Ofcom slams BT on anti-competitive broadband

Ofcom believes that BT has infringed competition law in its pricing of broadband services, the UK communications regulator said.

The decision, which BT is contesting, dates back to a complaint filed over two years ago - since when many of the main players have changed their names or ceased to exist.

Freeserve (now Wanadoo) alleged in 2002 that BT Openworld, the telco's retail arm, was selling its broadband at a loss. If true, this would be illegal because BT is not permitted to "cross-subsidise" its services in this manner because it would hamper competition.

Freeserve's claim was twice rejected by Oftel, the UK telecommunications regulator that was later replaced by Ofcom. But Freeserve kept fighting and the case was eventually investigated by Ofcom.

Ofcom is now proposing to rule that BT has infringed Section 18 of the Competition Act 1998 and Article 82 of the EC Treaty "in relation to the company's residential broadband pricing".

The regulator has sent BT a Statement of Objections stating the facts of the case, the matters to which it has taken objection, the action it proposes and the reasons for this.

BT now has the opportunity to state its case and the telco is expected to fight its corner vigorously, having previously dismissed Freeserve's case as "spurious".

"This is a long-running case that has lasted over two years, during which time we've been cleared twice. We're confident of our position," said a BT spokesman.

It is not clear what sanctions BT could face if Ofcom does judge that it has acted anti-competitively. Freeserve's complaint referred to price cuts that BT made in 2002, since when the broadband market has changed substantially.

Ofcom, though, has said it is investigating BT's "post-May 2002 residential broadband pricing policies".

The BT spokesman said that while the origin of the complaint is historic, there is a potential impact on current pricing.

There was speculation on Wednesday that BT could face a large fine. It's understood that the documents supplied to Ofcom by BT make no mention of financial penalties, but under Chapter II of the Competition Act a company can be fined up to 10 per cent of their turnover.

BT had a turnover of £4.567bn in its most recent financial quarter, and last year achieved annual turnover of £18.5bn.

Graeme Wearden writes for ZDNet UK