BT 2000 Annual Report Download - page 21

Business review
20 Annual report and Form 20-F
(i.e. no increases above RPI), or no longer subject to price
controls. Those services Oftel considers unlikely to
become competitive in the near future are subject to
basket controls; those Oftel considers likely to become
competitive are subject to price cap control and those
Oftel considers fully competitive services are not subject
to price controls.
BT must publish a noti¢cation to the Director General
and other licensed operators if it intends to amend existing
charges or to o¡er new services.
Review of the price controls
Oftel is currently consulting to determine whether price
controls should be extended beyond the present period that
ends in 2001, and, if so, what form they should take. This
process takes the form of a series of consultations that
began in July 1999. Oftel expects to complete the review by
December 2000. The BT Board expects to decide by the end
of January 2001 whether to accept the proposals or seek a
referral to the CC. BT believes the high level of competition
that already exists in telecommunications should remove
the need for further retail price controls.
If Oftel and BT are unable to agree on future price
control arrangements, and the issue is referred to the CC,
Oftel may extend the current retail price controls for eight
months, and network charge controls for six months, from
31 July 2001 and 30 September 2001, respectively.
Mobile networks
Licence modi¢cations recommended by the CC have led
to an initial reduction of about 25% in the price of calls
from a BT line to mobile telephones from 30 April 1999
and an e¡ective annual RPI minus 8.5 reduction for a
further two years. Speci¢cally, the CC required a reduction
in BT's average retention (the amount BT keeps to cover
costs and an element of pro¢t after paying a termination
charge to the mobile operator completing the call) from
5.8 pence per minute (ppm) to 3.4 ppm for the 2000
¢nancial year.
The CC also recommended that BT Cellnet and
Vodafone AirTouch make price reductions on their average
termination charges, from 14.8 ppm to 11.7 ppm for the
2000 ¢nancial year; this price has come under a price
control of RPI minus 9 for two years.
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 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 is pursuing a policy of
progressive liberalisation and harmonisation in
telecommunications. Since January 1998, the provision of
infrastructure and all telecommunication services was
liberalised in the European Union. Speci¢c directives
imposed new rules for voice telephony, leased lines and
interconnection, with particular emphasis on organisations
with signi¢cant market power and with a common set of
principles for licensing and enforcement. These have
largely been implemented in national legislation.
The European Commission reviewed progress during 1999
and is proposing a simpli¢ed regulatory framework which
will include a more uniform regulatory treatment of
di¡erent communications technologies and a revision of
the concept of signi¢cant market power.
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 e¡ective regulation,
especially in the areas of forward-looking costs for
interconnection, carrier pre-selection and number
portability, is anticipated this year.
In April 2000, the Japanese government invited
applications for third generation (3G) mobile licences. In
April 2000, J-Phone applied for a 3G licence. The Japanese
government is expected to decide on the successful
licensees in summer 2000.
Asia Paci®c
Many countries in Asia Paci¢c have either reviewed, or are
reviewing, their regulatory frameworks with the aim of
liberalising their telecommunications markets. Territories
in which BT has major interests, such as Hong Kong, the
Republic of Korea and New Zealand, are now largely
liberalised. Other countries, such as India and Malaysia,
are implementing liberalisation programmes.
In each of these countries, liberalisation is moving in
the same direction, but with some important di¡erences
depending on the local circumstances. In all of them,