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Ofcom plans to reduce prices for high-speed data links

Posted by malcolm on Monday, February 25th, 2013 at 16:20

Ofcom is proposing to regulate the price of BT’s very high-bandwidth wholesale leased line services at speeds above 1 Gbit/s, after a review concluded that BT had ‘significant market power’ in that sector of the market.

Under draft proposals released on Monday, Ofcom plans to impose “significant price reductions outside London, at 11% below inflation per year over the next three years”. However, BT would be allowed to raise prices for leased lines based on older technologies.

An Ofcom statement said:

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.

However, a BT spokesperson told The Register that the plans were “mistaken”.

We believe Ofcom’s decisions to regulate very high bandwidth Ethernet and optical services outside of London for the first time is mistaken; we provided clear evidence to Ofcom that the market is highly competitive and that there is no market failure that needs regulatory intervention.

We also believe Ofcom could have gone further in deregulating legacy retail services; newer, more efficient alternatives now exist removing the need for the regulation of such legacy services altogether.

Ofcom has, however, recognised the greater competition for Ethernet services in London, and their moves will simplify and add certainty to pricing in business markets. We also believe that Ofcom’s charge controls must allow a fair return on our investment in leased lines to allow sustainable investment in the next generation of telecoms services and infrastructure.

The draft proposals exclude Hull, where Kcom is the dominant telecoms provider, and London, where “BT faces greater competition from other providers”.

Ofcom has notified the European Commission in accordance with the revised European Framework. The Commission, The Body of European Regulators for Electronic Communications (BEREC), and other national regulators will have one month to review the draft proposals.

If Ofcom’s plans go ahead, the new charge controls would come into force on 1 April 2013 and continue for three years.

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