U.K.’s telecom regulator published a final ‘margin rule’ Thurs. s...

that BT’s current DataStream and proposed IPStream prices comply with the country’s new regulatory framework for e- communications networks. Anticipating Ofcom’s move, BT this month raised wholesale prices on some IPStream broadband office products, prompting outrage from small- to-medium-sized ISPs afraid the “margin squeeze” would drive them out of business. This week, the U.K. Internet Federation (UKIF) said it was talking to legislators about Ofcom’s anticipated ruling and considering seeking help from the European Commission. The consultation also sparked concern from BT, which had issues about the workings of the margin squeeze test, a spokeswoman said. However, she said, BT now understands better how Ofcom intends to use the rule. The company will study Ofcom’s 151-page document and wait to see what other industry segments do, the spokeswoman said. UKIF’s response to Ofcom’s announcement was swift. Instead of promoting effective and sustainable competition, the group said, the decision will concentrate market control in a few large ISPs. The market-squeeze model is based on large ISPs, not smaller ones, which should be charged for the capacity they use instead of their customer numbers, UKIF said. It also panned Ofcom for admitting “its model might be wrong” but hoping it will correct itself in the coming 5 years. “This does not give industry much hope,” UKIF said. The ISPs called on Ofcom to reevaluate the nature of its wholesale broadband access regulation -- “and a parliamentary enquiry might help this process.” Also Thurs., Ofcom unveiled its final proposals for wholesale price cuts for local loop unbundling (LLU) services. In May, the regulator set out initial proposals from its market review on wholesale local access (which includes LLU), but didn’t specify LLU prices. It also announced proposals for the wholesale margin on BT’s DataStream broadband products. At the same time, BT cut prices for its LLU services. Given BT’s actions, Ofcom said, it could simply have relied on BT’s voluntary price reductions and the work of a newly created independent telecoms adjudicator. However, it said, many operators thought Ofcom should do its own price review to give new market entrants greater certainty. Thurs.’s proposals include: (1) A 68% decrease in shared access connection prices from those before the BT price cut. (2) A 76% reduction in rental fees. (3) A 42% drop in fully unbundled connection transfer fees. (4) A 27% decrease in fully unbundled new provide connections. The consultation doesn’t set a ceiling for fully-unbundled loops, the subject of a separate analysis. LLU “offers the greatest potential for downstream service and price differentiation and competition,” Ofcom said. However, given the substantial capital investment needed to enter the market, BT’s Datastream “will play an important transitory role.” The new pricing structure, industry participation in the telecom adjudication scheme and BT’s “fresh approach have the potential to add up to a faster broadband roll-out for Britain,” said Ofcom Chief Exec. Stephen Carter.