Ofcom rules BT not able to raise wholesale prices
December 16, 2010
Ofcom has ruled against telecoms operator BT, saying that it will not be allowed to raise its wholesale prices in order to recover from its large pension deficit.
The UK telecoms firm has a 3.8 billion pound pension debt, currently, and was looking to the water, energy and postal sectors, who use wholesale prices to cover deficits, to propose a similar allowance in the telecoms industry. Ofcom, however, has ruled that the move would not be in the best interest of competition or the public.
Furthermore, Ofcom said that its ruling, which considers rival firms like TalkTalk and BSkyB as well, reflects the existing principal duty of the regulatory body, which is to uphold the the public interest and promote competition. According to Ofcom it believed it needed to foster an environment among wholesale providers and regulated firms of confidence and willingness to invest.
At present, BT is allowed to use wholesale prices to cover the costs of its pension payouts, but not to recover from a deficit. However, recent reforms to policy in the way pension payments are calculated has helped BT recoup some of its multi-billion pound deficit.
BT said that the ruling was disappointing and that it would appeal the decision. At the time, BT’s shares remained flat at 181.6 pence.
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