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."