Oftel rapped over BT's leased line fees

BT dominates the market for providing dedicated high-bandwidth connections to businesses, which means they have traditionally ended up paying whatever price for the service that the telco sees fit. With telecoms watchdog Oftel seemingly having taken little action to tackle the issue, the situation had looked as if it would go on indefinitely.

But earlier this month, after two years of talk, Oftel finally took a few tentative steps towards rectifying the situation. The regulator published a consultation document, National Leased Lines: Effective Competition Review and Policy Options, admitting that there is not enough competition in the market and confirming that BT overcharges for its services as a result of its virtual monopoly.

The retail leased line market is worth about £1.4bn per year, and with BT currently controlling 83 per cent of this, it's no wonder local operators and medium-sized businesses have been forced to turn to the telco giant for its services.

But Oftel is now looking at ways of promoting greater competition to remedy the low choice/high-cost problem. It suggests the obvious price cuts, but admits that this is just the start of a process that could take years to resolve and one which will require much input from the watchdog, the industry, and BT itself.

Laying it on the line
While the timing and tone of the report seems to suggest that this lack of competition has come as news to Oftel, it is certainly no surprise to anyone else that has been using BT's leased line services. The Telecommunications Managers' Association (TMA) has been banging on the regulator's door for years, claiming its members are suffering thanks to BT's stranglehold.

Since 1996, the Telecommunications User Association (TUA) has also been berating Oftel, arguing that it allows BT to take advantage of its huge market share by charging consumers over-inflated prices.

According to the group's chairman Bill Mieran, back in the days when Don Cruickshank was Oftel's director general, the TUA badgered him over leased lines, but always received the same reply: that the market was sufficiently competitive at that time.

"We weren't competitive in 1996. The pricing structure hasn't changed much since then, and the market certainly hasn't become more competitive," said Mieran angrily.

The watchdog is adamant, however, that when it carried out its 1996 pricing review, the market was clearly competitive and so it felt unjustified in taking any action. But while it admits that it needs to look at such issues very carefully because the market is changing so quickly, it still only carries out a pricing review every four years.

As a result, Mieran is demanding that Oftel should look at reviewing the industry on a more regular basis. "If Oftel is literally going to wait four years each time in a fast-moving market, that's not enough," he said. "You're talking about a lot of money being spent here, and unnecessarily so, because there's not sufficient competition."

High charges
And a great deal of money is indeed being spent. In October last year, BT was charging more than 250 euros (£153) per month for a 64Kbps, 5km circuit. The European Commission's ceiling for the same circuit was just 80 euros (£49) per month. This means that BT is making some 2000 euros per customer more than it should - every year.

When pressed on the issue, BT argues that its prices are both competitive and justified. "We feel we offer a competitive service," said a spokesman, explaining that the company has carried out its own research, which justifies its competitiveness claims.

"With price comparisons, you have to bear in mind a possible health warning that is always a problem - you have to ensure you are comparing like with like," he added.

BT claims to provide a range of discount schemes on leased lines, but was unable to provide any specific details as to how these work. The telco confirmed that it would fully comply with any Oftel ruling, however, just as it has in the past.

But when such a ruling is likely to be made is anyone's guess. Cries of joy were heard at last year's TMA conference in Brighton when it was announced that Oftel would finally investigate the problem. Those smiles soon disappeared, however, when it was confirmed that the review process would take at least another 12 months to complete.

This year's TMA conference is now just over a month away and nothing seems to have changed. "We need a result as quickly as possible for the benefit of all involved," said Derek Nicholas, a member of the TMA's specialist competitions and markets group.

But Oftel has only just started the consultation process and will not announce the results until early next year. Even then, it may not provide any answers to the question on everyone's lips: 'When are the changes going to be implemented, and when will users finally get the competitive pricing they deserve?'

The best answer a spokesman for the regulator could give was far from encouraging. "It's not going to be weeks," he said.

Months, even years, is probably more accurate. But now would appear to be a ripe time to launch a competitive leased line business. Any takers?