Telecom authority Ofcom has said that millions of homes and businesses in rural parts of the UK could see a significant reduction in broadband prices by the end of this year, after it cut the wholesale price that BT charges other Internet service providers (ISPs).

The move could benefit around 3 million homes and businesses, said Ofcom. 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.

Ofcom has asked BT to reduce its rates by 12% below inflation per year for broadband services of up to 8Mbps.

At present, BT is the only operator in many smaller telephone exchanges and ISPs have to factor ‘renting’ BT’s equipment into their price plans.

Ofcom expects the move to trigger more competition between retail ISPs and to lead to cheaper retail prices and better quality services.

Ofcom said it expects "the level of the charge control to incentivise efficient investment by ISPs to roll out their own networks in these areas and enable them to compete with BT Wholesale. It will also incentivise BT Wholesale to upgrade services where it is efficient to do so."

Earlier this month, Ofcom published the first interactive broadband map of the UK.

The map shows that nearly 70% of the UK has broadband access, but speeds and uptakes varying greatly in urban and rural areas.

Most rural areas have lower speeds and a greater proportion of customers who receive speeds less than 2Mbps, finds the report. Ofcom cites poor infrastructure and low housing density as reasons for this disparity.

Ofcom’s charge controls could narrow the difference between prices that consumers in rural and urban areas are paying for broadband services.

This difference is mainly due to the more limited set of offers available which is a result of the higher costs of delivering broadband to customers in rural areas.

Ofcom has also exempted ADSL 2+ technology from charge controls. The communications regulator hopes this would encourage BT Wholesale to invest in this new technology where it is cost effective to do so.

ADSL 2+ is capable of supporting faster broadband speeds than ADSL, with a maximum possible speed of 24 Mbps over the copper network.

The charge controls will come into effect by mid August 2011, said Ofcom.