop to £87.41 from £91.50. A line used just for broadband would fall from £14.70 to £11.90. But BT said it had to be able to earn a fair rate of return to rollout high-speed networks across the UK. Consumers will see little effect from the price cuts.

BT's Openreach operations might also have to cut prices on its wholesale telephone line rental, should the EC accept Ofcom's proposals, The Inquirer says.

Ofcom proposes a drop from £103.68 per year to £98.81 for the 2012/13 financial year, with further drops in accordance with its RPI - 7.3% formula.

Ofcom claimed it has the right to order BT Openreach price cuts due to its considerable market power. Given that BT's copper network is by far the biggest in the UK, just about every major ADSL provider has to deal with BT Openreach if it wants to conduct business.

Ofcom said the cuts were based in part on an assessment of the costs Openreach incurred running the network of underground ducts used to carry copper lines to properties, BBC News notes.

Industry expert Matt Howett, from telecommunications analyst firm Ovum, told the BBC that the proposals followed pressure from Europe to reduce pricing.