The OFT has published the full text of its clearance decision in the anticipated acquisition by BT Group plc (BT) of PlusNet plc (PlusNet). The OFT announced its decision not to refer this merger to the Competition Commission under the Enterprise Act 2002 on 23 January 2007.

BT provides global telecommunications services which include voice telephony services and internet access. PlusNet is a UK-based Internet Service Provider (ISP) that also provides voice telephony services.

Relevant Market

The parties overlap in the provision of the following services at retail level: fixed line rental and voice calls; retail broadband internet access services, including: WiFi (wireless internet access) and VoIP (voice over internet protocol); and retail narrowband internet access services. The OFT considered the relevant product markets in relation to fixed line rental and voice calls and the internet.

Competition Assessment

The OFT decided that there was no substantial competition concerns regarding access to the broadband market. In order to provide retail broadband internet access services, a supplier has to gain access to network facilities. Such access can be provided on a wholesale basis by BT or the cable companies or other suppliers. The OFT considered that there had been recent entry at wholesale level by vertically integrated suppliers of retail internet access and telecommunications services through Local Loop Unbundling. BT also provides access, which has facilitated entry at the retail level in fixed line rental, voice calls and internet access services. In addition there has been recent investment by suppliers of retail broadband access services, with the Carphone Warehouse announcing that it would be prepared to run free broadband access at a loss and BSkyB announcing a £400 million investment in the development of its broadband business over the next three years. The OFT also considered that the emergence of new technologies for providing internet access services has widened the field of viable competitors in the sector.

Concerns were raised with the OFT that BT may be limiting customer choice at the downstream level and reducing the pool of potential wholesale customers by its acquisition of PlusNet. The OFT considered however, that the potential for future entry at the retail level for telecommunications services suppliers meant that the pool of potential wholesale customers could grow rather than be decreased. The OFT did however, note that this may be a concern if BT were to make a series of similar acquisitions.