Ofcom has set out new proposals to cap the amount BT can charge rival communications providers for use of its telecoms infrastructure, which it claims will lead to price reductions for most customers.

A consultation paper published today proposes a cap of up to 6.5 per cent above inflation (measured under the retail price index) for legacy leased lines using Traditional Interface (TI) technology, and a cap of between 8 per cent and 16 per cent below inflation for newer telecoms lines based on the faster Ethernet standard.

“Ofcom expects the proposed controls will lead to real-terms price reductions for most customers of the £2 billion leased lines market, such as businesses, schools, universities and libraries,” said the regulator in a statement.

“Consumer mobile and broadband operators, which use leased lines to transfer data on their networks, would also see savings which could be passed on to customers.”

BT responding to news of the proposed caps by saying regulation should allow a fair return on leased lines products in order to ensure sustainable investment in the future of the UK's telecoms infrastructure.

“While we note Ofcom’s recognition of the costs and declining volumes across Partial Private Circuit products, we have some concerns about the proposals for wholesale Ethernet services pricing outside the London area,” said a BT spokesperson. “We will engage with Ofcom to make our views clear.”

The watchdog announced its intention to impose charge controls on BT in its Business Connectivity Market Review, published last month, which stated that BT has significant market power in a number of wholesale leased line services.

Price controls will be relaxed in London, where BT faces greater competition from other providers.

Ofcom plans to put safeguard cap on Ethernet services in the captial to ensure that prices do not rise over the next three years.

The proposals will remain under consultation until 30 August 2012. Ofcom will then review the evidence provided before publishing the new prices.

A number of British service providers piggyback on BT's network infrastructure, including O2, Vodafone and Plusnet.