Ofcom, the UK telecom industry regulator has begun an investigation following complaints from THUS Plc and Gamma Telecom Limited against BT about alleged margin squeeze in wholesale call pricing.
Richard Bligh, Marketing Director at Gamma Telecom told Comms Business Magazine, “We allege BT has operated unfairly, and that by seeking a healthy competitive industry we are acting in the best interests of the channel and end users.”
The complaints centre around allegations that BT’s pricing of wholesale end-to-end voice calls to resellers since April 2005 amounts to an abusive margin squeeze and breaches the Chapter II provisions of the Competition Act 1998 and Article 82 of the EC Treaty.
Specifically, the complainants allege that BT’s pricing: may be below cost; is aimed at eliminating or weakening competition in the provision of wholesale end-to-end voice calls to resellers by reducing the margin available to Carrier Pre-Selection Operators (CPSOs) when they sell their services to resellers.
THUS and Gamma are concerned that this will result in CPSOs no longer being able to compete in the market profitably and that a number can be expected to exit the market.
BT has previously been found to have significant market power in a number of network access markets.
As set out in section 25 of the Competition Act 1998, Ofcom may conduct an investigation if there are reasonable grounds for suspecting that the Chapter II prohibition has been infringed. In addition to the Chapter II prohibition, Ofcom has the power to apply Article 82 of the EC Treaty in full.
Ofcom has now opened an investigation into the matters raised by THUS and Gamma’s complaints and will consider whether BT has abused a dominant position under UK and/or EC competition law.
Cable & Wireless has indicated support for THUS’ complaint.