Ofcom Proposes Business Line Price Caps For BT

Steve McCaskill is editor of TechWeekEurope and ChannelBiz. He joined as a reporter in 2011 and covers all areas of IT, with a particular interest in telecommunications, mobile and networking, along with sports technology.

Follow on: Google +

Ofcom says price controls will promote business broadband competition, but BT says they will discourage investment

Ofcom has published proposed caps on the price BT can charge rivals for leased lines used by businesses, public sector organisations and mobile operators, claiming the controls will promote competition and reduce costs which could then be passed onto customers.

The regulator first announced plans to intervene last month its Business Connectivity Market Review and argues that BT has too much power in the £2 billion leased line market.

“Ofcom is proposing a form of charge control that aims to bring prices down to costs over a three-year period,” said Ofcom. “This type of control, which is linked to inflation based on the consumer price index (CPI), provides an incentive for BT to make efficiency gains.”

Proposed caps

Fibre © Sam72 Shutterstock 2012The proposals would apply to both traditional interface lines of up to 8Gbps and Ethernet connections of up to 1Gbps. The City of London and Docklands would be excluded because Ofcom believes there is sufficient competition there, and Hull, where Kcom is the market leader.

A consultation into the matter is ongoing, and closes at the end of July. If the proposals are passed, they could come into effect in the first quarter of 2016.

The consultation will also determine how to price access to BT’s dark fibre. Currently, Openreach makes leased lines available to other companies on a wholesale basis, meaning the line and the equipment used to power the connection are bundled. The regulator wants third party communications providers to be able to ‘light up’ this dark fibre using their own equipment.

Ofcom is proposing the price of dark fibre access should be based on BT’s existing 1Gbps Ethernet service, minus the cost of BT’s equipment to light up the fibre.

BT opposition

BT opposes the plans, arguing that any change to regulation would distort competition, reduce returns on existing investments and remove any incentive to spend more money on its network.

“These are proposals for discussion, so we’ll be making our views known to Ofcom,” a BT spokesperson told TechWeekEurope. “We believe there should be less regulation in this market, not more, as businesses already have a diverse and growing choice amongst a large number of providers.

“More regulation could discourage future investment in the UK’s telecoms infrastructure.”

However, rival TalkTalk has tentatively welcomed Ofcom’s proposals and says it will review them to see if they go far enough.

“We welcome Ofcom’s acknowledgment that British businesses are paying too much for their connectivity and its proposal to drastically cut prices BT’s lower speed Ethernet prices,” said the company. “Even larger price reductions are needed for high speed 10G Ethernet circuits to fuel digital Britain and we are reviewing whether the proposals for dark fibre will address this problem quickly enough.”

 What do you know about fibre broadband? Take our quiz!