The government has backed BT Group PLC’s (LON:BT.A) network subsidiary Openreach in its dispute with the UK regulator Ofcom against cheaper wholesale price.
Openreach has argued that Ofcom’s planned charge controls would undermine its ability to invest in new ultra-fast broadband infrastructure.
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Culture secretary, Karen Bradley, wrote to Ofcom chief executive, Sharon White, recommending she should reconsider its plans as it could reduce demand for better services, such as fibre, and “deincentivise” investment in the network.
Bradely also questioned “whether the regulatory regime is at risk of not striking the right balance between ensuring appropriate consumer prices while driving necessary levels of long-term investment in the networks".
Openreach's plans for ultra-fast broadband
The intervention comes in the wake of Openreach’s offer to the government to improve broadband speeds across Britain without the need for universal service obligation to be introduced.
The offer, called universal broadband coverage (UBC), will cost the company between £450mln and £600mln, which Openreach expects to claw back through higher wholesale charges to rival broadband companies using its network.
The government has been trying to encourage investment in broadband network upgrades as the UK’s digital infrastructure is falling behind France, Italy, Germany and Spain. At the moment only a small fraction of households and businesses are able to access ultra-fast services based on fibre-optic lines.
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Ofcom has proposed cutting the wholesale price of the cheapest service package of 40Mbs by 40%. Its planned charge controls on existing superfast services are due to be put into place next year.
Openreach has said the watchdog’s price controls would hamper its plans to replace ageing copper telephone lines with faster and more reliable fibre optics.
Openreach customers angered by government intervention
The government has drawn criticism from some Openreach customers over its intervention. An industry source told The Telegraph: “It's completely inappropriate for ministers to interfere in Ofcom's independent decision making."
In March, BT agreed to Ofcom's request for the legal separation of Openreach to address competition concerns.
Shares in BT gained 1.13% to 273.90p in morning trading.