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Ofcom introduces BT price margin rule for fibre

James Pearce
March 19, 2015

New measure means BT must maintain sufficient margin between its wholesale and retail charges for superfast broadband

Ofcom has introduced new measures that will force BT to maintain a “sufficient margin” between its wholesale and retail charges for superfast broadband in order to promote competition in the market.

The new rule, which will come in to play on April 1, means that BT will continue to set prices for access to its wholesale fibre network, but the regulator hopes it will prevent BT from preventing rivals from competing profitably for superfast customers.

BT is currently the largest retail provider of fibre broadband services over its network, but is required to allow other operators to use its network to sell superfast broadband to consumers under a process known as ‘virtual unbundled local access’ (VULA).

Ofcom found that BT is currently meeting the criteria for the new margin rule, which it called a “safeguard which limits BT’s ability to reduce retail margins in future, and ensures that any increases in BT’s costs must be reflected in its prices.”

A statement from BT said: “Ofcom have made changes to the way they will apply their margin squeeze test. This follows an unprecedented intervention by the EC who said BT should be allowed more flexibility to recover its sports costs over a longer period.

“The amendments announced today do not adequately address our concerns nor those raised by the Commission. We will now consider our options.

“We are not opposed to the principle of a margin squeeze test – and in fact Ofcom has confirmed that we currently pass the test.

“The proposed test is however 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.

“UK regulation remains worryingly lopsided. 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.”

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