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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