BT faces price controls on leased-line business

Oftel, the telecoms regulator, took the first step yesterday to regulate the prices British Telecom can charge for wholesale leased lines, saying the company's tariffs for the service are too expensive.

Oftel, the telecoms regulator, took the first step yesterday to regulate the prices British Telecom can charge for wholesale leased lines, saying the company's tariffs for the service are too expensive.

BT has revenue of £1.4bn from its leased-line business which generates a return on capital of 31 per cent. Leased lines, used by companies, are always-on links used for voice, internet and data traffic.

Anne Lambert, Oftel's director of operations, said: "We don't think there is effective competition in the retail market for leased lines. At this stage price controls are likely to be the appropriate remedy."

Oftel is likely to use inflation-adjusted price reductions over four years. The formula, RPI minus X, uses the rate of inflation less a percentage amount that is likely to be increased each year.

The watchdog believes BT has effective market dominance in the sector and that there are barriers to entry. "We are saying this market is not working properly," Ms Lambert said. "It's not to say we have a target for BT market share."