BT rivals angered by Ofcom's broadband plans
The Broadband Industry Group (BIG) claimed this week that Ofcom, the new communications regulator, and telecoms watchdog Oftel had missed an opportunity to bring more competition to the UK broadband market, and ultimately lower prices for consumers and businesses.
Ofcom and Oftel published a joint market review into the UK wholesale broadband sector on Tuesday that concluded that BT had a dominant position in the market. To combat BT's significant market power (SMP), it will still be subject to eight regulatory restraints to prevent abuse.
In recent months, BIG's members have been lobbying for a change in the way that BT prices the products that it sells to other telcos. This range, called Datastream, lets other telcos connect their networks to BT's local exchanges, and thus offer their own wholesale broadband services over their customers' phone lines.
Currently, BT sets Datastream prices at a fixed amount below the cost of its wholesale ADSL services -- a process called "retail minus", but BIG wants this changed to a "cost plus" system where BT would only be able to charge slightly above its own costs to provide Datastream.
Ofcom, which will regulate the telecommunication and broadcasting sectors from the end of this month, decided against forcing BT to move to a cost-plus system. Instead, it wants retail-minus to remain. In future, however, Ofcom not BT will set the minus margin.
"On the face of it, this is a bad deal for consumers and they have a right to feel let down. The regulators have missed the opportunity to introduce cost-plus pricing, which would increase competition in the market and lower broadband prices for consumers," BIG claimed in a statement.
"As a group, we are frustrated, but remain determined to secure a fair outcome for both consumers and business. We will continue to campaign for 'cost-plus' pricing and greater competition in the UK broadband market," the group added.
BIG is made up of Brightview, Cable & Wireless, Centrica, Energis, Freeserve and Tiscali.
John Pluthero, chief executive of Energis, was particularly unimpressed. He claimed that the market review said nothing new, and only offered the promise of "jam tomorrow".
"Four years on, there is still no broadband revolution -- instead we have one supplier, one product and one price. Tomorrow never comes -- the broadband revolution is on hold until further notice," said Pluthero.
The fact that Ofcom is giving itself a direct hand in the pricing of Datastream, by controlling of the "retail-minus" factor, could lead to fireworks in the future if BT feels it is being made to sell the service too cheaply, or if other telcos think they're paying too much for it.
AOL has a more positive view on Oftel and Ofcom's report than BIG, even though it believes that the process of creating more competition will take some time.
"AOL welcomes the proposal by Ofcom to more closely regulate the supply of wholesale broadband services by BT, which would be a significant step forward for broadband in the UK," said an AOL spokesman.
"If the proposal were adopted, it would provide better transparency, regulatory certainty and hopefully increased efficiency in the provision of wholesale broadband services. This would lead to wider choice, product innovation and possibly lower prices and greater availability for consumers," he added.