BT 2007 Annual Report Download - page 23

Non-UK regulation
BT must comply with the regulatory regimes in the countries in
which we operate and this can have a material impact on our
business.
European Union
Regulation in each country within the EU is conducted within
the regulatory framework determined by EU directives,
regulations and recommendations. The manner and speed with
which directives have been implemented vary from country to
country and national regulators are working together in the
European Regulators Group to introduce greater harmonisation
in their approach to the assessment of SMP and the imposition
of appropriate remedies.
BT does not have universal service obligations outside the UK,
although in certain member states we may be required to
contribute towards an industry fund to pay for the cost of
meeting universal service obligations in those countries.
Following the European Commission’s formal investigation
into the way the UK Government set BT’s property rates and
those paid by Kingston Communications, and whether the
Government complied with European Community Treaty rules on
state aid, the Commission concluded that no such state aid had
been granted. The Commission’s decision has now been
appealed, but we continue to believe that any allegation of state
aid is groundless, and that the appeal will not succeed.
Rest of the world
The vast majority of the markets in which we operate around
the world are regulated, and in most of these we have to meet
certain conditions and obtain licences or other authorisations.
The degree to which these markets are liberalised varies widely.
Our ability to compete fully in some countries is therefore
constrained.
We continue to press incumbent operators and their national
regulatory authorities around the world (including the EU) for
cost-related wholesale access to their networks where
appropriate.
Other significant changes and issues
Wholesale broadband pricing
We have had discussions with Ofcom about how we might
ensure price-related protection for broadband consumers in
parts of the UK where wholesale broadband competition is less
likely to develop in the next few years. The aim is to balance our
need to be competitive in the wholesale broadband market
while recognising that emerging LLU operators require a period
of stability in order to establish a sustainable business. As a
result, we have agreed a series of detailed ceiling and floor
pricing commitments for certain mass market wholesale
broadband products – BT IPStream and the proposed Wholesale
Broadband Connect service. The commitment on price floors
ends on 1 July 2009, and on 31 December 2010 for price
ceilings.
Funds for liabilities
Under the terms of the Electronic Communications Code, an
electronic communications provider with apparatus on or in the
public highway is required to make financial provision to cover
any damage caused by work it carries out, and for the removal
of its network in the event of liquidation or bankruptcy.
The conditions require the company to provide Ofcom
annually with a certificate that, in the opinion of its board of
directors, it has fulfilled its obligations to ensure the availability
of the required funds. This has been done by BT.
RELATIONSHIP WITH HM GOVERNMENT
The UK Government, collectively, is our largest customer, but
the provision of services to any one of its departments or
agencies does not comprise a material proportion of our
revenue. Except as described below, the commercial relationship
between BT as a supplier and the UK Government as customer
has been on a normal customer and supplier basis.
We can, however, be required by law to do certain things and
provide certain services for the UK Government. General
conditions made under the Communications Act require all
providers of public telephone networks and/or publicly available
telephone services, including BT, at the request of and in
consultation with the authorities, to make, and if necessary
implement, plans for the provision or restoration of services in
connection with disasters. The Civil Contingencies Act 2004
contains provisions enabling obligations to be imposed on
providers of public electronic communications networks,
including BT, in connection with civil contingency planning. In
addition, the Secretary of State has statutory powers to require
us to take certain actions in the interest of national security and
international relations.
LEGAL PROCEEDINGS
BT does not believe that there are any pending legal
proceedings which would have a material adverse effect on the
financial position or operations of the group.
There have been criminal proceedings in Italy against 21
defendants, including a former BT employee, in connection with
the Italian UMTS (universal mobile telecommunications system)
auction. Blu, in which BT held a minority interest, participated in
that auction process. On 20 July 2005, the former BT employee
was found not culpable of the fraud charge brought by the
Rome Public Prosecutor. All the other defendants were also
acquitted. The Public Prosecutor is in the process of appealing
the court’s decision. If the appeal is successful, BT could be held
liable, with others, for any damages. We have concluded that it
would not be appropriate to make a provision in respect of any
such claim.
RESOURCES
Corporate reputation and brand strength
BT has a strong, integrated brand that is widely recognised both
in the UK and around the world. According to global branding
organisation, Superbrands, BT has the fourth strongest brand in
the UK, up from twenty first a year ago. Superbrands, which
publishes a list of the leading 500 brands in the UK, judges
companies on quality, reliability and distinction.
Our brand helps to shape our relationships with all our
stakeholders, including shareholders, customers, suppliers and
employees. It is vital that they all have a clear understanding of
what BT stands for, and that all their interactions with us
contribute to a consistently positive image of BT.
As a vital asset, the BT brand needs to be developed,
protected and managed with the same rigour that we bring to
other assets, both tangible and intangible. And as the world and
the markets in which we operate change, so our brand needs to
reflect this, becoming more confident, dynamic and forward
looking.
Our vision for BT is to be dedicated to helping customers
thrive in a changing world.
Our mission is to be the leader in delivering converged
networked services.
By ensuring that the services we offer customers are
consistently focused on meeting their needs, straightforward and
Report of the Directors Business review
22 BT Group plc Annual Report & Form 20-F