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BT demands end to Ofcom wholesale broadband subsidies for BSkyB, TalkTalk

Telco giant claims watchdog has driven competition deep into network

Red telephone boxes near royal opera house

Updated BT is pressuring communications regulator Ofcom to end what it described as a "pricing distortion" in the wholesale broadband market that has protected rivals BSkyB and TalkTalk for nearly 10 years.

The former national telco would like the watchdog to end maximum limits set on the prices rivals BSkyB and TalkTalk have to pay for wholesale telecoms services.

"TalkTalk and BSkyB have enjoyed subsidies for the best part of a decade but it is time for that to end," said BT's consumer boss John Petter.

"Both are successful companies and both are more than capable of standing on their own two feet. It is particularly unfair that BT has to give BSkyB a commercial leg up when they consistently refuse to provide us with fair access to their own services."

The one-time national telco's gripes come as competition – particularly with its foe BSkyB – has heated up after BT made an aggressive move into the television market and secured expensive rights to broadcast much sought after football games over successive seasons.

"Ofcom should be given credit for driving competition deeper into the network but that success needs to be reflected in current regulation," Petter added.

He said:

We know that Ofcom want to tackle this distortion but we want them to act now given this is a highly dynamic and competitive market. All we are asking for is a level playing field where prices reflect costs and consumers benefit as a result.

BT commissioned a consulting outfit to look at the figures in a move to back up its claim that the broadband market in the UK had changed.

Plum Consulting argued in its report (PDF) that BSkyB and TalkTalk had pocketed £623m over the past nine years due to the alleged "pricing distortion."

BT, in a rare – and what cynics might call opportunistic – defence of small Blighty ISPs, claimed that Ofcom's policy on unbundled lines (LLU) had meant that the little guys had "suffered a competitive disadvantage" due to a lack of capital to invest in local loop unbundling.

The company said:

Ofcom’s policy has achieved its goals with the number of fully unbundled lines now standing at 7.6 million compared with less than 50,000 in 2005. The main beneficiaries have been Sky and TalkTalk who now have more than nine million broadband customers between them, around half of all the broadband connections carried over BT’s network.

The watchdog said in 2009 that the pricing gap needed to be closed, but BT is still quibbling with Ofcom over the numbers.

BT's lobbying of the regulator took both TalkTalk and BSkyB by surprise. TalkTalk's spokesperson told El Reg:

The people who have benefitted from Ofcom's regulation [are] consumers. What BT are actually calling for is for consumers and businesses to pay more for broadband, and for that money to go straight into BT's pockets. Ofcom should be proud of how their approach to regulation has lead to the UK having one of the most competitive markets in the world and they must keep it that way. We urge Ofcom to ignore this self-serving request.

BSkyB told us:

If regulatory charges are to change, this should happen gradually over time as Ofcom proposes. In any event, we believe that Openreach’s customers are currently paying too much based on inappropriate costs being loaded onto its customers, which hits UK consumers in the pocket.

Ofcom hadn't immediately got back to us with comment at the time of publication. We'll update if we hear more. ®

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