Oftel to act over BT pricing

Industry regulator finally admits UK business are paying too much for leased lines. Antony Savvas reports

Industry regulator finally admits UK business are paying too much for leased lines. Antony Savvas reports

The battle to reduce leased-line prices in the UK for broadband data network access could finally be over, following the decision by regulator Oftel to take action over BT's dominant position in the market.

However, the conclusion Oftel reached last week, that businesses in the UK are paying higher prices for leased lines than in other European countries, could have been made two years ago.

In previous consultations, Oftel found that the UK was no more expensive than some other large European countries but ignored the fact that prices were higher than in the US and are above the European average.

The unbundling of BT's local loop is expected to take place from July 2001, and promises to allow a broader range of telecoms suppliers to offer always-on dedicated high bandwidth network connections. The hope is competition will create lower prices for business.

Together with the wider availability of Asymmetric Digital Subscriber Line (ADSL) services, and the eventual roll-out of third generation mobile services from 2002, the UK might now be in a more competitive position in a global e-business market.

Oftel will make its final recommendations regarding the pricing of leased lines in November, after a relatively short consultation period, which started this January. Oftel consultations taken more than a year in the past.

Defending the time taken for this new leased-line consultation, an Oftel spokeswoman said, "Since previous consultations, there have been changes in the market in Europe, which has meant BT's prices are, on average, now more expensive than other countries."

In its latest consultation, Oftel chose to ignore price comparisons with the US market on the grounds that heavy discounting there and a lack of clear data made it impossible to make accurate comparisons with the UK.

To make its recommendations, Oftel relied on figures showing price comparisons between the main established telecoms operators in Europe. BT was not the most expensive in any of the categories measured.

But when BT's retail prices were compared with the third cheapest foreign incumbent telecoms firm (the identity of which has not been revealed), and the average price across Europe it was found to be more expensive overall. Various distances between the leased-line circuits and different speeds were studied.

Despite the delay in opening up the leased-line market, Oftel's decision was still welcomed by users.

The Telecommunications Managers Association (TMA), which has campaigned on the issue for the past two years, was pleased with the news. TMA director-general David Harrington said, "Our contention that the UK leased-line market is an effective monopoly, and that prices aren't based on cost, had been pressed on Oftel for over two years before the latest consultation started."

By the time the recommendations are made in November, he said, it would have been three years since the original complaint. By then, 512kilobit per second ADSL will be launched in the UK, and become another alternative for businesses seeking broadband network access.

The recommendations were also welcomed by the Internet Service Providers Association, which said it had been complaining about the cost of leased lines for at least five years.

The challenge for Oftel now is to make sure that arguments with BT about adopting the recommendations do not drag on, and that users can enjoy cheaper leased-line prices sooner rather than later.

BT said it welcomed Oftel's consultation, but was concerned about the way some of the comparisons were made. BT said it still believed its prices were competitive with the rest of Europe, and said some of the recommendations would not benefit customers.

Oftel's options

  • Encourage more negotiations between BT and its rivals to enable them to use the BT-controlled infrastructure to offer alternative services to customers. However, Oftel has already said this may prove to be too slow

  • The second, and most likely, action is to force BT to offer access to its rivals at only cost price, and on a non-discriminatory basis

  • Third, Oftel could combine the second option and bring in price controls on this access for a four-year period.

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