Ofcom adds £22m interest to BT’s £94m Ethernet overpayment

Ofcom adds £22m interest to BT’s £94m Ethernet overpayment

The UK regulator, Ofcom, has told BT that it has to pay £22 million in interest payments to rival operators because it overcharged by £94 million for wholesale Ethernet payments a decade ago.

The complaints – some dating back seven years – came from five companies: Cable & Wireless Worldwide (CWW), since absorbed into Vodafone, Sky, TalkTalk, Verizon and Virgin Media.

BT said only in response to the determination: “We will now consider the judgment in detail and assess whether we appeal to the Supreme Court.”

The latest decision is part of a long-running dispute between BT, along with its Openreach last-mile division, and the five competitors. It also follows a decision in March 2017 that BT should pay a £342 million penalty over other failings in wholesale Ethernet services. 

Ofcom decided as long ago as 2012 that BT had overcharged for Ethernet services between 2006 and 2011, and its decision was upheld by the Competition Appeal Tribunal (CAT). As a result BT was ordered to repay those amounts, including interest.

The dispute moved backwards and forwards between the CAT, the Court of Appeal and Ofcom, with the CAT telling Ofcom almost three years ago that the regulator should address two final issues in dispute, including the exact interest payments due.

In Ofcom’s latest decision it says that “the correct amount of principal overcharge by BT is £94,620,000”. It has excluded excess construction charges (ECCs) of £203,000 that BT should have make for extra work.

“The interest on the corrected principal overcharge payable by BT is £22,422,000,” said Ofcom, but now assesses the amount due as £22,219,000, after ECC overpayment is removed. But BT is entitled to interest on the ECC overpayment, Ofcom adds.

The 96-page document from Ofcom excludes details of the exact payments to individual operators – presumably because they would reveal sensitive information about the size of each company’s market. 

Much of the document focuses on Ofcom’s arguments about the fair interest rates – which it sets at the Bank of England base rate for the relevant time plus 1%. That gives an actual rate that varies from 6.4% in 2008 to 2.9% in 2012.

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