Freeserve sparks investigation into BT's broadband marketing

The way in which BT markets its residential broadband offering will face an official investigation early next year following a complaint from rival Freeserve.

The French-owned ISP originally asked Oftel to look into the promotion of the telco's 'no frills' product, BT Broadband, in March this year but the telecoms regulator dismissed the case.

However, Freeserve went to the Competition Commission Appeal Tribunal (CCAT) and appealed against that decision. Today it learned that the appeal had been successful.

CCAT will now examine the substance of the complaint in mid-January 2003.

David Melville, Freeserve general counsel, said in a statement: "Notwithstanding institutionalised inactivity and prevarication by the industry regulator Oftel, we welcome the CCAT judgement as underlining a judicial commitment to ensure competition in this important new market - competition is vital if the UK is to achieve its ambitious programme for mass consumer take-up of broadband internet."

Freeserve filed two complaints, one against BT Retail, the other against BT Wholesale and BTopenworld.

In the first complaint, Freeserve alleged that BT Wholesale had abused its dominant position through "cross-subsidy, discrimination and predatory pricing as well as through sending out a 'Telephone Census' to its customers".

Freeserve's gripes included allegations that BTopenworld - the telco's ISP division - was given advance notice on a price cut on wholesale broadband access introduced by another division of BT, BT Wholesale.

This enabled BTopenworld to put together marketing campaigns and offer special deals to customers before the rest of the industry, according to Freeserve. The ISP also believes BT is guilty of cross-subsidisation.

The most recent complaint centres on BT Retail's alleged ability to exploit what Freeserve calls "huge unmatchable advantages" over other ISPs, including marketing BT Broadband on 19 million phone bills and via 13 million calls to its customer support line every quarter - the so-called 'blue bill' issue.

Freeserve believes that this explains why BT Broadband is being offered by BT Retail rather than BT's internet subsidiary, BTopenworld, which is not allowed to use BT's fixed line phone business to unfair advantage.

According to BT, the Competition Commission will now examine the actions that Oftel took when it considered Freeserve's complaint, rather than BT's broadband activity.

"Today's ruling is a matter for Oftel as it decides the technical issue of whether an Oftel case closure is an appealable decision. The tribunal will now look at the case closure and there will be a new hearing dealing principally with Oftel's procedures and the principles they apply, rather than the specific actions of BT," a BT spokesman said.

Graeme Wearden contributed to this story.