BT 1999 Annual Report Download - page 23

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required to publish and have audited financial statements
for the regulatory “businesses” and “activities”, in order to
support the linkage of costs with interconnect prices and
with a view to providing demonstrable evidence that BT is
neither behaving in a discriminatory fashion nor unfairly
subsidising its activities. The regulatory “businesses” for
which separated accounts are currently produced are:
access; apparatus supply; network; retail systems;
supplemental services; and residual services.
Review of the price controls
In May 1999, Oftel issued proposals to amend BT’s
Licence to allow for a possible extension of the current
retail price controls for eight months, and network
charge controls for six months, from 31 July 2001 and
30 September 2001, respectively. This will allow Oftel
to complete a more up-to-date assessment of the
telecommunications markets and the need for any further
price controls from 2001. The current controls would only
be extended should Oftel and BT be unable to agree on
future arrangements for price control, and the issue was
referred to the CC.
Non-UK regulation
In developing its business internationally, BT must take
account of the regulatory regimes in the countries in
which it operates or wishes to operate.
United States
In the United States, the Federal Communications
Commission (FCC) has extensive authority to regulate
interstate and foreign services and services provided
by common carriers, as well as the authority to
implement policies that promote competition for all
telecommunication services.
European Union
The European Commission has been pursuing a policy
of progressive liberalisation and harmonisation in
telecommunications. Since 1 January 1998, the provision
of infrastructure and all telecommunication services has
been liberalised in the European Union. Specific directives
imposed new rules in relation to voice telephony, leased
lines and interconnection, with particular emphasis on
organisations with significant market power and with a
common set of principles for licensing and enforcement.
These have largely been implemented in national
legislation. The Commission will be reviewing progress
during 1999 and is expected to propose further measures.
Japan
Japan is taking a staged approach to deregulation. Full
liberalisation (save a 20% ceiling on foreign ownership
in Nippon Telegraph and Telephone Corporation) was
implemented in 1998. A move to more effective regulation
– especially in the areas of interconnection, carrier pre-
selection and number portability – is anticipated in 2000.
Rest of the world
The World Trade Organisation’s Agreement on Basic
Telecommunications, signed in February 1997, has
created a framework for the progressive opening of
telecommunication markets, in accordance with world
trade standards. The agreement provides assurance that
commitments made by the 69 participating nations can be
legally enforced. However, the commitments themselves
provide only limited opportunities in some markets. A
further round of World Trade Organisation negotiations
will start at the end of 1999.
Future regulation
In addition to regulation relating to the telecommunications
industry, BT is subject to general competition law.
The Competition Act 1998, which comes into effect in
March 2000 brings the UK into line with European Union
law by prohibiting anti-competitive agreements and
concerted practices and the abuse of a dominant market
position. Enforcement will be by the Director General of
Fair Trading and, in the case of telecommunications, the
Director General of Telecommunications will have
concurrent powers with the Director General of Fair
Trading. They will have significant new powers of
investigation. Breach of the prohibitions could lead to fines
of up to 10% of group turnover and/or result in claims for
damages in the civil courts. There are powers to order a
company to cease an infringing activity. However, the Act
will also introduce a new statutory independent appeals
mechanism and the general fair trading condition in BT’s
Licence will be removed.
Other significant changes and issues
Domestic obligations in a global market
As a result of BT’s growing global interests, a Licence
condition prohibits BT from doing anything, by act or
omission, that would detract materially from its ability to
meet its Licence obligations to provide telecommunications
services in the UK and to do so to any standards specified
by the Director General of Telecommunications. BT’s
directors are required to submit an annual compliance
certificate to the Director General.
HM Government’s review of utility regulation
HM Government has initiated a review of utility regulation,
with proposals for regulatory reform which include a
tiered regime with little or no regulation for fully
competitive industries, ranging to more close regulation
for those industries where competition has not developed
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