Ofcom blocks BT wholesale price hike

Michael Carroll
16 Dec 2010
Daily News

UK incumbent BT won’t be able to raise wholesale fees to cover a deficit in its pension budget, regulator Ofcom has ruled.

The UK regulator claimed the decision maintains consistency in its approach to setting wholesale charges, and will protect consumer’s interests by maintaining competition in the market.

Ofcom’s decision effectively means it won’t change its approach for calculating the amount Openreach, BT’s retail division, can levy on competitors.

The regulator said existing guidelines still apply noting that “statutory reported accounting costs,” should be used to measure the telco’s continuing service costs and that “the cost of capital should not be adjusted,” to account for “a defined benefit pension scheme.”

BT sparked the 18-month review after arguing Ofcom was out of step with other industry regulators by not accounting for the extra costs incurred to cover the deficit of £5.2 billion ($8.1b) at September 30.

The telco had hoped to raise wholesale fees by around 4%.

A spokesman told telecomasia.net it was disappointed by Ofcom’s decision.

“We believe that we have provided strong evidence that pension deficit payments should be reflected in our costs,” he said, noting there is “precedent from other regulated industries,” to back-up the telco’s view.

MORE ARTICLES ON: British Telecom, Ofcom, Regulation

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