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Could this be the
end of cheap broadband?
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Broadband prices could rise after Ofcom review
Garnet Roach garnet@consumerchoices.co.uk
Broadband bills look set to rise after Ofcom announced a review of the amount that BT can charge operators to use its services (02-06-08).
The consultation is expected to last until the end of the year, but the telecoms regulator admitted that “the evidence we have reviewed to date suggests that there is likely to be a case for some increases in the charges” BT Wholesale imposes.
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"We will no doubt see a price hike for new customers"
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Although it added that it might not allow BT (www.BT.com) to increase prices as much as it wants, any price increases Ofcom allows will no doubt affect the retail costs of broadband packages and could signal the end of the cheap broadband boom.
Providers that are likely to be hit the hardest are those offering “free broadband” or “free line rental” using local loop unbundling (LLU), such as TalkTalk (www.TalkTalk.co.uk) and Tiscali (www.Tiscali.co.uk) as they have much lower profit margins, relying on savings made by LLU, which is cheaper for companies to run once they have installed their own equipment in the local BT exchange.
In a statement, “free broadband” provider TalkTalk, said: “Of course Openreach should be able to make a fair return, but that return should not be at the expense of innovation and customer choice and value.”
However, one provider that will benefit from any price increases across the BT copper wire network is Virgin Media (www.VirginMedia.com) which uses its own cable network rather than leasing lines from BT.
Michael Phillips, BroadbandChoices.co.uk product director, said: “Any price increases by BT Openreach - even by £1 or £2 a year per connection - will have a serious impact on the broadband market.
“Over the past year the trend for increasingly longer contracts has seen people signing up for up to 24 months, but if wholesale prices go up, ISPs will begin to see losses on the lengthy contracts that they must uphold and we will no doubt see a price hike for new customers.”
Related article - Cheap broadband.
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