BT loses appeal for backdated MTR payout

21 Apr 2010

The British Court of Appeal has rejected a call by fixed line incumbent BT for a potential multi-million pound payout from mobile network operators linked to a dispute over call termination rates, according to the Financial Times. The issue stems from a decision by telecoms regulator Ofcom in 2007 to set forth a four-year plan outlining proposed reductions in termination rates for 0870 numbers which was subsequently challenged by BT. Upon considering the matter the Competition Appeal Tribunal (CAT) issued two judgements, in May and August 2008, that Ofcom should have pressed for steeper cuts, stating that proposals for lower termination rates made by the Competition Commission should take effect from April 2009. Despite Ofcom issuing a new determination in the matter in April 2009, BT maintained that the new rates should apply retroactively. However, in the latest development the Court of Appeal claimed that the CAT did not hold the necessary authority to order Ofcom to apply the decision retrospectively. Following the outcome it has been suggested that, while unhappy with the ruling, BT will not appeal, with the incumbent noting: ‘We are disappointed to have lost the case but it does not affect our financial guidance.’

More positively for BT however, earlier this month Ofcom unveiled proposals for significant reductions in mobile termination rates (MTRs) for the four years to March 2015, with the regulator noting: ‘We expect these reductions to be passed on to consumers through competition.’ Under the proposals Ofcom has called for MTRs to fall from GBP0.043 (USD0.066) per minute to GBP0.005 per minute by March 2015 for the four major cellcos – O2 UK, Vodafone UK, Orange UK and T-Mobile UK. The country’s smallest network operator by subscribers, H3G UK, will also be required to cut MTRs to GBP0.005 per minute from its current GBP0.046 rate. Unsurprisingly, with mobile operators generating around GBP2 billion per year from MTRs, opposition to the proposals has been swift, with Orange UK claiming: ‘If these proposals come into force, the way our consumers currently buy, use and enjoy their mobiles may be forced to radically change.’ For its part BT, which in May 2009 launched its ‘Terminate the Rate’ campaign with H3G, pressing for a further reduction in MTRs, said it welcomed Ofcom’s proposals, although questioned the timeframe for the cuts, noting: ‘In this case what is being proposed is just the elimination of excessive prices and the mobile operators have had plenty of notice that termination rates are likely to fall.’