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Vodafone UK Funded Report Blasts Ofcom for Allowing Excess BT Profits

Monday, November 4th, 2013 (7:39 am) - Score 820

A new Vodafone UK commissioned report from consulting firm Frontier Economics has accused BT of being in breach of its regulatory commitments by allegedly making profits of nearly £5bn more than the level that Ofcom is claimed to deem acceptable.

The regulators official 2005 Undertakings, which committed BT to a “functional separation” of systems and processes in order to support the development of “effective competition” in the United Kingdom’s telecoms market, included various controversial charge controls and price restrictions that were intended to restrict profits in certain areas.

Apparently the report, which at the time of writing doesn’t appear to be available from the group’s website, states that BT’s returns for the wholesale services covered by the above regulations have often been above the benchmark rate set by Ofcom. Furthermore it’s claimed that BT’s prices could have been up to 10% lower had Ofcom clamped down on their “excess profits“.

A Vodafone Spokesperson said:

BT is holding the UK’s digital future to ransom. It’s time Ofcom prized open its stranglehold. We asked Frontier to objectively assess whether we were right to think that BT’s regulated prices have been inflated and their analysis reveals the full extent of those excess profits.”

In reply a BT spokesperson said that the “report is ludicrous” and contained “wildly inaccurate” figures, although no examples were given. The operator therefore remains confident that it has “met [Ofcom’s] obligations” and boasted about having some of the lowest prices in Europe for related services. But then it’s the UK and not the EU market that’s under review.

The report, which unsurprisingly also appears to have the support of TalkTalk, looks set to form part of a wider submission to help with Ofcom’s on-going review of the UK’s fixed telecoms markets that is due to post its conclusions by the end of spring 2014.

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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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3 Responses
  1. Avatar telecom engineer

    Funny how this comes to light only after vodaphone loose their mobile contract with bt…

  2. Avatar hmm

    vodafone same company avoids tax

    Vodafone: No UK tax to pay on £84bn sale

    http://www.bbc.co.uk/news/business-23924860

  3. Ofcom response might be;

    Of course, we left the door open for new investors! Step in. We will help you anyway we can if you have £100m cash pa for each of 15 years (+ capitalised labour + operational costs, it would help if we could certify you had the cash) to invest. Financial PR we find is only at most 50% of the real thing, as your report shows, but we need actual evidence, not another report. We have reports up to our elbows. You can be our new best friend. Come with Virgin and Talk /Talk that would even be better.

    The lack of new competition since 2006 is killing us! You have no idea how hard it is to write about how wonderful we are, year after year after year when there is no new competition to mention. It is exhausting, but something we have to endure. The boss is so desperate he taken to talking about ubiquity and convergence and changing market definitions, LOL… nothing until after the 2017 market reviews, something we will explain to him after Christmas..2014.

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