Ofcom seeks to encourage investment in ultrafast broadband with new restrictions on BT

Ofcom, the UK's telecoms regulator, has outlined plans (30-page / 956KB PDF) to impose a new condition on BT in the wholesale local access market after raising concerns about the impact regionalised discounting by BT could have on competition and the incentives others have to invest in their own ultrafast broadband networks.

"We recognise that BT might wish to vary its wholesale prices between different areas for reasons other than seeking to limit competition, although in general BT has maintained uniform national prices for the rental of superfast broadband," Ofcom said. "We believe that in circumstances where BT’s competitors are only just beginning to deploy new networks, the risk of harm from deterring that investment is greater than any potential costs which might arise from constraining BT’s ability to introduce targeted discounts. We consider that wholesale price variations by geographic area would constitute undue discrimination in these circumstances."

The regulator previously expressed its view that BT has "significant market power" in the wholesale local access market and set out plans to give rival telecoms companies in the UK greater rights to access existing telecoms infrastructure owned by BT so they can "deploy their own networks".

However, in response to that previous consultation some of BT's rivals raised concern with Ofcom about potential regionalised discounting BT could offer in relation to wholesale access to its network. They warned about the impact that could have on others' investment in new 'full-fibre' broadband networks.

In its latest consultation paper, Ofcom said that BT "has the incentive and ability to undermine emerging network competition using targeted wholesale price cuts".

"We would be concerned about BT responding to competition on a targeted basis in this instance because even if it is BT’s best commercial option – and is not directly motivated by BT’s incentives to choke off additional investment in other areas – these commercial reactions could themselves be sufficient to undermine potential entrants’ incentives to invest in the first place," Ofcom said.

"While rival networks to BT are becoming established we consider that it is appropriate to limit BT’s ability to react as it sees fit, including reactions that might normally be regarded as commercial reactions to entry," it said.

The restrictions that Ofcom has proposed would apply to "rental services used to provide network access to VULA other than VULA that is provided over GEA-FTTP, or for other rental services where those services are being provided in conjunction with such a VULA service for the purposes of providing electronic communications services to end users", according to proposed new condition that Ofcom has set out.

VULA (Virtual Unbundled Local Access) is a BT product that provides for third parties' access to its superfast broadband network. GEA-FTTP, or Generic Ethernet Access over Fibre to the Premises, concerns the provision of full-fibre broadband services to business and residential premises.

Ofcom rejected calls to impose retail price restrictions on BT.

Ofcom's consultation is open until 12 January 2018. It said that it intends the new measure to have effect from 1 April 2018.