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Competition Commission rules on wholesale line costs from BT
Monday 25 June 2012 21:29:50 by Andrew Ferguson

BT has had its attempts to allow the costs of lowering its pension deficit to be included in the Ofcom price regulation calculations rejected by the Competition Commission. Ofcom has been working to a formula that is seeing the cost of WLR, SMPF and MPF rentals decrease year on year, with the BT Group challenging the calculations as no account was made of the Groups desire to decrease its pension deficit.

The pension deficit currently sits at around £3bn, after significant reductions in 2008-2009 when the deficit stood at £9bn. The large deficit arising from the collapse in pension fund performance, and the downsizing of the workforce putting pressure on the fund as has been the case with many other large firms.

Earlier in 2012, there was a round of price reductions at the wholesale level, and while Ofcom claimed savings for consumers, a good few providers are increasing line rental due to other cost pressures, including the simple fact that more people are switching to unlimited calls packages.

One negative aspect of the pressure from Ofcom on BT and in particular Openreach to decrease the monthly line rental fees, is that any other work like repair visits are under pressure to generate some revenue reflected in the rise of people charged for visits, or faults not being investigated until a total failure of the broadband and voice service.

How the UK approaches regulation is difficult, on the one hand BT is the only local loop presence in great swathes of the country, with competitors looking to exploit this copper loop for minimum investment. The other aspect is that regulation needs to be encouraging altnet's that will reduce the dominance of the BT Group in the 52% of the UK where Virgin Media is not present.

Comments

Posted by Kr1s69 over 4 years ago
Ofcom should stop trying to squeeze every last penny out of the openreach charge and instead look at the monthly line rental charges of the big providers. Competition doesn't seem to be working in this area, as all prices are going up.
Posted by prlzx over 4 years ago
"... any other work like repair visits are under pressure to generate some revenue reflected in the rise of people charged for visits ..."

If OpenReach think repairs should generate revenue that is wrong headed. Repairs should always start with the assumption that is is fixing something the customer has already paid for this month and that needs to be working.

If a fault is suspected to be in a customer's wiring the onus is on the supplier to prove this before charging extra for the service of finding or fixing this.
Posted by prlzx over 4 years ago
OpenReach already keeps the end user at arms length if it refuses to communicate except via the ISP and the illusion of the whole service coming from the ISP does more harm than good.

I think end users are capable of understanding their ADSL is supplied by a combination of an OpenReach local line and ISP internet connectivity much as they can understand changing electricity billing company does not re-wire the street connection to the house.
Posted by prlzx over 4 years ago
Finally even the notion of a fault with your own service provision as potential income stream is automatically a conflict of interest as there would be a financial incentive to create faults then "fix" them.
Posted by prlzx over 4 years ago
As a thought experiment, I would be happy to pay OpenReach a set rental for physical presence of an intact local line of known quality (not calls nor data) them the option to buy voice service and data service from whoever.
From this scenario, suggesting the voice service be then made both compulsory and have a "default" supplier (BT) would be an illogical step.

Current arrangements then appear that both I and my ISP rent the same local line, effectively paying twice.
Posted by otester over 4 years ago
You voted for it, you got it.

Artificial competition at the expense of infrastructure investment.
Posted by mervl over 4 years ago
It might be instructive to compare the regulators approach to telecoms with gas: in the latter the regulator has forced a national infrastructure renewal programme AND ratcheted down its costs. So you can have both, it's a question of will. Or you can take a quite reasonable view that BT are doing a good enough job as it is.
Posted by mervl over 4 years ago
The problem with competition is that long term planning isn't part of the picture, so someone else has to force it, or you ignore it and mend and make do. But long term planning takes time to implement, and we consumers are too impatient.
Posted by Kushan over 4 years ago
"You voted for it, you got it.

Artificial competition at the expense of infrastructure investment. "

Yeahhh, because BT were going to investigate loads into the infrastructure if they didn't have to deal with that pesky "Competition".
Posted by throwaway over 4 years ago
I second what others have said about BT seeing repair as an additional revenue generator - we already pay line rental for a line and maintence, because a faulty line can't be used for service provision otherwise what is the line rental for? Right, to have a working line! So why are we paying again for maintence? Such perversed incentive since BT owns the loop.
Posted by themanstan over 4 years ago
Then one would expect OFCOM to prevent OR from charging for repairs, because they are unjustifiable costs to their wholesale clients.
Clearly, OFCOM fluffed the whole set up by reducing line rental to the point that it is not sufficient for on going maintenance and repairs.
Possibly down to setting themselves artificial goals, such as low line rental costs at the expense of other considerations... low line rental = they achieve goal and get bonus. Repair costs not a goal = not their problem.
Posted by andrew (Favicon staff member) over 4 years ago
It is not so much as a fault in the outside network being charged for, it is the rise in instances of no fault found charges, when user has intermittent issue etc
Posted by siddadav01 over 4 years ago
You cannot expect Openreach to keep the cost of repairing faults down, when the fault was not caused by them. Openreach only charge for the visit when the fault was caused by the enduser e.g. faulty handset, in a day when fuel and other costs are increasing it is only right that openreach increase their charges to cover this.
Posted by scotiaman over 4 years ago
I see nothing has changed - it's still the same old "telco providers" harping on about how much BT charges. Why don't they use some of the money they fleece of their customers for a poor service and use it to provide their own network instead of being leeches on BT's back! Even Virgin Media aren't keen on expanding their network, they would rather spend money annoying non-customers of theirs with countless leaflets !
Posted by pghuke over 4 years ago
Why cant Virgin be forced to open up their network, then we might see what the true costs of the local loop are.
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