EC slams Ofcom for BT pricing investigation

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The European Commission (EC) has criticised British telecoms regulator Ofcom’s plan to monitor the wholesale prices that BT charges other providers for the use of its fibre network, according to Reuters.

Providers have long claimed that BT overcharges for access to its infrastructure and, recently, that it uses that money to fund its moves into media and content provision, such as its sports coverage – services that it provides ‘free’ in some cases to its own retail customers.

In January, Ofcom proposed measuring the gap between BT’s wholesale and retail prices, to ensure that there is sufficient margin for competitors to make a profit from BT’s nationwide infrastructure.

But the EC has written to Ofcom suggesting that its margin test is too rigid and does not take into account the high costs that BT has had to pay to secure rights to such events as Premier League football matches.”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 significant market power,” it said.

“The test, as currently proposed by Ofcom, is fundamentally flawed,” BT responded in a written statement. “It is also unnecessary, given that BT’s fibre network is open to all companies to use on equal terms.”

Nevertheless, rival provider TalkTalk said that it welcomed the EC’s overall endorsement of margin regulation in the wholesale market. “As we’ve said before, this must be the beginning of the journey to bring down superfast broadband pricing and make consumers and Britain better off,” said a spokesman.

Ofcom has yet to issue a formal response to the EC’s comments.

UCInsight says: Why Ofcom is right to act

The argument is the latest evidence of the problems inherent in any unified communications market in which network providers increasingly see themselves as media companies as much as infrastructure owners.

As the major network provider market consolidates – in mobile as well as broadband communications – and a small number of mega-providers snap up their smaller competitors, both customers and commercial rivals face a perfect storm financially: having little option but to pay through the nose for basic telecoms services in order to fund the global multimedia ambitions of their infrastructure providers or, in this case, partners.

It’s already a significant problem in the US, where some providers – according to claims in this blog from Diginomica – are charging customers more if they only want ‘vanilla’ data services. Accepting content streams, or having their private data sold on to advertisers, wins customers a ‘discount’: an outrageous state of affairs for customers who already face rising prices from the network market’s ongoing consolidation.

UCInsight believes that Ofcom is right to investigate wholesale pricing in the interests of the wider UK economy, not least because the vast sums that BT is paying – and then, according to the claims of its critics, passing on to its wholesale clients – are for content that may be of no interest to large numbers of its customers, who may simply want the voice and data infrastructure services that used to be BT’s core business.

About Author

Chris Middleton

Chris Middleton is a widely respected business and technology journalist, author, and magazine editor. In recent years he has been Editor of Computing (where he remains Consulting Editor); co-founder and Managing Editor of Professional Outsourcing – a magazine he developed from scratch and grew to be the leading magazine in its field; Editor of CBR in its most successful year; and co-founder and launch Editor of Sourcingfocus.com. Today, he is co-Director of EastwoodMiddleton Publishing, and founder, designer, and Editor in Chief of Strategist magazine (UK), the boardroom magazine that provides strategic insight for business leaders, and of its mobile-first digital edition at www.iamtheStrategist.com. He is also co-founding Editor of Child Internet Safety magazine, and a contributing Editor of Diginomica.com. Over the years Chris has also written for, among many others, The Guardian, The Times, the BBC, and Computer Weekly. He is the author of several successful books on digital media, and a commissioning editor of more than 50 books.