Business Connectivity Market Review

Ofcom has published a statement in response to BT’s announcement on revised methodology for its 2007/ 08 Regulatory Financial Statements:

BT is required to publish an annual set of Regulatory Financial Statements (RFSs) in relation to markets in which it has been found to have Significant Market Power. BT has advised Ofcom that it has identified issues with the way it has reported volumes and revenues of partial private circuits (or leased lines) in their RFSs. Specifically, BT has said it is necessary to revise the methodology it uses for estimating turnover for partial private circuits. This means that BT will now publish its RFSs in the autumn. Any revisions made in this area will not impact on the BT Group’s statutory financial results.

The data contained in BT’s RFSs are a key input to Ofcom’s analysis as part of our decisions on prices for products including leased lines. Therefore, the changes will have an impact on Ofcom’s new charge controls for these services which were planned for implementation in September this year. Ofcom now aims to publish this consultation document in late autumn.

We are discussing with BT how the existing leased lines charge controls can be temporarily extended to deal with the delay to the implementation of new controls. We are also discussing how the new controls are then backdated to cover the period of this temporary extension, although we note that BT has accepted that any new controls would have effect from 1 October.

Publication of Ofcom’s second consultation document on the New Pricing Framework for Openreach will now be after BT has published their 2008 Regulatory Financial Statements.