UK Competition Commission Stop BT Linking Broadband to Pension Payments

The Competition Commission (CC) has quietly ruled in Ofcom’s favour by preventing BT from including wholesale broadband charges into its deficit repair payments, which could have forced rival ISPs to pay tens of millions of pounds more in order to help pay down the operators £9bn pension deficit.

Deficit repair payments represent the cash amounts that BT pays to reduce the deficit in the company’s pension fund. So far Ofcom has repeatedly ruled that neither deficit repair payments, nor pension “holidays“, should be taken into account when Ofcom sets BT’s regulated charges (2010 Pension Ruling).

According to the FT, BT last year challenged Ofcom’s ruling and ultimately managed to secure the Competition Commission’s interest. But it’s understood that both Sky Broadband and TalkTalk, which would have been adversely affected by any decision that favoured BT, intervened with the support of an independent pensions consultant, John Ralfe, whom was allegedly able to show that the pension deficit occurred as a result of BT’s own commercial decisions.

A BT Spokesperson said:

“Although the Competition Commission agreed with BT on a number of points, it ultimately concluded that Ofcom had not erred in how it applied its regulatory judgment.”

Ofcom said at the end of 2010 that predictability and consistency were important for creating an environment where BT and its wholesale customers could invest, which would have been less attractive had the regulator forced rivals to shoulder more of BT’s own pension deficit costs. Meanwhile BT continues to pay down its deficit, which was partly caused by many more employees taking money out than paying in.

Ofcom’s 2010 Pension Review
http://media.ofcom.org.uk/2010/12/15/ofcom-statement-on-bt-pensions/