The leading UK ISP says telecoms watchdog Oftel must act
urgently “if the market for DSL services is not to be effectively
handed over to BT, a position which would have significant long
term consequences for the health, vibrancy and competitive nature
of the broadband market as a whole.”
Freeserve welcomed the recent price reductions made by BT in the
provision of wholesale DSL, and said that it is prepared to compete
in the marketplace for retail customers. However, Freeserve says
that Oftel must recognise that the UK Government's stated aim of
achieving "effective and sustainable competition in the provision
of broadband access and services" will not be accomplished without
a firm and equitable approach to the market.
Freeserve cites a number of examples of anti-competitive
behaviour by BT/BT Openworld.
Immediately following the recent wholesale price reduction by
BT, BT launched a series of “broadband Britain” advertisements in
the national press. These advertisements are directed at the
consumer rather than BT Wholesale's ISP customer base, and refer
the reader to BT.com/broadband. Freeserve argues that the
positioning of the BT advertisements is grossly misleading when one
considers that BT.com provides a direct link to BT Openworld with
no reference to DSL products available from competing ISPs. The
effect of this advertising, argues Freeserve, is to make BT
synonymous with DSL to the exclusion of other service
providers.
Freeserve has requested that Oftel require BT to immediately
cease all DSL cross-marketing activity and to ensure that
BTOpenworld is not unduly preferred in the market for the supply of
DSL internet access to the consumer by leveraging the promotional
campaigns by BT Group.
Shortly after BT Group's announcement that it intended to reduce
the wholesale DSL price to £14.75 per month, BT Openworld stated in
that it would launch a £10 million advertising campaign, including
TV. In addition, BT Openworld arranged for the distribution of DSL
access CDs through a variety of retail outlets. Affiliate partners
of BT Openworld are also being positioned to provide links through
to the BT Openworld sign-up page. These announcements and
activities, argues Freeserve, demonstrate that BT Openworld must
have received advanced notification of the wholesale price cuts
with a view to positioning themselves within the market, ahead of
the competition.
Freeserve has asked Oftel to immediately investigate the timing
of the TV campaign about to be launched by BT Openworld. If it
appears that this campaign was planned before the wholesale price
announcement on 26th February (as Freeserve believes it must have
been), Oftel is asked to insist that the advertising is deferred,
and only allowed to be broadcast in a timescale consistent with
that available to the rest of the industry.
Freeserve has also asked Oftel to investigate the order
placement process between BT Openworld and its modem supplier.
Freeserve's experience suggests that modems are in relatively short
supply. Freeserve therefore asks Oftel to analyse the dates when
orders for modems were placed by BT Openworld, the call-off
arrangements between BT Openworld and its modem suppliers and the
stocks of modems presently available to BT Openworld in order to
meet their current demand.
Freeserve also accuses BT of predatory pricing by unlawful
cross-subsidising between BT and BT Openworld. The company says it
believes “BT Openworld cannot be generating sufficient revenues to
cover its variable and incremental costs”.
Freeserve has asked Oftel to investigate and challenge the
viability of the business case behind BT Openworld's current
offers. It asks Oftel to consider drawing on its powers under the
Competition Act to conduct an immediate cross subsidy/predatory
pricing investigation in order to prevent BT securing an
unassailable position in the market place.
John Pluthero, CEO of Freeserve, commented:
"The 'Chinese walls' that are supposed to
exist between BT Wholesale and BT Openworld may be fooling Oftel.
But to the rest of us who understand the lead times needed to bring
a new product to market it's obvious those walls are wafer
thin.
"There's now a realistic hope that broadband
will at last begin to take off this year in the UK and Freeserve
will play a big part in this; what must not be allowed to happen is
to hand that market to BT through flimsy regulation of the
incumbent's anti-competitive behaviour."
