Ofcom tackles BT wholesale pricing

Dylan Bushell-Embling | July 26, 2010

telecomseurope.net

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BT will likely be restricted from raising wholesale prices in an attempt to plug a €10 billion pension deficit, regulator Ofcom has announced.

The operator had petitioned Ofcom to allow it to raise wholesale fixed-line access prices by up to 4% to help it deal with its pension deficit, which according to [1] the Telegraph currently stands at over £9 billion (€10.77 billion).

But Ofcom on Friday revealed it currently plans to take no action [2] with regards to changing BT's regulated pricing and investment restrictions.

“Ofcom has not received compelling evidence from stakeholders which would justify a change in approach,” the regulator explained.

Because the purpose of Ofcom's pricing regulation is to provide “consumers with regulated prices that most closely match a fully competitive market,” allowing BT to change its rates would contravene this goal, it added.

BT had claimed that its wholesale customers – BSkyB, Cable & Wireless Worldwide and TalkTalk – should help fund the pensions of those workers who had built the network all three are currently using.

While a price hike was expected to add tens of millions of pounds to BT's coffers, Ofcom's likely decision won't have a significant impact on the company's cashflow, an insider source told the Telegraph.

The big potential impact comes when the UK's Pension Regulator makes its ruling on BT's arrangement to fund its deficit over 17 years, the Daily Mail said [3].

The regulator has expressed concerns with the arrangements, and is expected to issue its decision later this year.

BT is currently paying over £500 million annually as part of its plan to deal with its deficit.

Ofcom will make its final decision on wholesale pricing by the end of the year.

Source:

telecomseurope.net [4]

Dylan Bushell-Embling

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;BT [8] Debt [9] Pensions [10] UK [11] Wholesale [12]

Links:
[1] http://www.telegraph.co.uk/finance/newsbysector/epic/btdota/7907421/BT-fails-in-bid-to-make-rivals-plug-its-9bn-pension-deficit.html
[2] http://media.ofcom.org.uk/2010/07/23/ofcom-proposals-on-btpensions/
[3] http://www.dailymail.co.uk/money/article-1297197/BT-blow-price-hike-plan-plug-7-5bn-hole.html?ito=feeds-newsxml
[4] http://www.telecomseurope.net/telecomseurope.net
[5] http://www.digg.com/submit?url=&title=Ofcom tackles BT wholesale pricing&bodytext=BT will have to deal with its pension deficit alone
[6] http://www.telecomseurope.net/content/ofcom-tackles-bt-wholesale-pricing#comment
[7] http://www.telecomseurope.net/print/10482
[8] http://www.telecomseurope.net/tag/bt
[9] http://www.telecomseurope.net/tag/debt
[10] http://www.telecomseurope.net/tag/pensions
[11] http://www.telecomseurope.net/tag/uk
[12] http://www.telecomseurope.net/tag/wholesale