UK: Ofcom proposes lower prices for business telecoms

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Ofcom has today proposed controls on the wholesale prices BT charges for products using leased telecoms lines, which provide vital high-speed links for businesses and providers of superfast broadband and mobile services.

In the Business Connectivity Market Review1 published last month, Ofcom proposed that BT 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. The consultation published today identifies the proposed level for those price controls.

Ofcom 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.

Consumer mobile and broadband operators, which use leased lines to transfer data on their networks, would also see savings which could be passed on to customers.

Ofcom is proposing 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. This form of charge control also provides an incentive for BT to make efficiency gains.

These controls mainly relate to two groups of services (or ‘baskets’) which are provided by BT: 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.

  • For BT’s TI services, Ofcom is proposing an overall basket cap of between RPI + 0% and RPI + 6.5%, with a central estimate of RPI + 3.25%.
  • For BT’s Ethernet services, we are proposing an overall basket cap of between
    RPI − 8% and RPI − 16%, with a central estimate of RPI − 12%.

For low bandwidth Ethernet lines in west, east and central London, where BT faces greater competition from other providers, Ofcom is proposing a lighter form of price control – a safeguard cap on each relevant Ethernet service, ensuring that no prices can rise over the three-year period. Here to read more.

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