BT have asked communications regulator Ofcom, to stop subsidising the price of wholesale broadband to Sky and TalkTalk.
At the moment, BT subsidise Sky and TalkTalk for Local Loop Unbundling (LLU) which allows them to install their own equipment in BT exchanges. BT believes that the imposed subsidies have benefited Sky and TalkTalk by £623 million over the last nine years. BT also refers to a report from Plum Consulting which suggests that this figure could increase to over £1 billion if the subsidies remain in place for a further six years which was originally planned.
The subsidies were initially imposed by Ofcom to create a competitive broadband market which it has now done. BT’s share of the retail broadband market currently sites at 31% and therefore, they now believe that the subsidies should stop ahead of schedule as their aim has been achieved. It is largely regarded by many that Ofcom has successfully created one of the most competitive broadband markets in the world.
John Petter who is the BT Consumer CEO believes that companies such as Sky and TalkTalk are now more than capable of standing on their two own feet and that it is now time that they are on a level playing field in this highly competitive market.
Petter stated, “TalkTalk and Sky have enjoyed subsidies for the best part of a decade but it is time for that to end. Both are successful companies and both are more than capable of standing on their own two feet. It is particularly unfair that BT has to give Sky a commercial leg up when they consistently refuse to provide us with fair access to their own services.”
Petter added, “Ofcom should be given credit for driving competition deeper into the network but that success needs to be reflected in current regulation. We know that Ofcom want to tackle this distortion but we want them to act now given this is a highly dynamic and competitive market. All we are asking for is a level playing field where prices reflect costs and consumers benefit as a result.”
TalkTalk have already issued a statement of their thoughts towards such demands from BT and claim that BT want the subsidies to end so that consumers and businesses have to pay more for broadband and therefore increase their profits.
A TalkTalk spokesperson stated, “The people who have benefited from Ofcom’s regulation are consumers. What BT are actually calling for is for consumers and businesses to pay more for broadband, and for that money to go straight into BT’s pockets.”
The spokesperson added, “Ofcom should be proud of how their approach to regulation has led to the UK having one of the most competitive markets in the world and they must keep it that way. We urge Ofcom to ignore this self-serving request.”
BSkyB has also issued a statement in response to BTs claims in which they have reminded everyone that firms such as themselves are investing money to help improve the broadband network and that any changes need to be implemented at a slow rate.
In a statement, BskyB stated, “We have already invested more than £1bn in our broadband network to create more choice and competition for consumers, and which has helped drive down prices for millions. We’ve been able to do this thanks to certainty over the regulatory framework against which our investments are made. It’s this very principle of regulatory certainly that BT itself argues for when making investments of its own.”
BSkyB added, “If regulatory charges are to change, this should happen gradually over time as Ofcom proposes. In any event, we believe that Openreach’s customers are currently paying too much based on inappropriate costs being loaded onto its customers, which hits UK consumers in the pocket.”
