Ofcom Seeks to Cut BT Wholesale Leased Line Prices

Ofcom is touting potentially lower prices in the future for business telecom users after it published its proposals for controlling the wholesale prices that BT charges for leased telephone lines.

However BT told Techweek Europe that it remains ‘concerned’ at Ofcom’s proposals for the leased lines charge control.

Wholesale clampdown

Today’s publication of the proposals come after Ofcom’s decision last month to tighten the regulations over how BT shares its high-end telecom lines.

BT told TechWeekEurope at the time that it was “disappointed” by some of the proposals, but welcomed the recognition of increased competition in London, because Ofcom would allow for a decrease in regulations and controls in London because of the increased amount of competition in the capital.

BT is of course the major provider of wholesale services in the UK, so Ofcom’s proposals affect it the most, although there are some smaller players as well, such as Cable & Wireless Worldwide (now owned by Vodafone).

Ofcom however has BT Wholesale firmly in its sights with the proposals, as it thinks it has “significant market power in a number of wholesale leased line services, and that charge controls should be imposed in the relevant markets to protect purchasers of these products.”

Leased line price cap

Ofcom said that it expects the proposed controls will lead to real-terms price reductions for most customers of the £2bn leased lines market, such as businesses, schools, universities and libraries. It also thinks that consumer mobile and broadband operators, which of course use leased lines to transfer data on their networks, would also see cost-savings (which could in turn be passed on to their customers it hopes).

Essentially, what Ofcom is proposing is overall caps linked to inflation (measured under the retail price index, or RPI), designed to align the prices of these BT products with their cost by 2015.

It thinks these controls would be applied to both legacy leased lines using “traditional interface” (TI) technology, and newer telecoms lines based on the faster Ethernet standard for sending data at very high speeds over networks.

And Ofcom is proposing a lighter regulatory touch for low bandwidth Ethernet lines in west, east and central London, where BT faces greater competition from other providers.

BT concern

Despite Ofcom’s proposals, it is clear that BT remains concerned at some aspects of the scheme.

“Ofcom have today published their proposals for the leased lines charge control as part of its regular triennial review of the market,” BT told Techweek Europe in an emailed statement. “While we note Ofcom’s recognition of the costs and declining volumes across Partial Private Circuit products, we have some concerns about the proposals for wholesale Ethernet services pricing outside the London area.”

“We will engage with Ofcom to make our views clear,” BT added. “We believe regulation should allow a fair return on leased lines products in order to ensure sustainable investment in the future of the UK’s telecoms infrastructure.”

Interested parties have until 30 August to respond to the consultation before Ofcom makes its final decision.

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