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Ofcom starts ‘urgent’ investigation into BT tariffs

Allegation over 'abuse of dominant position'

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BT is to face an "urgent" investigation into allegations that its new phone tariffs are anti-competitive.

In its first major test as the new communications regulator, Ofcom confirmed that it has launched an investigation under Chapter II of the Competition Act into BT's new residential retail tariff packages for line rental and calls.

This will examine if the changes - which include the scrapping of standard rate line rental - constitutes an abuse of BT's dominant position under the Competition Act 1998.

Ofcom received complaints from 13 of BT's rivals, many of which offer consumers Carrier Pre-Select (CPS) services.

These operators are concerned that BT's retail tariff packages for line rental and calls, when combined with the wholesale telephony prices, will "distort competition in the provision of residential calls".

Although Ofcom has launched an investigation under the Competition Act, the regulator says it will make an initial ruling in the next four weeks.

"As a matter of urgency, Ofcom is considering the case for seeking interim measures under the Competition Act.

"If Ofcom concludes that there is a case for the interim measures, the options available would include a requirement upon BT to cease or reverse the proposed new tariffs," said the regulator in a statement.

Utilities giant Centrica which lodged a formal complaint with Ofcom over BT's tariff changes, was quick to react to today's news.

Said telecoms MD, Ian El-Mokadem: "We welcome today's announcement and didn't really expect anything less from Stephen Carter and his team. We are committed to assisting Ofcom in their investigation

"We strongly oppose BT's pricing changes as they are not in the best interests of the consumer in the absence of a viable wholesale line rental product and expect the findings of the investigation to confirm this.

"We welcome a quick conclusion to this matter and firm action from Ofcom given that a level playing field has not yet been delivered and this is an attempt by BT to squeeze competition in its early stages."

BT Retail chief exec Pierre Danon said: "We are extremely confident that our new customer propositions are wholly in line with our legal and regulatory obligation. We will of course co-operate with their investigation and remain sure that our position will be confirmed.

Last week, BT announced plans to scrap its standard rate in a move it said would simplify its tariff structure and make its service even better value for money for its customers. However, rivals were quick to point out that by scrapping its standard rate, the UK's 2.5m CPS customers will see their bills rise immediately by £12 a year.

CPS enables punters with a BT phone line to switch providers by receiving two separate bills - one from BT for line rental and one for calls from their new phone provider such as Centrica, Carphone Warehouse or Tele2.

With the cost of the minimum line rental rising by £1 a month under BT's new pricing, CPS customers are faced with an immediate extra charge. There are also concerns that new call tariffs imposed by BT could also be squeezing the CPS market. ®

Related stories

Centrica mulls legal action over BT tariffs
Ofcom to examine BT tariff change
BT simplifies tariffs
BT dominance 'unacceptable', say MPs

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