Closed
British Telecommunications plc (BT)
15 October 2020
29 November 2021
This investigation considered whether BT is complying with its obligations to provide a broadband universal service in accordance with the regulatory conditions imposed on 6 June 2019.
Universal Service Conditions for BT
We have today closed our investigation of BT’s compliance with its obligations to provide a broadband universal service in accordance with relevant regulatory conditions. This follows our announcement of July 2021 that we had suspended the investigation as BT had offered assurances in connection with the matters under investigation, and the conclusion of Ofcom’s consultation on proposed changes to the relevant regulatory conditions.
As a result of its assurances to Ofcom, BT has now changed its approach to calculating excess costs where the excess costs associated with a given connection in a cluster of premises do not exceed £5,000 (excluding VAT). In particular, BT will now provide connections to eligible customers who agree to pay their share of any relevant excess costs. Previously BT would only provide such a connection where customers in a given cluster collectively paid all excess costs. We are satisfied that BT has fully implemented this change and we consider that this will, in large part, address the concerns about consumer harm that led us to open this investigation.
In accordance with its assurance, BT has also applied this new approach retrospectively to ensure that any existing customer quotes or excess cost payment benefit from the change. Based on evidence provided by BT, we are satisfied that these comply with the relevant methodology.
Separate to this investigation, Ofcom has recently announced its decision to implement certain changes to the regulatory conditions associated with the Broadband Universal service. The changes mean that BT can now wait until it has agreement to recover the total excess costs before commencing a build, where the excess costs associated with a given connection exceed £5,000 (excluding VAT).
As a result of these factors, Ofcom is satisfied that the conduct that led to the opening of the investigation has ceased. Ofcom does not consider it appropriate to continue its investigation and has therefore closed it without making any findings as to BT’s compliance with the relevant regulatory obligations. Ofcom will continue to monitor BT’s provision of broadband as a universal service, in order to ensure that it is in line with the universal service conditions as amended.
We have decided to suspend our investigation, as BT has provided assurances it will take steps to mitigate the consumer harm we have identified.
BT’s approach to calculating excess costs meant it has not divided costs of shared infrastructure in the way we expected, which has resulted in some customers being asked to pay substantially higher excess costs. We have identified a significant risk of consumer harm associated with BT’s approach, where the excess costs of a connection were not significantly above £3,400 (excluding VAT).
As a result of our investigation, BT has now agreed to use our approach to calculating excess cost quotes, where excess costs are not significantly above £3,400. BT has also agreed to refund affected customers and re-issue quotes it has previously provided. We consider this should in large part address the concerns about consumer harm that led to us opening the investigation and, as a result, we are suspending the investigation to enable BT to implement these assurances.
We will continue to monitor BT's progress against the assurances provided and, subject to satisfactory progress by BT and the outcome of Ofcom’s consultation mentioned below, we expect to close the investigation in due course. We will provide further updates over the coming months.
We have today also published a consultation on proposed modifications to the Universal Service Conditions . This proposal is based on careful consideration of evidence gathered from BT during the investigation, data held by Ofcom, and information shared by USO customers and other interested parties. This showed that where the cost of a connection is very high, and excess costs are significantly above £3400, there is a risk of there being a disproportionate impact on the costs of funding the USO.
We have proposed that it would be appropriate to make a small, technical change to our rules to allow, in these circumstances, BT to recover excess costs before commencing build in order to mitigate this risk.
While there will be a number of customers who will benefit from receiving lower quotes going forward, there will be premises where the costs of provision remain very high. These customers are unlikely to benefit from the USO irrespective of the approach taken to shared costs, and BT’s change in approach will not address these cases. We will continue to work with industry and the Government to explore alternative technology and funding solutions for premises facing very high excess costs to receive a decent broadband connection.
Our investigation is continuing and we are currently considering our next steps. We will provide further updates over the summer.
We have obtained further information from BT which we are considering. We expect to make a provisional decision by the end of May.
Having completed our initial information gathering process, Ofcom has decided to proceed to the provisional decision phase of our investigation. We are gathering additional evidence and expect to provide an update by the end of March.
Ofcom has today opened an investigation in relation to BT’s compliance with its obligations as a broadband universal service provider.
In March 2018, the UK Government introduced legislation for a broadband ‘universal service obligation’ (USO), which gives homes and businesses the right to request a decent broadband connection.
Ofcom has worked to implement the USO as quickly and efficiently as possible. Following consultation, we designated BT as a Universal Service Provider and imposed regulatory conditions setting out how it must provide USO connections to eligible consumers.
Under the legislation, customers can request a USO connection from BT if they cannot currently receive affordable broadband services with speeds of at least 10 Mbit/s and upload speeds of at least 1 Mbit/s (among other technical parameters). Upon receiving such a request, BT must assess the costs of providing that connection and, where this is less than £3,400, BT must provide the connection. Where the assessed costs exceed that amount, BT must also provide the connection if the customer is willing to pay the excess costs.
Ofcom’s conditions set out how BT should assess the costs of providing a connection. In particular, as required by the legislation, BT must take into account that costs may be shared among other customers who could use the same infrastructure. BT must apply this methodology to calculate the costs of each requested connection.
While the cost of some connections will be high due to the remoteness of many of these premises, we are concerned that BT may not be complying with the regulatory conditions correctly where it assesses excess costs for a given connection. This could result in some customers’ quote for a connection being higher than necessary.
Ofcom will now gather evidence, and we expect to determine next steps before the end of the year.
Enforcement team (enforcement@ofcom.org.uk)
CW/01256/10/20