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Superfast broadband: Can new rules for BT boost competition?

Regulator changes the rules to try to give BT's competitors a chance in a more level playing field.
Written by Colin Barker, Contributor

Telecoms regulator Ofcom has proposed new requirements on BT to improve competition in the market for superfast broadband.

The new rules mean that BT has to "maintain sufficient margin between its wholesale and retail superfast broadband charges" so that other companies can match or beat its prices and still make a profit.

Different operators currently retail superfast broadband over BT’s network using a process known as 'virtual unbundled local access' (VULA). As Ofcom points out: "BT has flexibility to set the wholesale price for providing this access to its network."

In a statement, Ofcom said that it wanted to put in place a condition requiring BT to ensure that the margin between its wholesale VULA charges and its retail superfast broadband prices "is sufficient for rival operators to compete and make a profit".

One of the sticking points has been BT's highly successful channel BT Sport, which is currently free to all BT's superfast broadband customers. Ofcom said that its proposed new rules would "take into account the costs and revenues of these sport channels".

Ofcom has announced its provisional decision in relation to a complaint from TalkTalk last year. TalkTalk had alleged that BT failed to maintain a sufficient margin between its VULA wholesale and superfast-broadband retail prices, but the regulator said it has provisionally decided there are no grounds for action.

This investigation is separate from the rules which Ofcom is proposing today for BT under the European framework for telecommunications.

Commenting on the decision, a spokesperson for TalkTalk said: "We have long maintained that the time has come for fibre to be more robustly regulated, starting with a margin squeeze test."

A "margin squeeze" is where an operator supplying the essential input leverages its market power by raising its wholesale price (and/or dropping its retail prices) to squeeze competitors' margins.

"What matters most is ensuring a level playing field and competition for fibre in the future," the TalkTalk spokesperson said.

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