Freeserve accuses BT

Freeserve, the UK's largest internet service provider, has renewed its attack on BT, accusing the telecoms giant of pursuing an orchestrated campaign of anti-competitive behaviour.

John Pluthero, the chief executive of Freeserve, has reported BT to the telecoms watchdog Oftel over its ?10m broadband campaign.

BT is already involved in a spat with rival service provider AOL over the payment of VAT, and BT has now been accused of exploiting the links between its retail an wholesale arms to steal a march on the competition.

Freeserve, which relies on BT to deliver its internet service to 2.4m users and is battling to attract new business with its high-speed broadband service, believes BT is trying to take unfair advantage because it is the owner of the national telecoms network.

"The Chinese walls that are supposed to exist between BT Openworld and BT Wholesale may be fooling Oftel," said Mr Pluthero.

"But to the rest of us who understand the lead times needed to bring a new product to market it's obvious those walls are paper thin."

Immediately following February's announcement of a price reduction in the wholesale price of broadband, BT ran a series of ads in the national press directing readers to BT.com/broadband.

But Freeserve accused BT of using this to promote its own service because the advert linked to BT Openworld's own broadband offering without mentioning other ISPs that offer broadband.

BT Openworld, which is 100% owned by BT and is housed in the same headquarters, is legally obliged to operate at arm's length under Oftel guidelines.

But Freeserve is not convinced and believes it was informed of BT's wholesale broadband price cuts before the rest of the market.

The cut from ?25 to ?14.75 had a hugely significant impact on the market enabling BT rivals such as Freeserve and AOL to drop their prices to the consumer.

However, while BT has been signing up new broadband users at the rate of thousands a week, its two biggest rivals have yet to get off the starting blocks.

Freeserve argues that in booking a high profile TV campaign and distributing 2m sign-up CDs so soon after the announcement, BT Openworld showed it must have known about the cuts in advance.

According to Freeserve, the broadband push has also highlighted the need to separate BT's wholesale and retail arms - a move also long argued for by others in the industry.

Last January Oftel ruled it would be unfair for BT to cross-subsidise its consumer broadband services but no further action was taken.

Freeserve is demanding that Oftel launches an immediate investigation into predatory pricing under the Competition Act.

It argues that BT Openworld can't be generating enough revenue to cover its free installation offer and as such is guilty of cross subsidising its services.

"There's now a realistic chance that broadband will at last begin to take off in the UK and Freeserve will play a big part in this; what must not be allowed to happen is to hand that market to BT through flimsy regulation of the incumbent's anti-competitive behaviour," added Mr Pluthero.