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February 20, 2015updated 19 Aug 2016 4:02pm

European Commission slams Ofcom over BT price regulation

Ofcom's proposed margin-squeeze tests were criticised as inflexible.

By Alexander Sword

The European Commission (EC) has blasted Ofcom’s plans to monitor BT’s pricing structure for access to its network.

Ofcom had submitted a draft proposal to the EC in January, with plans to apply a margin-squeeze test to BT. The new proposal would require the UK telecoms provider to keep a "sufficient" margin between its wholesale and retail superfast broadband charges, in order to allow other providers to profitably match its prices.

However, in a letter to the British telecoms regulator today, the EC claimed that Ofcom’s test was inflexible and didn’t take into account BT’s additional costs for BT Sports. It also argued that the approach overly limited BT’s commercial activity.

BT welcomed the news from the EC.

While Ofcom believes BT is currently maintaining an adequate margin between its prices, this safeguard would lock this into law. Under the terms of the agreement BT, currently the largest retail provider of fibre broadband services, would retain the ability to set wholesale fibre prices, retaining an incentive to invest in the network.

"We are concerned that BT could distort the development of competition in superfast broadband by setting an insufficient margin between its wholesale VULA and retail superfast broadband prices," Ofcom said in a statement.

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