Cheaper broadband deals for rural areasOfcom price plans may cut cost of rural broadband

20 January 2011

Broadband costs more in rural areas

Broadband costs more in rural areas

Cheaper broadband could be on the cards if you live in the countryside, if proposals today by internet watchdog Ofcom go ahead.

The price - or retail rate - that a broadband provider charges its customers is influenced by how much it has to pay to use the broadband network, which is often owned by a separate company. This is known as the wholesale rate. 

In parts of the UK - particularly rural areas - BT Wholesale is the sole provider of wholesale broadband services. Ofcom says this applies to nearly 12% of the UK by population - around 3 million homes and businesses (see map). 

Where this is the case, Ofcom has proposed cutting the price that BT Wholesale is allowed to charge broadband providers that piggyback on its network. The proposed price reductions are between 10.75% and 14.75% below inflation.

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Urban/rural digital divide

More than 85% of the UK - mostly urban and highly populated areas - is served by two or more wholesale broadband operators. One of the rivals to BT Wholesale is cable network Virgin Media. 

Competition has also increased in recent years due to 'local loop unbundle' offers where providers install their own equipment on BT exchanges. Doing so allows them to offer faster and usually cheaper broadband packages. 

But where BT is the only wholesale provider, broadband customers have a much more limited choice of broadband deals, and the fastest, cheapest deals are unlikely to be available.

The Which? broadband review lets you find the best broadband deal for you, including letting you filter your search to exclude deals with restricted geographic availability.   

Lower prices and faster broadband?

Ofcom has said that its proposed price controls could narrow the difference between prices that broadband customers are paying in rural and urban areas. It expects competition between retail internet service providers (ISPs) who could reduce their broadband prices due to lower wholesale rates. 

Ofcom also believes that if wholesale prices come down, ISPs could invest in more broadband capacity for their customers without increasing costs. 

Which? broadband expert Ceri Stanaway says: 'It's incredibly frustrating for broadband customers on the wrong side of the digital divide to see ads and marketing for cheap, fast broadband - only to discover that they must pay more for a slower service because of where they live. 

'There's more work to be done to narrow the urban/rural gap, but Ofcom's proposals should go some way to addressing the imbalance. If the changes go through, we hope that broadband providers in rural areas seize the opportunity to compete to offer existing and prospective broadband customers a better deal.'

Ofcom expects to publish a statement in the summer. The charge controls are planned to come into effect shortly after publication of the statement.

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