Move could help ISPs increase capacity without raising prices
Ofcom is attempting to address the issue of slow broadband speeds in rural areas by forcing BT to lower its wholesale prices in these parts of the country.
The communications regulator said where BT has a monopoly, it must cut prices by 12 per cent below inflation because there is no competition at the wholesale level.
This should mean that internet service providers leasing BT Wholesale lines to premises in Wales, Scotland, Northern Ireland and counties such as Norfolk and Yorkshire can buy more capacity without raising prices.
Ofcom said: "BT is currently the monopoly provider in this geographic market and, even when the potential for future entry is accounted for, we considered that this did not act to constrain BT's wholesale prices.
"We believe that the benefit of the wholesale charge reductions resulting from this charge control could deliver lower retail prices and also improve broadband users' experience."
The news of the cuts has been welcomed by organisations such as the Country Land and Business Association but Charles Trotman the organisation's rural broadband expert issued a warning.
"We welcome any reduction in the prices that rural businesses and communities have to pay for broadband as rural prices tend to be higher than in urban
"However, Ofcom's announcement does nothing to help the 20 percent of
rural areas still without a fixed line broadband service.
"We are concerned that if there is a reduction in investment from infrastructure
providers as well as in prices, this may delay the provision of superfast broadband to all rural areas."
Michael Phillips, product director of price comparison site Broadbandchoices, also said that the move by Ofcom was positive but warned it would have "limited impact".
He said that rural broadband customers "already fork out an additional £10 per month over their conurbation-dwelling counterparts if the local exchange has not been enabled by LLU providers."
He said: "I would also question the quality of the service they are currently receiving as Ofcom's recent broadband map of the UK highlighted how huge swathes of the UK countryside are enduring poor connection speeds. If the UK is to be taken seriously as a tech economy, the Government needs to dedicate time and resource to bringing the whole of the UK into the online age."
Ofcom said the charge controls should come into effect in mid-August.
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