Ofcom proposes price caps for BT wholesale

The regulator announces the caps it will put in place to make sure BT charges fair prices for leasing its market dominating broadband and phone line infrastructure

Ofcom today set out proposals to cap the prices BT can charge for leasing its telecoms infrastructure, which it claims will lead to real-time price reductions for most customers.

The regulator said the lines, which are rented by companies to provide broadband and mobile connectivity, gave BT “significant market power” and suggested in its business connectivity market review last month that controls should be put in place to protect those purchasing the network.

Today it went one step further, outlining the specific caps on prices when compared to inflation.

For traditional interface (TI) lines, which carry BT’s slower connections, there will be a price limit of between 0% and +6.5% from the retail price index (RPI). However, for its Ethernet services, responsible for its superfast broadband offerings, the cap will be between -8% and -16% from RPI.

However, for low-bandwidth Ethernet lines in west, east and central London, Ofcom is softening these limits as BT faces much stronger competition in these areas. Instead, there will be a safeguard cap on relevant services purely to stop any price rises for three years.

“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,” read a statement from the regulator.

“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 wants BT to get its pricing in line with these limits by 2015, not only to save customers money, but to inspire BT to “make efficiency gains”.

But the telecoms giant is not as keen on the plans as the regulator.

“While we note Ofcom’s recognition of the costs and declining volumes across [TI] products, we have some concerns about the proposals for wholesale Ethernet services pricing outside the London area,” said a BT spokesman. “We will engage with Ofcom to make our views clear.”

The proposals are still under consultation and this process will end on 24 August 2012.

Read more on Network hardware