BT faces a new challenge in the New Year after the UK's new communications watchdog - Ofcom - said it wants to see more competition in the wholesale broadband access market after deciding that the UK's monster telco is too dominant.

In a consultation document published today, Ofcom found that the UK's broadband market has developed in the last couple of years with different technologies and operators providing high-speed Net access.

"However, it is also clear that at this point in time there is a national and distinct market in wholesale broadband services, and that BT is the dominant provider of those services," said Ofcom.

As a result, Ofcom wants to use its regulatory muscle to open-up the wholesale market. In particular, it wants to see a greater margin between two key BT wholesale broadband products - IPStream and Datastream.

BT's wholesale IPStream product provides an end-to-end ADSL service solely using BT's network and resold by many ISPs.

Datastream products, on the other hand, enable operators to use competing national networks from alternative rival carriers to provide services.

In short, Ofcom wants to see a greater cost margin between the two products to allow rival operators to offer competitive services using their own networks.

Said Ofcom in a statement: "BT should be required to provide its Datastream products on a retail minus basis. A requirement to offer Datastream at a retail minus price means in particular that BT must allow sufficient margin between the price it charges for its IPStream products and the price charged for the Datastream products."

Ofcom chief exec Stephen Carter said: "Broadband Britain needs broadband competition at the wholesale level as well as the retail level. Ofcom believes that these proposals will create the right balance of certainty, alternative supply and incentives to invest."

A spokesman for BT told The Register that the UK already has one of the most competitive broadband markets in the world and that it will defend its corner "very strongly".

Rival operators have long called for greater competition. Only last month, broadband industry lobby group, BIG, said that greater wholesale competition within the UK's broadband market would give the UK economy a £22 billion shot in the arm.

At the time, Energis boss John Pluthero said: "If we want an innovative, dynamic broadband market delivering huge economic benefit to the UK, genuine wholesale competition is needed. ®

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