BT's takeover of EE approved by regulator

Added by Chris Pateman | Thursday 21st January 2016

Disappointed!  Is that a strong enough word?

When you start from the kind of market definitions enshrined in the Communications Act 2003, you rather miss the fundamental point.  Which is that the market today does not operate the way it did in 2003, with different products sitting in neat technical silos which can all be identified and regulated separately.  This merger allows BT/EE to supply identical products over different delivery platforms, which are regulated in fundamentally different ways.  This is not a recipe for greater competition or enhanced user functionality.

Ofcom’s so-called ‘Digital Dividend’ spectrum auction at the end of 2012 was deliberately structured to avoid spectrum sequestration and to force an additional competitor into the market place.  BT bought the ‘new entrant’ block, sat on it for a couple of years, and can now merge it into EE’s 4G spectrum holdings without penalty.  Did nobody else really see that coming?   

In addition, as FCS cautioned all along, the combined entity currently looks set to enjoy a 100% monopoly over call-handling and communications functionality for the emergency services.  How does that play out in Ofcom or Parliament, when calls are made for stronger commercial controls?  “Of course, we could do that, Minister.  But it would, of course, draw resources away from that vital work your Home Office colleagues asked us to do after all those policemen died last year…”  Am I being impossibly cynical?  Or is that simply another version of the threat BT CEO Gavin Patterson made about “10 years of litigation” when politicians started asking awkward questions last year about structurally separating Openreach?

We had hoped the CMA would be minded to impose one simple and overdue solution:  to mandate a transparent and competitive market for wholesale access to mobile networks in precisely the same way as exists in the fixed-line telephony market.  

In any event, we have lost round 1.  What does Round 2 look like?

At the moment, frankly, it’s too early to tell.  Our one consolation is that BT has always been a ‘willing wholesaler’ in the fixed line market (albeit one whose willingness has been at least partly forced upon it by the regulator).  And BT have consistently held to the line throughout these proceedings that they’ll be a willing wholesaler for mobile access, too.  An early move in this direction would certainly do much to calm resellers’ nerves.  On the other hand, BT and EE both have awful reputations for customer service.  Is either of them likely to be making additional investments in that area any time soon?

FCS has been calling for Ofcom to be allowed a far more agile, tactical approach to regulation.  Something far better suited to the fast moving markets of today and tomorrow than the old Comms Act definitions and heavy-handed price controls.  But whether or not that happens any time soon, tight vigilance by the reseller community is the name of the game now.  And early gathering and submission of evidence to Ofcom of any unforeseen market distortions.  

If the reseller community wants to get the best result from this merger, the reseller community has to react and report:  if we wait until the market is broken before we ask Ofcom to act, we will have nobody but ourselves to blame.

Chris Pateman, CEO FCS

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