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Ofcom: BT can't raise wholesale prices to cover pensions

The regulator does not like the idea of reducing the telco's £9bn pension deficit by wholesale price changes, due to the uncertainty it would create
Written by David Meyer, Contributor

Ofcom does not think BT should be able to raise its wholesale prices to recoup pension costs, although the regulator has not yet made its final ruling on the matter.

On Friday, Ofcom launched a second consultation on the issue of taking BT's pension costs into account when settling regulated wholesale prices for Openreach's broadband and landline services. The first consultation, which kicked off in December last year, asked industry stakeholders whether BT's pension costs should affect the wholesale prices, and Ofcom reported back on Friday that it had "not received compelling evidence from stakeholders which would justify a change in approach".

The regulator laid out options in its second consultation for balancing BT's pension payments against the company's regulated wholesale prices, arguing that the alternative to these proposals "could lead to fluctuations in BT's wholesale prices as a result of changes to BT's pension deficit (and deficit repair payments) which would not provide certainty for stakeholders and would, potentially, lead to those prices being set at levels which do not accurately reflect the relevant underlying costs".

Ofcom said its final judgment on the issue will be published by the end of the year.

"It is right that Ofcom has considered this matter, as there is regulatory precedent from other industries for BT to be able to recover some proportion of its total pension costs through regulated charges," BT said in a statement on Friday. "There are a number of elements of this consultation that we will now review in detail and respond to in due course."

Although BT is not able to increase the wholesale price it is charging other telecoms providers for using its networks, it announced earlier this week that it was increasing the prices it charges its retail customers for many services. These rises will, for example, boost the cost of a three-minute, out-of-bundle daytime call between landlines from 2.5p to 30.1p.

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