Ofcom UK Rules BT Overcharged ISPs TalkTalk and Sky for Engineer Work

Ofcom has today ordered BT to repay (with interest) TalkTalk and Sky Broadband after the telecoms regulator found that the national operator had “overcharged” both ISPs for their Special Fault Investigation (SFI) engineer service and Time Related Charges (TRC).

SFIs and TRCs are often used as part of engineering work to help find and resolve customer phone and broadband faults (usually following an ISP’s request). But Ofcom’s investigation discovered that BT’s charges for the services “were not cost oriented“, which reflected the periods between 1st April 2011 – 26th June 2014 in the TalkTalk dispute (here) and between 1st January 2009 – 26th June in the Sky dispute (here).

The regulator has now identified the amount by which BT has overcharged for each service in each year and they consider it appropriate to direct the operator to repay TalkTalk and Sky a level of repayment “reflecting the full amount of the overcharge” for each of these services, although Ofcom has left it up to the Parties involved to agree the exact levels of repayment.

Ofcom Statement

Having assessed BT’s costs and charges for TRC and SFI services and taken into account the submissions made by the Parties and interested parties in relation to both the TalkTalk Dispute and the Sky Dispute we conclude, for the reasons set out above, that BT has overcharged for certain TRCs and SFIs during the periods identified above.

We therefore conclude that BT should, in accordance with the findings in this document, repay TalkTalk and Sky the amounts overcharged with interest. We consider an appropriate repayment level to be the difference between the level of the charge and DSAC [Distributed Stand Alone Cost] for each service within the scope of the Disputes.

We have identified the amount by which BT has overcharged for each service in each year. We do not have accurate information as to the volumes of each service purchased by TalkTalk and Sky and therefore have left it to the Parties to agree the exact levels of repayment that are due, based on our calculated unit charges.

We have also left it to the Parties to agree an appropriate level of interest to be paid by BT on the repayments. Repayment in each case will be dependent on the outcome of the Ethernet appeals.

BT had originally attempted to argued that Ofcom “does not have … the power to order retroactive payments in dispute resolution proceedings. This is because the CRF does not permit the NRAs to order administrative payments as a remedy for past breaches.” BT linked this question to an on-going case over the pricing of Ethernet Partial Private Circuits (PPCs), which has been running since 2009 and isn’t due to conclude until March 2017.

However Ofcom also took account of Sky’s concern, which feared that the related case could be delayed yet again if BT attempts a further appeal. “This would in Sky’s view allow BT to continue to benefit from its breach, act as a strong disincentive on BT to resolve similar disputes in the future, risk continued distortion of competition and consumer harm in downstream retail markets, and be inconsistent with Ofcom’s statutory duties to promote competition and maximise consumer benefit,” said Sky.

The regulatory ruled that it is still “appropriate for repayments to be made following the Court of Appeal judgement in the Ethernet appeal,” but they also “acknowledge that it is important to ensure that BT does not obtain any benefit from retaining the overcharge for a further period and have included in our directions that BT should pay interest on the amount of the overcharge. The interest should be calculated on the basis that it applies from the beginning of the relevant overcharge until the date of repayment by BT.”

We have asked BT for a comment and are awaiting their reply, although they have previously spoken of being “disappointed” because “the way in which Ofcom has assessed this case differs from our understanding of that guidance.”

UPDATE 3:51pm

A BT spokesperson just told ISPreview.co.uk: “BT followed Ofcom’s guidelines to set these prices – which relate to a small subset of non-standard service products – so we’re disappointed that their assessment of this case differs from our understanding of those guidelines.”