Reporting framework

Changes to BT's regulatory financial reporting framework

BT's response to Ofcom’s consultation document published 26 May 2005

Issued June 23, 2005

Executive Summary

BT welcomes Ofcom’s proposals. They result from much constructive work that has taken place between BT and Ofcom in implementing the requirements of the Statement of 22 July 2004 on “The regulatory financial reporting obligations on BT and Kingston Communications” (the “July Statement”).

We believe that the July Statement does more than enough to satisfy the ex ante obligations required by the EC Communications Directives. We also share Ofcom’s belief that “it would be infeasible and disproportionate to attempt to revise the 2004 Statement such that financial information received was capable of dealing with any [ex post] investigation or policy review” (consultation document para. 1.6). Rather, the challenge is to make regulatory financial information more relevant and more accessible for the purposes of Ofcom’s operational needs (eg, the investigations and policy reviews noted above) and there may be further scope for amendment to the
requirements of the July Statement.

The provision by BT to Ofcom of a new layer of regulatory financial reporting would help to meet this challenge by making more detailed information routinely available, and by making it easier for Ofcom to analyse that information. It would provide much greater visibility of cost attribution paths, so that Ofcom could better understand how costs flow through the cost attribution system and why they flow in that way. It could serve as a way to get unmediated validation of any other information that may be required from BT to facilitate any investigation or policy review.

Whilst BT believes that Ofcom is the prime user of its regulatory financial information, we recognise that the industry and the public more generally also has an interest. The new layer of information would be available only to Ofcom and therefore would not make BT’s regulatory financial information any more transparent to those other stakeholders.

In order to build confidence in the industry in the very detailed bottom-up costing processes followed by BT in preparing its regulatory financial statements, BT is prepared to host workshops at which we would seek to make these processes more transparent. These would increase the awareness and understanding of the regulatory accounting process. Whilst we would not expect all participants to agree
with every aspect of that process, such workshops could at least enable parties interested in any Ofcom investigation to respond to any consultation from a better informed perspective.

Together, we believe these initiatives offer real scope for a change in the focus of regulatory financial reporting, to make it more concise and relevant and thereby allow resources to be used more effectively by BT, Ofcom and the industry. In the meantime, we support the amendments proposed in this current consultation.

Download response as PDF document

Comments should be addressed to Musharaf Ahmad at musharaf.ahmad@bt.com