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 Hull1 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.
Promoting competition
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.
Next steps
The draft statement of measures announced today is subject to consideration by the European Commission, which has been notified accordingly. Under European law2, Ofcom is required to submit certain regulatory proposals to the Commission for review. Following this review, Ofcom expects to publish a final statement towards the end of March.
The new charge controls would commence on 1 April 2013 and remain in place for three years.
ENDS
NOTES FOR EDITORS
* Ethernet is a technical standard for sending data at high speed over networks.
The telecoms operator in Hull is Kcom.
Under the revised European Framework that was transposed into UK law in May 2011, Ofcom is required to submit certain regulatory proposals to the European Commission for their review. The European Commission has one month to review the draft decision during which it can comment and/or initiate further examination. The Body of European Regulators for Electronic Communications (BEREC) and other equivalent EU Member State national regulatory authorities also have the opportunity to comment during this one month period. This is a change to the previous process under which Ofcom consulted with UK stakeholders and the EU at the same time. Following the changes, Ofcom is now required to consult the EU after having undertaken a UK consultation.
The Business Connectivity Market Review identifies several regulatory markets including legacy traditional interface' lines, a contracting market which still represents the majority of leased lines; alternative interface' lines using technologies such as Ethernet, which allow for data transfer rates up to 1 Gbit/s; and extremely fast multiple interface' lines, which offer speeds exceeding 1 Gbit/s.
There are also three distinct geographic markets: the western, eastern and central London area; Hull, where the largest leased line operator is Kcom; and the rest of the UK.
Ofcom is taking a different regulatory approach in each of these various markets to ensure competition and promote innovation.
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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.
