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Ofcom ‘double standards’ in BT pension investigation

If I were Jeremy Darroch, chief executive of BSkyB, I would be incandescent at Ofcom giving BT a sympathetic hearing over its proposal to cane consumers with extra broadband charges so it can stuff its depleted pension fund.

Here’s why.  Ofcom appears to be operating a set of dual standards when it comes to regulatory investigation. On the one hand, it is perfectly prepared to consider lowering the wholesale prices that BSkyB charges its rivals for pay-TV programme rights. Principal beneficiaries? Virgin Media, Top Up TV and, er, BT Vision.

On the other hand, it is equally prepared to consider raising wholesale prices when such an action would benefit BT. As for example, with the line rental charged by BT wholesale subsidiary Openreach to third party broadband customers, such as TalkTalk  – and BSkyB. Ofcom says it wants to benefit the end-user of pay-TV by lowering prices; yet contradictorily it implies end-users generally may have to carry the passed-on burden of raised broadband tariff prices should BT’s pension stuffing be deemed ‘in the public interest’.

There’s more. The ostensible reason for an investigation into the pay-TV market is that BSkyB operates a complex monopoly, which may need to be moderated by introducing an independent pricing structure monitored by Ofcom. Wait a minute, though. Doesn’t BT also operate a complex monopoly – in the supply of broadband (copper-wire-based) infrastructure? And isn’t Ofcom opening itself to the charge of propping up that monopoly if it let’s BT’s proposal through?

The crux of the BT rationale is that it provides a vital public service, at a loss. In other words, it has had to run a pension deficit as a result of conditions (the regulatory framework; the rising longevity of its employees etc) beyond its reasonable control.

Yet it is far from evident that these are the only, or even the major, preconditions which have led to BT’s pension deficit. After all, isn’t this the same BT that for some years declined to pay money into its pension fund, to the more or less exclusive benefit of shareholders? And which wilfully embarked on a high-risk global expansion strategy that eventually boomeranged on all its stakeholders disastrously?

Ofcom, which has no doubt employed entirely objective criteria in investigating these separate yet related issues, nonetheless risks accusations of conflict of interest if it finds in favour of BT. All the more so because it has now become a football in the increasingly acrimonious war between HMG and Rupert Murdoch. If the NewsCorp-backed Tories get in next year, Ofcom will most likely find itself history.

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