Oftel calls the tune on UK leased line market

Oftel will publish its consultation paper on how to regulate the national leased line market next month.

The document will attempt to deal with changes resulting from the introduction of new technology such as digital subscriber line (DSL) services and will try to address user complaints about hazy pricing policies and service level agreements (SLAs) that are pitched in favour of vendors.

The telecoms watchdog announced that it intended to launch a review last November and early signs seem to indicate that market conditions are changing rapidly and users are receiving a much better deal than in the past.

Derek Nicholas, competition markets expert at the Telecommunications Managers Association (TMA), claimed: "Point-to-point leased lines play an important role for large corporates and are still more important than secondary protocols such as frame relay or IP. The price of leased line access bears no relation to cost. BT and, to a certain extent the other players, price the cost of leased lines according to the value they perceive the customer is receiving from the service."

But he added that small to medium sized enterprises appeared to end up with the worst deals. "BT makes big discounts available for large corporates, not only on the full telecoms package it provides, but on the specific leased line products offered. Corporates are getting a double discount," he attested.

So will the arrival of DSL and the unbundling of the local loop, which is due to take place next summer, affect leased line pricing?

Limited impact
Josie Sephton, the principal analyst at Ovum, said: "We haven't noticed a significant drop in the price of leased lines. The impact will be limited. Leased lines and DSL are very different products. There is a lot of confusion in the market about this."

But Nicholas claimed: "Short distance leased lines are most under threat by the introduction of DSL services. However, these products do not have a solid SLA, and when a mass roll-out of DSL occurs, there is likely to be a significant drop in the bandwidth available to businesses. You will get hot spots in built-up urban areas where there is a large take-up of DSL. In these circumstances, the minimum bit rate may not be guaranteed."

The TMA warns businesses to stick with existing leased line products because they generally provide superior service levels and to think twice before choosing DSL. It has also been urging Oftel to unravel the pricing structure to try and make it more understandable to users.

But Nicholas is pessimistic about whether the review is likely to change anything. "This is the second review that Oftel has launched in the pricing and regulation of the leased line market. Quite frankly, on past experience, we are not expecting a lot to result from this," he said.

Sephton believes, however, that although pricing may be difficult to understand, the amount charged by BT, the largest supplier of leased line circuits in the UK, is comparable to that of telcos in other major European markets such as France, Germany and Italy.

She added that BT's SLAs are also significantly better than comparable contracts elsewhere in Europe.