Ofcom wants to give rural customers the same opportunity to get broadband as urban counterparts so it has introduced a set of price proposals that would reduce how much BT (NYSE: BT) can charge competitive carriers to purchase wholesale services from the incumbent in Market 1 regions of the UK.
As defined by Ofcom, Market 1 regions consist of rural telephone exchanges where BT is the sole provider of wholesale broadband services (11.7 percent of premises).
Under its initial proposal, Ofcom wants BT to cut wholesale prices by 10.75 to 14.75 percent below inflation. By implementing these discounts, Ofcom believes it will drive further competition between competitive service providers and ultimately pass on lower-priced services to broadband subscribers in rural parts of the country.
The potential beneficiaries of the proposed price reductions would be about three million predominantly UK rural homes and businesses throughout sections of Scotland, Wales, Northern Ireland, South West England, Norfolk, Yorkshire, Cumbria and Northumberland.
However, Ofcom won't ask BT to reduce wholesale rates in Market 2 and Market 3 areas that are already served by a number of unbundled local loop (LLU) providers (TalkTalk, Sky Broadband, 02/Be Broadband) and cable MSOs such as Virgin Media.
These new price controls, which Ofcom will collect feedback on through the end of March, will only be applied on BT's 8 Mbps ADSL Max, but not its ADSL2+ services.
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