LONDON (Reuters) - BT's ability to bid aggressively in the upcoming Premier League football rights auction could be limited by a plan from regulator Ofcom to monitor the price it charges rivals to access its key superfast fibre network.
Ofcom said on Thursday it would measure the difference between the wholesale price BT charges rivals and the retail price it charges its customers to make sure there is a sufficient margin for competitors to make a profit from the infrastructure.
BT's smaller rival TalkTalk has long argued that BT overcharges for wholesale access, helping it to fund additional services such as sports programming which it gives to customers as part of the broadband bundle.
BT, the country's biggest fixed-line provider, has turned around its business in recent years by building a fibre network that has driven the uptake of broadband services, both by consumers and by rivals who take the lines on a wholesale basis to offer to customers.
It has also spent around 2 billion pounds on the acquisition of sports rights, helping to draw customers to the network, and the next auction for Premier League programming is expected early this year.
BT has previously been cleared of breaching the Competition Act in terms of operating a margin squeeze, and Ofcom said on Thursday it thought BT would currently pass the new test, but that it planned to introduce the new system as a safeguard.
"Ofcom's indicative assessment is that BT is maintaining a sufficient margin under the new draft rules," Ofcom said.
"Therefore, the condition is a safeguard which limits BT's ability to reduce retail margins in future, and ensures that any increases in BT's costs must be reflected in its prices."
Under the proposal, the Ofcom margin test will include BT's costs for sports programming, spread over those customers that take the service, which will increase the margin. Were BT to ever fail the test, it could adjust its wholesale or retail prices, or reduce the cost base.
"This will increase the weight of TV sport in the cost side of the calculation and mean that its contribution will rise proportionally more with any heavier spend on rights by the incumbent," analysts at Citi said.
BT has said it may appeal against the ruling. The proposal will now be sent for review to the European Commission and Ofcom will publish a final statement in February.
"We are delighted that Ofcom has confirmed that super fast broadband is going to be a price regulated product," TalkTalk CEO Dido Harding told Reuters. "Ofcom are right to be concerned that BT could abuse its position."