Business must wait for better broadband

IT managers hoping for more choice and less expensive business class DSL-broadband will have to wait until Ofcom takes over the regulatory reins.

ISPs have vowed to press the new watchdog, which takes over from Oftel at the end of the year, to re-examine the wholesale broadband market and local loop unbundling (LLU).

According to reports, Oftel is against ordering BT to further lower costs as it believes this may harm investment and hinder the continued roll-out of broadband.

But ISPs Tiscali, Easynet and Bulldog have told vnunet.com that they will continue to press for change.

BT is currently allowed to charge on the 'retail minus' model. This means that the regulator looks at what BT charges competitors to see whether prices can be lowered without any visibility of the actual cost.

BT's customers maintain that, if this was changed to the more aggressive and transparent cost-based pricing regime, it would substantially lower costs.

This model is based on what it costs BT to provide a service plus a reasonable profit, but Oftel will apparently rule against such a move.

"To be fair we were not expecting Oftel to tackle the issue of 'retail minus' versus cost-based pricing models as this is a complex matter and it is only a couple of months before Oftel shuts up shop. So this is not a surprise," said Steve Horley, general manager for access and voice at Tiscali.

"However we are disappointed that Oftel makes no mention of activation and migration costs and we will be asking Ofcom to pick up all these issues."

LLU, which allows companies other than BT to provide the last mile of networks, was also designed to offer customers more choice. But BT still controls 99 per cent of the market.

David Rivington, finance and strategy director at Bulldog, told vnunet.com: "We recall [Oftel director general] David Edmonds's comment in an interview with the Financial Times earlier in August when he stated that LLU was his greatest failure. [Now] he calls LLU a niche service."

Bulldog is demanding that prices for LLU services be reduced in line with those of competing platforms.

"LLU is not niche for Bulldog and could well be an even greater success if the regulator demonstrated more commitment towards helping it compete," said Rivington.

"In other EU countries like France and Germany, EU investigators have fined and mandated incumbents to deliver price reductions to companies in Bulldog's position. Oftel and Ofcom should take action before the EU is forced to intervene."