Wanadoo faces fine for stifling ADSL competition

The European Commission is to fine French ISP Wanadoo for stifling competition in the high-speed internet access market.

The European Commission is to fine French ISP Wanadoo for stifling competition in the high-speed internet access market.

Commission competition officials have concluded that Wanadoo, whose largest shareholder is state-owned France Télécom, offered subscribers ADSL lines at a price that did not even cover the firm’s marketing and sales costs.

Wanadoo has a 70% share of the high-speed internet access market in France, according to commission figures. EU antitrust laws forbid dominant players from offering their wares at below cost because this practice, known as predatory pricing, is recognised as a tactic to deter rivals from entering the market.

Wanadoo is likely to be fined around €10m (£6.9m) - a little less than the €12.6m (£7.7m) fine imposed on Germany’s phone giant Deutsche Telekom earlier this year.

Deutsche Telekom was found to have been squeezing the profit margins of rival high-speed ISPs by overcharging them for access to the local loop in the German phone line grid which connects local phone exchanges to homes and offices.

The commission found that France Télécom was compensating for the losses incurred as a result ofWanadoo’s below-cost pricing strategy with the revenues it earned from charging rival ISPs for access to its local loop.

"France Télécom has been selling high-speed access at a price that more than covers the costs incurred by Wanadoo," a source said.

The fine will be lower than the one imposed on Deutsche Telekom because the offence ended last October and only lasted 18 months. Deutsche Telekom was found to have continued its margin squeezing tactics for longer.

Commission competition officials declined to comment on the decision, which is expected to be finalised at next week’s meeting of European commissioners. The draft decision taken by the competition department will be scrutinised by a committee comprising national government representatives .
If they support the commission’s action, as they are expected to, the decision will be presented to the 20 European commissioners for final approval.

Paul Meller writes for IDG News Service

Read more on IT legislation and regulation