A British member of Parliament (MP) Mon. challenged the U.K. tele...

asked the Office of Communications (Ofcom) about recent hikes in BT’s wholesale prices for some broadband products. Now, Young said, he regards it as “very urgent to have a clear statement” from Ofcom explaining how its decisions are intended to benefit industry and its customers. In Aug., BT announced higher prices on IPStream broadband office (end-to-end) products, saying it has a “regulatory obligation” to maintain a margin between those products and its DataStream offerings, which let large ISPs buy local access from BT but provide connectivity over their own networks (CD Aug 16 p4). Ofcom later issued a “margin squeeze” ruling requiring the spread. The increased IPStream costs have riled small- and medium-sized ISPs that contend they're being squeezed out of existence. Some 70 of them formed a group, the U.K. Internet Federation (UKIF), which has been pressing BT and Ofcom for relief. BT and UKIF have had several meetings on the ISPs concerns, so far unresolved, but UKIF has also been talking to Parliament. Young, who said he had talked with both BT and the ISPs, wrote that there seems to be a “prima facie case” Ofcom “may have misjudged the market implications of its decision on an obscure bit of jargon called the ‘margin squeeze test’ and related rulings as applied to BT’s pricing and product packaging in the wholesale ADSL market.” Ofcom’s actions could have a “dire effect” on small ISPs and their customers, Young said, particularly because BT gave only 28 days’ notice of the “dramatic” change in price structure. While most markets may not offer a case for protecting resellers that don’t directly compete with BT, he said, the U.K. broadband market is different now because: (1) A high proportion of retail and business customers lack choice in cable and so rely on ADSL. (2) For any company wishing to provide broadband to customers, BT is the only available primary supplier. (3) In an evolving market, the wide range of ISPs offering different products and services is important in securing a high level of innovation. (4) Small and medium-sized ISPs add value in ways not open to larger providers. While in principle they may get a better deal from a bulk consolidator than from BT, the consolidator also must rely on BT, “so that somewhere in the process either an artificial margin or 2 sets of costs are being added before the product reaches the consumer.” The issues may be “obscure,” Young said, but “we mustn’t allow that to damage our opportunities in the use of broadband.” UKIF is worried that the price structure change, effective at month’s end, will prevent them from maintaining profit margins, because of yearlong contracts with their customers, the group said. “Ofcom must rethink the timing of the impact of their actions or they will seriously damage an entire industry in the name of ‘regulation,'” a UKIF spokesman said. Young has been “the first MP to grasp the nettle on this difficult issue,” he said. UKIF is urging as many people as possible to contact their MPs.