Ofcom has announced new price proposals for BT Wholesale business broadband. The telecoms regulator wants to put price caps on BT leased lines to “ensure that the prices for wholesale leased lines services are not excessive and are broadly in line with the cost of provision.”
Ofcom wants to “align prices with cost at the end of the charge control period,” which will end in 2015-2016.
The idea is to keep price rises in line with inflation rises in areas where BT is considered to have ‘Significant Market Power’ (SMP); deemed broadly to be outside of central London and in Hull, where KC (Kingston Communications) has a monopoly.
Ofcom announced its intentions to regulate BT leased lines last month.
It’s revealed now that there would be two separate price caps for BT leased lines; one for low-high bandwidth lines and regional trunk services (BT’s ‘Traditional Interface’ or TI) and one for Ethernet, which refers to services up to and including 1Gbps broadband.
Under Ofcom proposals, TI lines will be subject to a maximum price cap of no higher than 6.5 per cent above inflation (measured in RPI – the retail price index), with an estimate of 3.25 per cent.
Ethernet lines would be capped at rates lower than inflation, between minus 8 per cent and minus 16 per cent (with a central estimate of 12 per cent).
Ofcom says that linking price caps to inflation (the ‘RPI-X’ model) “has been tried and tested over many years for telecoms charge controls,” and that it would encourage BT to “make efficiency improvements to reduce its costs in line with the expected path set by the charge control.”
Ofcom intends to apply the price controls over “a maximum of three years.” BT and clients have until the 30th of August to respond.