Whose Authority?

BT_EE_GPOTower

By waving through BT’s takeover of EE, the government’s competition watchdog has again put corporate interests ahead of the public interest.

Last year, it took me four months to extricate myself from an expired home broadband contract with BT. After wasting more than a day of my life on the phone fighting off BT’s determination to charge me for services I was no longer getting, I finally got rid of them just before Christmas. Then I woke up last week to find that I’m about to become a BT customer again. Twice over. I haven’t chosen to “come home” to BT. I’ve been forced back to this rapacious behemoth because the Competition and Markets Authority (CMA) has given BT the green light to take over my mobile and office broadband supplier, EE. So much for competition and consumer choice.

Mind you, come to think of it, I didn’t choose EE either. I chose Orange, way back in 1997. I was happy with Orange. Orange were friendly and responsive and didn’t charge the earth for things like phone insurance. The coverage was reasonably good and Orange seemed content to supply me with a mobile phone and not waste my time trying to take over everything else in my life. But the 2010 merger of Orange UK and T-Mobile forced me to become a customer of a new entity, EE.

I didn’t mind too much at the time. I even switched the broadband service at my office to EE (a previous takeover having forced me to move from the excellent BE Broadband service to the dreadful Sky). EE’s broadband is an improvement on Sky’s, but my mobile bills have risen significantly and – inexplicably, since EE was merger of two existing networks – coverage seems to have got worse. EE’s customer service, once Orange’s strong suit, is famously abysmal. But never mind, I could at least console myself that I wasn’t a BT Broadband customer any more.

The gap between rhetoric and reality when it comes to competition and consumer choice is so wide the words themselves have become meaningless. Every takeover and merger by definition reduces consumer choice, both by forcing existing customers to switch to a supplier they haven’t chosen, and reducing the range of options available generally. I don’t care how “pro-business” the CMA thinks has to be to keep ministers happy, you can’t argue with the fact that taking something away means there is less than there was before.

Takeovers and mergers have become a hallmark of today’s capitalism. Many executives define their careers by them. I’ve never been convinced that competitive markets are the best way to run everything. But where we have them, and they’ve worked reasonably well with telecommunications, they have to operate on the basis of meaningful competition and real choice. And if that’s the CMA’s job, it should treat every proposed takeover with the utmost suspicion. Instead, it seems to do the opposite, looking for excuses to wave these deals through. I can’t think of the last time the CMA or its predecessor blocked a significant takeover in the UK.

The CMA inquiry chair, Mike Wooton, claims there is little overlap between the mobile and landline markets in the UK, so the takeover will not significantly reduce competition and choice in either market. This is backward thinking, as the CMA must know. Landlines are dying out, and increasingly consumers make little distinction between the two “markets”, often choosing to buy packages which bundle landlines with mobile, TV and broadband services (so-called “quad-play” packages). EE is itself a broadband supplier (with a 4% market share in 2015), so there can be no question that the takeover will reduce competition in that area. How can the CMA think that strengthening the most powerful players in the landline, broadband and mobile markets will improve competition and choice? They have allowed BT to take out one of its major potential competitors in the emerging digital media market, and increase still further its stranglehold over the most important element within that market – the supply of broadband internet services.

BT’s dominance over the telecoms market is even greater than its market share suggests. Through its Open Reach division, it controls access to most of the broadband network — whoever your broadband supplier is, it’s probably BT who supply the line to your house or office. BT also dominates the market for linking mobile masts and, with EE tucked under its belt, it will control access to the mobile network for some smaller suppliers, like Virgin Mobile, who rely on the EE network. Reports suggest the CMA panel was split over BT’s likely dominance in the wholesale market, but there wasn’t a sufficient majority to take any action.

BT and EE are also ranked lowest for customer service by Ofcom – and are among the most complained about businesses in the UK – something else overlooked by the CMA. All this reinforces the suspicion that most regulators are useless because they’re in the pockets of the people they’re supposed to be regulating.

Takeovers and mergers are the Achilles Heel in the free market idea. Big firms exploit the government’s reluctance to intervene in “free” markets to do everything they can to reduce competition and choice. Unchecked by powerful regulators, big firms don’t welcome competition, they try to snuff it out. Quite simply, they want to get themselves a monopoly, or as close to one as they can get.

Firms have no choice but to behave like this because, at the mercy of shareholders, they must maximise profits in the short-term. If they don’t, the top management lose their jobs, as Marks and Spencer’s chief Marc Bolland recently found out. Without regulation, the free market is not a stable form of social organisation, because everyone involved has an over-riding incentive to stop the market operating freely. Thwarting those ambitions is what the CMA is for. Sadly, it doesn’t seem to be taking its job seriously.

Photo: GadgetyNews (Jay Garrett) / CC BY-SA 3.0