BT 2006 Annual Report Download - page 16

individual providers which are designated to have the USO
(universal service obligation) or, following a review of the
relevant markets, are found to have SMP (significant market
power). Other general obligations are set out in the
Communications Act.
Conditions applying to all providers of electronic
communications networks or services
General Conditions
The ‘General Conditions’ made by Ofcom under the
Communications Act generally apply to all providers of
electronic communications networks or services. Although these
conditions are concerned primarily with consumer protection,
they also address issues such as general access and
interconnection obligations, standards, emergency planning and
numbering. A separate condition regulates the provision of
premium rate services.
Electronic Communications Code conditions
The Electronic Communications Code applies to
communications providers authorised to carry out streetworks
and similar activities for network provision. Its application is
subject to conditions made by the Secretary of State for Trade
and Industry.
Other general obligations
Other obligations contained in the Communications Act
include:
sthe payment of administrative charges (broadly the
equivalent of licence fees under the old framework)
sthe provision of information to Ofcom when required.
Conditions applying to BT specifically
Universal service obligation conditions
BT is the designated supplier of universal service for the UK,
excluding the Hull area where Kingston Communications is the
designated provider.
The services covered by the USO are defined in an order
issued by the Secretary of State for Trade and Industry. Our
primary obligation is to provide a single narrowband connection
to the fixed telephone network which, in addition to voice
services, must support functional internet access, to anyone
who reasonably requests it. Additional conditions relate to
issues such as schemes for consumers with special social needs,
and the provision of public payphone services.
Ofcom intends to review the cost and benefit of the USO in
2007 and if it considers the net cost of the USO to be an undue
burden, it could look at alternative ways of funding it.
Significant market power conditions
Ofcom is required by the European Commission (EC) to define,
analyse and regularly review markets, and to determine whether
any communications provider has SMP, which is aligned with
the competition law concept of dominance. Economic
regulation can only be imposed following a market review and a
finding of SMP.
Where Ofcom finds that a provider has SMP in a market, it
must impose such additional SMP conditions as it considers
appropriate, as specified in the Communications Act. These
may include obligations to meet reasonable requests to supply
certain services to other communications providers, not to
discriminate unduly and to notify price changes and obligations
relating to regulatory accounting. In some cases, extra
obligations such as price controls have also been imposed.
Following a number of market reviews by Ofcom, BT has been
deemed to have SMP in certain fixed telecommunications
markets, including the markets for fixed narrowband retail
services, fixed narrowband wholesale exchange lines, call
origination and conveyance, wholesale broadband access and
wholesale local access.
Enforcement under the Communications Act
Where a breach of a condition is not remedied following
preliminary notification by Ofcom, Ofcom may take legally
enforceable action under the Communications Act and/or
impose a penalty of up to 10% of relevant revenue. In addition,
a person who suffers loss or damage as a result of a breach
may, with Ofcom’s consent, sue for damages. In the case of
serious and repeated contraventions, Ofcom may restrict or
suspend the provider’s entitlement to provide networks or
services. The Communications Act provides for appeals against
regulatory decisions, including appeals on the merits, to the
Competition Appeals Tribunal.
BT’s Undertakings under the Enterprise Act
The key Undertakings given by BT are to:
sestablish a new access services division to operate BT’s local
access and backhaul networks, and to provide services over
those networks to the UK communications industry on the
basis of equivalence – we established Openreach for this
purpose on 21 January 2006
sdeliver equivalence of input for key wholesale products, and
increased transparency for others
sintroduce new rules on access to, and sharing of, certain
restricted information – in particular the commercial
information of Openreach and BT Wholesale
srestrict the exercise of influence by other parts of BT on the
commercial policy of both Openreach and parts of BT
Wholesale
sensure fair access and migration to BT’s next-generation
network – 21CN – for other communications providers
spublish and make available to all BT people a code of
practice explaining what they must do to comply with the
Undertakings
screate an Equality of Access Board (EAB) to monitor, report
and advise on BT’s compliance with the Undertakings and
the code of practice. The EAB was established on
1 November 2005. (The EAB Annual Report 2006 (which does
not form part of this report) is available online at
www.bt.com/eabreport).
The Undertakings include a number of things to be achieved
by specified dates. As at 31 March 2006, we had achieved all
the milestones required by that date, and we are working hard
to ensure future milestones are achieved.
Enforcement under the Enterprise Act
In the case of a breach of the Undertakings, Ofcom has the
right to seek an injunction through the courts. However, the
Undertakings set out a process for Ofcom to issue a direction,
which we would normally expect it to do rather than instigate
court proceedings. A third party who suffers loss from the
breach may take action in the courts against BT for damages.
Whether or not it took enforcement action, Ofcom would be
able to refer BT to the Competition Commission. (See
Enterprise Act)BT’s recourse against an Ofcom decision in
relation to the Undertakings would be an application for judicial
review.
BT Group plc Annual Report and Form 20-F 2006 Operating and financial review14