This statement and determination (the “Determination”) sets out our resolution to the dispute brought by Cable and Wireless UK (“CW UK”) against British Telecommunications plc (“BT”) (collectively “the Parties”) concerning BT’s methodology for calculating its payments to terminating communications providers (“TCPs”) for 0845 calls that it originates, and whether since November 2009, BT has paid to CW UK an appropriate amount of 0845 call revenue (“the Dispute”).
Under SMP condition AAA11, for 0845 calls originating on its network, BT is obliged to provide NTS call origination “on fair and reasonable terms, conditions and charges” and to pay to TCPs the Net Retail Call Revenue it receives from its customers for those calls, less certain deductions. The allowable deductions are set out in Condition AAA11.4 and include a charge for the costs of originating the call. In these Provisional Conclusions, the payments passed on in accordance with Condition AAA11 are referred to as out-payments, or “POLOs” (payments to other licensed operators).
CW UK believes that BT has understated its Net Retail Call Revenue when calculating POLOs, and as a consequence the POLOs have been lower than they should have been, and therefore were not fair and reasonable, in line with the requirements of SMP condition AAA11. CW UK specifically claims that:
- BT has used an inappropriate methodology to identify the amount of revenue from standard retail line rental packages (which incorporate an inclusive call allowance that can be used to make ‘free’ calls to 0845 numbers at weekends) (“line rental revenue”) to include in the Net Retail Call Revenue, and has done so since 1 November 2009; and
- it is due additional payments because prior to August 2011, BT did not make any allocation to the Net Retail Call Revenue of the revenue generated by premium retail call packages, being the amount paid by BT’s customers, in addition to standard line rental, for packages that included ‘free’ calls at weekends and at other times of the day (“package fee revenue”).
BT submits that while it previously erred in failing to include a proportion of line rental revenue and package fee revenues in its Net Retail Call Revenue when calculating 0845 POLOs, it has sought to correct this. It submits that its current calculation methodology is fair and reasonable. BT additionally claims that no additional payments are due because of offsetting declines in the retail revenues associated with 0845 calls that BT did not take into account when calculating POLOs.