Original URL: http://www.theregister.co.uk/2012/07/05/ofcom_mulls_price_cap/

BT upset at Ofcom's wholesale leased-line price cap plan

Watchdog hopes it'll drive down costs for telco's rivals

By Kelly Fiveash

Posted in Broadband, 5th July 2012 12:02 GMT

BT is worried about Ofcom's plans to tighten its control of the national telco's wholesale Ethernet services prices outside of London.

The communications watchdog warned today that it had proposed 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.

At the same time, Ofcom has also gone soft on BT by promising a "safeguard cap" on low bandwidth Ethernet lines in west, east and central London, because those are the areas where the telecoms giant faces more competition.

Ofcom proposed today that "no prices can rise over the three-year period" for each relevant Ethernet service in those parts of the capital outlined by the watchdog.

BT said in a statement to The Register:

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. 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.

Ofcom clearly disagrees with BT's concerns. It said:

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.

The regulator proposed the following for BT's prices based on retail price index (RPI) inflation:

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

Ofcom said that public consultation [PDF] on its proposals would run until 30 August. The regulator will then review the comments, consult with the European Commission and then report its findings in early 2013.

Last month, the comms watchdog confirmed it was planning to put forward proposals to regulate 1Gbps+ wholesale leased lines that exist outside of Blighty's capital.

At the same time, Ofcom made it clear in June that it wouldn't intervene on the touchy subject of BT's so-called dark fibre (unlit/unused optical fibre), which rivals had hoped the national telco would rent out on a wholesale basis.

Brussels commissioner 'Steelie' Neelie Kroes has been lobbying for years to get incumbent telcos in Europe to allow access to "unlit" fibre already laid but not used, so that rival firms can light it themselves.

Just yesterday, the EC stalled the UK's superfast broadband plans amid competition concerns that the bidding process for public funds had turned into a two-horse race between BT and Japanese company Fujitsu, which is investing around £2bn in Britain to gain put its own fibre tentacles into the country. ®