Ofcom is pushing ahead with plans to fix the price BT can charge other internet service providers (ISPs) for access to is Openreach wholesale broadband network. The move should help ensure fibre broadband prices remain low.
Ofcom put forward the proposals in January after a complaint from TalkTalk in May 2013 stating that it believed BT was charging too much for its fibre services at a wholesale level, effectively creating a monopoly.
This complaint was dismissed last year after Ofcom ruled BT was not acting in this way. However, it did agree to introduce a test to ensure BT could not act in this way in the future.
This was unveiled in January and sent to the European Commission (EC) for approval.
The EC, though, has said that it believes Ofcom’s inclusion of BT Sport pricing within the test is unfair, as BT should be allowed to compete in this area.
“In the view of the Commission, Ofcom’s proposed approach lacks the necessary flexibility in particular with regards to the treatment of costs for BT Sports,” it said.
“The Commission considers that the proposed static approach unduly limits BT’s commercial activity with regards to a market in which it does not have SMP [significant market power].”
However, Ofcom, while acknowledging the SMP point, said it believes it should maintain the focus on BT Sport within the tests.
“Ofcom’s proposal to include the costs of BT Sport within the VULA [Virtual Unbundled Local Access] margin condition draws BT’s investment in premium sport content into the factors of which Ofcom should take account,” it said in its report.
“As a result, Ofcom should give full weight to the extent of the investment made by BT in trying to build up its pay TV business and the impact of the condition on BT’s incentives to make further investments in pay TV.”
This decision has upset BT. In a statement sent to V3 it said that while it was not adverse to the introduction of the test, it believes the inclusion of BT Sport costs within the test show how "lopsided" telecoms regulation is within the UK.
“The proposed test is flawed and, among other things, fails to recognise that BT is a new entrant in the pay TV market. The effect is to provide unwarranted regulatory protection to the likes of TalkTalk and Sky,” it said.
“The UK telecoms market is the most heavily regulated in the world yet there has been little action to address Sky’s continuing dominance of the pay TV market. This imbalance needs to be addressed if customers aren’t to lose out in what is an increasingly converged marketplace.”
BT has said in the past it would consider appealing against Ofcom's tests, and given the EC's complaints it may well feel it would have a strong chance of winning. However, it has said nothing about whether it will do this.
The test from Ofcom will come into force on 1 April, 2015.
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