short lines
OFCOM determination means UK Communications Providers
entitled to 40% refund from BT
October 2009
As a result of a determination made by OFCOM on 15th October 2009[i] it is now clear that any communications provider which has, over the past 4 or 5 years, bought certain types of services known as “Partial Private Circuits” (PPCs) from BT is likely to be entitled to a refund of around 40%.
PPCs are the wholesale inputs used to create leased lines, which are fixed permanent communications connections providing capacity between two points. There are two main parts to PPCs – terminating segments and trunk segments. PPCs are purchased as either a terminating segment or as a terminating segment combined with a trunk segment. Communications Providers (CPs) are then able to combine PPCs with their own networks to offer leased line services to their own customers (usually medium and large sized enterprises).
The dispute was brought by Cable & Wireless, THUS, Global Crossing, Verizon, Virgin Media and COLT (the “Claimants”) last year . They claimed that BT’s prices for PPCs were so high as to amount to a breach by BT of its obligation to offer these services at a price reasonably derived from the cost of provision.
Having looked into the matter OFCOM has now determined that BT was overcharging for 2Mbit/s PPC trunk services in the period between April 2005 and September 2008. The total amount of BT’s charges to any CP for this type of PPC during this period was £121m, and OFCOM has determined that around 40% of this charge, more than £50m, represented an overcharge[ii]. Of that £50m, OFCOM has ordered around £40m to be repaid to the Claimants. This means that there is another £10m or so available to other CPs who bought these PPC services from BT over that period.
Whilst OFCOM has determined that BT did not overcharge for most other types of PPC services they have expressly stated that there are “concerns” that BT may also have overcharged for certain 140/155Mbit/s terminating segment services and for 34/45Mbit/s trunk services[iii]. OFCOM have stated that they will look into this specific question further and publish a determination shortly though it seems quite probable that a further determination that BT should repay money will follow.
Conclusion
As a result of this determination any communication provider which has purchased PPCs from BT over the past 4 or 5 years would be well advised to look into whether it may be entitled to a refund from BT. The amount of this refund is likely to be significant.
[i]See http://www.ofcom.org.uk/consult/condocs/draft_deter_ppc/PPC_final_determination.pdf
[ii]See para 7.168
[iii]Para 7.30
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