Oftel throws out Freeserve's BT complaint

Oftel has once again rejected Freeserve's claim that BT is guilty of making anti-competitive broadband price cuts, some 20 months after the original allegation was made.

The telecommunications regulator said it still believes that BT Openworld's decision to cut the price of its consumer ADSL product in March 2002 was fair. Peter Waller, Oftel's deputy director general of telecommunications, said: "Oftel has carried out a thorough reinvestigation, and found no evidence to support Freeserve's allegation."

Oftel's decision has already been welcomed by BT, which slammed Freeserve's complaint as "spurious". BT is also understood to be unimpressed by the way the issue has dragged on, eating up time and resources that could have been better directed solving the problems of Broadband Britain.

Freeserve is threatening to appeal against the ruling, however, a move that could push the complaint into its third year.

This is just the latest stage in a sometimes farcical process that observers say has discredited some of the parties involved and even the whole UK telecoms regulatory system.

The row began after BT made large cuts to the price of its wholesale ADSL offerings, which are bought and then resold by almost all UK internet service providers. These ISPs responded by cutting their own retail prices, driving down the cost of consumer broadband below the £30 per month barrier.

But Freeserve quickly complained to Oftel that BT Openworld had been given advanced notification of these price cuts, and that Openworld's broadband pricing was unfairly low and constituted cross-subsidy by the telco. Such a margin squeeze would be illegal: BT isn't permitted to sell retail broadband products at a loss, as this would give it an unfair advantage.

Oftel dismissed these claims in June 2002. Freeserve then took its case to the Competition Commission, adding additional complaints about BT's "no frills" broadband package. This turn of events moved one BT insider to slam Freeserve's "perpetual but redundant belly-aching".

In April 2003 - already a full year after the original complaint - the Competition Commission ruled against Freeserve on three charges but ordered Oftel to re-examine the issue of the alleged margin squeeze.

Oftel has spent the last seven months reassessing this part of Freeserve's complaint, but has now confirmed its original decision that BT's pricing policy did not amount to an anti-competitive margin squeeze.

"We are pleased that Oftel has finally thrown out Freeserve's spurious claims," said a BT spokesman. "It is a shame that it has taken over 18 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," he added.

Freeserve, though, may not be letting the issue lie.

"We've not seen the full decision but believe that Oftel has concluded that BT priced below cost [based on Oftel's own methodology and assumptions, and using BT's own cost data] for some categories of consumers, but still concluded that there was no abuse of dominance," said Freeserve in a statement.

"Freeserve will take this fully into account when considering whether to appeal Oftel's decision to the Competition Appeal Tribunal as and when we have had a chance to review the decision in detail," the ISP added.

Industry insiders, though, are left wondering how the row can have lasted for almost two years without being fully resolved. Even if Freeserve could prove its case, the UK broadband market has developed so much since March 2002 that it would be seemingly impossible for a regulator to make amends.

Graeme Wearden writes for ZDNet UK