Ofcom To Introduce Leased Line Price Reduction
Ofcom has notified the European Commission of proposals to reduce prices for high speed data links which support UK businesses as well as mobile and broadband providers.
This follows Ofcom’s Business Connectivity Market Review, which has examined the
£2bn-a-year market for wholesale leased lines. These are used by businesses, mobile operators and broadband providers to transfer data over their networks.
The proposals are subject to comments from the European Commission. They include new price controls on BT, the major provider of wholesale leased line services, which would significantly reduce the price of newer products based on modern Ethernet* technology for many businesses. This will help meet the growing demand for fast data services from the likes of schools, universities, mobile operators, internet providers and consumers.
Ofcom is proposing that BT’s very high-bandwidth, wholesale leased line services at speeds above 1 Gbit/s – in all parts of the UK except London and Hull – should be subject to regulation, as BT has been found to have ‘significant market power’ in this relatively new market.
For Ethernet products with speeds up to and including 1 Gbit/s, Ofcom’s draft decision is broadly to maintain existing regulation, including charge controls and a requirement on BT to provide access on a strictly non-discriminatory basis. Ofcom is, however, proposing to impose significant price reductions outside London, at 11% below inflation per year over the next three years.
Under the draft decisions, BT’s prices for leased lines based on older technology will be permitted to rise modestly to reflect higher costs in this declining market. Reductions in Ethernet charges will provide customers with a cheaper alternative and an incentive to migrate to newer, more efficient technologies.
Lighter regulation in London
While maintaining and extending some existing regulation on BT, Ofcom proposes to impose lighter regulation in the London area, where BT faces greater competition from other providers. This would involve safeguard caps on products up to and including 1 Gbit/s, and no regulation on very high bandwidth products, where there is effective competition.
Ofcom is also proposing to deregulate the market for longer-distance legacy leased lines, and to require BT to provide its regulated Ethernet* services on the same basis to all retail providers.
The draft measures are designed to promote competition. They will also help ensure the UK has a backbone of high-speed business networks capable of supporting not only companies, but also consumer services that ultimately rely on these networks, such as superfast broadband and mobile video streaming.
Leased lines also provide vital high-speed links between schools, universities, libraries and other public bodies.