BT faces whopping fines over Wanadoo complaint (maybe)

BT faces monster fines if it is found to have breached competition laws concerning its early provision of broadband in the UK.

Yesterday, telecoms regulator Ofcom effectively ruled that the UK's dominant fixed line telco had "infringed Section 18 of the Competition Act 1998 and Article 82 of the EC Treaty in relation to the company's residential broadband pricing". It gave BT eight weeks to respond to its findings.

This is the latest ruling in a case that began way back in 2002, when Wanadoo - then known as Freeserve - complained to the then telecoms regulator, Oftel, about the launch price of BT Openworld's consumer broadband Internet access product. At the time, Freeserve alleged that BT was cross-subsidising the product and using predatory pricing.

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

In April 2003, the CAT 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".

In November 2003, 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 the wake of that decision, BT said that the regulator had 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".

At the time, a BT spokesman gloated: "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."

Undaunted by this setback, Freesereve appealed the case to the CAT in January 2004. In June this year, the CAT referred the complaint back to Ofcom which, yesterday, ruled that BT had a case to answer after all. As a result, some are getting excited at the prospect of BT facing a fine of up to ten per cent of its annual turnover, while others reckon that this would allow ISPs to seek compensation for BT's behaviour.

Then again, there are whispers that the document sent by Ofcom to BT contains no mention of any financial penalties for the giant telco, which some reckon is "significant".

In a statement, BT said: "This is a long running case that has already been going on for over two years and in which BT has already been cleared twice. We remain confident of our position. The case involves complex legal issues which will take time to resolve and we will continue to work with Ofcom over the coming months to bring this matter to an equitable conclusion."

As far as Freeserve - now Wanadoo - is concerned, it's view on the matter is short and sweet: "We were confident in this case and have no further comment to make."

However, you can only imagine what the ISP is thinking privately. During its two-year campaign the ISP has taken some flak from BT and the industry. No doubt Wanadoo would be keen to see BT slapped with a punitive fine and the chance to extract some compensation. Even more important, though, Wanadoo could get the chance to take a pop at all those critics who described the company as serial complainers and whingers.

But don't expect anything to happen quickly. Whichever side comes out of this on top, the other is sure to appeal the decision. People familiar with the situation have told The Register that this could run on for at least another 18 months. ®

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