BT 2001 Annual Report Download - page 24

Business review
24 BT Annual report and Form 20-F
Universal service
In September 2000, Oftel issued a further
consultation on BT’s Universal Service
Obligation (USO). BT endorses Oftel’s
view that, at this point, BT’s USO should
not be extended to cover broadband
services. Whilst BT welcomes Oftel’s
revision of costs and bene¢ts set out in
the previous consultation, BT is
disappointed by Oftel’s failure to
acknowledge the strong case for industry
funding of the signi¢cant net costs that
fall on BT in providing universal service.
BT still believes social telephony would
be better funded through an industry-
wide fund. BT awaits Oftel’s ¢nal
conclusions.
HM Government’s review of
telecommunications and broadcasting
regulation
HM Government has initiated a review of
telecommunications and broadcasting
regulation. HM Government published a
White Paper in December 2000 proposing
regulatory reform concerning the
convergence of the communications
industries. A new regulatory body is
proposed, to be called the O⁄ce of
Communications (OFCOM), that will
amalgamate the roles of ¢ve existing
regulatory agencies: O⁄ce of
Telecommunications; Independent
Television Commission; Broadcasting
Standards Commission; Radio Authority
and Radiocommunications Authority.
OFCOM will be headed by a chairman and
chief executive supported by executive
and non-executive board members.
The main change for telecoms would
be the proposed introduction of ¢nes for
breach of regulatory obligations. BT
supports HM Government’s vision for the
converging sector and welcomes the
intention not to apply broadcasting rules
to internet content. However, BT, along
with many others, is seeking full rights of
appeal against regulatory decisions and
the incorporation within OFCOM of
incentives to reduce the level of regulation
when appropriate.
Oftel strategy statement
In January 2000, Oftel published a strategy
statement based on the principle that
regulation should go no further than the
minimum necessary to protect consumers.
The two key features of the strategy are
increased use of industry self- and co-
regulation, and reviews of the
e¡ectiveness of competition in major
market sectors. BT supports the proposal
for an extension of self- and co-regulation,
which has the potential to result in
regulation which is more £exible, more
responsive and more pragmatic. BT is
discussing with other stakeholders how
this can best be put into practice,
especially in consumer-related areas.
BT also supports the aim of the
e¡ective competition reviews, which are
intended to ensure that the regulatory
framework responds to changed
competitive conditions. The reviews will
be carried out over the next few years
according to a schedule which Oftel has
published: where it is found that
competition is delivering bene¢ts to
consumers in the sectors reviewed,
regulation will be reduced or withdrawn,
as appropriate. Sectors for which reviews
have already been initiated or completed
include national leased lines and mobile
telephony. BT supports Oftel’s plans to
review the duplication between licence
conditions and the Competition Act during
the current ¢nancial year.
Interconnection product
On 26 May 2000, Oftel issued a
determination stating that BT should
provide an interconnection product under
its licence for £at rate internet access call
origination (FRIACO). The determination
requires BT to provide call origination for
internet access, not on the standard pence
per minute basis but with charging based
upon network capacity purchased. The
determination directed BT to o¡er
FRIACO at the local exchange level from
1 June 2000. BT complied with this
direction. BT had concerns at potential
network congestion should FRIACO have
to be made available at the next level up
from the local exchange (DMSU). Oftel has
acknowledged these concerns and, on
13 November 2000, began consulting on
proposals that would make FRIACO
available at the DMSU level, although
with safeguards in place for one year to
ensure the network does not become
congested. A ¢nal determination on DMSU
FRIACO was issued on 15 February 2001
requiring BT to o¡er such a product but
with safeguards, including requirements
on other operators to re-arrange tra⁄c, to
prevent network congestion. The charges
for both FRIACO services are to be
incorporated in the network charge control
regime.
Office of Fair Trading review of Yellow
Pages
On 11 May 2001, the Director General of
Fair Trading issued a statement that, at
the request of the Secretary of State for
Trade and Industry, the OFT is to seek
further undertakings from BT in respect of
Yell’s fees for advertising in its printed UK
consumer classi¢ed directories (Yellow
Pages). BT is being asked, amongst other
things, to cap the fees at RPI minus 6 for
four years from January 2002.
The decision follows a review by the
OFT of undertakings entered into by BT
in 1996. The existing undertakings were
given following a 1996 Monopolies and
Mergers Commission (now Competition
Commission) report on the supply of
classi¢ed directory advertising services.
They cap Yell’s advertising rates at RPI
minus 2. They also require Yell to publish
a rate card, ensure that directory areas do
not overlap and to provide ¢nancial
statements to the OFT.