The European Commission (EC) has objected to Ofcom’s recent proposal to monitor the prices BT is allowed to charge rival operators to access its national superfast fibre network.
In January 2015, Ofcom told the EC it would introduce a new rule forcing BT to maintain a sufficient margin between its wholesale and retail superfast broadband charges, which would enable other providers to match its pricing better.
If implemented, the proposals would also take into account the costs and revenues of BT Sport, which is offered free to superfast broadband customers in its retail bundles.
Ofcom said its proposal would still allow BT to set its wholesale prices, but would also give it more of an incentive to invest in its commercial fibre roll-out.
At the time, BT said that although it did not object to the plan in principle, it opposed the idea that the rules should take into account the costs of BT Sport, and rejected outright the notion that rivals such as Sky or TalkTalk needed regulatory assistance.
In its response to Ofcom, seen by Computer Weekly, the EC argued that Ofcom’s proposed rule did not take sufficient account of the high costs of securing Premier League football rights for BT Sport – earlier in February, BT struck a £320m deal to carry more games for a number of seasons.
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The EC's letter said that the period-by-period (six months) approach to price-monitoring set out by Ofcom would unduly limit BT’s flexibility with regard to the treatment of costs for BT Sport, limiting BT's ability to defer the recovery of its costs for BT Sport over a longer period.
It said that the rules, as planned, might result in BT being backed into a corner and having to take action that would be bad for consumers.
“Given the magnitude of the costs involved and the uncertainty of future costs and revenues of BT Sport as new rights auctions approach, there is a risk that Ofcom’s regulatory intervention would have a significant impact on non-regulated markets without necessarily affecting the price of the virtual unbundled local access (VULA) input,” Brussels warned.
A BT spokesperson said: “We are very encouraged by the response of the Commission. Its view that Ofcom’s test unduly limits BT’s flexibility to recover its sports costs over a longer period needs to be addressed by Ofcom and we hope the proposed test will now be amended accordingly.
“BT is trying to ensure real competition in pay TV sports for the first time in 25 years. We are the new entrants in this market and we should not hampered by regulation.”