Ref: 16/02
Date: 28 March 2002

BT’s recent price cuts in many of its wholesale broadband Internet services reflect cost savings achieved by BT and are not anti-competitive, Oftel has confirmed today.

Oftel’s findings mean that service providers can now confirm their own price reductions for broadband Internet access using BT’s wholesale service.

Announcing closure of the investigation into the pricing of BT’s IPStream and DataStream wholesale DSL products, David Edmonds Director General of Telecommunications said:

"Oftel has looked very carefully at BT’s new prices following a complaint from an operator that the prices of BT’s wholesale broadband products were anti-competitive.

"Oftel has found that BT’s price reductions reflect the significant cut in network and provision costs that BT has managed to achieve in order to bring wholesale broadband Internet prices down.

"BT can pass these cost savings onto ISPs, who in turn can reduce their own retail prices for broadband Internet access to consumers.

"Many ISPs have already announced their intention to cut their broadband prices but were concerned that Oftel would find the prices anti-competitive. Oftel’s closure of its investigation means they can now confirm these price reductions to their customers.

"Oftel has always believed that effective competition between different delivery platforms is the best way to drive down broadband prices and increase choice for consumers.

"Oftel estimates that there are now over 155,000 ADSL connections and over 195,000 cable modem connections for broadband services in the UK.

"I am confident that the UK’s dynamic broadband market will result in a significant increase in broadband take up in 2002."

Notes to Editors

1. Oftel’s decision has been published on the Office of Fair Trading’s website at http://www.oft.gov.uk/Business/Competition+Act/default.htm

2. Oftel does not approve BT’s prices but it does have powers to intervene where it believes they may be anti-competitive. Oftel opened an investigation into the DataStream product last summer, when it became concerned that BT’s pricing might be anti-competitive. In the autumn, Oftel received a complaint from an operator alleging that the prices of IPStream, DataStream and VideoStream were anti-competitive. BT has notified Oftel that it is considering introducing new prices for its VideoStream wholesale product, in which case Oftel will need to investigate whether any new prices are set a competitive level. Oftel will therefore continue to keep open its investigation into VideoStream.

3. Oftel has also closed its investigation into allegations that BT was operating a margin squeeze. Oftel looked at whether the margin between the wholesale price of IPStream 500 and the retail price charged by BTOpenworld for its At Home product was insufficient to allow other service providers to compete effectively with BTOpenworld. Oftel has considered the impact of the latest reduction in the wholesale price of IPStream 500 as part of its investigation into these allegations and has concluded that there is no evidence to suggest a margin squeeze is currently in operation.

4. IPStream 500 is used primarily to offer ADSL services to residential consumers. Oftel was also separately asked to investigate whether BT was operating a margin squeeze in relation to its IPStream S products (used by service providers to offer ADSL services to business consumers). Oftel has concluded its investigation and found no evidence to support these allegations.