Ofcom tells BT to offer rivals better margin

BT could be forced to raise its broadband prices or cut the charges for rivals to use its network under tough tests being proposed by regulator Ofcom.

The new rules are designed to ensure that BT cannot exploit its market position against Sky and TalkTalk. For now, Ofcom judges that BT’s retail and wholesale prices comply with the new test. In order to allow rivals to be able to make reasonable profits, there needs to be a sufficient gap between the price BT charges them to use its network and the retail price at which BT sells its own broadband services.

Previous regulation required BT to allow rival operators to use its network to sell superfast broadband to consumers. The process is known as “virtual unbundled local access” (Vula). Some 3.4 million superfast broadband connections in the UK are currently offered under this agreement.

Ofcom has decided that regular tests are required “to ensure that other communication providers have sufficient margin to be able to compete with BT in the provision of superfast broadband packages to consumers”.

BT described the plans as “misconceived but not unexpected…We’re not opposed to the principle of a test… Ofcom has said our current prices will also pass this new test when it comes into force…However, 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.”

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