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Ofcom UK Probes BT After TalkTalk FTTC Broadband Competition Complaint

Thursday, May 2nd, 2013 (7:57 am) - Score 1,540
ofcom uk telecoms regulator

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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Mark Jackson
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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11 Responses
  1. Avatar Ignitionnet

    Very odd comment that there’s a lack of evidence – the prices Wholesale charge Retail are right there on the BT Wholesale website.

    The only shock here is why it took so long for someone to complain about margin squeeze. It’s hardly coincidence that BT Group is able to offer unlimited fibre services well below anyone else’s pricing. Economies of scale only go so far.

    • Is it well below anyone else’s pricing though? Sky also has economics of scale to their advantage and their “unlimited” Sky Fibre package costs £20 per month (excluding any short term discounts / promos).

      Even TalkTalk’s Essentials (£6.50) plus Fibre Boost (£10) comes out cheaper but they’ve done a poor job of promoting it. The same level of package on BT is £23. Obviously each package has other value-add differences but it’s a tighter race among big ISPs.

    • Avatar Ignitionnet

      BT Wholesale charge Plusnet, including VAT, 19.20/month for an 80Mb/20Mb FTTC line.

      This doesn’t include any bandwidth on the Wholesale network, which is 48GBP/Mbps/month, at all. 200kbps per customer is if anything on the low side on unlimited, unshaped services as a provision and is another 9.60/month.

      Plusnet sell an unlimited broadband only package for 19.99/month.

      There is supposed to be adequate margin throughout the 3 layers of BT, this is absent between BT Wholesale and Plusnet / BT Retail as far as FTTC goes. That’s the rub.

    • Avatar FibreFred

      I must admit I don’t “get” Plusnet, are they a separate company that is owned by BT or part of the BT Group?

  2. Avatar Kyle

    Can’t see why TalkTalk would raise the issue as they have failed to advertise any offering of their FTTC ‘add-on’, prefering to opt for pushing their “up to 24Mbps” product.

    If they feel they aren’t getting the subscriber base they believe they should have, then they need to address their current strategy as FTTC is not (seemingly) a product they want to push.

  3. Avatar JNeuhoff

    BT Group should have been split up into completely independent companies a long time ago, with one of them being a pure network infrastructure company. This way, all service providers are on equal terms when using the network infrastructure. And it will be a lot easier for a regulator to properly control the network company (though Ofcom is a joke, needs to replaced by a proper regulator!)

    • Avatar FibreFred

      They are on equal terms? Ofcom sees to that

      I wonder what will happen if Ofcom rule in Talktalks favour then, BT have to increase their prices?

      Can you imagine getting a mid contract increase because another ISP moaned it was too cheap 🙂

    • I think that would depend on Ofcom’s chosen regulatory solution. It might mean an increase but it could also mean a decrease or perhaps a more flexible version of VULA. It’s probably far too early to speculate as this sort of thing can drag on for a very long time.

  4. Avatar FibreFred

    Maybe the struggle to compete is nothing to do with pricing and more to do with TalkTalk being the most complained about provider in the UK?

    Just a thought 😉

    • Avatar Kyle

      I thought EE had just overtaken them? It’s too sunny to try and find the article. Either way, I’d rather do without than be with these monkeys (no offence, monkeys)!

    • Avatar FibreFred

      Oh yeah that sounds familiar, well they’ve still been top of that chart for a while I think 🙂

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