Time is on the side of BT's broadband price cuts

Once BT reveals what changes it is planning to the cost of wholesale ADSL, it will probably have time to implement them before Oftel finishes any relevant investigation
Written by Graeme Wearden, Contributor

Rival operators who are unhappy that BT is poised to announce significant reductions in the cost of its wholesale broadband package will struggle to stop any changes being implemented.

BT must announce details of any price cuts 28 days before they are due to come into effect. But if the telecoms regulator Oftel, which will decide whether any price changes are anti-competitive, hasn't made a decision after this time then BT can bring them into effect. Previous Oftel investigations have taken much longer than one month.

The means that BT should be able to bring its new broadband strategy into effect even if it is accused of predatory pricing -- something that Bulldog Communications has already citedas a reason to stop the price cuts.

Oftel told ZDNet UK News that although the 28-day window was to ensure that both the regulator and the industry knew that a price change was imminent, it was not designed as an opportunity for investigation. Under the terms of its licence, BT is not allowed to sell products at a loss -- thus using its financial strength to muscle out competitors.

"If we want to investigate a price cut, this wouldn't normally mean that we would interfere until a decision has been made," an Oftel spokeswoman said.

She added that it was possible for Oftel to change prices retrospectively, if it concluded that BT has broken the rules. However, she would not speculate how this might work in this case, as BT has not yet made its announcement.

It is also unclear how long an Oftel investigation might take, as it depends on the complexity of the case, and also how quickly different companies provide the information that the regulator needs. However, an earlier investigation into BT's wholesale broadband pricing which began in August 2001 is still underway, suggesting that it could take months for any new probe to be completed.

Some insiders are predicting that the wholesale cost of BT's consumer ADSL product will be slashed to £15 +VAT per month, down from £25 +VAT. BT has refused to speculate ahead of the official announcement, but has been assuring journalists that reports claiming the wholesale price would be halved are incorrect.

Some of BT's rivals have reacted more enthusiastically than Bulldog to the idea that BT might cut its prices. Elliott Mueller, the head of wireless broadband provider Tele2, believes it could provide a boost to the whole sector.

It is still possible that BT will find a way of cutting its wholesale prices while avoiding making a loss on the product.

When new chief executive Ben Verwaayen announced that BT was planning broadband price cuts, he promised the assembled journalists that he was not planning to break the regulations. Other comments, though, left the impression that he wouldn't back away from a row with Oftel. "I respect the regulator, but he has his job and I have mine. My responsibility is to BT's shareholders, customers and employees," said Verwaayen.

"Of course, we would abide by the regulator's decision," he added, leading to speculation that BT was inviting Oftel to block a price cut, and then llet the regulator take the blame.

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