Vodafone, TalkTalk appeal Ofcom Openreach finding
August 30, 2019
Vodafone UK and TalkTalk have lodged an appeal with the Competition Appeal Tribunal to try and overturn Ofcom’s regulation published on June 28th.
Helen Lamprell, Vodafone UK’s General Counsel, said the company “had not taken the decision lightly.” The fundamental problem, argue Vodafone and TalkTalk is that BT/Openreach has significant market power and so regulated price control of the wholesale market is crucial.
Lamprell stared that relying on duplicating infrastructure has not been a successful strategy for the UK so far: “What seems to have happened here is a policy decision around network infrastructure competition being a good thing being applied in the face of evidence to the contrary that we’re not at that stage yet and the historic evidence is, is fairly negative….We’ve had that situation the past, when we had Cable & Wireless… MCI and Global Crossing, all those guys rolling out [infrastructure] and that didn’t end particularly well for most of them.”
Lamprell stated Ofcom’s action is likely to damage on the UK’s digital infrastructure and strengthen BT’s market dominance, even though it only applies as far as 2021, when a new review period begins.
TalkTalk and Vodafone want to address three areas of concern contained in Ofcom’s statement “promoting competition and investment in fibre networks: review of the physical infrastructure and business connectivity markets” through the tribunal:
• Ofcom’s decision that BT does not have significant market power in Central London when Ofcom’s own analysis shows in fact BT has between 60 per cent and 70 per cent share of that market and the European Union’s definition of a dominant positions in competition law is over 50 per cent.
The regulator’s rationale is that there are competing fibre networks in central London that can be extended to undermine that significant market power. Vodafone and TalkTalk contend that BT will maintain its dominance by having already connected most premises there. Also, rival networks are rarely extended because it’s too expensive and disruptive to dig up the roads.
• Ofcom’s decision to discontinue using a cost-based price cap as the charge control, which reflected BT’s falling costs in providing these services. Instead BT has a freer hand regarding charges as a flat price cap has replaced it.
Lamprell said this would cost other communications providers, the public sector and British businesses an additional £230 billion (€255bn) over the next 20 months, and was a “windfall” for BT. The figures are based on the difference between BT’s prices now under the cost-based cap and what they would be with the flat-rate cap, plus figures from Ofcom, BT and its own research.
• The decision not to impose a price cap in areas Ofcom identified as ‘high network reach’, such as Birmingham, Glasgow and Manchester where the regulator ‘expects’ competition to enter the broadband market.
Lamprell said Vodafone believes regulation should be based on evidence not hope, and that Ofcom’s approach could slow 5G deployment.