Ofcom proposes lower prices for high-speed business lines

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 Review published last month, Ofcom proposed that BT has 'significant market power' in a number of wholesale leased line markets, and that 'charge controls' should be imposed to protect buyers of these products.

Ofcom is today consulting on the proposed level of those controls, which would apply to some of BT's wholesale leased line prices. The new controls should lead to significant 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 a form of charge control that aims to bring prices down to costs over a three-year period. 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.

The main charge controls relate to two groups of services - or 'baskets' - provided by BT. These are older leased lines using 'traditional interface' technology, and newer lines based on the faster 'Ethernet' standard for sending data at very high speeds over networks.

• For BT's traditional interface services with bandwidths up to and including 8Mbit/s, Ofcom is proposing an overall basket cap of between CPI - 6.25% and CPI - 14.25%, with a central estimate of CPI - 12.25%. This will mean prices will come down using those formulas each year, for three years from April 2016.
• For BT's Ethernet services with bandwidths up to and including 1Gbit/s, Ofcom is proposing an overall basket cap of between CPI - 9.75% and CPI - 17.75%, with a central estimate of CPI - 13.75%. Again, prices will come down using those formulas each year, for three years from April 2016.

More detail on dark fibre

In last month's BCMR, Ofcom also proposed that companies providing leased lines should be granted access to BT's networks through a process known as 'dark fibre'.

This would involve BT giving competitors physical access to its fibre-optic cables, allowing them to take direct control of the connection. The service is referred to as dark fibre because the fibre-optic cables would not be 'lit' using BT's electronic equipment. Instead, they would be 'lit' by the competitor installing its own equipment at either end of the cable.

Ofcom proposed that the price of dark fibre access should be based on BT's existing 1Gbit/s Ethernet products, for which BT provides the electronics, minus the cost of those electronics. Today's consultation provides guidance on how Ofcom would expect those costs to be calculated.

The Ethernet caps above assume that BT would be required to provide dark fibre access, and take account of its cost in doing so.

Next steps

Details of all the charge controls being proposed today are available in the consultation, which closes on 31 July 2015.

Ofcom expects to publish its final decisions in the first quarter of 2016, taking effect from 1 April 2016.