BT could raise significantly the prices that it charges broadband rivals for accessing its network after securing a preliminary review from the regulator.
The pledge from Ofcom to consider BT’s case for more flexibility on its pricing is expected to ignite a bitter row with competitors such as Carphone Warehouse and Tiscali.
They are expected to complain that any increase in the amount they pay for products including local loop unbundling (LLU) - the process under which they take control of BT’s lines to supply their own fast internet services - could seriously hamper Britain’s broadband revolution.
The gathering storm comes before the telecom giant’s third-quarter results tomorrow, at which it is expected to announce further job cuts - up to 2,000, according to some analysts. The group will also be quizzed for evidence that it is on track to hit a critical 15 per cent margin target in its global services division, the unit that supplies multinationals with telecoms and IT services.
Analysts are concerned that the division, which is regarded as an essential growth engine for BT, is not meeting expectations. An update on the group’s pension fund is also expected. Some analysts estimate that the surplus on the equities-heavy £40billion fund has been wiped out after recent market falls.
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A sweeping review of BT and its grip on connections between people’s homes and the local telephone exchange was conducted by the regulator in 2003. It ended with BT - which had been threatened with being split up - creating Openreach, an independent division aimed at ensuring fair access to its network for all operators.
However, BT has told Ofcom that it is not making the 10 per cent regulatory return on investment that it was promised at the time and that it needs more flexibility. A BT spokesman said: “It is important that the company has clarity on how we can hit the 10 per cent return. How exactly that is achieved, we would need to sit round the table with Ofcom and establish.”
Ofcom said in a statement that it was “aware of BT’s concerns with respect to revenue and profit level in the future” and had agreed to an informal review to weigh up whether BT had a case. Any resulting formal review would take place this year, it said. Analysts belive that a review could involve BT charging rivals anything up to an additional £3 per fully unbundled line per month. At present a fully unbundled line costs £6.67.
Mike Williams, of Citigroup, said that any increase would “cause a bit of an issue for the retail providers of broadband as to whether they pass it [the increase] on to their customers or not”.
Steve Malcolm, an analyst at Aret?, said an increase in LLU prices would pose a dilemma for unbundled broadband providers, such as Carphone Warehouse and Tiscali. “It seems unlikely they would be able to absorb any increases given poor current profitability, while passing them on to customers would inevitabily create a backlash.”
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An iPhone with double the amount of memory was unveiled by Apple yesterday in a move expected to infuriate many existing users.
The 16-gigabyte phone’s launch comes only three months after the original 8-gigabyte version of the gadget - a combined iPod music player, mobile phone and internet surfer - went on sale.
The new version costs £329, only £60 more than the original version, which many Apple fans rushed out to buy at Christmas.
Shaun Williams, of CCS Insight, the telecoms consultancy, said: “I wouldn’t be overly happy if I had just bought one at Christmas. It would have been nice to have the option.”