BT may face greater regulation on its pricing of business Ethernet networks following a consultation launched by Ofcom today.

In its Business Connectivity Market Review, the watchdog has made a number of proposals to encourage competition in the business connectivity market, and to identify how best to sustain critical fibre networks between firms.

BT is the major provider of wholesale leased lines services in all areas of the UK except London, where it faces greater competition from other providers, and Hull, where Kcom is the market leader.

Ofcom is therefore proposing to maintain and extend some existing regulation on BT outside London, and to introduce less strict pricing regulations for BT’s Ethernet prices for services up to 1Gbit/s in the capital.

‘London benefits from a substantial, competitive fibre infrastructure, in a wider geographic area than previously found. This has allowed Ofcom to propose significantly extending the deregulated area for legacy high-speed networks westwards towards Heathrow, the watchdog said.

Outside the capital, Ofcom is proposing to regulate very high-bandwidth, wholesale leased line services above 1Gbit/s.

BT would also be required to provide its regulated Ethernet services on the same basis to all retail providers.

Meanwhile, existing regulation would remain for products with speeds up to and including 1Gbit/s, as well as charge controls.

Ofcom plans to outline the prices it recommends BT can charge customers for the wholesale leased lines products in the coming weeks.

BT said it was "disappointed" with some of Ofcom's proposals.

"From an initial read of the document, we are disappointed that Ofcom has found that BT has market power in the highly competitive high bandwidth market and still intend to regulate declining legacy retail services," a BT spokesperson said.

"However, we welcome Ofcom's intention to simplify and add certainty to pricing remedies in business connectivity, as well as their greater recognition of competition in London. We will continue to engage with Ofcom and other stakeholders throughout this consultation process."

The telecoms regulator last reviewed the business connectivity market in 2008. Since then, it has found that demand for legacy leased lines based on older technology has declined greatly, with more providers switching to faster, cheaper Ethernet lines.

Its consultation closes on 24 August 2012, and can be found here.