Ofcom proposes restrictions on what BT can charge for business telecoms

The telecoms regulator has launched a consultation on plans to place price caps that are linked to inflation on both 'traditional interface' technology and new Ethernet high-speed services that BT provides.

Ofcom said that the "charge controls" are necessary to counteract the "significant market power in a number of wholesale leased line services" that BT enjoys in the telecoms market.

"We consider that these charge controls proposals are sufficient to constrain BT's pricing," Ofcom said in a summary of its consultation. "They will provide incentives to make efficiency improvements and are appropriate for achieving the other objectives pursued. We are therefore not proposing to impose a cost orientation obligation in addition to these charge controls."

Leased lines form part of communications infrastructure and enable voice and data traffic to be transmitted between fixed locations. They are relied upon by many organisations for a wide range of IT provision, including internet access. They are also used by communications providers, such as mobile network operators, and fixed broadband services to carry traffic through their networks. The market is worth £2 billion, Ofcom said.

The regulator has proposed a number of varying charge caps that are dependent on the precise services organisations opt for with BT's 'traditional interface' technology. The "central estimate" is that BT can impose year-on-year rate rises of 3.25% on top of inflation. Inflation is measured in accordance with the retail price index (RPI).

For usage of its Ethernet services infrastructure, Ofcom has proposed that BT decrease what it charges from anything between 8% and 16% a year after RPI has been factored in, depending on the type of services organisations contract. In some areas of London a "lighter form of price control" has been proposed for use of use of some Ethernet lines to reflect the fact that BT faces "greater competition" in those areas. As a result the company will not be able to place any price rises for use of those lines for three years, under the plans.

Ofcom said that the proposals are "designed to align the prices of these BT products with their cost by 2015." It said that the charge controls it has suggested also incentivise BT to "make efficiency gains."

"We want to ensure that the prices for wholesale leased lines services are not excessive and are broadly in line with the cost of provision," the regular said. "Wholesale prices for leased lines are likely to be reflected in retail prices. Excessive wholesale prices are likely to result in excessive retail prices, which would be to the detriment of consumers."

"We are seeking to promote efficiency in the provision of wholesale leased lines services. Through the structure of the charge control, it is possible to provide BT with the opportunity to make efficiency improvements. These improvements would also be in the interest of consumers, as they can ultimately share the benefits of greater efficiency," it added.

Stakeholders have until 30 August to respond to Ofcom's consultation.