Ref : 48/00
Date : 3 July 2000

Oftel today issued a draft direction requiring BT Cellnet to stop unfairly cross-subsidising its own mobile phone service providers to ensure that independent service providers can compete on a fair basis.

An Oftel investigation has found that BT Cellnet has used its network business to subsidise its own service providers, giving them an unfair advantage over service providers that do not have their own mobile networks.

The investigation found that BT Cellnet’s service providers are not covering their costs on services supplied to customers and would have been making a loss without subsidy from BT Cellnet.

Vodafone and BT Cellnet are required to provide wholesale airtime to independent service providers on the grounds that they have strong positions in the mobile market.

Vodafone was also included in the investigation but was not found to be cross subsidising its service providers.

David Edmonds, Director General of Telecommunications said today:

"For competition to be effective it is vital that independent service providers are able to offer a real alternative to those service providers owned by a particular operator.

"If BT Cellnet charge service providers too much for wholesale airtime, customers will face an unbalanced choice when shopping around for a good deal on their mobile phone.

"Oftel’s review of the mobile market in 1999 found that competition was increasing and I am proposing that BT Cellnet should take action to resolve this problem to ensure that competition continues to develop.

"Lowering their wholesale price would be a very effective way of doing this."

Oftel will carry out a further review of competition in the mobile market starting in the Autumn of this year.

Notes to Editors

1. Oftel initiated the investigation following the July 1999 statement on competition in the mobile market. Oftel’s review of the mobile market is available on Oftel’s website at www.oftel.gov.uk/competition/mmrv799.htm.

2. Oftel has issued a draft Direction for consultation under Condition 66 of BT Cellnet’s mobile PTO Licence stating that BT Cellnet should take action to stop the unfair cross-subsidisation of its tied service-providers.

3. The consultation on the draft Direction will last for 28 days with a further 2 weeks for comments on comments.

4. A full explanation of Oftel’s methodology is contained in the explanatory document attached to the draft Direction.

5. In March 2000 Oftel issued a formal determination that Vodafone and BTCellnet continue to have Market Influence in the UK mobile market and must continue to allow service providers access to their networks.

6. The draft Direction is available from Oftel's website at www.oftel.gov.uk/competition/btcel700.htm.

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