Ofcom today confirmed its decision not to change the way it treats BT's pension costs when setting regulated wholesale charges for telecoms services, including broadband and landlines. This follows an initial consultation published in December last year and a further consultation in July this year.
Ofcom sets the prices that Openreach, BT's wholesale access division, can charge other communications providers to deliver services to consumers. Regulatory controls also apply to certain other services provided by BT Wholesale such as leased lines*.
BT's pension deficit contributions have increased in recent years and Ofcom has considered whether there are good reasons for changing the way that it currently treats BT's pension costs. At present Ofcom allows for ongoing pension service costs, as reported in BT's statutory accounts, but excludes payments made by BT in respect of any pension fund deficit.
After considering the evidence, including responses from stakeholders, Ofcom has decided to maintain its current approach.
The pension guidelines that Ofcom has published today will also help ensure that the treatment of BT's pension costs is consistent with setting regulated charges efficiently. The guidelines will maintain a consistent regulatory approach.
Ofcom believes this is important for creating an environment in which regulated firms, such as BT, and their wholesale customers are willing and able to invest.
The guidelines meet Ofcom's principal duty to further the interests of citizens and consumers by promoting competition.
Ofcom has set out three decisions in relation to BT's pension costs:
The alternative - including deficit repair payments in regulated prices - could potentially, lead to those prices being set at levels which do not accurately reflect the relevant underlying costs. It would also be inconsistent with the basis on which BT's prices have been regulated since the company's privatisation.
NOTES FOR EDITORS