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August 18, 2005

Ofcom limits BT wholesale charges

UK communications regulator Ofcom has set limits on prices for some wholesale telecoms products charged by BT Group Plc, the former UK incumbent. It predicted the move could save UK consumers and businesses up to GBP400m ($718m) over the next four years.

By CBR Staff Writer

Ofcom estimates that these controls on BT’s wholesale network charges, when combined with effective retail competition, could potentially reduce telecommunications costs for UK businesses and consumers by around GBP350m ($628m) to GBP400m ($718m), the regulator said.

The ruling means that BT has to limit the prices it charges rivals to use its links between local exchanges and central exchanges for traffic including traditional voice calls. The projected savings could reduce bills for households and businesses by about GBP4 ($7.17) a year.

Under the new limits, BT can charge wholesale rates of GBP58.51 ($105.06) a year to customers renting one of its last-mile copper line. The last mile is the actual copper line running from a local telephone exchange into UK households or businesses. BT controls almost all of the last-mile network in the UK, which is generally considered to be one of its most valuable assets because it is the vital link between independent suppliers and clients (consumers or businesses). Ofcom has also limited BT to a charge of GBP60.11 ($107.95) a year for unbundled local loop access.

Ofcom stressed that consumers would only benefit from the forecast savings if effective retail competition were to be fostered between telecoms providers to force them to pass wholesale savings on to customers.

The regulator also took the opportunity to publish a statement on its new regulatory regime for BT that it revealed in late June. BT promised to create a separate business to run the access to its wholesale network, and in return escaped a threat to break up the UK carrier. Both BT and its rivals such as Cable & Wireless Plc welcomed the plan, which is to be finalized in September.

BT’s ownership of the last mile of copper wires into homes and business, the so-called local loop, gave BT’s customer-facing arm BT Retail an inherent advantage in the provision of voice calls and internet access services to businesses and households.

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