UK regulator limits BT network access prices

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Ofcom on Thursday published new controls for some wholesale products by BT Group that the UK communications regulator said would reduce costs for the telecom group’s competitors and their customers by up to £400m ($723m) over four years.

Estimates of BT’s costs are used to calculate how much it can charge competing telecommunications companies to access different parts of its network.

While the controls announced on Thursday will not have a dramatic impact in an industry that turns over about £40bn a year, they complement a wider strategic review announced by Ofcom in June.

The strategic review, which will be finalised in September, was broadly welcomed by both BT’s competitors such as Cable & Wireless and the market - which had feared BT would be broken up or referred to the Competition Commission.

“Ofcom estimates that these controls on BT’s wholesale network charges, when combined with effective retail competition, could potentially reduce telecommunications costs for UK businesses and consumers by around £350-400m,” the regulator said.

The regulator also released an evaluation of the cost to BT of maintaining the copper lines which connect its core network to homes and business premises.

Ofcom estimated the cost of providing access to its last-mile copper access network was £58.51 a year, or £60.11 a year for “unbundled local loop” access, in which the wholesale customer has more control over the line.

Ofcom also announced changes to the period over which BT recovers the cost of its copper lines would be extended from 15 years to 18 years, while the accounting life of duct would be increased to 40 years from an average of 38 years.

However, Ofcom said it believed BT’s existing valuation of its surplus network assets was appropriate. It added that the telecom group’s own estimate of the cost of manpower of building the network was “the most objective estimate available today” of what the cost of replacing the entire network would be today.

BT’s shares were down 1p to 155¼p in early morning trade.

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