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UK's Ofcom to cut cost of switching superfast broadband provider

By Paul Sandle

LONDON (Reuters) - Britain's telecoms regulator is imposing new constraints on BT Group Plc in its operation of Britain's biggest fiber optic network, saying it aimed to make the market for superfast broadband services more competitive.

BT sells access to its network - built in a multi-billion pounds investment over several years - to other vendors such as TalkTalk, who then offer superfast broadband to consumers.

But some of those vendors have complained that BT's market dominance gives it an unfair advantage.

Ofcom said on Wednesday it would make it cheaper to switch superfast broadband provider and would also reduce minimum contract lengths to one month from a year.

Superfast connections, which offer speeds more than four times faster than conventional broadband, are increasingly popular. The number of subscribers on BT's fiber network had grown to 1.4 million by last year.

BT's wholesale division Openreach had imposed a 50 pound charge for switching customers from one provider to another. Under the proposed changes, that would be cut to between 10 and 15 pounds.

But Ofcom stopped short of setting controls on the amount BT can charge rivals for the product, choosing instead to maintain a requirement that BT's charges are "fair and reasonable".

ECONOMIC CASE

It said competition from conventional broadband services, and from cable company Virgin Media's superfast product, were already keeping a lid on superfast prices. It also said it did not want to undermine the economic case for rolling out fiber services.

BT says it charges the same for fiber access to some 70 operators, including TalkTalk and Sky, as it does to its own retail division.

Ofcom did, however, propose it could intervene in the setting of the margin between the wholesale price BT charges and the price to its customers to promote competition.

TalkTalk had complained that there was not a large enough gap between the wholesale price and the rate at which it sells the product to retail customers.

"TalkTalk is pleased Ofcom is taking the issue of fiber regulation so seriously and that it has recognized the need for margin squeeze regulation in its proposals," the company said. "We look forward to working with Ofcom on the next stages."

BT, whose fiber network will cover two-thirds of the country by spring 2014, said it was pleased Ofcom was maintaining pricing freedom for Openreach's fiber products.

"BT has already accepted a long payback period for its fiber deployment and its wholesale fiber prices - which are amongst the lowest in Europe - reflect this," a spokesman said.

BT shares were little changed, down 0.7 percent by 6.56 a.m. ET while the FTSE 100 index was down 1.6 percent.

(Editing by David Holmes)

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