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2/26/2013
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Britain Might Get Cheaper High-Speed Data Connections

Telecommunications regulator Ofcom wants dominant provider BT to lower its prices over next three years to increase market competition and create more interest in Ethernet services.

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British communications regulator Ofcom is proposing tariffs on the U.K.'s leading business and consumer telco, BT. According to the proposal, BT would be allowed to offer leased line charges based on older technology that can "rise modestly to reflect higher costs in this declining market," but any newer Ethernet-based product charges would be controlled.

The intention is to both provide the market with a cheaper alternative and also to create an incentive for customers to migrate to newer, more efficient technologies. Bottom line: U.K. enterprises could see the prices they pay for their high-speed data links drop soon -- if the plan is approved by lawmakers.

Ofcom also wants to see deregulation of 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. The aim is to "help meet the growing demand for fast data services from the likes of schools, universities, mobile operators, Internet providers and consumers," it said.

[ Curious about the U.K.'s mobile landscape? Read U.K. Attempts To Solve Looming Spectrum Crunch. ]

One-time state-controlled BT, formerly British Telecom, dominates the national business and consumer phone and broadband market -- it exited the cellular market in 2001 -- despite facing increased competition since it became a private sector company under Prime Minister Margaret Thatcher in 1984.

A particular sinecure for the company has been data communications infrastructure, namely the wholesale leased line business, a £2 billion ($3 billion) market, which is the way businesses, mobile service providers and broadband providers transfer data over their networks and where BT is the major local provider. But Ofcom has been investigating BT's pricing and practices in that sector, conducting an in-depth Business Connectivity Market Review, the main output of which is to impose new price controls on the vendor.

Specifically, Ofcom is proposing that BT's high-bandwidth wholesale leased line services operating at any speed above 1 Gbps be regulated, because BT "has been found to have 'significant market power' in this relatively new market." For Ethernet products with speeds up to and including 1 Gbps, Ofcom intends to push for "significant price reductions outside London," at 11% below inflation per year over the next three years.

There is a caveat to the proposals outsiders might find quaint: They would apply to "all parts of the U.K. except London and Hull," the former as there is enough competition to BK there, but the latter because it was the only town in the U.K. that didn't become hooked up to British Telecom's predecessor, The General Post Office (GPO). As a result Hull boasts white -- no red -- versions of the iconic British phone booth.

CIOs are cautioned to not reduce their budgets quite yet. The next step is for lawmakers in the European Commission to make the final decision on Ofcom's proposals, and under European Union law Brussels has a month to give its approval.

If the proposals go through, though, prices could come down soon: the new controls would take effect in April and remain in place for three years -- a change that could help many enterprise budgets, as well as potentially get a bit more competition into the British data transmission and services market.

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