Ofcom’s BT statement – Legal Issues Examined

Following hot on the heals of yesterdays Ofcom’s notice to BT, under Section 155(1) of the Enterprise Act 2002, Russ Taylor of OfcomWatch takes us through the legal issues.

Ofcom's BT statement - Legal Issues ExaminedOfcom released the details of the BT settlement.

Folks, here are the key takeaways / open issues as I see them from a legal perspective:

* This is essentially a consultation on whether BT has promised enough (‘undertakings’ – spelled out in Section 2 of the document) to avoid referral of this matter to the Competition Commission. Ofcom concludes that BT has, and asks for public comment until August 12, 2005.

* Section 4.14 of the document is the key allegation, and check-out the indirect wording on Ofcom’s part! Ofcom basically say that BT had the incentive to engage in anti-competitive conduct, and later say that it suspects BT ‘may have acted in accordance with the incentives set out above.’ Is that Plain English? Even the title of Section 4 is non-confrontational… referring to the problems of the market, rather than problems with BT.Ofcom's BT statement - Legal Issues Examined

* Annex E is the basic document (the Annexes are here). It is the proposed agreement between BT and Ofcom. It specifies the undertakings. It looks to me like the Access Service Division (ASD) CEO reports to the BT CEO. So, presumably, the BT CEO can terminate the ASD CEO? That’s not exactly ‘separation’. And more importantly, it does not square with the classic definition of a CEO.

* It’s a lengthy document, and I’ve only skimmed it, but the missing element–in my opinion–seems to be a clear dispute resolution / problem solving element of the undertakings. In other words, what happens if BT shirks its duties, or there is a dispute about one of the undertakings. Are the undertakings self-enforcing? I don’t think so. Sections 12 through 17 of Annex E purport to cover this ground, but I think they are vaguely worded. Section 14, in particular, seems to merely allow BT and Ofcom to agree to disagree, and has no real teeth other than Ofcom’s ability to declare BT in breach of the undertakings. But what then? Does Ofcom then have the power to fine BT? I don’t think so – I think a breach would require Ofcom to go to court to secure a remedy… or threaten another referral? So, would communications policy decisions then rest in the hands of a court? Why didn’t Ofcom require BT, as part of its undertakings, to waive court procedures and agree to a schedule of monetary penalties, etc.Ofcom's BT statement - Legal Issues Examined

* I also recall that Ofcom initially said that third parties would be able to secure relief under this settlement–for their losses caused by BT’s breaches of the undertakings. How does that work? This element of the scheme seems to be completely missing from the documents.

* Finally, what happens if BT merges with another entity to which these undertakings do not apply. I’m confused… Overall, I think the document accomplishes much by way of technically sorting out a way to limit BT’s market power. But from a legal perspective, it needs some more thought.

* * *

This should be an interesting consultation… stay tuned…

Russ taylor is a co-founder of OfcomWatch