If you're a UK IT manager, expect to pay up to three times as much for a leased line than your counterpart in Europe or the US.
BT dominates the market for dedicated high-bandwidth connections, forcing businesses to pay whatever price the telco sees fit. With seemingly little activity on the part of telecoms watchdog Oftel in tackling the issue, the situation looked as if it would go on indefinitely.
Then last week, after two years of talk, Oftel finally took some 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 leased line market and confirming that BT overcharges for its services because of its virtual monopoly.
The retail leased line market is worth about £1.4 billion a year. With BT currently controlling 83 per cent of that, it's no wonder local operators and medium-sized businesses are forced to turn to the telco giant for such services.
Oftel has therefore looked 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 which could take years to resolve and which will require much input from Oftel, the industry, and BT itself.
Banging on Oftel's door
While the timing and tone of the report seems to suggest that the lack of competition has come as news to the regulator, it's certainly no surprise to anyone else who has to deal with BT's leased line services. The Telecommunications Managers' Association (TMA) has been banging on Oftel'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, for allowing BT to take advantage of its huge market share by charging consumers overinflated prices. According to its chairman, Bill Mieran, back in the days when Don Cruickshank was Oftel 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," says Mieran angrily.
Oftel is adamant, however, that when it carried out its 1996 pricing review, the market was clearly competitive and it therefore felt unjustified in taking any action. Oftel admits that issues need to be looked at very carefully because the market is changing so quickly, but still only carries out a pricing review in a four-year cycle.
Mieran demands 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 says. "You're talking about a lot of money being spent here, and unnecessarily so, because there's insufficient competition."
BT justifies its pricing
A great deal of money is indeed being spent. In October last year, BT was charging more than EUR250 (£153) per month for a 64Kbps, 5km circuit.
The European Commission's ceiling for the same circuit was just EUR80 (£49) per month. Therefore BT is making more than EUR2,000 per customer more than it should - every year.
When pressed on the issue by Computing, BT argues that its prices are both competitive and justified. "We feel we offer a competitive service," says a spokesman, explaining that the company has carried out its own research that justifies its claims of competitiveness. "With price comparisons, you have to ensure you are comparing like with like."
BT claims to offer 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, just as it has in the past.
First the good news, then the bad...
When that ruling will 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 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," says Derek Nicholas, a member of the TMA's specialist competitions and markets group.
Oftel has only just started the consultation process and will not be announcing 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. Now would seem to be a ripe time to launch a competitive leased line business.
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