BT Group plc (LON:BT.A) shares were given a boost on Friday after the telecoms regulator eased price controls on the company’s network subsidiary Openreach.
Ofcom said the monthly wholesale charge for a basic 40 megabits per second broadband package on its existing copper network will be reduced gradually to reach £11.92 in 2021.
Under the regulator's previous proposal, Openreach was to be hit with a £11.23 price control.
In a statement, BT said it estimates the impact of the price changes on Openreach's revenue and profit for fiscal year 2018/19 will be between £80mln and £120mln.
Shares in BT rose 4% to 241p in early deals.
READ: BT's quarterly profits fall as costs continue to rise but full year guidance unchanged
The softer-than-expected outcome from Ofcom's wholesale local access (WLA) review follows complaints from BT that strict price controls would stifle its plans to invest in upgrading the UK’s broadband infrastructure.
Openreach is replacing ageing copper lines with fibre-optic lines to improve internet speeds. It will connect fibre broadband into three million premises by 2020.
Ofcom’s decision means BT’s wholesale clients that rely on access to the Openreach network, such as TalkTalk (LON:TALK) and Sky PLC (LON:SKY), face higher charges that are likely to be passed on to consumers.
Renewed pressure to expand fibre upgrade
It also means BT is likely to face more pressure to expand its fibre broadband plans across the UK.
"Openreach's cost base will increase as a result of meeting the more demanding minimum service levels required in WLA markets," BT said.
Ofcom has also put in new measures to make it cheaper for rivals to lay their own fibre networks.
BT faces increased competition
Openreach will be forced to clear blocked underground ducts and ensure there is enough space to make way for new cables on telegraph poles by rivals wanting to piggyback on its infrastructure.
"We are considering the implications for full and fair competition of the restriction on BT's ability to vary its FTTC (fibre to the premises) and G.fast wholesale rental charges between different geographic areas," BT said.
Vodafone Group PLC (LON:VOD) is investing in its own full fibre network in partnership with CityFibreand plans to connect one million homes by 2021.
READ: Vodafone takes aim at BT through lightning fast telecoms network deal with CityFibre
Culture secretary Matt Hancock welcomed Ofcom’s new rules.
“Ofcom's measures will be instrumental in supporting full fibre roll-out by promoting competition and ensuring widespread availability of these services,” he said.
“The whole telecoms sector must now come together - in the national interest - to invest in the digital infrastructure that the UK needs and become a model of great customer service.”