BT gloats as Freeserve loses broadband pricing appeal

'Spurious' claims rejected by Oftel

Oftel has, once again, rejected claims for Freeserve accusing BT of predatory pricing.

Confirmation that Freeserve has failed in its attempt to prove that BT abused its dominant position is likely to come as a massive blow to those who've worked long and hard on this case. It is the Freeserve's second big setback in weeks, coming hot on the heels of the firm's High Court defeat in which it sought - and failed - to have - AOL UK's exemption from paying VAT (since rescinded) declared illegal.

The Oftel blow concerns allegations made by Freeserve in March 2002 about the launch price of BTOpenworld’s consumer broadband Internet access product. At the time, Freeserve alleged that BT was cross-subsidising the product and involved in predatory pricing.

When Oftel rejected Freeserve's complaint, the ISP took its case to the Competition Commission Appeal Tribunals (CCAT), the UK's highest specialist competition law court.

In April this year, the CCAT dismissed three out of four of Freeserve's complaints but ruled that, on the issue of predatory pricing, Oftel failed to explain its decision properly. Freeserve claimed victory explaining, at the time, that "Oftel did not sufficiently describe its analytical approach, that its analysis remained unclear in important respects, and that it did not sufficiently explain the principles it used in its decision".

Freeserve chief exec Eric Abensur went further: "This is an important victory for Freeserve and for UK broadband development as a whole."

However, the jubilation has since evaporated. Late yesterday, Oftel published its re-examination into the issue and found that its earlier ruling was sound and that there was no evidence of anti-competitive margin squeeze.

In a statement, Peter Waller, second in command at Oftel, said: "Oftel has carried out a thorough reinvestigation, and found no evidence to support Freeserve's allegation.

"The Tribunal did not challenge the original verdict of Oftel's investigation, but said we had given insufficient explanation of how we had reached our decision.

"This concludes one of Oftel's final investigations. It underlines the importance we attach to fair competition in the broadband market, backed by regulatory decisions underpinned by the most thorough analysis of market conditions at the time."

BT was quick to make the most of Freeserve's misfortune insisting that the regulator’s "detailed and reasoned decision" found there was "no evidence that BT has been squeezing its competitors’ margins, and no evidence of any adverse effect in the competitive retail market".

Said a BT spokesman: "We are pleased that Oftel has finally thrown out Freeserve's spurious claims. It is a shame that it has taken over eighteen months to reach this point, but at least common sense has prevailed.

"Perhaps Freeserve will be a little less quick to complain and a bit more willing to acknowledge the fact that the UK now has the most competitive broadband sector in the world."

For its part, Freeserve was putting a brave face on things while keeping alive the idea that it might still appeal the decision.

The ISP said in a statement: " We've not seen the full decision but believe that Oftel has concluded that BT priced below cost…for some categories of consumers, but still concluded that there was no abuse of dominance. Freeserve will take this fully into account when considering whether to appeal Oftel's decision to the Competition Appeal Tribunal as and when we have had a chance to review the decision in detail." ®

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