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December 16, 2004

BT welcomes Ofcom price cuts

BT Group Plc, the former UK telecoms incumbent, has welcomed the findings of last November's market review of local loop unbundling by the UK telecoms sector watchdog Ofcom.

By CBR Staff Writer

Earlier in 2004, Ofcom had threatened to break up BT in order to encourage competition, but in last month’s review settled to call for BT to provide its rivals with real equality of access to its network. BT owns of the bulk of Britain’s fixed telephone lines, and for years has dragged its heels over competitor access to its network.

In April Ofcom had warned BT that it would have to make both behavioral and organizational changes to boost competition in the sector. To this end, BT recently appointed Rob Sanders as director of wholesale line rental operations, a move to try and convince the regulator that it is trading fairly with its rivals. The appointment follows the appointment of Tom Maguire as director of local loop unbundling.

The regulator is looking for BT to boost the growth of broadband services by allowing competitors access to its local telephone exchanges. Local loop unbundling, or opening the last mile of household connections, allows rival operators to install their own equipment into BT local exchanges. By investing in LLU, operators can offer broadband Internet access and other advanced services directly to consumers and businesses, instead of renting access to the copper cables from BT.

It is little wonder then that BT has welcomed Ofcom’s findings. Paul Reynolds, chief executive of BT Wholesale, said: BT has been working hard with Ofcom since May on this issue, and these prices reductions are absolutely in line with what we jointly agreed then. I believe they are right for the industry.

The agreement means that the price of a broadband Internet connection in the UK could soon fall even further, because Ofcom has effectively reduced the amount that BT can charge other telecoms groups to put their own broadband equipment in its local telephone exchanges.

In its final review of the UK wholesale local access market, the industry watchdog reduced charges by 60%.

Recently, pan-European broadband provider Easynet Group Plc announced that it had launched a wholesale 8Mbps broadband service called LLUStream, following the company’s recent decision to start investing in local loop unbundling. The rival wholesale broadband service is aimed at other Internet service providers, telecom carriers, and system integrators, and costs as little as GBP6 ($11.60) a month for volume buyers.

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Ofcom said that since it announced interim LLU price proposals back in August, the number of unbundled lines has risen to over 26,000 from 12,000 in May 2004. Its target is one million unbundled lines by summer 2006.

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