BT Escape Latest Ofcom UK FTTC Margin Squeeze Test Unscathed

The telecoms regulator has re-run its FTTC / VULA “margin squeeze” test, which was introduced earlier this year as a mechanism for keeping BT’s “fibre broadband” prices fair by ensuring they “maintain a sufficient margin between wholesale and retail … charges“, and found that the operator is not in breach.

The test imposes a new Significant Market Power requirement on BT to ensure they don’t “set the VULA margin such that it prevents an operator that has slightly higher costs than BT (or some other slight commercial drawback relative to BT) from being able to profitably match BT’s retail superfast broadband offers” (here and here).

Ofcom’s test weights a number of different factors, such as the price of the FTTC service and the impact of bundling value added features like free BTSport. The regulator is currently reviewing their approach (here), although in the meantime they’ve just completed another run using the latest data from BT and once again found that the operator is not in breach.

Ofcoms Statement

“On 31 May 2015 BT submitted the data necessary for us to monitor BT’s compliance with SMP services condition 14 (Virtual Unbundled Local Access margin control) over the compliance period 1-30 April 2015.

At paragraph 1.15 of our statement “Fixed Access Market Reviews: Approach to the VULA margin” of 19 March 2015 we explained that following BT submitting its first compliance report, we would issue a statement that informs stakeholders whether or not we have reasonable grounds to suspect non-compliance over the first month assessment.

Having carried out a high level assessment, we have no reasonable grounds for believing that BT is contravening, or has contravened, SMP services condition 14 over the compliance period 1-30 April 2015.”

BT will no doubt feel as if the latest result adds further fuel to their belief that Ofcom’s test is “flawed” and merely provides “unwarranted regulatory protection” to their rivals (e.g. Sky Broadband and TalkTalk). The operator has already tabled an appeal against the measure with the Competition Appeals Tribunal (here).