Ofcom Attempt to Finally Resolve BT Ethernet Overcharging Dispute

After several years and various legal challenges the UK telecoms regulator has proposed what could be the final resolution to a long running dispute relating to BT’s overcharging for business Ethernet services, which initially required them to repay £94.8m to Sky (Sky Broadband), TalkTalk, Virgin Media, Cable & Wireless Worldwide (Vodafone) and Verizon.

The £94,823,000 repayment order for overcharging on Backhaul Extension Services (described by BT as “high speed, permanently connected, point-to-point data circuits“) was initially handed down, following a two year battle, by Ofcom in December 2012 (here).

Sadly nobody seemed happy with the conclusion and three appeals were lodged with the Competition Appeal Tribunal (CAT), firstly by BT who said there was “no evidence of economic harm to support Ofcom’s findings“, then by Sky and TalkTalk (jointly) and finally one from CWW, Virgin and Verizon (jointly).

Fast forward to August 2014 and the CAT ruled to uphold Ofcom’s original decision, albeit with the caveats that the regulator should have, a) made an adjustment to BT’s rental costs in 2009/10 in respect of the exclusion of excess construction charges (ECCs); and b) ordered BT to pay interest on the repayments. Today Ofcom has proposed their final solution to the long running dispute.

Ofcom’s Provisional Conclusions on the Remitted Matters

1.7 Our provisional conclusions are that:

1.7.1 Adjusting for the ECC overpayment, the correct amount of principal overcharge by BT is £94,620,000.

1.7.2 The corrected figure above takes account of the repayment that BT is entitled to in respect of the exclusion of ECCs of £203,000.

1.7.3 The interest on the corrected principal overcharge payable by BT is £22,422,000.

1.7.4 The net amount which BT should repay to the Disputing Parties (i.e. the interest less the ECCs adjustment) is £22,219,000; and

1.7.5 From 29 December 2012, BT should pay interest on the net amount due to the Disputing Parties at a rate of BoE+1%.

1.8 From 29 December 2012, BT is entitled to interest on the ECC overpayment. By calculating a net amount due to the Disputing Parties, and allowing for interest on that net amount only, BT’s entitlement has been given effect to in these Provisional Conclusions.

Ofcom has thrown their provisional proposal open for comment until 5pm on 6th July 2015.