BT (LON:BT.A) faces yet more regulation from Ofcom after the telecoms regulator has announced a price cap for the company’s superfast packages.
Ofcom said that these caps will lead to “real-terms price reductions” for internet service providers and other firms including O2 (ETR:O2D), Vodafone (LON:VOD) or Plusnet who will be able to pass savings onto customers.
Not all packages will be capped, with relief to BT and investors in the company. Only the cheapest superfast broadband packages will have a price cap, allowing BT to have complete control of the faster broadband packages.
Under the new rules enforced by Ofcom, the price of the cheapest super fast broadband line will gradually come down from £7.40 per month to £4.40 in 2021. This change will affect BT’s revenue by an estimated £70 million in 2019, though estimates have varied.
Following the announcement, there was question that BT would invest more into the faster networks, leading the chief executive of TalkTalk (LON:TALK) to say that these packages should also be capped.
“Ofcom’s decision to only regulate some products also risks entrenching a speed divide, with customers having to make a false choice between fair prices or higher speeds” she said.
A spokesperson from BT has said: “Ofcom have proposed a number of ways to address fibre pricing and service so we will be reviewing these in detail, but on first viewing they do not appear to incentivize more investment in ‘full fibre’ networks,”
“The UK needs a regulatory framework that encourages investment and rewards risk. Building digital infrastructure is very expensive with long payback periods and we won’t recover our more than £3bn investment in fibre until after this charge control period,” he added.
The aim of the price caps is to align the prices of these BT products with their cost by 2015″, according to Ofcom.