Ofta says telecoms company did not use wholesale fees to cover residential losses PCCW has been cleared of abusing its dominant market position to exert a 'price squeeze' on rival internet service providers. It has slashed the amount it charges customers for residential broadband connections by about 50 per cent. The Office of the Telecommunications Authority (Ofta) launched an investigation after competitors complained the firm was cutting the price of broadband services while keeping the price of broadband connections it sells to other telecoms firms relatively high. They complained that since 2001, PCCW's Netvigator broadband arm IMS - which holds the biggest share of the internet service provider market - has cut the price of consumer subscriptions by about 50 per cent to as little as $148 a month. Over the same period, however, PCCW's wholesale price for broadband services sold on to other telecom operators has been cut by only 12 per cent, making it harder for them to compete. The 38 per cent disparity in price created a 'significant margin squeeze for the internet service providers depending on PCCW's wholesale broadband conveyance service', the complainants argued. PCCW's price-cutting came during a period in which the number of broadband accounts in Hong Kong homes grew from less than 600,000 to more than 1.2 million, sparking fierce competition between internet service providers. Ofta launched a 10-month investigation into the allegations in November to see if PCCW was guilty of 'margin squeeze' - a situation where competitors are discriminated against in pricing to the extent where they are unable to effectively compete. The complainants pointed out that the two other telecoms companies that sell on broadband services to potential competitors - Hong Kong Broadband Network and Hutchison Global Communications - priced their products 'very competitively' compared with PCCW. Ofta carried out what it termed a 'profitability analysis' to check if PCCW was using the money it made from wholesale broadband services to cover the losses it made on cutting the cost of broadband to residential customers. In a report, the authority said its key concern was to determine whether PCCW had engaged in conduct which amounted to an abuse of its dominant position in the market - an offence under the Telecommunications Ordinance. It found that PCCW had not used profits from wholesale broadband sales to cover losses on residential sales.