Undue Discrimination by SMP Providers

BT's Response to Ofcom's Consultation Undue Discrimination by SMP Providers

Issued 8th September, 2005

Executive summary:

BT supports Ofcom's consultation on undue discrimination which seeks to provide further guidance and clarity on how it will investigate potential contraventions of the regulatory obligation not to unduly discriminate which is imposed on SMP providers. The consultation is timely in view of the Telecommunications Strategic Review and the proposed Undertakings which are aimed at addressing concerns about the potential for discrimination in the provision of SMP services.

Increasing competitive activity and the advent of new technologies should lead to more scope for service differentiation such that consumers have a wider choice of products and services. This will increase the range of means whereby services are provided, including by SMP providers. BT is therefore pleased that Ofcom recognises that differentiation can be warranted, especially where it leads to an expansion of demand or opens up new market segments. The regulatory regime should be able to cater for these situations and the benefits they give for consumers must be taken into account when reviewing the approach.

 BT broadly agrees with the approach put forward in the Consultation but has two key concerns:

• First, the guidance suggests that there will be a shift in the burden of proof in all cases of non-price differences in transaction conditions offered by a vertically-integrated SMP provider. In the Consultation such instances are to be presumed to be harmful to competition and in breach of SMP obligations. This significant change would, we believe, be contrary to fundamental rights of defence and the general principles of UK public law and competition law. We therefore suggest an alternative, proportionate approach which would be in line with Regulation 1/2003. More specifically, it is for the party or authority alleging the infringement to prove its existence to the required legal standard. It should be for the undertaking invoking the benefit of the defence (ie objective justification) to demonstrate that the conditions for applying such defence are satisfied.

• Second, BT considers that Ofcom should focus on behaviour which has evidence-based anti-competitive effects at the time of the investigation (actual effects) or is likely to have such effects in the near future on the basis of the available evidence (potential effects). In particular, when considering whether differentiation might have a harmful effect on the market in the future, such analysis must be based on a coherent theory of competitive harm supported by the facts of the case.

The UK regulatory regime has played a major role in the successful development of the telecommunications marketplace. At the same time, regulatory developments in the UK should not undermine the objective of achieving an EU-wide harmonised regulatory regime. The proportionality of new obligations should therefore be carefully considered in comparison to other regulatory bodies.

Download full response as PDF document

Comments should be addressed to Phil Ling at Phil.Ling@bt.com