Millions of people are set to get cheaper internet access after BT was told this week to slash the prices it charges rival firms in rural areas.

Ofcom, the UK telecoms regulator, has instructed BT to cut annual prices by 12% below inflation for the next three years for firms that use its network to supply remote rural locations. It is hoped these buyers will then pass on cuts to consumers.

Key Points

  • BT ordered to cut prices to firms that use its network
  • Firms then expected to pass on cuts for consumers
  • Up to three million homes and businesses could benefit

Up to three million homes and businesses will benefit from the reduction, it is claimed, especially those located in the hard-to-access parts of Scotland, Wales and Northern Ireland, the South West, Yorkshire, Northumberland and Cumbria.

The reduction does not include connection, which reduces the effective price cut to about 11%, Ofcom adds.

Higher delivery costs mean customers in remote areas pay more than those in the cities and towns, but the regulator wants the cut to encourage both internet providers and BT to invest more in upgrading their systems.

This should result in lower prices and also faster access speeds, while also encouraging more providers to install their own networks to compete with BT.

The regulator says 78% of broadband customers are in densely-populated and urban areas, which have effective competition and get a good service, but deals are still limited for the population outside these areas.

BT says nearly two-thirds of its 5,500 telecoms exchanges serve the remote area market, but they account for only 12% of customers.

A BT spokesman says: "Unlike many other providers, despite the higher costs involved, BT's consumer broadband products have always been priced the same in rural areas as in urban areas.

"This ruling is therefore of more relevance to those internet service providers who currently charge a supplement in rural areas."

Ofcom flagged its intention to impose the price cuts in January when it indicated the reductions would be in a range of 10.75% to 14.75% below inflation.

Caroline Spelman, Secretary of State for Environment, Food and Rural Affairs, says: "Decent internet access is vital for rural business and education, helping to promote social inclusion and improving life in rural areas right across the country."