BT calls on Ofcom for more level pricing in wholesale broadband sector

4 Mar 2014

British fixed line incumbent BT has called on the local telecoms regulator Ofcom to level the playing field in the country’s wholesale broadband market, arguing that the watchdog has ‘achieved its policy goal of driving competition deeper into the network’. With BT having suggested that there is no longer a need for prices to be set that favour some operators over others, it has claimed that the fact that its retail broadband market share now stands at around 31%, compared with between 41% and 52% for other ex-incumbents in Europe, is proof of the increased competition in the sector.

Noting that the situation had its roots in 2005, when Ofcom decided to promote local loop unbundling (LLU), BT claims that the regulator has, over the years, set the price of fully bundled service below cost, while inflating the costs of the alternative option under which companies take a direct wholesale service from the telco. Arguing that alternative providers BSkyB and TalkTalk have been the main beneficiaries of such a situation, the incumbent claims that regulatory policies have made life difficult for those smaller internet service providers which lacked the capital to invest in LLU. BT notes, however, that Ofcom ‘recognised the potentially harmful effects of their policy on efficient broadband provision, investment and competition in 2009’, at which date the regulator said prices should reflect cost difference by 2012/13. Under the watchdog’s current proposal, the price gap between the relevant products is to be reduced from GBP19 (USD31) per annum to GBP10 per annum over the course of the next three years. Despite this, BT claims that the true cost difference has been estimated at between GBP0 and GBP4.

‘TalkTalk and Sky have enjoyed subsidies for the best part of a decade but it is time for that to end,’ said John Petter, CEO of BT’s Consumer unit, adding: ‘Ofcom should be given credit for driving competition deeper into the network but that success needs to be reflected in current regulation. We know that Ofcom want to tackle this distortion but we want them to act now given this is a highly dynamic and competitive market. All we are asking for is a level playing field where prices reflect costs and consumers benefit as a result.’

United Kingdom, BT Group (incl. Openreach), Ofcom