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BT has been operating under
the existing retail price control from 1 August 1997, under which a cap of RPI
minus 4.5 applies to the services used by the lowest 80% of BT’s residential
customers by bill size. This retail price control is estimated to have covered
services representing about 13% of the group’s turnover for the 2001 financial
year. In the current price control year to 31 July 2001, BT has already reduced
its prices by 1.20%, which is more than the required reduction of 1.09%. The
equivalent reduction in the previous control year was 3.24%.
Most of BT’s interconnect
(network) charges to other UK operators are based on long-run incremental
costs. There are annual reductions in these charges based on a RPI minus 8
price cap. The current network charge control regime operates until 30
September 2001. After this time it has been proposed that the broad structure
of the interconnect (network) services be retained for another four years but
that the “X” within the RPI minus X price-cap formula be varied between 7.5 and
13.
The Competition Commission
(CC) required BT to reduce charges from a BT line to mobile phones by around
25% in the 1999 financial year and an effective annual RPI minus 7 reduction
for the 2000 and 2001 financial years.
On 11 May 2001, the Office
of Fair Trading issued a statement outlining the decision of the Secretary of
State for Trade and Industry on the Office of Fair Trading’s review of Yell’s
Yellow Pages business. The statement requires Yell to cap the fees charged for
advertising in its UK Yellow Pages directories at RPI minus 6 for four years
from January 2002. The current price cap of RPI minus 2 has been in force since
1996.
The regulatory environment
in the UK has had, and will continue to have, a significant adverse impact on
the group’s turnover and operating profit. As the group has extended its
activities to other countries, BT is required to consider the regulatory
regimes in those countries. |
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