Editor's Note: This Practice Note draws on Ofcom's Competition Bulletin Issue 6, October 1997
In 1995, a competing internet service provider, UUNet, alleged that BT was engaging in predatory pricing for its internet access service (provided through BTNet). UUNet complained that a BTNet offer at a price 9 times less then BT’s comparable services was anti-competitive, and BTNet was not recovering its cost; furthermore, BT was offering a free trial period of subscription. The British regulatory agency Oftel (now Ofcom) found in 1997 under the following conditions:
- Barriers to entry were low and, therefore, BT could not expect to exclude competitors from the market and gain the market power needed to recoup losses in the long run
- BT’s other internet services were distinguishable from the BTNet service and, therefore, UUNet’s comparison was not well-founded
- Early BTNet losses not recovered were consistent with start-up business trends and that BT’s projected figures showed more profitability
- Free promotional subscriptions were commonplace in the industry, and BTNet had limited the offer to the initial period
Oftel’s final ruling was that BT had not engaged in any form of predatory pricing, although Oftel did continue to monitor BT due to its significant market presence.