The UK's wholesale broadband access market is not effectively competitive because of BT's dominance in the sector, Ofcom and Oftel have concluded in a consultation paper that was published on Tuesday.
After conducting a thorough review of the market, the incoming communications regulator and the outgoing telecoms watchdog have agreed that BT has significant market power (SMP), and is likely to maintain this power for at least the next 18 months.
The consultation paper examined Britain's wholesale broadband market to see if any service providers occupy a dominant position. If no firm was ruled to have SMP, then the market would be effectively competitive. The paper concludes that BT has SMP in the market for wholesale asymmetric broadband services, and also in the market for broadband conveyance -- the backhaul of high-speed data traffic.
The telco will continue to be the subject of eight separate regulatory obligations, in an attempt to prevent it abusing its position. For example, it will have to continue providing network access to other operators on reasonable terms, and it won't be allowed to unduly discriminate against other players.
"These proposals will address a competition deficit," said David Edmonds, director general of Oftel, who has been responsible for keeping checks on BT during the last few years.
"They will bring clarity and predictability to a strategically important and distinct market, enabling other network operators to compete effectively against BT and, in turn, leading to greater choice and value for the consumer," Edmonds added, in a statement accompanying the report.
Kingston Communications was also judged to have SMP in the Hull area, where it operates a telecommunications network.
A number of factors contributed to BT being labelled with the SMP tag. A crucial part of the decision was the fact that BT now controls 55 percent of the wholesale broadband market, compared to almost 31 percent for NTL, and just over 13 percent for Telewest.
BT's market share is expected to grow even larger in the next few years.
"BT’s continued desire to rollout its broadband availability, when coupled with its ubiquity and dominance in the provision of wholesale narrowband analogue access services, means that it has far greater ability to obtain increasing numbers of future asymmetric broadband customers, and thus market share, than its cable operator competitors," predicted the two regulators.
During the consultation process, BT fought against being dubbed a company with SMP. On Tuesday, though, the telco insisted that it had earned the label through its investment in broadband during the last few years.
"The reason the regulators have ruled we have significant market power is that we built Britain's DSL market. Who else has invested in it?" a BT spokesman said, adding that the influence of the cable companies should not be underestimated.
"BT already offers a wholesale portfolio of broadband services, and already meets the requirements as detailed in the regulatory statement. The UK has more ISPs selling broadband than any European country and the UK has some of the best value wholesale broadband prices in the world," the BT spokesman continued.