BT was today ordered to cut the wholesale prices it charges other phone providers to use its landline and broadband network by between 6% and 12% over the next three years.
Media regulator Ofcom trumpeted the price cuts, saying: “Telephone and broadband customers could see lower prices as a result.”
The regulation affects BT’s Openreach division, led by Liv Garfield, which lets other providers such as BSkyB and TalkTalk run their own lines through BT’s local exchanges — a technique known as “unbundling”.
Analysts at JPMorganCazenove reckoned the price cuts were “mild” but could still cost BT as much as £50 million or around 1% of headline operating profits.
TalkTalk is likely to be the main beneficiary and it could get a 4% lift to its profits, according to JPMorgan.
Ofcom has imposed similar regulatory cuts on BT previously because the telecoms giant has “significant market power” in local exchanges and the regulator wants to foster greater competition.
BT will have to reduce its wholesale prices by between 6% and 12% below the rate of inflation, although the amount depends on the kind of phone and broadband service.
Those close to BT said the changes were largely expected.
But a spokesman added: “These proposals are complex and we will review them in depth. There are a number of areas where we believe Ofcom have not fully recognised the costs of providing services.”
TalkTalk welcomed the changes, saying that they should “underpin competition”.
The move comes as BT makes a £1 billion push beyond telecoms by expanding in pay-TV, with the launch of Premier League football coverage for the first time on August 1.
BT’s decision to challenge BSkyB, the dominant player in pay-TV sport, has already triggered a huge marketing battle.
Both companies today announced the first Premier League matches that they will be broadcasting next season.
