News that BT might be gearing up for a series of aggressive broadband price cuts was warmly received both by Internet users and the media on Monday, but the idea runs a real risk of being sunk by regulator Oftel.
Oftel has told ZDNet UK News that it could launch an investigation if BT cuts the cost of its wholesale ADSL product, which is bought and resold by ISPs. BT Wholesale is not allowed to sell this product at a loss, and Oftel would force it to reverse any price cut if it decided that BT was misusing its commercial strength to disadvantage its rival broadband providers.
"BT must give us 28 days warning before it implements any price cuts. If we receive a complaint, or if we have any regulatory concerns of our own, then we will investigate," said an Oftel spokeswoman.
ISPs such as AOL have repeatedly called on BT to cut its broadband prices, so it is unlikely that they will complain if cuts are implemented. Companies who are planning to compete with BT at the wholesale level by installing their own equipment in or near a local exchange are much more likely to complain to Oftel if they believe that BT is acting unfairly.
"We do welcome anything that brings down the price that customers pay for broadband, but we do want competition in all levels of the market," explained the Oftel spokeswoman, indicating that the regulator would be concerned if it suspected BT Wholesale was squeezing out its rivals.
These firms, which hope to use local-loop unbundling as a way to compete with BT, are certain to complain to Oftel if they suspect BT Wholesale is selling ADSL at a loss.
BT has repeatedly blamed regulations for its failure to charge less for broadband, although it has achieved some price cuts over recent months.
Sources within the company suggest that incoming chief executive Ben Verwaayen's plan for broadband includes announcing price cuts, and leaving Oftel to decide whether the cuts are acceptable.
Oftel would not say whether it was happy with this potential scenario. If implemented, the regulator would carry the bulk of the blame for Britain's failure to embrace broadband quickly enough. Oftel might be forced to choose between blocking a popular price cut, or being accused of abandoning the concept of competition in the wholesale broadband market.
BT's third-quarter financial results are due on Thursday, and Ben Verwaayen looks certain to be the headline act as he reveals his broadband strategy.
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