Ofcom has lifted a restriction meaning BT will now be allowed to start selling bundles of services such as landlines, broadband and digital TV.
In a decision announced on Tuesday, the telecoms watchdog said that as a result of increased competition for landline provision, it has opted to deregulate the retail telecoms market. This effectively puts an end to previous controls on bundled services and prices from BT.
The ruling, which removes one of the last pieces of regulation affecting the former incumbent, is based on the findings of a consultation launched by Ofcom in March. The review looked into the state of competition in the fixed-line telephony market, which covers analogue and digital (ISDN) lines.
"We have now completed our review. Our conclusions are that most of the UK retail markets, with the exception of Hull, are now effectively competitive and, specifically, BT no longer has significant market power... in the provision of retail fixed narrowband analogue access and retail calls markets in either the residential or business sectors," the regulator said in a statement.
Ofcom noted that around 12 million households and small businesses in the UK now use telecoms providers other than BT, including Virgin Media, BSkyB and TalkTalk. In Hull, however, provider KCOM still dominates the fixed-line market, Ofcom said, and the regulations will continue to apply to the operator.
The decision will benefit consumers by spurring competition around bundled services, Ofcom's chief executive Ed Richards said. "This is an important step in deregulating telecoms where competition can be relied upon to serve the consumer interest," he said.
Ofcom said the average monthly cost of home landline calls fell from £25.04 in 2002 to £21.57 in 2008 — a drop it attributed to competition between providers.
BT said the move would allow the company to compete on a more-level playing field. "This will allow BT to offer more targeted discounts on products and services and more attractive bundles at better prices, something we have been unable to offer widely to date," said BT Retail chief executive Gavin Patterson in a statement.
Ofcom said that during its consultation, BT's competitors criticised the proposed deregulation efforts, citing issues such as the telecom's high market share in retail landlines and the barriers its rivals faced to entry and growth. However, the regulator said the evidence demonstrated that these issues had been overcome by changes in the market in the past few years.
In addition, a recent run of poor earnings results at BT has undermined competitors' suggestions that the company's market dominance is indicated by its profitability.
The deregulatory action is the latest in a series of such moves. In 2006, Ofcom removed retail price controls on BT, and in 2007 it relaxed access controls for BT for businesses with a telecoms budget of more than £1m a year. However, Ofcom noted that regulations are still in place regarding BT in two retail business markets.