Millions of broadband bills to see an increase by profiteering BT

It has been claimed that because of price rises millions of broadband users will face over a 30gbp increase in charges for annual broadband internet over the next three years.

By 2012 there will be a 35 percent increase in the wholesale charges imposed on rival providers by BT to run telephone services and internet access over its network.

As many as 800 000 homes will be effectively priced out of having a broadband connection at home because of these price increases, it has been warned.

A recent study by an academic from Warwick Business School is the basis for the criticism and he argues that by increasing the cost of broadband BT is effectively profiteering.

The current wholesale costs are from £81.69 per year to provide a home with a broadband link, which BT is planning to increase by 11 percent in April to £91. This has essentially been agreed by Ofcom, the industry regulator, who is willing to allow an increase to £112 a year by 2012, which compared to today’s figures is an increase of 37 percent.

BT will also still be using its existing copper wire network to run broadband services when the increase is made, although it has pledge to build a new high-speed fibre-optic network to replace this at a cost of £1.5 billion. This cost will be passed on to all consumers according to Ofcom.

Following his analysis Dr Chris Doyle of Warwick Business School said that BT was on course for having one of the most expensive wholesale prices in Europe when it should in fact be amongst the cheapest.

He said ‘BT is very inefficient, or it is exaggerating its costs or it is deliberately being allowed to make excess profits by the regulator.’

The Government policy to ensure that customers from all groups of income should be able to access broadband is something that these increases are at odds with said Dr Doyle, who received his finance for the work by Carphone Warehouse, which uses the existing BT copper wireless network to offer its TalkTalk internet service.

He said ‘The Government recently set out ambitious plans to include all households in the digital revolution so it is puzzling that the regulator is proposing to allow BT to increase wholesale prices and so raise the barrier for lower income households. Even more puzzling is why BT is seeking a price increase in the first place. The UK introduced competition into telecoms before almost every other EU member state, it has one of the highest population densities in Europe and a population size which allows for scale economies. All these factors, together with the elaborate regulatory oversight of Ofcom, should combine to make BT the most efficient and lowest cost provider in Europe with no need for increases to wholesale charges warranted at this stage.’

He also added ‘I conclude that either BT is much less efficient than it should be, or it is exaggerating its costs or it is being allowed to make excess profits by the regulator.’