Ofcom proposes guilty verdict on BT competition breaches

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The Independent Online

Ofcom telecoms and media regulator, told BT Group yesterday it was proposing to find the company guilty of breaching the Competition Act in relation to the pricing of its broadband internet services.

Ofcom telecoms and media regulator, told BT Group yesterday it was proposing to find the company guilty of breaching the Competition Act in relation to the pricing of its broadband internet services.

The issue strikes at the heart of the long-running debate over BT's role as both a provider of telecoms services to private customers and the operator of the nation's main, wholesale infrastructure network.

Broadband rivals, such as Wanadoo, the France Telecom subsidiary whose complaint led to Ofcom's announcement, argue that there is a conflict in BT being a retail and wholesale provider of telecoms services.

In the case of broadband internet provision, Wanadoo has alleged that BT Retail can charge customers unrealistically low prices because it receives special terms when buying technical services from BT Wholesale which are not available to retail rivals. Wanadoo claims this so-called "margin squeeze" between BT's wholesale and retail prices prevents rivals making an economic return.

Ofcom delivered its proposed verdict in a Statement of Objections which sets out the facts of the case, the matters that Ofcom objects to, the action it proposes and Ofcom's reasons for its decision.

Although Ofcom has the power to fine BT, it is understood that yesterday's document does not include a financial penalty as a remedy. The regulator also has the power to force BT to stop any offending behaviour.

BT has until 27 October to reply. After that, if Ofcom decides to proceed with the decision outlined, BT has the right of appeal.

A statement from BT said: "This is a long-running case that has already been going on for more than two years and in which BT has already been cleared twice. We remain confident of our position. The case involves complex legal issues which will take time to resolve and we will continue to work with Ofcom over the coming months to bring this matter to an equitable conclusion."

The complaint was first lodged by Freeserve, Wanadoo's predecessor, in May 2002. It was made to Oftel, which rejected the claim. Freeserve then appealed, a process spanning the creation of Ofcom, which has taken over from Oftel. Since then Article 82 of the EC Treaty has come into effect. It allows cross-border actions between companies and has added another legal layer to the dispute.

BT's role as a retail and wholesale provider of telecoms services is under wider scrutiny as part of Ofcom's strategic review of the telecoms industry.

Splitting BT into two companies was included as a possibility in the review's initial stages, although many observers believe it unlikely that Ofcom would take such a radical step. It is more likely that stricter controls will be imposed to ensure greater transparency in the commercial arrangements between BT Retail and BT Wholesale.

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