Ofcom outlines proposals for wholesale leased line charge controls

15 Jun 2015

UK telecoms regulator Ofcom has proposed controls on the wholesale prices that fixed line incumbent BT charges for products using leased telecoms lines, following up on the publication of its ‘Business Connectivity Market Review’ last month. In a press release confirming its plans, the regulator said that, with BT having been classified as holding ‘significant market power’ in a number of wholesale leased line markets, ‘charge controls’ should be imposed to protect buyers of such products.

To that end, Ofcom has launched a consultation on the proposed level of those controls, adding that it expects these to lead to ‘significant real-terms price reductions for most customers of the GBP2 billion (USD3.11 billion) leased lines market, such as businesses, schools, universities and libraries’. Further, the regulator has suggested that 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.

As per its proposals Ofcom has suggested a form of charge control that aims to bring prices down to costs over a three-year period, saying that 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. For the telco’s ‘traditional interface’ services with bandwidths up to and including 8Mbps Ofcom has proposed an overall basket cap of between CPI – 6.25% and CPI – 14.25%, with a central estimate of CPI – 12.25%. Meanwhile, for BT’s Ethernet services with bandwidths up to and including 1Gbps Ofcom has recommended an overall basket cap of between CPI – 9.75% and CPI – 17.75%, with a central estimate of CPI – 13.75%. For both types of service prices would be reduced using the aforementioned formulas each year, for three years starting from April 2016.

In addition, with Ofcom having last month proposed that companies providing leased lines should be granted access to BT’s networks through a process known as ‘dark fibre’, it has confirmed that it believes that the price of dark fibre access should be based on BT’s existing 1Gbps Ethernet products, for which BT provides the electronics, minus the cost of those electronics. However, the regulator has said it expects the consultation regarding the price proposals to provide guidance on how those costs will be calculated.

The consultation on the price proposals will close on 31 July 2015, with Ofcom having said it expects to publish its final decisions in the first quarter of 2016, taking effect from 1 April 2016.

United Kingdom, BT Group (incl. Openreach), Ofcom