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BT
has been operating under a revised retail price control
from 1 August 2002, under which a cap of RPI minus RPI
(therefore price cannot increase) 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 from continuing activities for
the 2003 financial year. The requirement is to keep
prices unchanged for the price control year to 31 July
2003. Regulation allows any unused allowance or excess
deduction remaining at the end of the price control
year (31 July) to be carried forward. The equivalent
reduction in the previous control year was 2.50% against
the required reduction of 2.45%.
Most
of BT’s interconnect (network) charges to other
UK operators are based on long-run incremental costs.
Until 30 September 2001, there were annual reductions
in these charges based on a RPI minus 8 price cap. Since
that date, the broad structure of the interconnect (network)
services has been retained but the ‘‘X’’
within the RPI minus X price-cap formula now varies
between 7.5 and 13, this new price control runs until
2005.
The
regulatory environment in the UK has had, and is expected
to 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 comply with the regulatory regimes
in those countries.
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