Ofcom Fines BT UK £95m for Overcharging on Wholesale Ethernet Services

A two year legal battle between BT and several major ISPs has finally ended with Ofcom forcing the national UK telecoms operator to pay a fine of £94,823,000 after it was found to have overcharged the broadband providers for Backhaul Extension Services (BES) between 2004/6 and 2011.

BTOpenreach states that Backhaul Extension Services are “high speed, permanently connected, point-to-point data circuits” that provide a secure link between a telephone exchange and an ISP or between an exchange and another exchange (Daisy Chain). Internet providers often used BES for connecting unbundled (LLU) exchanges with their own networks, although for obvious reasons the original product has since been replaced.

Ofcoms Statement

“We have concluded that BT has overcharged the parties a total of £94,823,000 for certain wholesale Ethernet services and that BT is required to make repayments for the full amounts by which it has overcharged them.”

The move means that TalkTalk, Virgin Media, Sky Broadband (BSkyB), Verizon UK and Cable & Wireless (CW) should be set to receive a nice repayment in the not too distant future. However BT, which not so long ago lost a related battle in the Court of Appeal (CAT), hasn’t given up just yet.

A BT Spokesperson said:

“We have provided evidence to Ofcom that shows we complied with our regulatory obligations and that we kept them informed of our pricing decisions throughout the period being disputed. The market for Ethernet services has grown strongly over the period and there is no evidence of economic harm to support Ofcom’s findings.”

BT said it was “disappointed” and refuted Ofcom’s findings. The operator said that it would now move to consider all of its options and has threatened to launch another appeal.

On the surface this may seem like a victory for Ofcom and the ISPs, yet it could be another story for consumers. BT has a nasty habit of recovering any lost monies by simply hiking prices in other areas.

Indeed excessive price increases for Phone Line Rental and Calls, which often go well above the normal level of inflation, have become an all too common occurrence and often appear to follow such rulings.

The related documentation suggests, in our own view, that any appeal by BT to the relevant competition authority would need to be lodged before 21st February 2013.