BT Calls For End To TalkTalk And Sky’s £623m Copper Broadband ‘Subsidies’

BT has called on Ofcom to close the price gap between the cost of what the company can charge other ISPs for its fully unbundled services and its wholesale service, claiming that rivals Sky and TalkTalk have effectively received subsidies of £623 million since 2005.

The decision in 2005 to unbundle BT’s copper lines, allowing other companies to install their own equipment in BT exchanges for broadband and phone services, has successfully increased competition in the broadband market, but the former state monopoly says that current prices are distorting the market.

BT says that Ofcom has achieved its goal of making the UK broadband market more competitive, with the number of unbundled lines now at 7.6 million compared to less than 50,000 in 2005, while the country has some of the cheapest Internet packages in the world.

BT subsidies

However BT adds that this has been achieved by setting the price of its fully unbundled services below cost, while inflating prices for BT’s direct wholesale service. As a result, BT says TalkTalk and Sky have been the main beneficiaries of unbundling as they now have nine million customers between them – half of whom are connected over BT’s network – while smaller ISPs have struggled because they lack the capital to install their own equipment.

BT says Ofcom has recognised the need to close the gap, but will not do so for another six years, by which time the company claims TalkTalk and Sky will have benefited to the tune of £1 billion.

“Ofcom should be given credit for driving competition deeper into the network but that success needs to be reflected in current regulation,” says John Petter, BT Consumer CEO. “We know that Ofcom want to tackle this distortion but we want them to act now given this is a highly dynamic and competitive market. All we are asking for is a level playing field where prices reflect costs and consumers benefit as a result.”

TalkTalk has rejected the calls, saying any measure to increase the amount that BT can charge other companies for access to unbundled lines would only harm consumers and benefit BT’s revenues.

“The people who have benefitted from Ofcom’s regulation are consumers,” a TalkTalk spokesperson told TechWeekEurope. “What BT are actually calling for is for consumers and businesses to pay more for broadband, and for that money to go straight into BT’s pockets. Ofcom should be proud of how their  approach to regulation has led to the UK having one of the most competitive markets in the world and they must keep it that way. We urge Ofcom to ignore this self-serving request.”

Sky had not responded to TechWeekEurope’s request for comment at the time of publication.

Broadband battle

BT’s comments form part of its response to Ofcom’s Fixed Access Market Review (FAMR), which has called for cheaper access to the company’s copper lines, although the company says the regulator has underestimated the cost of running the network.

The company’s actions also form part of a wider ongoing battle between the UK’s major telecoms, with BT, Sky and TalkTalk all looking to secure a greater share of the broadband, landline and television markets.

Last year, BT launched three BT Sport channels which are available for free to all BT broadband subscribers. BT Sport currently shows live Premier League football, while it has also secured the rights for UEFA Champions League football from 2015, fending off competition from Sky, which has been the market leader in sports television for more than two decades.

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