BT 2016 Annual Report Download - page 39

Overview The Strategic Report Governance Financial statements Additional information
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Other regulatory decisions and activities
Business Connectivity market and cost attribution
In April 2016, Ofcom published its final statement on its Business
Connectivity Market Review, Leased Lines Charge
Control and Cost Attribution Review. The key measures Ofcom
imposed are:
• charge controls to apply from 1 May 2016 until 31 March
2019;
• the introduction of minimum service levels for the provision
of Ethernet services by Openreach;
• requiring Openreach to provide access to its fibre network for
providers of high-speed leased lines for businesses (‘dark fibre’).
In setting the charge controls, Ofcom made a number of base year
cost adjustments to reflect its Cost Attribution Review assessment
that some of our attribution methodologies do not reflect the
activity that drives the cost. This is also likely to affect future price
controls, including in the Wholesale Local Access and Narrowband
markets.
Ethernet dispute
In August 2015, the Court of Appeal granted us permission to
appeal the CAT’s August 2014 decision relating to a dispute on
historical Ethernet pricing that was originally determined by Ofcom
in 2012. Our appeal was granted on three legal grounds, including
whether Ofcom had the power to require us to make the payments
it determined in the dispute and if it has the power to award
interest charges on these payments. Ofcom has deferred its final
determination on the amount of interest payable until the Court
hears the appeal, which we expect to take place in March 2017.
In November 2015, the Court of Appeal also granted TalkTalk
permission to appeal the CAT’s August 2014 decision.
Margin squeeze test
In May 2015, we lodged an appeal with the CAT against the
design of Ofcom’s regulatory margin squeeze test which requires
BT Consumer to maintain a ‘minimum margin’ on newly-acquired
fibre broadband customers.
In August 2015, Ofcom issued supplementary guidance on how
the ‘minimum margin’ test in respect of fibre broadband would be
impacted by a material change in circumstances (such as the
launch of our UEFA Champions League and UEFA Europa League
content). While we welcome this guidance, it still doesn’t provide
enough flexibility around how we recover our BT Sport costs.
And we believe it doesn’t address concerns previously raised by the
European Commission around providing us sufficient flexibility
to recover these costs.
In March 2016, the CAT issued its judgment on our appeal. The
CAT found that Ofcom was entitled to impose a regulatory margin
squeeze test as one of the remedies in its Fixed Access Market
Review, and rejected our arguments that Ofcom had not met the
legal or evidential tests to impose such a condition. Our appeal
on the design of the margin squeeze test is being heard by the
CMA and its provisional determination is expected in the coming
months.
Pay-TV
We’re appealing to the CAT Ofcom’s November 2015 decision
to remove Sky’s Wholesale Must Offer obligation on Sky Sports.
We believe that effective remedies are essential to address the
failure of competition in the pay-TV market, where Sky has held
a dominant position for more than a decade.
Broadband USO
In March 2016, the UK Government began a consultation on a
broadband Universal Service Obligation (USO) that will require a
minimum line speed of 10Mbps to be provided. In April 2016,
at the Government’s request, Ofcom began a consultation on the
design of the USO including: whether there should be one or more
designated USO providers; whether there should be a competitive
process for designating USO providers; and whether the net costs
of a USO should be funded by industry. Ofcom plans to report back
to the Government by the end of 2016.
In February 2015 we announced that we’d agreed definitive terms to
acquire EE. This transaction was subject to approval by BT shareholders
and merger clearance, in particular from the UK Competition and Markets
Authority (CMA). In October 2015, the CMA gave its provisional clearance
to the deal, announcing that it is not expected to result in a substantial
lessening of competition in any market in the UK. The CMA gave formal
approval, unconditionally without remedies, on 15 January 2016.
Regulatory approval
of our acquisition of EE
Protecting
the environment
We believe that the Information and Communications Technology
(ICT) industry plays a vital and ever-growing role in tackling climate
changea. As set out in a reportb published this year, we believe
increased investment in ICT can reduce UK carbon emissions by
24% by 2030, while creating value for the UK economy (£122bn
in that year). Reflecting our role in this area, we also organised and
took part in working sessions at the UN climate negotiations in
Paris (COP21).
We launched 100% Sport at Climate Week in New York,
encouraging sports fans to switch to renewable energy and
promoting our support for the global
#go100percent campaign
(created by the Renewables 100 Policy Institute).
3:1
Enable customers to reduce their
carbon emissions by at least three
times the end-to-end carbon impact
of our business
Our 2020 ambition
a As a signatory to the Climate Disclosure Standards Board’s (CDSB) fiduciary duty and climate
change disclosure, we summarise our response to climate change through this Annual Report
with more details in our Delivering Our Purpose report, www.btplc.com/Purposefulbusiness
b ‘The Role of ICT in Reducing Carbon Emissions in the UK’, www.btplc.com/Purposefulbusiness/
Stories/Energyenvironment/UKcarbontargets/index.htm