The Carphone Warehouse has suffered a setback to its ambitious plans to offer cut price broadband and phone services. A draft ruling by regulator Ofcom has failed to uphold a request by Carphone to slash the cost of migrating large numbers of users to its new service.
If the draft ruling is confirmed, Carphone will have to pay more to migrate each customer to its new phone and broadband service than it had hoped, adding to its overheads.
Like many aspects of local loop unbundling (LLU) (the process by which operators install their kit in BT exchanges to provide telecoms services direct to end users) the details surrounding the row between Carphone and BT are complex.
Earlier this year, Opal Telecom (part of Carphone Warehouse) called on Ofcom to resolve a dispute concerning the maximum charge BT can make for the bulk migration of fully unbundled (MPF) and shared access (SMPF) lines. Fully unbundled lines are where the LLU operator, for example Bulldog, takes full control of a phone line to a home or business providing both a broadband and phone service.
Shared access is where the LLU operator provides the broadband connection, but the phone service remains hooked up to BT's network. In the case of both MPF and SMPF, the maximum amount BT is allowed to charge operators for migrating individual lines in bulk is £34.86 per line.
But in May last year BT Wholesale announced a special promo of £20 per line for the mass migration of shared lines (SMPF). At the time, ISPs such as AOL, Wanadoo and Tiscali had said they were interested in migrating large numbers of users to shared LLU while BT was keen to give LLU a chance to take-off.
No LLU operators at the time expressed an interest in the bulk migration of fully unbundled lines. That is until last November when Opal announced its intention to unbundle up to 1,000 exchanges. A month later, Carphone bought Onetel and Tele2, taking its number of residential fixed line customers to around 2.5m.
Last month, Carphone announced details of a new product based on fully unbundled lines that would provide a broadband service, inclusive phone calls and line rental for just £20.99 a month - massively undercutting similar services from rivals. Carphone is currently signing up customers and plans to start migration onto its new LLU platform later in the summer.
But it wants to pay the promo price of £20 per line to migrate its customers onto its LLU platform - not £34.86. When it failed to reach agreement with BT earlier this year it complained to Ofcom claiming that the £20 SMPF offer should also be extended to fully unbundled (MPF) lines. Not to do so was "discriminatory", it said.
In its "draft determination" to try and resolve the dispute, Ofcom has ruled that the maximum charge BT should impose for the bulk migration of fully unbundled lines should be £29.06.
While it's cheaper than the original ceiling, it's still way off the £20 fee for migrating shared lines currently being offered by BT.
The draft ruling has now been thrown open for consultation until the middle of May and a final decision is due early in June.
A spokeswoman for BT told us that the giant telco was "considering the details of Ofcom's draft determination" and that it would "respond within the legal deadline".
"We will continue to co-operate fully with Ofcom," she said. "Openreach is fully committed to working with The Carphone Warehouse and all of our customers to ensure that LLU is a success."
No one at Carphone was available for comment at the time of writing. ®