BT must not squeeze rivals, says Ofcom

Telecoms regulator Ofcom has ruled that BT must help ensure a competitive marketplace by not overcharging rivals for wholesale access to its broadband infrastructure.

Other companies such as TalkTalk and Sky currently have to buy access to BT’s Openreach network in order to provide a fibre-optic ‘superfast’ service to their subscribers.

Several of these companies complained that they were being squeezed by BT, who were keeping wholesale and retail prices too close together, thereby preventing competitors from increasing their own profit margins.

As a result of these complaints, Ofcom has implemented proposals to place restrictions on BT’s pricing, and created a six-monthly test to ensure that BT is not operating a so-called ‘margin squeeze’.

Failure of the test could see BT having to either cut its wholesale prices to rivals, or increase its superfast prices to consumers.

While BT seems to have passed its initial assessment, with no indication that the company has been unfair in its pricing, these ‘safeguards’ as Ofcom calls them, will continue to operate indefinitely.

Ofcom has released a statement signalling its intention to set a new rule to ensure that ‘BT must maintain a sufficient margin between its wholesale and retail … charges in order to allow other providers profitably to match its prices.’

Unsurprisingly, the news was received positively by both TalkTalk and Sky. TalkTalk said the provider was ‘delighted that superfast broadband will be a price regulated product’.

Meanwhile a Sky spokesperson said ‘Ofcom will need to be continually vigilant to ensure the remedy is effective when put into practice in a fast-moving market’.

Also unsurprisingly, BT’s response was somewhat more ambivalent, calling Ofcom’s statement ‘misconceived but not unexpected’, but saying that the company is ‘not opposed to the principle of a test’, and pointing out that the provider has passed both Ofcom’s new test as well as the standard Competition Act test.

BT is known to be unhappy at Ofcom’s inclusion of the cost of BT sport, estimated at hundreds of millions of pounds per year, when calculating overall superfast broadband charges.

A BT spokesperson said ‘BT is trying to ensure real competition in pay TV sports for the first time in 25 years. Yet the UK’s lop-sided regulatory regime means Sky remains largely unregulated, while further hurdles are proposed for us, the pay TV challenger’.

BT has said it may appeal against the ruling.

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