A little sand in the shoe of BT’s structure is no bad thing

Ofcom, Britain's telecommunications regulator, intends to intervene in an early-stage telecommunications market -- one in which the country's incumbent fixed line operator, BT Group, has blazed a trail and invested lots of money. And all this before it claims to have clear evidence of behavior harmful to consumers. Ofcom thinks additional steps are needed to prevent BT’s dominance in traditional telephony from leaching into the new superfast broadband market.

BT, or rather Openreach, the subsidiary ensuring equality of access for rivals that piggyback on its network, can charge whatever wholesale price it chooses for the new service -- so long as all the suppliers get the same deal. Now, however, Ofcom wants to introduce tweaks that might constrain what BT can charge. The regulator believes this is necessary because of fears the group may dominate the market by squeezing the retail margin it earns on the product. Ofcom worries about BT’s ability to tinker with the economics of the market in ways that could tighten its already firm grip. The group has 74 percent of superfast connections over Openreach, compared with 40 percent for conventional broadband. No one is suggesting BT be forced to demerge the fixed-line network. But should it do so for commercial reasons, few would stand in its way.