Call prices to fall after study into BT costs

The prospect of even cheaper phone calls and internet access took a step forward yesterday with the publication of Ofcom's latest consultation document on calculating the cost of BT Group's core assets.

The prospect of even cheaper phone calls and internet access took a step forward yesterday with the publication of Ofcom's latest consultation document on calculating the cost of BT Group's core assets.

The telecoms regulator is looking in detail at how to calculate the exact cost of BT's network of copper wires that connect homes with local exchanges. Once it has done this it will be able to implement new price controls on the company.

The new charging structure, when agreed, will deliver savings to rival telecoms groups that want to supply their own telephone services to residential areas - so-called wholesale line rental. It will also make using BT's local network of copper wires connected to exchanges more cost effective for providing broadband internet access, known as local loop unbundling.

The process of calculating the true cost of BT's copper wire network has proved long and complex and yesterday Ofcom revealed that figures it had been using in its calculations up to now were wrong.

Following requests for more information two weeks ago by BT's rivals, including Cable & Wireless (C&W), the regulator has published a new consultation document and extended the period for responses by two weeks.

Regulators have found that the amount that BT charges rivals for accessing its network were too high compared to the cost of its assets, large parts of which were installed and paid for while BT was still a state-owned monopoly.

Yesterday's Ofcom publication showed that BT had been "over-recovering" when charging other telecoms groups that are forced to use its network to supply their own services to customers. Ofcom has revised its estimate of the savings that rival suppliers can now expect to see in future.

A spokeswoman for C&W said: "The range of potential savings we might expect has risen from 4.8 to 14.2 per cent to 5.8 to 15 per cent. If we can reduce what they [BT Group] can recover then that decreases the cost of wholesale line rental and local loop unbundling."

Calculating the cost of BT's copper network is itself part of a wider project being undertaken by Ofcom accurately to account for BT's total cost of capital.

Deregulation of telecoms services has introduced more competition, but without knowing what BT's costs are it is impossible to impose accurate controls on what the group can reasonably charge rivals.