Licence condition

BT's response to the Draft Direction under the provisions of licence condition 78.14 regarding the regulatory Financial Statements of British Telecommunications plc, dated 21 August 2002

Download full response in PDF format.

Download Sir Bryan Carsberg response in PDF format.

Download Annex 2 response in PDF format.

Executive Summary

Oftel needs up to date, accurate and relevant information to do its job. BT wants to work with Oftel to achieve this. The present regulatory accounting framework has evolved over a number of years and needs an overhaul, not least to address the changes involved in the implementation of the new EU Directives due to take full effect in July 2003.

Oftel's proposals are based on requiring significantly more data and documentation to be prepared for publication and audited to stricter standards - including a new "reperformance" standard, more onerous than any currently in use. We argue that this is not a proportionate response to the issue and that it would involve an excessive increase in costs. Further, some of the requirements are simply not achievable.

Oftel's desire to seek more information is in itself questionable. What we believe Oftel needs is accurate data relevant to particular requirements, that is presented clearly. We would argue that Oftel is pursuing quantity when it should be pursuing quality and clarity.

In less than a year, the current UK regulatory system will be replaced by new UK and EU laws. Oftel's proposals would produce a much more wide-ranging and complex regulatory accounting framework than the new environment will require. Indeed, under the new regime, the regulator will not have the power to demand some of the material that Oftel's proposals would require.

BT believes, too, that the Oftel proposals are at variance with the EU's objective to harmonise regulation in Member States. Oftel's current requirements are the most demanding in the EU. Only one other Member State, for example, requires publication of regulatory accounts. At a time when the EU is seeking to create a European norm, we would argue that Oftel's proposals would further worsen what is already an imbalance.

It is BT's view that Oftel's proposals are open to legal challenge. In this response, BT will seek to demonstrate that they go beyond the defined purpose of the relevant Condition (78) in BT's licence. They are not in accordance with existing obligations under EU Directives that regulation should be objectively justified and based on principles such as proportionality. And they are at variance with Oftel's duty to implement the new EU electronic communications Directives.

Neither do Oftel's proposals fall within its role in relation to the Competition Act. Indeed, by requiring the publication of detailed financial information on BT's activities in competitive markets, the proposals would have a distorting effect on competition and place BT at a significant competitive disadvantage.

There is general agreement on the need for reliable, timely regulatory accounting information. BT wants to agree a way forward with Oftel to meet the requirements of current regulation and the changes that will take effect next year.

BT welcomes comments on this submission which should be sent by e-mail to:

Tim Jones
tim.jones@bt.com