BT re-examines pricing after UK watchdog inquiry

UK telecoms giant BT today overhauled the prices it charges rival broadband operators following an inquiry by Britain's industry watchdog Ofcom.

In a move set to spark greater competition between suppliers of high-speed broadband services, BT said it was lowering the amount it levies on other firms to switch customers between broadband networks by 78% from Saturday.

Rival operators Tiscali and Thus complained to Ofcom’s predecessor, Oftel, that BT was restricting competition by overcharging for the service.

The two firms use BT Datastream which means they maintain their own network and are able to sell products direct to customers, enabling them to compete aggressively on price.

But if they want to switch customers from BT’s all-in broadband service IPStream – favoured by Internet service providers such as AOL – they have to pay a fee of £50 (€75).

The pricing overhaul means the operators will now pay only £11 (€16) to BT for each new broadband customer they sign from rival firms.

This new charge was in line with proposals from Ofcom, which pointed out that migration charges represented an obstacle to fair competition.

Ofcom chief executive Stephen Carter said: “At this price, with robust processes, they should no longer be such an obstacle.”

BT said the price cut reflected cost savings from its own work to minimise the disruption to customers when switching between suppliers.

Customers currently lose broadband services for up to three weeks when changing suppliers – a process that Ofcom believes should take half an hour.

BT said the move towards an automated migration process would be implemented in stages throughout the year.

Bruce Stanford, director of products at BT Wholesale, said: “Today’s price cut will introduce greater flexibility into the broadband market.”

Service providers welcomed the announcement but said further moves were needed to make the broadband market more flexible.

Mary Turner, chief executive of Tiscali UK, said: “We would hope that Ofcom will now look at the activation fee, which is still far too high at £50 (€75).”

Attention will also be focused on the margins for the wholesale market, due to be announced by Ofcom at the end of May.

The Broadband Industry Group, which includes Cable & Wireless and Freeserve, said: “We are pleased that one of the many steps needed for the creation of a genuinely competitive wholesale broadband market has been taken.”