In January the UK’s telecoms regulator announced new rules requiring BT to maintain “a sufficient margin” between what it charges rivals to access its superfast broadband network and the retail prices it charges end users.
At the time Ofcom said there was no evidence BT was acting unfairly but confirmed it would re-assess the market every six months to ensure the firm’s ongoing compliance.
The regulator also confirmed its calculations would include the costs for BT Sport, which is currently given away free to BT broadband customers.
The European Commission subsequently raised concerns that Ofcom’s planned approach “unduly limits” BT’s flexibility to defer sports costs over a commercially viable period by requiring it to show sufficient margins at each review rather than over the lifetime of a customer’s contract.
The EC’s intervention echoed concerns raised by BT which pointed out that there are costs spikes associated with the acquisition of new rights, for example when it starts broadcasting the Champions League this summer.
It says Ofcom’s plans means the costs for this and other new content “would be included in the test from day one, whereas associated revenues will grow over time.”
In response to BT and the EC’s concerns, the regulator says it’ll adopt a more flexible approach where there’s been “a material change in circumstance” and in some cases may decide to “defer a decision on the outcome” of any assessment “until an appropriate period has passed (so that more months’ data is available).”
It adds: “This would allow us to assess the position in the compliance period taking into account the subsequent growth that has been observed in demand.”
A spokesperson for BT said the changes announced today “do not adequately address our concerns nor those raised by the Commission,” and added that the firm “will now consider our options.”
The spokesperson added: “‘We are not opposed to the principle of a margin squeeze test – and in fact Ofcom has confirmed that we currently pass the test.
“The proposed test is however flawed and, among other things, fails to recognise that BT is a new entrant in the Pay TV market.”
With the UK’s TV, mobile and broadband markets converging, BT says the regulatory framework needs to be updated to cover all providers.
The spokesperson said: “UK regulation remains worryingly lopsided. The UK telecoms market is the most heavily regulated in the world yet there has been little action to address Sky’s continuing dominance of the Pay TV market
“This imbalance needs to be addressed if customers aren’t to lose out in what is an increasingly converged marketplace.”
A spokesperson for Sky, which wants BT split from its Openreach network division, said: “This action is a welcome step towards addressing the obvious conflict of interest created by BT’s ownership of Openreach. However, it remains to be seen whether this complex and untested regulation will succeed in practice.”
