Watchdog accuses BT over pricing

Ofcom said it believed BT may have engaged in a "margin squeeze" in 2008 and 2009 by setting the prices charged to other providers for its wholesale calls product at a level that would not have allowed rivals to cover their costs.

Its statement follows a two-year investigation after BT's rivals Thus, now part of Cable & Wireless Worldwide, and Gamma Telecom complained to Ofcom that BT was undercutting the market.

BT said it strongly refuted the allegations in Ofcom's statement of objections, which date back to between July 2008 and April 2009.

A spokesman said: "We will, of course, participate fully in the Ofcom investigation over the coming months and defend our pricing vigorously."

BT's wholesale calls product is used by other communications providers to offer calls at a retail level to consumer and business-es.

Rivals such as Thus and Gamma also provide the same wholesale service, but use BT lines.

In their original complaint, Thus and Gamma claimed BT was pricing its wholesale calls product below cost to force competitors that use its lines out of the market.

Ofcom said BT would now have 12 weeks to respond to yesterday's statement of objections before it delivers a final ruling on whether competition law has been infringed.