Competition Commission rules on wholesale line costs from BT
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.