Ofcom has announced plans to improve competition and promote investment in the superfast broadband market, specifically targeting BT's pricing strategy to ensure other providers can compete.
Given that BT currently dominates the superfast space with its network, there are concerns that other providers aren't able to compete at a profitable level. As such, a new pricing rule has been proposed, which would mean that BT "must maintain a sufficient margin between its wholesale and retail superfast broadband charges in order to allow other providers to profitably match its prices".
In essence, it means that BT will still be able to set its prices, but not in such a way that could prevent other broadband providers from being able to comfortably compete for customers. BT is currently the largest retail provider of fibre broadband services over its network, but it's required to allow other operators to use that network to sell superfast broadband to consumers.
This is under a process known as 'virtual unbundled local access' (VULA), and the new rules are related to this very process – BT would have to ensure that the margin between its wholesale VULA charges and the price it charges its customers is sufficient for rival operators to compete and make a profit, thereby ensuring healthy competition and offering more choice for consumers.
The changes have been proposed because of the exceptional growth in the superfast broadband market in recent years. When Ofcom introduced the requirement for BT to allow other operators to use its upgraded fibre network, there were fewer than 100,000 superfast broadband connections on it, but this has now risen to around 3.4 million.
Take-up is expected to increase further over the coming years, so the new measures have been designed to ensure that different operators can effectively compete in the market, which will, in turn, encourage investment, while ensuring that consumers can benefit from competitive prices and high-quality services.
The rules are still in the draft stage, having been notified to the European Commission yesterday, but if they're approved, they'll come into force in March this year. But, why wait? It could take a while for any pricing changes to take full effect, so if you're paying too much for your broadband, TV and phone package, use our comparison tool to see if you could get a better deal.
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