EU Gives Ofcom Green Light for Cheaper BT Leased Line Prices in the UK

The UK telecoms regulator, Ofcom, confirms that the European Commission (EC) “did not raise any concerns” about its plans to slash the price that ISPs, mobile operators and businesses must pay to BT for 1Gbps+ wholesale Leased Line (Ethernet) services in all parts of the UK except Hull and London.

Ofcom’s Business Connectivity Review of the related market, which is worth around £2 billion per year, initially ruled in July 2012 that BT held Significant Market Power (SMP) in the “relatively new market” for faster than 1Gbps services (here) and should be subject to tighter regulation (e.g. price caps).

Ofcoms Statement

“Leased lines provide dedicated symmetric transmission capacity between fixed locations, and their overall value exceeds £2bn per annum in the UK. They play an important role in business communications services and are used to support a wide variety of applications, both in the private and public sectors. They also play a significant role in delivering fixed and mobile broadband services to consumers, because communications providers (CPs) use them extensively in their networks.

BT remains by far the largest wholesale supplier of leased lines in the UK. For illustrative purposes, if we consider all wholesale circuits, we estimate that BT has a share of 82% of volumes. The majority of CPs remain reliant on BT’s network in providing services to their customers.

Our decisions are designed to promote competition in the provision of leased lines and the services which use them, and will affect the availability, choice, price, quality and value for money of data-transfer services throughout the UK. They are therefore important in furthering the interests of citizens and consumers.”

The proposal, which left existing regulation for sub-1Gbps services in place, was completed in February 2013 and submitted to Europe for today’s final approval (here). Ofcom now intends that the new rules and charge controls will commence from 1st April 2013 and remain in place for 3 years.

Separately BT has secured a small exemption for the West, East and Central London Area (here). Meanwhile BT continues to view Ofcom’s policy as “mistaken” and claims “the market is highly competitive and that there is no market failure that needs regulatory intervention“. It remains to be seen whether or not BT will compensate for the changes by simply putting prices up in other areas.

Ofcoms Business Connectivity Market Review – Final Statement
http://stakeholders.ofcom.org.uk/consultations/business-connectivity-mr/final-statement/