Ofcom threatens full legal investigation if BT refuses to play ball

18 Nov 2004

Despite more than 20 years of liberalisation, competition in the UK’s telecoms market is at best ‘fragile’ according to the details of a report published today by the industry watchdog Ofcom. In a sad indictment of liberalisation in the British communications sector, the regulator now says it could be forced to launch a full legal investigation into BT, under the auspices of the Enterprise Act, amid concerns that the incumbent is still failing to give its retail rivals fair and proper access to its local infrastructure. Although the former monopoly claims it has complied with Ofcom and its forebears in providing alternative operators with a level playing field, many of its rivals dispute this – a fact which has now led Ofcom to consider imposing stringent changes to BT’s mechanisms and pricing processes, backed with a thinly veiled threat that the Competition Commission may have to get involved.

Speaking about the content of the agency’s ‘Strategic Review of Telecommunications’ today, Ofcom chief executive Stephen Carter said: ‘Twenty years after liberalisation, the market has made good progress. However, its foundations are unstable in parts, overly dependent on intrusive regulation and with limited sustained competition’. The review marks a watershed in terms of a full investigation into sector competition and concludes that, despite many positive initiatives, the UK market structure is ‘unstable’ and unfairly dictated to by BT, and that two decades of legislative intervention have resulted in a minefield of complex rules and regulations. BT is remaining tight-lipped on the content of the full report, and is considering its recommendations before issuing a response.

Ofcom’s recent tough talking fuelled speculation over whether it one day intends to break-up BT, but today’s much-publicised review indicates instead, that the regulator prefers to adopt a softer, more persuasive line to cajole the telco into freeing its grip on the market. The European Union’s competition authorities have long held concerns that former monopoly operators around Europe continue to stifle competition by heel-dragging on issues such as unbundling the local loop. In the UK, it is argued that this has resulted in a slow take-up of high speed internet access services and, indeed, at the end of last year broadband penetration in the UK lagged well behind many of its European rivals such as Belgium and the Netherlands. With the situation surrounding BT’s dominance becoming increasingly untenable, Ofcom is for now steering clear of a costly, disruptive and time-consuming break-up plan, in favour of curtailing BT’s ability to set prices that effectively skew things in its favour. In particular, the regulator is proposing that the telco gives its competitors access to its wholesale network at the same price as BT provides for its own retail arm BT Retail, thus ensuring that rivals are not at an unfair disadvantage by virtue of the incumbent’s dominant position.

United Kingdom, BT Group (incl. Openreach)