Ofcom hits BT with superfast broadband price limits

BT may appeal against Ofcom's proposed superfast broadband pricing rules, which could affect the wholesale and retail costing of its services.

The regulator is seeking permission from the European Commission to introduce a new rule to ensure BT maintains a "sufficient margin" between its wholesale and retail pricing figures.

The rule would not remove BT's right to set the price of its wholesale fibre prices, but would prevent it from making changes that could stop rivals from profiting when offering competing services to customers.

TalkTalk and Sky are able to offer their customers access to superfast broadband services by paying BT a sum based on its wholesale purchase fees.

If the difference in BT's wholesale and retail pricing is too small, it is feared the companies may struggle to profit from the arrangement.

In a statement to IT Pro, BT labelled the decision "misconceived" and said it is now mulling over how to respond and possibly appeal against the proposed measures.

"We're not opposed to the principle of a test. In fact, we passed the standard Competition Act test recently and Ofcom has said our current prices will also pass this new test when it comes into force," a BT spokesperson said.

One point the telco does object to, however, is Ofcom's decision to include the cost and revenues generated by offering its BT Sport services free to its superfast broadband customers.

"We do not think our sports costs should be part of any assessment and we reject the notion that Sky and TalkTalk require further regulatory assistance. They have more than 40 per cent of the broadband market between them compared to BT's 31 per cent," the spokesperson continued.

"BT is trying to ensure real competition in pay TV sports for the first time in 25 years. Yet the UK's lop-sided regulatory regime means Sky remains largely unregulated, while further hurdles are proposed for us, the pay TV challenger."

Ofcom confirmed in its statement the difference between BT's two price points is fine at present, and that the rule is simply being introduced as a preventative measure.

"Today's draft decisions are aimed at ensuring that different operators can compete in the developing broadband market in years to come, so that consumers benefit from competitive prices, network investment and high-quality, innovative services," the Ofcom statement reads.

The proposals will be reviewed by the European Commission, and Ofcom said it hopes to be in a position to enforce the new rule from March 2015.

IT Pro contacted Sky for a response to this story, but was still awaiting a response at the time of writing. TalkTalk, meanwhile, told the publication it was "delighted" by Ofcom's actions.

"They [Ofcom] are right to be concerned that BT could abuse its position to undermine competition in superfast broadband. Robust regulation creates a more competitive market that better serves consumers and small businesses," TalkTalk said.

"We do think, however, that consumers should be disappointed that the proposals will not lead to an immediate price reduction. Broadband is critical to our future. This must be the beginning of the journey to bring down superfast broadband pricing and make consumers and Britain better off."