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BT argues Ofcom is 'mistaken' on Ethernet price capping plan

Plenty of competition, says national telco

The smart choice: opportunity from uncertainty

BT has hit out at Ofcom over its plans to tighten control of pricing of the national telco's wholesale Ethernet services outside London and Hull by describing the decision to regulate high speed data links as a "mistake".

The move came as Britain's communications watchdog notified the European Commission of its proposals to further cap pricing on BT - which is the major supplier of wholesale leased line services in the £2bn-a-year UK market.

Ofcom warned in July 2012 that it wanted to come down hard on BT charges for products using leased telecoms lines - which provide high-speed links for businesses including BT's rivals who provide superfast broadband and mobile services.

But it said at the time that a "safeguard cap" on low bandwidth Ethernet lines in west, east and central London would be applied because BT faces more competition in those areas. Hull is also excluded as the telecoms operator in that city is Kcom.

Ofcom wants BT's high-bandwidth services that are leased on a wholesale basis and carry speeds above 1Gbit/s to be regulated because the watchdog says that the telco giant was found to have "significant power" in that market.

It said:

For Ethernet products with speeds up to and including 1 Gbit/s, Ofcom’s draft decision is broadly to maintain existing regulation, including charge controls and a requirement on BT to provide access on a strictly non-discriminatory basis. Ofcom is, however, proposing to impose significant price reductions outside London, at 11 per cent below inflation per year over the next three years.

Under the draft decisions, BT’s prices for leased lines based on older technology will be permitted to rise modestly to reflect higher costs in this declining market. Reductions in Ethernet charges will provide customers with a cheaper alternative and an incentive to migrate to newer, more efficient technologies.

Brussels has one month to peruse the regulator's draft plan. Ofcom is then expected to publish a final statement towards the end of March with new charge controls commencing on 1 April and staying in place for three years, if the decision is upheld by the Commission.

BT told The Register:

We believe Ofcom’s decisions to regulate very high bandwidth Ethernet and optical services outside of London for the first time is mistaken; we provided clear evidence to Ofcom that the market is highly competitive and that there is no market failure that needs regulatory intervention.

We also believe Ofcom could have gone further in deregulating legacy retail services; newer, more efficient alternatives now exist removing the need for the regulation of such legacy services altogether.

Ofcom has, however, recognised the greater competition for Ethernet services in London, and their moves will simplify and add certainty to pricing in business markets. We also believe that Ofcom’s charge controls must allow a fair return on our investment in leased lines to allow sustainable investment in the next generation of telecoms services and infrastructure.

BT's Ethernet products are already subjected to a charge control of RPI-7 per cent, but Ofcom wants to tighten that pricing by upping it to RPI-11 per cent. ®

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