BT to fight Ofcom's wholesale price cuts

 

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By Stewart Mitchell

Posted on 6 Jul 2012 at 09:48

BT will fight Ofcom-imposed price reductions on its leased line business, claiming proposals laid out by the regulator could damage investment in fibre infrastructure.

Ofcom has opened a consultation on proposals to force BT to reduce the prices of its Ethernet leased lines by up to 16% outside London, claiming the company is effectively a monopoly in many areas.

Leased lines are rented out by businesses to boost bandwidth, as well as by rival communications providers. The prices are set every three years, and in this round, Ofcom is seeking reductions between 8% and 16%.

“We have some concerns about the proposals for wholesale Ethernet services pricing outside the London area,” BT said in a statement. “We will engage with Ofcom to make our views clear."

BT believes 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

The company said the pricing plan was a disincentive to investment.

“BT believes 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," the company said.

Simulated competition

However, Ofcom said the proposals should not affect the superfast broadband rollout, and that the caps were necessary to keep wholesale prices low in areas where BT was the only provider.

“We found in the review that BT has significant market power in these sub markets - in particular in 1Gbit/sec and above lines outside London,” an Ofcom spokesperson told PC Pro.

“The pricing cap would bring the prices BT can charge down to a cost level, which is what it could have charged if there had been competition - by imposing the cap it reflects what would happen if there were more the one player.”

According to Ofcom, the reductions could mean cheaper prices for mobile or rival ISP users, but BT said that as the price caps related to wholesale prices there was no guarantee that reductions would be passed on to consumers.

Prices for BT’s older, lower-bandwidth services, also sold to businesses and service providers, would be capped at between between 0% and 6.5% of current levels for the next three years, after inflation was taken into account.