EU recommends price cap on leased telecom lines

Leased lines, which in Europe are largely offered by former monopoly telephone companies, provide high-quality symmetric and dedicated transmission capacity between two locations. Enterprises use them to connect to the Internet and operate their own corporate networks. Many service providers, such as ISPs (Internet service providers) and new carriers competing against traditional telcos, need them to link their customers to broadband networks.

The Commission has been monitoring leased line prices for years. It claims that despite the liberalization of the European telecoms market in the previous decade, substantial variations in wholesale prices for leased lines still exist and that these prices don´t directly reflect the cost of supplying the service.

Users are also keen to see more regulation of leased line prices.

˝The variations in European leased line prices are quite staggering,˝ said Ewan Sutherland, chairman of the International Telecommunications Users Group (INTUG) in Brussels. ˝Even if this initiative is a recommendation and not a legally binding regulation, it still carries a lot of weight and will be used by national regulators, service providers and enterprises to drive down prices.˝

The Commission, the executive arm of the European Union recommended price caps for line capacities of 64K bps (bit per second), 2M bps, 34M bps and 155M bps, in line lengths of up to 2 kilometers, 5 km, 15 km and 50 km, it said Wednesday in a statement.

Businesses of all sizes will benefit from lower, transparent prices, including those that are located in rural areas or that are planning to relocate to such areas, according to Sutherland.

˝I know of one big French company that decided to move its headquarters from the center of Paris to a smaller city in the country only to pay some several hundred thousand euros in additional annual leased lines costs,˝ he said. ˝This is just one example but there are many more, like the call-center company that rang up a steep connectivity bill when it set up a center in Flanders, or the Western European manufacturer that opened a plant in the Polish countryside.˝

Some small companies have turned to DSL (digital subscriber line) services as an alternative to leased lines, while others are exploring Ethernet and new wireless LAN technologies, but many medium-size and large businesses still require leased lines, according to Sandra O´Boyle, senior analyst for Internet services at Current Analysis Inc.

˝For business-critical operations, many big companies need leased lines because these provide high resiliency and security, dedicated bandwidth and stringent service level agreements,˝ she said. ˝But when their local telco charges steep prices, this becomes a competitive issue for them; it affects their bottom-line operating costs.˝

The ceiling prices recommended by the Commission range from €61 (US$79) per month for a 64k bps, 2 km circuit to €4,144 per month for a 155M bps, 50 km circuit.

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