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EDITOR’s BLOG 060417 Interconnect issues

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Recent news that BT is to be fined £42million by Ofcom for abusing the terms of the contract by reducing compensation payments to third parties for late installations sticks in the craw of many telemedia companies.

The penalty is a result of an investigation by Ofcom into BT’s network arm, Openreach. Ofcom opened the investigation in November 2015 shortly after Vodafone brought allegations to Ofcom that BT had misused its contractual terms through the late delivery of Ethernet services without Vodafone’s consent, and by failing to compensate the company for these delays.

The investigation found that, between January 2013 and December 2014, BT misused the terms of its contracts to reduce compensation payments owed to other telecoms providers for failing to deliver ‘Ethernet’ services on time.

On top of the £42 million, BT will also be fined £300,000 for failing to provide information to Ofcom. This is on top of the £300 million they will have to pay in compensation after admitting failings.

But many in the industry are up in arms that BT may well be doing far more than reducing payments, it could be withholding monies from the value chain – often wrongfully, they say –  due to its role in policing interconnect abuse.

The AIT process is intended to deter fraud and bad practice by denying the perpetrators the revenue from the calls withholding payment for those calls. There is a contractual process that all phone companies have to abide by, the terms are exactly the same for all companies who use BT as a third party.

In recent years, this process has been subject to increasing levels of abuse with some phone companies appearing to use it, for example, to mitigate the effects of errors in their price lists.

BT is meant to safeguard the process to prevent abuse, but it appears that it too might be part of the problem. Many claim that BT is withholding money without providing any meaningful evidence of fraud or bad practice and breaching the agreed process, the total sums involved run into the millions. This is causing some phone companies serious difficulties, placing some in jeopardy.

There is a growing list of these claims and withheld funds and there is a storm brewing. While we gather more data on the issue from the industry, some are considering what they can do. There are two courses of action: the industry can either raise a legal challenge or it can go to Ofcom. The first is expensive and uncertain, the second is easier and cheaper, but Ofcom tends not to accept AIT disputes. So what is the industry to do?

The effect of these issues is to act as a barrier to entry into the market, increase prices of services provided to consumers and discourage innovation – the very things that Ofcom is meant to protect against. The segment of the industry that has service providers as customers is strongly of the view that BT is abusing its dominant market position, but there seems to be little they can do about it.

We look forward to hearing your views.

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Editor and content creator for Telemedia – for 18 years and counting

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