Ofcom sets caps on BT internet line prices

BT could be forced to sell its internet access to businesses at cost price

Telecoms regulator Ofcom may force BT to cut the price it charges firms to provide internet access outside London.

In an effort to curb the cost of leasing capacity on BT's networks, the regulator outlined proposed price caps.

It said these would lead to "real-terms price reductions" for internet service providers and other firms.

As a result, companies such as O2, Vodafone or Plusnet would then be able to pass those savings on to their customers.

BT dominates the leased lines market, which Ofcom values at £2bn, so providers depend on its network.

Ofcom proposed that over the next three years, prices for lines using older technology should be subject to increases of no more than Retail Prices Index (RPI) inflation plus 6.5%.

However, newer lines using ethernet technology would have to come down in price, with charges to be reduced by at least RPI inflation minus 8%.

Ofcom said BT faced greater competition from other providers of ethernet telecoms lines in east, west and central London.

In these areas, it said prices should be subject to a lighter form of control, merely ruling out any rises over the three years.

Ofcom said the caps were "designed to align the prices of these BT products with their cost by 2015".

The proposals will now undergo a consultation process which closes at the end of August.