Ofcom dismisses BT pricing complaint from TalkTalk

Regulator does consult on new pricing structures though

Ofcom has ruled that there are no grounds for action against BT over claims it was charging other internet service providers (ISPs) too much to access its fibre services.

However, Ofcom is also opening a consultation on how it should ensure BT is setting the fairest possible price for access to its fibre network.

Ofcom made the ruling after a complaint from rival TalkTalk in May 2013 that BT was deliberately setting the pricing for its fibre services under its Openreach division too high, in order to create a monopoly in this market.

In an update on its website, Ofcom said having looked at the merits of the complaint it does not believe there is any need for an investigation. "Ofcom has investigated TalkTalk's complaint under the Competition Act 1998, and has provisionally decided there are no grounds for action," it said.

BT welcomed the decision, saying: "We are pleased that Ofcom has rejected TalkTalk's competition complaint and shown that BT's fibre pricing is completely fair."

Despite the ruling Ofcom has also announced plans for a consultation on the pricing BT charges for access to its Openreach fibre services, called virtual unbundled local access (VULA).

Ofcom said it wants to introduce new regulations to ensure BT's charges to other ISPs - such as TalkTalk and Sky - for access to its fibre network are as low as possible, in order to ensure competitive pricing for consumers.

"Ofcom is proposing to put in place a regulatory condition requiring BT to ensure that the margin between its wholesale VULA charges and its retail superfast broadband prices is sufficient for rival operators to compete and make a profit," the regulator added.

Ofcom said it intends for BT to continue to set these prices itself, but that the consultation will help ensure a fair pricing gap is in place.

TalkTalk said it was pleased Ofcom had issued the consultation, even though its complaint had been dismissed.

"We're really pleased that Ofcom is announcing that it now proposes to start regulating fibre more effectively. We have long maintained that the time has come for fibre to be more robustly regulated, starting with a margin squeeze test," it said.

"This leads naturally towards full price regulation in 2017. What matters most is ensuring a level playing field and competition for fibre in the future. Once implemented, these new rules will make British consumers and businesses better off."

BT welcomed this decision too, saying it hoped the consultation would prove it is already setting prices fairly and "discourages spurious claims such as that made by TalkTalk," over its pricing structures.

"There is strong competition in the UK broadband market and we are confident our pricing will pass any regulatory test that may be put in place," it added.

The consultation is open for 10 weeks and closes on 28 August 2014, with a decision expected in the fourth quarter.