Schedule 1 to the Licence shall be modified as follows:
1. [Without affecting any right or obligation acquired, accrued or incurred under Condition 24A (except Condition 24A.4) before that date,] with effect from 1 August 1997, for Condition 24A is substituted the following Condition:
"Control of General Prices
24A.1 The Licensee shall take all reasonable steps to secure that, during any Relevant Year, the amount of General Prices remains such that:
(a) if the Controlling Percentage for that Year (determined in accordance with paragraphs 24A.3 to [24A.5] and, if appropriate, adjusted in accordance with paragraphs 24A.10 and 24A.11) is zero or positive, any Percentage Change which has taken place in the aggregate of all General Prices (determined and calculated, on a weighted basis, in accordance with paragraphs 24A.6 and 24A.7) at the end of each Period does not constitute an increase by more than the Controlling Percentage; or
(b) if that Percentage is negative, there is no Percentage Change in General Prices by way of increase and, before the end of that Year, there is such a Change by way of reduction of not less than that Percentage.
24A.1A Where, for the purpose of complying with this Condition, the Licensee is required [to reduce] its General Prices in any Relevant Year the Licensee shall take all reasonable steps to ensure that the combined effect on accrued income of the Licensee of all individual changes in General Prices shall be not [less] than that which would have been produced had [all of] those changes been made at exactly the same time and no later than on [1 November] in that Year, and accordingly [1 November] in that Year shall be the latest weighted average date (within the meaning of paragraph 24A.1B below) in that Year for the purposes of the making of reductions in General Prices. For the purpose of establishing whether or not the Licensee has complied with the obligation imposed on it by this paragraph 24A.1A a calculation shall be carried out by employing the formula set out in paragraph 24A.1B below.
24A.1B The formula mentioned in paragraph 24A.1A above is -
Where:
WAD = the weighted average date
Ri = the revenue change associated with the ith price change made in the Relevant Year
RC = the total revenue change required in the Relevant Year to achieve compliance with paragraph 24A.1
Di = the date on which the ith price change takes effect expressed as a numeric entity on a scale ranging from 1 August = -92 to 31 July = 272, except in a leap year when 31 July = 273.
24A.1C To the extent that the Licensee has made, during any Relevant Year, any [reductions] in General Prices beyond those necessary for compliance with Condition 24A, those [reductions] shall be relevant in applying paragraph 24A.1A and paragraph 24A.1B to price changes in the Relevant Year immediately following the Relevant Year in which those [reductions] were made. In applying the formula referred to in paragraph 24A.1B to such changes, subject to paragraph 24A.1D, that formula shall apply with the meaning of Di amended as follows:
Di = the date on which the ith price change takes effect expressed as a numeric entity on a scale ranging from
1 August = -457 to 31 July = -93, except in a leap year, when 1 August = -458.
24A.1D If, in relation to any [reduction] in General Prices to which paragraph 24A.1C applies, the Director is of the opinion that Di should not equal the date on which that price change takes effect as described in that paragraph, but should equal 1 August in the immediately following Relevant Year (expressed as a numeric entity where 1 August = -92), he shall so notify the Licensee as soon as practicable after receipt by the Director of notification by the Licensee of the price change and the Director shall include in his notification the reasons for his opinion. Where the Director has given such a notification the formula referred to in paragraph 24A.1B shall apply with Di = -92 to any [reduction] in General Prices to which that notification applies.
24A.1E Where the Licensee decides that a charge (or group of charges) for any of the things mentioned in the definition of General Prices is to be offered only:
(a) as part of a Standard Price in combination with another such charge (or group of charges) or with an additional periodic fee; and
(b) in two or more such Standard Price combinations,
the Licensee shall nominate one charge (or group of charges) in such Standard Price combinations (including the fee, if any) to be the General Price for the purposes of this Condition (the "Reference Price"). The Licensee may nominate only one Reference Price (or group of Reference Prices) to be the General Price for the relevant business and residential calls, one for the use and Ordinary Maintenance of residential Exchange Lines and one for the use and Ordinary Maintenance of business Exchange Lines. The Licensee shall offer the Reference Price for calls in combination with the Reference Price for the use and Ordinary Maintainance of business Exchange Lines and in combination with the Reference Price for the use and Ordinary Maintenance of residential Exchange Lines.
24A.2 Where, notwithstanding the obligation imposed on the Licensee by paragraph 24A.1 (or paragraph 24A.1 of Condition 24A having effect on 31 July 1997) there has taken place a change in General Prices (or General Prices as defined in that Condition 24A) of a kind not permitted under paragraph 24A.1(a) or (b) (or paragraph 24A.1(a) or (b) of Condition 24A having effect on 31 July 1997), the Licensee shall make adjustments in General Prices sufficient to satisfy the Director that the matter has been remedied. Such adjustments shall not be relevant for the purposes of establishing compliance with Condition 24A.1 in the following Relevant Year.
24A.2A Where notwithstanding the obligation imposed on the Licensee by paragraph 24A.1A (or paragraph 24A.1A of Condition 24A having effect on 31 July 1997) the effect on accrued income of the changes in General Prices (or General Prices as defined in that Condition 24A) fails, in the opinion of the Director, to meet the requirements of that paragraph, the Licensee shall make such further reductions in General Prices as may be reasonably required to satisfy the Director that the matter has been remedied.
24A.3 Subject to paragraphs 24A.4, [24A.5], 24A.10 and 24A.11 the Controlling Percentage in relation to any Relevant Year is the amount of the change in the Retail Prices Index in the period of 12 months ending on 30 June immediately before the beginning of that Year, expressed as a percentage (rounded to two decimal places) of that Index as at the beginning of that period ("RPI"), reduced by [ ].
24A.4 If the difference between General Prices charged at the beginning and at the end of any Relevant Year is such that the relevant Percentage Change in General Prices is less (in the case of a permitted increase), or greater (in the case of a required reduction), than the change permitted, or required, in accordance with paragraph 24A.1, than the Controlling Percentage for the following Relevant Year shall be determined in accordance with paragraph 24A.3 but, [subject to paragraph 24A.5,] increased by the amount of such deficiency or excess (as the case may be).
[Draft provision to deal with any failure of BT to meet the cap in the last Relevant Year?]
[24A.5 The Controlling Percentage for the fourth Relevant Year shall only be increased by virtue of paragraph 24A.4 to the extent that such an increase would have been permitted if that paragraph had not applied to increase the Controlling Percentage for the second such Year.]
24A.6 The amount of a Percentage Change in General Prices which has taken place at any time during a Relevant Year is determined by taking the amount of the change in each General Price which has taken place between the beginning of the Relevant Year and that time, multiplying that amount by the amount of the revenue reasonably believed by the Licensee to have accrued during the Relevant Financial Year in respect of the service for which that Price is charged, dividing in each case the amounts so produced by the Price charged at the beginning of the Relevant Year for the service to which each such amount relates, and taking the aggregate of the results, expressed as a percentage of all the revenue reasonably believed to have accrued for such services during the Relevant Financial Year.
24A.7 Notwithstanding paragraph 24A.6, if the Licensee has notified the Director in writing both of its intention to increase during a Period one or more General Prices and of its intention within three months of the first such increase to reduce one or more General Prices then, unless:
(a) the Director dissents within 28 days of such notification on the ground that undue advantage is being taken of this paragraph; or
(b) the reduction as so notified is not introduced,
for the purposes of paragraph 24A.6, when determining the amount of a Percentage Change which has taken place at the end of the said Period and each subsequent Period, it shall be assumed that any such reduction had taken place during the first mentioned Period.
24A.8 Where the Licensee makes a material change (other than to the amount of a General Price) to any service for which a General Price is charged or to the date on which its financial year ends or there is a material change in the basis of the Retail Prices Index, this Condition shall have effect subject to such reasonable adjustment to take account of the change as the Director may, after consultation with the Licensee, determine to be appropriate in the circumstances; and for the purposes of this paragraph a material change to any service includes the introduction of a new service wholly or substantially in substitution for that existing service.
24A.9 Subject to this paragraph, this Condition shall not have effect in relation to a new service, the charges for which would otherwise be General Prices, other than a new service to which paragraph 24A.8 applies. In relation to a new service other than one to which paragraph 24A.8 applies, the Director may, after consultation with the Licensee, in any Relevant Year during which it is first possible, from the Relevant Financial Year accounts, to ascertain 12 months' actual revenue in respect of that service accrued in relation to that Relevant Financial Year, determine that the charges for that service shall in the subsequent year be General Prices and this Condition shall, from that subsequent Relevant Year, apply accordingly.
24A.10 If the Licensee imposes a specific charge or an increased charge in relation to any goods or service which up to the time when the charge or increased charge is first imposed had been provided without charge or at a lower charge and the Director determines, after consultation with the Licensee, that some or all the costs properly attributable to that service had previously been attributed to services to which General Prices apply and that it would be proper in the circumstances for the newly introduced or increased charge to be controlled, that charge shall, unless the Director determines otherwise, be a General Price and this Condition shall have effect subject to the following provisions:
(a) the Licensee shall produce a forecast of the revenue expected to accrue as a result of the charge or increased charge for the goods or service over a period of twelve months from the date of introduction or increase of the charge;
(b) the forecast shall be expressed as a percentage of the total amount of revenue reasonably believed by the Licensee to have accrued in respect of General Prices during the Relevant Financial Year which relates to the Relevant year during which the charge is introduced or increased;
(c) the Controlling Percentage for that Relevant Year shall be reduced by that percentage;
(d) an adjustment shall be made to the Controlling Percentage for that Relevant Year in respect of which it is first possible, from the Relevant Financial Year accounts, to take into account a comparison between the first 12 months' actual accrued revenue from the charge and the forecast referred to in sub-paragraph (a), whereby the Controlling Percentage for that Relevant Year shall be increased or reduced (as the case may be) by the difference between the forecast amount referred to in sub-paragraph (a) and the amount of actual accrued revenue (the difference to be expressed as a percentage of the total amount of revenue accrued in respect of General Prices during the Relevant Financial Year which relates to that Relevant Year);
(e) further adjustments shall be made to the Controlling Percentage referred to in sub-paragraph (d) and adjusted as specified therein:
(i) where there is any difference between the forecast referred to in sub-paragraph (a) and the actual accrued revenue referred to in sub-paragraph (d), in order to compensate for the extent to which, by virtue of that difference, General Prices in previous Relevant Years have been too high or too low (as the case may be), and
(ii) where there has been any variation in the charge for the service between the Relevant Year referred to in sub-paragraph (b) and the Relevant Year referred to in sub-paragraph (d) which the Director, after consultation with the Licensee, determines should be taken into account for the purposes of calculating the Controlling Percentage; and
(f) The adjustments referred to in sub-paragraphs (d) and (e) shall be made in the precise manner which the Director determines to be appropriate in the circumstances, after consultation with the Licensee.
24A.11 If the charge or increased charge for any goods or service covered by paragraph 24A.10 is altered following its introduction but before the adjustment referred to in paragraph 24A.10 (d) can be made then, in respect of that charge, in calculating the amount of a Percentage Change in General Prices in paragraph 24A.6, the forecast set out in paragraph 24A.10 (a) shall be substituted for the amount referred to in paragraph 24A.12(a).
24A.12 The Licensee shall no later than the time at which it notifies or should have notified the Director under Condition 16 of any amendment of any charge which is a General Price inform the Director in writing of:
(a) the amount of revenue which the Licensee reasonably believes to have accrued in the Relevant Financial Year for each service in respect of which a General Price is charged; and
(b) the amount of each General Price at the beginning of the Relevant Year.
24A.13 Without prejudice to its obligations under Condition 16 in relation to General Prices, the Licensee shall as soon as practicable after the end of each Period in which there has been a change in a General Price inform the Director in writing of:
(a) the changes made or new charges imposed in relation to any General Price during the Period specifying its nature and amount and the service for which the Price is charged; and
(b) the amount of the Percentage Change in General Prices which has taken place during the Period and whether by way of increase or reduction.
24A.15 In this Condition:
"Discounted General Prices" means prices which are charged as part of a Package or as part of a Standard Price combination of the type described in Condition 24C.2(b) (not including Reference Prices) and which, if they were not so charged, would be General Prices;
"General Prices" means (being in all cases the Licensee's Standard Prices):
(a) all [periodic] charges for the use and Ordinary Maintenance of an Exchange Line;
(b) all charges for the connection or taking over of an Exchange Line; and
(c) all charges for the conveyance by means of such Exchange Lines of voice telephony Messages from a place within the Licensed Area to any other place (whether or not within the Licensed Area), excluding charges, whether paid in cash or by credit card or debit card or token or otherwise, in respect of calls from Public Call Boxes, and calls from Private Call Boxes where the charge to the renter is based on charges for calls from Public Call Boxes published by the Licensee in accordance with Condition 16, and transferred charges in respect of calls from Call Boxes,
other than:
(i) charges payable by Operators;
(ii) charges for Private Circuits or International Private Circuits (as defined in Condition 24B);
(iii) charges for special, priority or emergency maintenance or for Fault Repair Services (as defined in Condition 10.6);
(iv) charges for the conveyance of voice telephony Messages in relation to any services provided by means of the Licensee's Applicable Systems which form part of its Supplemental Services Business;
(v) charges for the conveyance of voice telephony Messages which are to be conveyed to customers of an Operator which is not a Fixed Link Operator;
(vi) charges for Specially Tariffed Voice Services;
(vii) charges for directory information services;
(viii) charges for the facility of transferring, with assistance from a human operator, charges for the conveyance of the voice telephony Messages referred to in sub-paragraph (c);
[(ix) Virtual Private Networks,]
(x) charges for any service of a kind provided under Condition 12,
and each discrete charge of any such description shall be treated as a separate General Price;
"Fixed Link Operator" means a public telecommunications operator which runs a public telecommunication system and whose Licence does not authorise the provision of a Land Mobile Radio Service (as defined in Condition 18);
"Operator" has the meaning given to it in Condition 16B;
"Ordinary Maintenance" means maintenance which is part of the service provided by the Licensee in consideration of the [quarterly] Exchange Line rental and includes normal fault repair, as defined in the Licensee's standard terms and conditions;
"Packages" has the meaning given to it in Condition 24C.8;
"Percentage Change" is defined in paragraph 24A.6;
"Period" means a calendar month or such longer period as the Director may determine;
"RPI" is defined in paragraph 24A.3;
"Relevant Year" means any of the two periods of 12 months beginning on 1 August starting with 1 August 1997 and ending on 31 July [2001];
"the Relevant Financial Year" means in relation to a Relevant Year the financial year of the Licensee ending last before the beginning of the Relevant Year, being a financial year in respect of which annual accounts have been prepared and audited in accordance with the requirements of the Companies Act 1985;
"Retail Prices Index" means the index of retail prices compiled by Her Majesty's Government in respect of all items;
"Specially Tariffed Voice Services" mean calls to access premium rate services, local call services, freephone services, national call services and other specially charged services;
"Standard Price" means any price charged or offered by the Licensee otherwise than in relation to a Package;
["Virtual Private Network" means an assembly of transmission, switching and network control apparatus and functions, embedded within the Applicable Systems, and used to provide services at least equivalent to those capable of being provided by a network of Private Circuits;]
Any reference to "service" which is not part of the expression "goods or service" shall be taken to include a reference to goods for the purposes of paragraphs 24A.10 and 24A.11.
References to accrued revenue are references to the revenue attributable to General Prices but with the addition of the revenue attributable to Discounted General Prices where the revenue is grossed up so as to leave the discount out of account (or grossed down where the revenue is greater than that attributable to the relevant General Price), and cognate expressions shall be construed accordingly.
24A.16 This Condition shall not apply to such extent as the Director may determine upon request by the Licensee."
2. [Without affecting any right or obligation acquired, accrued or incurred under Condition 24B (except Condition 24B.4) before that date,] with effect from 1 August 1997, for Condition 24B is substituted the following Condition:
"Control of Private Circuit Prices
24B.1 The provisions of Condition 24A (except Conditions 24A.1A to 24A.1E) shall apply to:
(a) the aggregate of Private Circuit Prices for analogue Private Circuits; and
(b) the aggregate of Private Circuit Prices for digital Private Circuits of a capacity less than or equal to 64 kbit/s,
respectively as though each such category of Prices are General Prices except that the Controlling Percentage applicable to each category shall be RPI.
24B.2 Notwithstanding paragraph 24B.1 the Licensee shall take all reasonable steps to secure that no discrete Private Circuit Price in the categories set out in paragraphs 24B.1(a) and 24B.1(b) increases during any Relevant Year by more than:
(a) in the case of analogue Private Circuits, RPI plus 2; and
(b) in the case of digital Private Circuits of a capacity less than or equal to 64 kbit/s, RPI plus 1.
24B.3 For the purposes of this Condition, references to accrued revenue in Condition 24A are references to the amount of revenue which would be produced before the application of any discounts to the relevant Private Circuit Prices.
[The timing constraint Conditions 24A.1A to 24A.1D may require to be modified and inserted here to allow for the weighted calculation of any increases in Prices.]
24B.4 In this Condition:
"International Private Circuit" means a communication facility:
(a) which is provided by means of both a telecommunication system comprised in the Applicable Systems and a telecommunication system in a country or territory other than the United Kingdom;
(b) made available to a person for the conveyance of Messages between points, all of which are points of connection between telecommunication systems referred to in sub-paragraph (a) and other telecommunication systems;
(c) which is such that all of the Messages transmitted at any of the points mentioned in sub-paragraph (b) are received at every other such point; and
(d) which is such that the points mentioned in sub-paragraph (b) are fixed by the way in which the facility is installed and cannot be selected by persons or apparatus sending Messages by means of that facility;
["Offshore Private Circuit" means a communication system which is:
(a) provided by means of both a telecommunication system comprised in the Applicable Systems and a telecommunication system which is on any installation which is maintained in waters to which the Mineral Workings (Offshore Installations) Act 1971 applies;
(b) made available to a person for the conveyance of Messages between points, all of which are points of connection between a public telecommunication system and a telecommunication system which is not a public telecommunication system;
(c) which is such that all Messages transmitted at any of the points mentioned in sub-paragraph (b) above are received at every other such point; and
(d) which is such that the points mentioned in sub-paragraph (b) above are fixed by the way in which the facility is installed and cannot otherwise by selected by persons or apparatus sending Messages by means of that facility;]
"Ordinary Maintenance" means maintenance which is part of the service provided by the Licensee in consideration of the [periodic] Private Circuit charge for any particular category of Private Circuit and includes normal fault repair, as defined in the Licensee's standard terms and conditions;
"Private Circuit" has the meaning given to it in paragraph 1 of Part 1 of Schedule 1;
"Private Circuit Prices" means all [periodic] [and other] charges for the use and Ordinary Maintenance of terrestrial Private Circuits which are wholly situated within the Licensed Area other than:
(a) parts of International Private Circuits provided by means of the Applicable Systems; or
[(b) Offshore Private Circuits],
and each discrete charge of any such description shall be treated as a separate Private Circuit Price.
3. With effect from 1 August 1997, in Condition 24C.8 (Treatment of Certain Packages and Standard Prices for Price Control Purposes):
(a) in the definition of "Relevant Year", for the words "the period 1 August 1992 to 31 July 1993" shall be substituted the words "the year beginning on 1 August 1996 and ending on 31 July 1997"; and
(b) at the end of the definition of "Packages" shall be added the words "or Private Circuit Prices (as defined in Condition 24B)".
[Need to amend definition of "Controlled Revenue"?]
[Draft provision to deal with any failure of BT to meet the Discount Yield in the last Relevant Year?]
4. With effect from 1 August 1997:
(a) in Condition 24D.2A (Residential Low User Scheme), for the words "Condition 24A.14" shall be substituted the words "Condition 24A.3"; and
(b) in Condition 26.1 (Charges for the Installation of Certain Exchange Lines), the words "until 1 August 1997" shall be deleted.
5. [To be drafted: consequential amendments to the definition of "Network Cost" (re an Exchange Line Price) in Condition 24F (Further Provisions Relating to General Prices), in particular to deal with the change from fully allocated to long-run incremental cost.]
