Sky and Talk Talk might not pass on savings from Ofcom's price cuts

UK INTERNET SERVICE PROVIDERS (ISPs) Sky and Talk Talk will not commit to cutting consumer prices, should telecom regulator Ofcom's recent proposals for wholesale broadband price reductions go into effect in April 2012.

Ofcom's proposals, which have yet to be approved by the European Commission, would result in firms such as Sky and Talk Talk paying less for reselling lines from BT Openreach. However as Ofcom announced that the number of unbundled lines had surpassed eight million, Sky and Talk Talk told The INQUIRER that they were not committing to passing any price savings on to customers, while BT is considering appealing Ofcom's proposals.

A Sky spokesperson told us, "Whilst it's too early to comment on the specifics of these draft proposals, we continue to work with Ofcom and the rest of the industry to help create the right framework to deliver more choice, quality and innovation for consumers."

Perhaps not surprisingly Talk Talk seemed happy about the possibility that wholesale broadband prices might fall, but like Sky would not commit to passing on any savings to its customers. A spokesperson for Talk Talk told us, "The proposed LLU [Local Loop Unbundling] charges are within expectations. We are pleased that the charges are being reduced - this reflects that BT's charges have been excessive in the past. We are reviewing the detail."

BT on the other hand seemed none too pleased at the prospect that its wholesale prices, which are set by Ofcom, might be reduced again. In a statement, BT said, "Whilst the prices are within the range outlined by Ofcom in November, we disagree with some of the underlying assumptions that they have used to determine these charge controls."

Since BT invests to string copper and, more recently fibre, Ofcom's apparent intent to force down prices could affect the telecom's willingness to invest in its infrastructure. BT was quick to point out that as a public company it needs to consider its bottom line, stating, "Our primary concern throughout this process is to ensure that we are able to achieve a fair rate of return in order to continue our investment in the future of the UK's communications infrastructure."

BT added, "We will consider all options available to us, including appealing, after Ofcom confirms its final decisions," suggesting that its customers should not count on lower prices.

An Ofcom spokesperson told The INQUIRER that it doesn't have the power to set consumer broadband prices, but hopes wholesale price cuts will be passed on to consumers. But, judging by Sky and Talk Talk's non-committal statements, the relationship between wholesale prices and those paid by consumers is uncertain. µ