Oftel raps BT Cellnet over subsidies

BT Cellnet has been accused by UK telecoms watchdog Oftel of unfairly cross-subsidising its mobile phone service providers to help stem their losses.

Oftel has issued a draft order against BT Cellnet, claiming that it used its network business to subsidise its mobile service provider subsidiaries, such as Martin Dawes. Oftel said this was unfair to independent service providers, such as RSL and Infopoint.

BT Cellnet refuted the claims and said it firmly believes that it does not unfairly cross-subsidise its service activities. It has accused Oftel of using "wholly unreasonable" and out-dated measurements. The watchdog has given 28 days for parties to comment on the draft.

Oftel's investigation, launched in July last year, found that BT Cellnet's service providers were not covering their costs on services supplied to customers and would have been making a loss without the operator's subsidy.

David Edmonds, director general of Oftel, said: "If BT Cellnet charges service providers too much for wholesale airtime, customers will face an unbalanced choice when shopping around for a good deal on their mobile phone.

"For competition to be effective it is vital that independent service providers are able to offer a real alternative to those service providers owned by a particular operator."

Edmonds added that a drop in BT Cellnet's wholesale price would "be a very effective way" of ensuring that competition can continue to develop in the mobile market.

However, BT Cellnet has rejected the accusation and has asked Oftel to urgently review its assessment devices. In a statement, the company said it considers the watchdog's seven-year-old formula to be "an anachronism that has passed its sell-by date as a method of measurement".

"The major reason for imbalance in the mobile phone service provision market is due to regulatory decisions made by Oftel which permit Orange and One 2 One much greater freedom and flexibility in promoting their own service provision interests," the statement added.

"Until this market imbalance is addressed, BT Cellnet considers it unreasonable for it to be subject to additional complex, and obscure monitoring and enforcement procedures."

Both BT Cellnet and Vodafone were investigated by Oftel, but Vodafone was found not to be cross-subsidising its service providers. Both operators are required to offer wholesale airtime to independent service providers on the basis that they have strong positions in the mobile market.

A spokeswoman for Oftel said the draft order, or 'direction', would last for 28 days, followed by two weeks for further comments from BT Cellnet and other service providers.