Ofcom proposes Openreach broadband and phone price cut

Openreach, BT's wholesale division, has been told to cut its prices

BT Group will have to cut the prices it charges internet providers and others who sell on services using its lines, Ofcom says.

The telecoms regulator wants the cost for use of a broadband and phone line to fall from £91.50 per year to £87.41.

The cost of using a broadband line only should also drop from £14.70 per year to £11.92, Ofcom said.

An Ofcom spokeswoman said: "We hope it will lead to cheaper broadband and landline prices for consumers."

This is the third time Ofcom has set the prices that Openreach, BT's wholesale division, charges other companies for using their lines.

The proposals have been submitted to the European Commissionwhich has a month to comment on the changes.

If approved, Ofcom expects the changes to come into force from April.

Market power

Ofcom regulates the prices charged by Openreach because, it says, the company has a dominant position in the market.

The price changes were welcomed by Talk Talk, one of the communications providers which uses Openreach lines.

A spokeswoman said: "We are pleased that the charges are being reduced - this reflects that BT's charges have been excessive in the past."

However, in a statement BT told the BBC: "We disagree with some of the underlying assumptions that they have used to determine these charge controls.

"Our primary concern throughout this process is to ensure that we are able to achieve a fair rate of return in order to continue our investment in the future of the UK's communications infrastructure.

"We will consider all options available to us, including appealing, after Ofcom confirms its final decisions."

Downward pressure

Ofcom said that the cuts were based in part on an assessment of the costs Openreach incurred running the network of underground ducts used to carry copper lines to properties.

Industry expert Matt Howett, from telecommunications analyst firm Ovum, told the BBC that the proposals followed pressure from Europe to reduce pricing.

"The European Commission has been very vocal about trying to bring down the cost for alternative operators to access incumbents' networks," he said.

But he added that BT could take its concerns with the proposed price reductions to Ofcom before anything was approved.

"Openreach will say the revisions will stop it from being able to make a fair return to be able to continue to invest in its network."