Ofcom forces BT to cut rural broadband access costs

Businesses in rural areas could soon see an increase in broadband speeds after Ofcom announced that it will force BT Wholesale to reduce the price it charges to other service providers to rent capacity on its network.

The move should mean that internet service providers (ISPs) will be able to buy more capacity from BT and increase the speeds they offer without having to charge more. It could also increase competition among ISPs.

Ofcom believes this could benefit some three million homes and businesses in areas covering the south west, Norfolk, Yorkshire, Cumbria and Northumberland in England, and throughout Scotland, Wales and Northern Ireland.

The price reduction will be 12 per cent below inflation per year, and will apply to services provided using BT's wholesale broadband network. Ofcom has applied for an exemption to this reduction on BT's ASDL2+ product, however.

Matthew Howett, a telecoms analyst with Ovum, explained to V3 that Ofcom is trying to encourage BT to invest more in the technology, which can provide speeds of up to 24Mbit/s, in order to improve rural networks.

"Because BT can make more return by deploying this technology it should entice them to do so, rather than other, slower, technologies, while competitors will be able to promise faster speeds to potential customers on this service as well," he said.

"Overall the move to reduce costs of access to BT's technologies is a good one as it helps increase the potential for competition in rural regions and keeps the UK on track to meet government and European broadband targets."

Sarah Lee, head of policy for the Countryside Alliance, said the news would be a huge boost for those in rural regions and was long overdue.

"We are delighted by Ofcom's decision to instruct BT to cut charges for firms that use the network to supply broadband to rural locations," she said.

"People living in the countryside have been left behind in the digital divide for far too long and it is vital that they have effective and affordable broadband if their rural economies are to grow and prosper."

Ofcom outlined its intention to bring in these controls at the start of the year in order to stimulate competition in rural markets. The charge controls into effect in August and will be in force until 31 March 2014.

The government will be hoping that the move helps with its goal of providing everyone in the UK with a minimum of 2Mbit/s and 90 per cent with 25Mbit/s broadband by 2015.