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Regulator tightens grip on BT as it mulls superfast broadband price cap

Ofcom is proposing to reduce the amount BT’s Openreach division can charge competitors for its superfast broadband service
bt and openreach vans
Earlier this month, Ofcom agreed a deal with BT to make Openreach a legally separate company

Regulator Ofcom has tightened its grip on beleaguered telecoms giant BT Group PLC (LON:BT.A) once again after proposing a cap on wholesale superfast broadband prices.

The proposals – assuming they go ahead as planned – would cut the price BT’s infrastructure arm, Openreach, can charge competitors for its superfast service, which has speeds of up to 40 megabits per second.

Currently, BT charges its competitors such as Sky and TalkTalk £88.80 a year in wholesale charges for each individual superfast package, although Ofcom wants this to be capped at £52.77 by 2020/21.

That would force BT to slash the best part of £100mln in charges to its rivals.

The price changes are part of a wider package suggested by Ofcom, which also wants Openreach to adhere to stricter rules on repairing faults and installing new broadband lines more quickly.

“Our plans are designed to encourage long-term investment in future ultrafast, full-fibre networks, while promoting competition and protecting consumers from high prices,” said Ofcom’s competition group director Jonathan Oxley.

“People need reliable phone and broadband services more than ever. We're making sure the market is delivering the best possible services for homes and business across the UK.”

The news is likely to be welcomed by millions of consumers, with Ofcom expecting the cuts to be passed down.

Largest ever fine

Openreach owns and operates the vast majority of the UK telecoms infrastructure and other providers must pay to use the network.

Because of the company’s dominance in the sector, Ofcom dictates the prices that BT and its Openreach subsidiary can charge in order to protect other firms and consumers.

The regulator has been tough on BT recently. Only this week it fined the group £42mln – its largest fine ever issued – for failing to correctly compensate internet firms for delays in fixing problems.

BT was also forced to set aside a further £300mln  to repay the compensation owed to the firms, and Ofcom promised to come down hard again if the company fails to meet the higher standards set out today.

BT’s not been doing a lot of self-help though. In January, shares tanked following corruption at its Italian business.

After opening lower, BT shares actually gained 1.4p on Friday morning to trade at 318.5p.

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