EC levels criticism at Ofcom’s planned pricing rule for BT’s wholesale fibre offerings

20 Feb 2015

British telecoms regulator Ofcom’s proposed new pricing rule for BT’s wholesale fibre offering has been criticised by the European Commission (EC), according to Reuters.

As previously reported by CommsUpdate, last month Ofcom unveiled new measures which it said were designed to promote competition and investment in the superfast broadband market. Under a draft decision notified to the EC, a new pricing rule would mean that fixed line incumbent BT would be required to ‘maintain a sufficient margin between its wholesale and retail superfast broadband charges in order to allow other providers profitably to match its prices’. This new pricing rule would, however, preserve the telco’s existing flexibility to set its wholesale fibre prices, Ofcom noted, saying that this would in turn provide an incentive for future investment by BT in its fibre infrastructure, while ensuring it could not set prices ‘in such a way that might prevent other operators from competing profitably for superfast broadband customers’.

Now, however, in a letter to Ofcom regarding the matter the EC is understood to have said that the proposed margin-squeeze test did not take into enough consideration the high costs that BT has to pay in a highly competitive market to secure rights for content such as Premier League football. Arguing that BT should be allowed more flexibility in how it spreads the costs than the six-monthly reference period proposed by Ofcom, the Commission noted: ‘Ofcom’s proposed approach lacks the necessary flexibility in particular with regards to the treatment of costs for BT Sports … The Commission considers that the proposed static approach unduly limits BT’s commercial activity with regards to a market in which it does not have significant market power.’

For its part, BT has responded favourably to this latest development, with a statement from the telco cited as saying: ‘The test, as currently proposed by Ofcom, is fundamentally flawed … It is also unnecessary given BT’s fibre network is open to all companies to use on equal terms.’ Ofcom has, meanwhile, said that having received the EC’s comments it will review them before publishing a final statement ‘in due course’.

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