Ofcom decision on BT Wholesale margins 'flawed': Gamma

Regulator decides not to fine BT despite industry complaint dating back to 2008

Gamma Telecom has slammed Ofcom's decision not to fine BT Wholesale for alleged anti-competitive behaviour, maintaining that rivals could not realistically compete with its margins.

Bob Falconer, chief executive of Gamma, said he was "very disappointed" at the decision, which he said was of an "appeasing nature" that would not support healthier telecoms competition in future.

"We believe this is a flawed decision, and fails to recognise the pressure exerted on BT Wholesale's competitors at the time. Gamma survived only by rapidly diversifying into new products, and Thus was acquired by C&W in the second half of 2008," Falconer said.

"The basis of our complaint has been upheld, and yet no action is being taken."

Gamma and Thus originally complained to Ofcom about BT Wholesale in 2008, but the decision only came down on 20 June.

According to Ofcom's final decision, made according to Chapter II of the Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union, "an abusive margin squeeze is when a vertically integrated dominant company fails to maintain enough margin between its upstream prices and downstream prices such that it fails to cover its downstream costs".

Ofcom found that BT had at the time priced its wholesale calls at a loss (calculated over adjusted costs) of some millions of pounds over 10 months from July 2008 to April 2009.

"However, we do not have sufficient evidence to demonstrate that, on the balance of probabilities, BT's conduct was likely to, or has had an anti-competitive effect or that it is likely to have such an effect in future," it wrote.

"Anti-competitive effects did not arise in this case because the negative margin incurred by BT's Wholesale Calls product was principally driven by one large contract, rather than a generalised pattern of pricing below cost."

The incident referred to wholesale, end-to-end, voice calls.

Gamma and Thus had alleged, specifically, that BT's pricing may be below cost or be aimed at weakening competition by reducing the margin available to carrier pre-selection operators when they sell their services to resellers.

Gamma's Falconer (pictured, right) concluded: "It appears to give a green light to market abuse so long as a dominant player's competitors are crippled rather than completely destroyed."

Gamma is considering further action.