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Ofcom UK Probes BT After TalkTalk FTTC Broadband Competition Complaint

Thursday, May 2nd, 2013 (7:57 am) - Score 1,574

BT has said that its “disappointed” after the UK communications regulator, Ofcom, responded to a competition complaint from rival ISP TalkTalk by opening an investigation into whether or not the operator was “abusing a dominant position” in its supply of superfast broadband (FTTC and FTTP) services.

The move brings to a head two years of bitter rivalry between TalkTalk and BT, which has seen both attacking each other for various perceived market failures (examples: here and here). Sky Broadband has also expressed similar concerns about the alleged lack of competition and regulation in the United Kingdom’s emerging market for fibre optic based services.

On the one side TalkTalk has been frustrated that there’s no fully unbundled (LLU) equivalent for BT’s 80Mbps capable FTTC technology, which would allow it more control over how their product and prices are differentiated. By comparison unbundled ADSL2+ (up to 20/24Mbps) services have helped ISPs like TalkTalk to promote cheaper packages and to grow.

On the other side BT frequently counters that its fibre products are offered on a “level playing field” to all ISPs and that those who complain could always build a rival infrastructure. However, excluding Virgin Media, other ISPs would struggle to afford such a thing and recent efforts from Digital Region and Fujitsu UK to develop an alternative are either struggling to survive or have failed.

Back in 2010 the government and Ofcom also appeared to relax their regulatory controls over the new fibre market, which was broadly perceived to be in response to BT’s £2.5bn commercial roll-out of FTTC and FTTP technologies. At the time BT warned that it would be difficult to invest in the new services if strict regulation got in the way. Ofcom’s period of grace is expected to last for around 5 years.

Ofcom Statement on TalkTalks Complaint

Ofcom has received a complaint from TTG alleging that BT has been abusing a dominant position in breach of the Chapter II prohibition in the Act and Article 102 TFEU in relation to the supply of superfast broadband (‘SFBB’). Specifically, TTG alleges that BT has failed to maintain a sufficient margin between its upstream costs and downstream prices, thereby operating an abusive margin squeeze.

As set out in section 25 of the Act, Ofcom may conduct an investigation where there are reasonable grounds for suspecting that the Chapter II prohibition and/or the prohibition in Article 102 TFEU has been infringed. In addition to the Chapter II prohibition in the Act, Ofcom has the power to apply Article 102 TFEU in full.

Ofcom has now opened an investigation under section 25 of the Act into the matters raised by TTG’s complaint and will consider whether BT has abused a dominant position under UK and/or EU competition law.

The initial phase of Ofcom’s investigation into BT’s “alleged margin squeeze in superfast broadband pricing” is set to begin later this spring and continue through the summer, which will involve gathering and analysing the information. During the Autumn/Winter 2013 period the regulator will then decide whether or not to proceed further or drop the investigation.

Meanwhile an angry BT warned that there was a “lack of any evidence” to support TalkTalk’s case and as a result the operator expects Ofcom to drop the investigation later this year. “It would be better if the industry’s and Ofcom’s focus was on investing in the future of the country rather than on spurious actions designed to hold up fibre in the UK,” said a spokeswoman for BT.

Ultimately today’s market is a product of Ofcom’s regulatory choices and as a result TalkTalk’s complaint may face an uphill struggle, although the regulator has historically signalled that it would like to see future improvements in the market.

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By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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