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BT grumbles about having to subsidise Sky and TalkTalk’s broadband

BT has a bee in its bonnet over what the company refers to as a “pricing distortion” in the wholesale broadband market which it claims has benefited Sky and TalkTalk to the tune of £623 million over the last nine years.

BT cites a report from Plum Consulting stating that this figure could reach £1 billion if Ofcom keeps matters as they are for the next six years (as is the plan).

The money is the amount lost due to BT’s subsidising of Sky and TalkTalk (principally) when it comes to broadband Local Loop Unbundling (LLU), whereby these third-party ISPs install their own equipment in BT exchanges.

Hence BT wants a level playing field in the wholesale broadband market, and the company is badgering Ofcom – which keeps the subsidies in place to ensure fair competition in the market – saying that it’s now time to drop the scheme.

BT argues that firms like Sky and TalkTalk are big enough to stand on their own, and that the UK consumer broadband market is a balanced picture, with BT having 31 per cent of the market.

The wholesale pricing gap between BT and rivals is due to be phased out over the next six years by Ofcom, but BT wants it to happen now.

John Petter, BT Consumer CEO, commented: “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.”

“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.”

Both Sky and TalkTalk remain unimpressed though (surprise, surprise). The Inquirer notes that a TalkTalk spokesperson said: “The people who have benefitted 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.”