EC fines Wanadoo €10m for predatory pricing

Sold ADSL too cheaply

The European Commission has slapped a €10.35m fine on Wanadoo for predatory pricing on consumer ADSL services in France.

An EC investigation found that the France Telecom-owned ISP deliberately set prices on broadband products at lower than cost. This restricted the opportunities of rivals to enter the market and constituted an abuse of a dominant market position, the Commission ruled.

Wanadoo's below-cost prices were enacted from the end of 1999 to October 2002. The ISP began mass-marketing its ADSL products heavily in March 2001, and it is from this point that it is deemed to have abused its position. Between January 2001 and September, 2001, Wanadoo's market share jumped from 46 per cent to 72 per cent in a market that grew five-fold. At the end of the period, no other broadband access provider - and this includes cable companies - held more than 10 per cent market share. And one ADSL provider, Mangoosta, went bust.

From January 2001 to September 2002, Wanadoo's market share rose from 46% to 72%, on a market that grew five-fold.

We'll let the European Commission pick up the story:

Wanadoo suffered substantial losses up to the end of 2002 as a result of this practice. The practice coincided with a company plan to pre-empt the strategic market for high-speed Internet access. While Wanadoo was suffering large-scale losses on the relevant service, France Télécom, which at that time held almost 100% of the market for wholesale ADSL services for Internet service providers (including Wanadoo), was anticipating considerable profits in the near future on its own wholesale ADSL products.

Wanadoo's policy was deliberate, since the company was fully aware of the level of losses which it was suffering and of the legal risks associated with the launch of its eXtense service. According to in-house company documents, the company was still expecting at the beginning of 2002 to continue selling at a loss in 2003 and 2004.

In October 2002, France Telecom slashed wholesale access prices by 30 per cent and since then, the broadband market in France has grown in a more balanced way, the EC says.

The Commission says it may investigate more Wanadoo-type cases in other member countries. It notes also its the decision of 21 May in which the Commission fined Deutsche Telekom for the prices it charged for access to the local loop.

Freeserve, the UK's biggest ISP, is a wholly-owned subsidiary of Wanadoo. ®

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