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Ofcom to Cut Openreach Prices: Will it Increase Fibre Broadband Take-up?

Openreach’s wholesale prices to drop dramatically, but will it make a difference in fibre broadband adoption? welcomes guest contributor Julia Kukiewicz, Editor of, a consumer site focused on UK broadband (among many others).

Later this year Ofcom will force Openreach to radically cut the wholesale cost of installing a fibre line, from £50 to £11. The regulator says that this price cut, which is currently waiting on European Commission approval, will promote competition among the ISPs that resell BT fibre. That’s BT, Sky, TalkTalk, Plusnet, Primus and EE, among many others.

How big a difference, though, will an Openreach wholesale price cut really make to consumers?

Let’s consider how the ISPs pass on these wholesale prices today by looking at a sampling — three of the biggest providers, and three substantially smaller — of how much they are currently charging new customers to sign up for fibre broadband:


£30 (free with up to 76Mb)










Free (£50 without Plusnet home phone)

Almost all of the ISPs are already incorporating part of the wholesale fee into their monthly fee or just eating it, with the expectation that their customers will buy extra services and/or stay and pay beyond their minimum contract term. Even with that concession, though, the fees could be a significant barrier to standard broadband households that are considering making the leap to fibre broadband. Psychologists call this ‘the pain of paying’: it’s unappealing to make a big upfront payment for a service, even if you feel that the monthly price is pretty reasonable. Similarly, almost all of the listed ISPs offer fibre only on an 18-month contract (Sky being the exception, offering a 12 month tie-in), which is a big commitment for a household looking to switch. Thus, at face value, reducing the wholesale installation fee and contract length for fibre (Ofcom want Openreach’s fibre contracts to go down from a year to a month) looks to make BT FTTC more attractive, as long as the cuts are passed on. In the case of fees, at least, that certainly seems likely. It is expected that the effect will be less pronounced with contracts, because there are a lot of other pressures encouraging ISPs to offer long contracts, but even 12-month fibre contracts would be an improvement in terms of encouraging fibre switching. However, although price seems like an important barrier to signing up households to fibre, the level of that factor’s importance is far from assured.

Let’s pause here to consider the current rates of fibre take-up. As of March 2014, about 14% of UK households who have a fibre service available actually take it. Take-up has been growing over the past few years — just a year before the rate was just 10% — but it is still pretty low. At the same time, infrastructure availability is growing fast. BT FTTC is now available to around 70% of UK premises, and will soon be available to many more as it rolls out services on behalf of the local councils that awarded it BDUK money. Based on current projections, fibre broadband penetration could exceed 90% by the end of 2015. In this environment, price barriers like fees and long contracts may be stopping households from taking up fibre, but taking the popularity of pay TV services as an example, the ‘pain of paying’ explanation can clearly only take us so far. Logo

In a 2012 report entitled Strategies for Superfast Demand Stimulation, the broadband monitoring group Point Topic suggested that the focus needed to shift from building infrastructure to building customers that actually want it. Successful fibre broadband network areas — that is, areas where take up was high, giving companies a return on their investment and hence more impetus to continue expanding the network — were not areas with the most coverage and the lowest prices, according to Point Topic, but instead were places where real and active support from local people made people enthusiastic and excited about signing up for better broadband. And we are already seeing this in some areas with broadband champions, and even more strongly in communities which have taken the initiative to work with a local ISP, such as Frilford, Oxfordshire working with Gigaclear and Forest of Bowland and the Lune Valley, Lancashire working with Broadband for Rural North (B4RN)*. The bigger ISPs, though, haven’t taken the initiative to really stimulate demand in this way, and unless they do we may be waiting a long time for fibre take-up to really increase, even with Ofcom’s cut in wholesale costs.

Julia Kukiewicz

By Julia Kukiewicz

A guest contributor, Julia Kukiewicz is an editor for, a consumer site focused on UK broadband (among other things).