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By Ian Walker and Simon Zekaria
LONDON--The U.K. Office of Communications said Thursday BT Group
PLC (BT.A.LN) must maintain a sufficient margin between its
wholesale and retail superfast broadband charges to allow other
providers to profitably match its prices.
The communications regulator made the rule as it set out new
measures to promote competition and investment in the growing
market for superfast broadband. However, the measures are subject
to review by the European Commission, upon which the regulator
expects to publish a final statement in February, it said.
The new regulatory condition would start from March and remain
in place until March 2017, when the current regulatory review
period ends, Ofcom added.
"The new pricing rule would preserve BT's current flexibility to
set its wholesale fiber prices, which in turn provides an incentive
for future investment by the company in its fiber network," the
regulator said.
At the same time, it will mean BT can't set prices in such a way
that might prevent other operators from competing profitably for
superfast broadband customers.
BT is currently the largest retail provider of fiber broadband
services over its network, but is required to allow other operators
to use its network to sell superfast broadband to consumers under a
process known as "virtual unbundled local access".
A spokesperson for rival operator TalkTalk Telecom Group PLC
(TALK.LN) said it welcomes the move. "Broadband is critical to our
future. This must be the beginning of the journey to bring down
superfast broadband pricing and make consumers and Britain better
off."
A spokesman for pay-TV giant Sky PLC (SKY.LN), which also
provides broadband services, said: "Ofcom's action is welcome
recognition of the competition problems that can prevent customers
from getting the best choice and value in superfast broadband."
A BT spokesman said Ofcom's statement is "misconceived" and said
it may appeal.
Ofcom said the new rules take into account the costs and revenue
of BT's sport channels, which the telecoms incumbent is using to
win broadband customers. BT has spent billions of dollars over the
past year and a half buying premium sports rights for the channels,
including English Premier League soccer.
The changes "increase the weight of TV sport in the cost side of
the calculation," based on the numbers of subscribers taking up the
product, rather than the whole to which it is available, Citi
analyst Simon Weeden said.
The BT spokesman said: "We do not think our sports costs should
be part of any assessment."
At 1225 GMT, shares in TalkTalk fell 1% to 310.8 pence. BT
shares fell 1.1% to 396.9 pence and Sky shares were up 1.3% at 910
pence.
Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749 and
Simon Zekaria at simon.zekaria@wsj.com