Ofcom consults on reductions in LLU and WLR prices

Ofcom today started a consultation on price controls for local loop unbundling and wholesale line rental products provided by Openreach, the functionally separate local access division of BT.

This consultation follows on from Ofcom’s finding in its wholesale local access and wholesale fixed analogue exchange line market reviews that BT held a position in those markets akin to dominance (in EU telecoms regulatory speak – ‘significant market power’). Each of those market reviews imposed various obligations on BT including an obligation to meet reasonable requests for network access, an obligation to publish a reference offer, cost-orientation requirements and a compliance with charge control requirements – the subject matter of today’s consultation. 

In common with other UK telecoms charge controls, the proposal is that the charge controls will take the form of an RPI-X% control (where RPI = retail price index and X is set at a level to ensure that BT’s expected rate of return reaches an ‘acceptable’ level by the end of the charge control period), although somewhat unusually a two year, rather than the more normal four year, period is proposed for the charge control.

The charge control has been structured as:

  • an individual control for metallic path facility (or MPF – the copper wire to the home);
  • an individual control for shared metallic path facility (or SMPF – the high frequency part of the copper wire to the home, used to provide broadband, rather than voice);
  • separate baskets for (i) MPF ancillary services, (ii) SMPF ancillary services; and (iii) co-mingling services;
  • an individual control for wholesale line (WLR) rental;
  • an individual control for WLR new connection; and
  • an individual control for WLR transfer.

Prior charge controls were reviewed by the Competition Commission (see here for LLU and here for WLR), and those determinations have been taken into account in this consultation as well as BT’s revaluation of its duct network. This consultation uses a WACC for BT of 8.6%, although this is subject to another consultation on the appropriate WACC.

Responses are due by 9 June.