Ofcom ethernet charge controls could see prices drop
Leased line and ethernet services are a £2bn market, and following on from a consultation announced a couple of weeks ago, proposals have been published to control the pricing that BT charges at the wholesale level for its leased line and ethernet services, and other items such as excess construction.
"We want to ensure that the prices for wholesale leased lines services are not excessive and are broadly in line with the cost of provision. Wholesale prices for leased lines are likely to be reflected in retail prices. Excessive wholesale prices are likely to result in excessive retail prices, which would be to the detriment of consumers.
We are seeking to promote efficiency in the provision of wholesale leased lines services. Through the structure of the charge control, it is possible to provide BT with the opportunity to make efficiency improvements. These improvements would also be in the interest of consumers, as they can ultimately share the benefits of greater efficiency.Ofcom on approach to charge controls
The charge controls proposed centre around the use price limits, where the annual price has to vary according a formula such as RPI -X. Ethernet services look set to benefit from an RPI-12% formula, whereas the TI basket (covering low, medium and high bandwidth services outside the WECLA, low bandwidth services within the WECLA and regional trunk services at all bandwidths) will have some scope for price rises (RPI+3.5%).
Responses to these proposals have to be with Ofcom by 30th August 2012, with a statement expected in early 2013. The timescale means that by the time any controls are in place, the mobile operators may be looking to build their 4G networks.