BT could be obliged to lower wholesale broadband prices in rural areas, according to proposals from communications regulator Ofcom.
Ofcom has proposed significant reductions in the prices that BT Wholesale can charge internet service providers (ISPs) in parts of the country where it is the sole provider of wholesale broadband services - mainly in rural areas.
The proposed price reductions are to a level between 10.75 percent and 14.75 percent below inflation.
As a result, Ofcom expects competition between retail ISPs, who will benefit from the lower wholesale prices, to lead to reductions in retail prices which could benefit consumers.
The changes may also lead to better quality services, said Ofcom, by enabling ISPs to allocate more bandwidth per customer which could deliver faster broadband services.
The proposals could benefit nearly 12 percent of UK households or around 3 million homes and businesses, said the regulator. These are mostly in rural areas including parts of Scotland, Wales and Northern Ireland, as well as the South West of England, Norfolk, Yorkshire, Cumbria, Northumberland and other areas.
In other areas of the country, where there is some wholesale broadband competition delivered through local loop unbundling, Ofcom is not proposing any charge controls.
"Ofcom's aim is to incentivise BT Wholesale to continue to improve its efficiency. This could make it cheaper for other communications providers to roll out services and should ultimately benefit consumers in those areas through lower prices," said the regulator.
In response to the proposals, a BT spokeswoman told the BBC: "It is key that the details strike the right balance between control and incentives to invest in rural areas.
"As the UK's main investor in rural broadband, we will engage fully in the consultation process which follows to make our case."
Earlier this month, BT announced that over 40 market towns would be getting "super-fast" broadband over fibre connections next year. The rollout is part of a £2.5bn BT fibre-broadband programme to increase UK broadband speeds generally, including in rural areas.