Current Cost Financial Statements 2013
including Openreach Undertakings
Statement by Ofcom
Ofcom Statement on BT’s Current Cost Financial Statements 2013
Introduction
Current Cost Accounting – valuation of assets
BT’s reporting obligations arise out of market reviews conducted by Ofcom and SMP service
Conditions OA1 to OA34 and Directions 1 to 6.
BT has revised the basis for deriving its CCA valuation of its copper and duct assets. As
explained in Section 2.1, BT has changed its valuation methodology from an absolute basis
to an approach based on actual spend, indexed using RPI. The 2011/12 comparatives have
been restated on this new basis. According to BT, the change in methodology resulted in a
net £65m increase in duct and copper assets for that year.
Under SMP services Condition OA6(c), BT is required to publish with the audited regulatory
financial statements (RFS) any written statement made by Ofcom and provided to BT
commenting on the data in, the notes to or the presentation of any or all of the RFS and/or
the Accounting Documents.
A review of the reporting framework
The RFS are produced by BT and follow the principles and methodologies as set out in BT’s
Primary and Secondary Accounting Documents. These documents are published alongside
the RFS. They have not been reviewed by Ofcom.
We are now conducting a review of the regulatory reporting framework to ensure that it is
fit for purpose. Following our consultation published in September 2012 we are now
preparing for a second consultation for later this year.
Notwithstanding this, Ofcom believes that we can be helpful to users of the RFS by drawing
attention to several important aspects of BT’s 2012/13 RFS. Primarily, we consider that
users of the RFS should be aware of changes in the way BT allocates its costs and assets.
As part of this review, we will consider the appropriate future roles for Ofcom and for BT in
determining the basis of preparation of the RFS, including the choice of allocation rules and
valuation methodologies.
Changes in allocation methodologies
During 2012/13, BT changed some of the methodologies it uses to prepare its RFS. As
described in Section 2.1, the effect of some of these changes is material. Under SMP
services Condition OA9, BT is required to include prior year comparatives in its RFS prepared
on a basis that is consistent with the current year figures, unless there are reasons for not
doing so. Where BT does not include prior year comparatives, it has to set out the
particulars of the departure, the reasons for it and its effect.
As set out in Section 2.1, BT has restated the prior year comparatives in these Statements to
reflect some, but not all, of its methodology changes. Where BT has restated the prior year
comparatives, it sets out the effect at a market level, in Section 2.1. In Section 2.1, BT also
identifies a number of changes where it considers the restatement of comparative
information for the year ended 31 March 2012 is either not practicable or not material.
One of the changes that BT has not reflected in its restated comparatives relates to the
changes that are described by BT in Section 2.1 as reflecting the new organisational
structure following the merger of BT Innovate & Design and BT Operate to create BT
Technology, Service & Operations. BT has explained to us that, although the impact of this
change is material, it is unable to restate the 2011/12 accounts for the reasons given in
Section 2.1.
We have written to BT requesting that it prepares a separate report setting out the reasons
for, and effects of, all material methodology changes, in more detail. We intend that a
version of this report should be published on BT’s website alongside its RFS, in September.
Contents
Section 7.3 - Wholesale Analogue Exchange Line Services ......................................... 33
Current Cost Financial Statements
Section 7.3.1 - Wholesale Analogue Exchange Line Services (Annex 11) ................ 34
Section 1 Introduction to the Current Cost Financial Statements ....................................... 3
Section 7.3.2 - Wholesale Analogue Exchange Line Services calculation of FAC based
on component costs and usage factors (Annex 16) ................................................ 36
Section 1.1 - Introduction: Regulation in the UK ......................................................... 4
Section 1.2 - Regulatory Financial Reporting Obligations ............................................ 6
Section 7.4 - Wholesale ISDN2 Exchange Line Services .............................................. 38
Section 1.3 - Regulatory Financial Review (Annex 4) ................................................... 7
Section 7.4.1 - Wholesale ISDN2 Exchange Line Services (Annex 11) ..................... 39
Section 2 Basis of Preparation ......................................................................................... 8
Section 2.1 - Introduction to the Basis of Preparation ................................................. 9
Section 7.4.2 - Wholesale ISDN2 Exchange Line Services calculation of FAC based on
component costs and usage factors (Annex 16) ..................................................... 41
Section 2.2 - Other Aspects to the Basis of Preparation (Annex 22) ............................ 13
Section 7.5 - Wholesale Business ISDN30 Exchange Line Services .............................. 43
Section 2.2.1 - Key changes as a result of certain regulatory decisions ................... 13
Section 7.5.1 - Wholesale ISDN30 Exchange Line Services (Annex 12) ................... 44
Section 3 Statement of Responsibility ............................................................................ 14
Section 7.6 - TISBO (up to and including 8Mbit/s) ..................................................... 46
Section 3.1 - Statement of Responsibility (Annex 2) .................................................. 15
Section 7.6.1 - TISBO (up to and including 8Mbit/s (Annex 11) ............................. 48
Section 4 Audit Report.................................................................................................. 16
Section 7.6.2 - TISBO (up to and including 8Mbit/s) calculation of FAC based on
component costs and usage factors (Annex 16) ..................................................... 54
Section 4.1 - Report of Independent Auditors (Annex 23) ......................................... 17
Section 7.7 - TISBO (above 8Mbit/s up to and including 45Mbit/s) ............................ 56
Section 5 Summary of Financial Performance................................................................. 21
Section 7.7.1 - TISBO (above 8Mbit/s up to and including 45Mbit/s) (Annex 11) ... 58
Section 5.1 – Consolidated Performance Summary (Annex 3) ..................................... 22
Section 6 Attribution of Wholesale Current Costs and Mean Capital Employed ................. 23
Section 7.7.2 - TISBO (above 8Mbit/s up to and including 45Mbit/s) calculation of
FAC based on component costs and usage factors (Annex 16) ................................ 60
Section 6.1 - Attribution of Wholesale Current Costs 2013 (Annex 5A) ....................... 24
Section 7.8 - TISBO (above 45Mbit/s up to and including 155Mbit/s) ........................ 62
Section 6.1.1 - Notes on Wholesale sector costs ................................................... 25
Section 7.8.1 - TISBO (above 45Mbit/s up to and including 155Mbit/s) (Annex 11) 64
Section 6.2 - Attribution of Wholesale Current Costs 2012 (Annex 5A) (h) .................. 26
Section 7.8.2 - TISBO (above 45Mbit/s up to and including 155Mbit/s) calculation of
FAC based on component costs and usage factors (Annex 16) ................................ 66
Section 6.3 - Attribution of Wholesale Current Cost Mean Capital Employed 2013
(Annex 6A) .............................................................................................................. 27
Section 7.9 - AISBO (up to and including 1Gbit/s) ..................................................... 68
Section 6.3.1 - Notes on Wholesale MCE sector costs ................................................ 28
Section 7.9.1 - AISBO (up to and including 1Gbit/s) (Annex 11) ............................ 69
Section 6.4 - Attribution of Wholesale Current Cost Mean Capital Employed 2012
(Annex 6A) (h) ......................................................................................................... 29
Section 7.9.2 - AISBO (up to and including 1Gbit/s) calculation of FAC based on
component costs and usage factors (Annex 16) ..................................................... 75
Section 7 Review of Access Markets............................................................................... 30
Section 7.10 - Wholesale Local Access (WLA) ............................................................ 77
Section 7.1 - Financial Performance in Access Markets (Annex 7) ............................... 31
Section 7.10.1 - Wholesale Local Access (WLA) (Annex 11) ................................... 78
Section 7.2 - Access Markets Review (Annex 10 & 11) ............................................... 32
Section 7.10.2 - Wholesale Local Access (WLA) calculation of FAC based on
component costs and usage factors (Annex 16) ..................................................... 80
Section 7.2.1 - Access Markets Group Level Review (Annex 10) ............................ 32
Page 1
Contents
Section 8 Review of Other Wholesale Markets ................................................................ 82
Section 8.10 - Wholesale Broadband Access Market 2 ............................................. 118
Section 8.1 - Financial Performance in Other Wholesale Markets (Annex 8) ................ 83
Section 8.10.1 - Wholesale Broadband Access Market 2 (Annex 11) .................... 119
Section 8.2 - Review of Other Wholesale Markets (Annex 10 & 14) ............................ 84
Section 8.10.2 - Wholesale Broadband Access Market 2 calculation of FAC based
component costs and usage factors (Annex 16) ................................................... 123
Section 8.2.1 - Market Group Level Review (Annex 10) ........................................ 84
Section 9 Reconciliation Statements ............................................................................ 125
Section 8.3 - Call origination on fixed public narrowband networks ............................ 85
Section 9.1 - BT Reconciliation Statement 2013 (Annex 19) .................................... 126
Section 8.3.1 - Call origination on fixed public narrowband networks (Annex 13) ... 86
Section 9.1.1 - BT Reconciliation Statement 2012 (Annex 19) (h) ............................ 127
Section 8.3.2 - Call origination on fixed public narrowband networks calculation of
FAC based on component costs and usage factors (Annex 16) ............................... 88
Section 9.1.2 - BT Reconciliation Statement MCE 2013 (Annex 20) .......................... 128
Section 8.4 - Single transit on fixed public narrowband networks ............................... 90
Section 10 Openreach Information .............................................................................. 129
Section 8.4.1 - Single transit on fixed public narrowband networks (Annex 13) ...... 91
Section 10.1 - Openreach Income Statement 2013 ................................................. 130
Section 8.5 - Technical Areas (Interconnect Circuits).................................................. 92
Section 10.2 - Openreach Income Statement 2012 (h) ............................................ 131
Section 8.5.1 - Technical Areas (Interconnect Circuits) (Annex 11) ......................... 93
Section 10.3 - Openreach MCE Statement 2013 ..................................................... 132
Section 8.5.2 - Technical Areas (Interconnect Circuits) calculation of FAC based on
component costs and usage factors (Annex 16) .................................................... 95
Section 10.4 - Openreach MCE Statement 2012 (h) ................................................ 133
Section 10.5 - Reconciliation of Openreach Income Statement 2013 ....................... 134
Section 8.6 - Fixed Call Termination.......................................................................... 97
Section 10.6 - Reconciliation of Openreach Income Statement 2012 (h) .................. 135
Section 8.6.1 - Fixed Call Termination (Annex 13)................................................. 98
Section 10.7 - Openreach Notes ............................................................................. 136
Section 8.6.2 - Fixed Call Termination calculation of FAC based on component costs
and usage factors (Annex 16) ............................................................................... 99
Appendix 1 Other Information ..................................................................................... 138
Appendix 1.1 - Network Activity Statements Consolidated 2013 (Annex 15) ............ 139
Section 8.7 - Wholesale Trunk Segments ................................................................ 101
Appendix 1.1.1 - Network Activity Statements Consolidated 2012 (Annex 15) (h) .... 142
Section 8.7.1 - Wholesale Trunk Segments (Annex 11) ....................................... 102
Appendix 1.2 - BT Network Services Reconciliation 2013 (Annex 17) ....................... 145
Section 8.7.2 - Wholesale Trunk Segments calculation of FAC based on component
costs and usage factors (Annex 16) .................................................................... 104
Appendix 1.2.1 - BT Network Services Reconciliation 2012 (Annex 17) (h) ............... 148
Section 8.8 - Technical Areas (Point of Handover) ................................................... 106
Appendix 1.3 - Change of Current Cost Financial Statements Format 2013 ............... 151
Section 8.8.1 - Market: Technical Areas (Point of Handover) (Annex 11).............. 107
Appendix 2 Price Control Statements ........................................................................... 152
Section 8.8.2 - Technical Areas (Point of Handover) calculation of FAC based on
component costs and usage factors (Annex 16) .................................................. 109
Appendix 2.1- Price Controls in Access and Other Wholesale Markets (Annex24)
(Unaudited) ........................................................................................................... 153
Section 8.9 - Wholesale Broadband Access Market 1 ............................................... 111
Glossary and Footnotes List ......................................................................................... 154
Section 8.9.1 - Wholesale Broadband Access Market 1 (Annex 11) ...................... 112
Glossary ................................................................................................................. 155
Section 8.9.2 - Wholesale Broadband Access Market 1 calculation of FAC based on
component costs and usage factors (Annex 16) .................................................. 116
Footnotes .............................................................................................................. 157
Additional Information................................................................................................ 158
Page 2
Section 1 – Introduction to the Current Cost Financial Statements
Section 1
Introduction to the Current Cost Financial Statements
Page 3
Section 1 – Introduction to the Current Cost Financial Statements
Section 1.1 - Introduction: Regulation in the UK
The UK telecoms industry is regulated through various European directives, the
Communications Act 2003 (the Communications Act) and Ofcom (the UK’s independent
regulator) as well as other regulations and recommendations.
Where Ofcom finds that a provider has SMP, it must impose appropriate remedies that may
include price controls. At 31 March 2013, as a result of previous market reviews, we were
deemed to have SMP in a number of markets. These markets are listed in Section 1.2 Regulatory Financial Reporting Obligations.
The Communications Act
Where a provider has SMP, the Communications Act enables Ofcom to impose one or more
obligations in relation to each market, including:
The Communications Act gives Ofcom legal powers and sets out the legal requirements for
how electronic communications services should be regulated in the UK. It includes the
conditions imposed by the European directives. The Government is currently reviewing our
sector’s regulatory regime, with a new framework planned for 2015. The review is looking
into how to encourage growth and innovation and how to remove unnecessary regulation.

Ofcom

Ofcom is the independent regulator and competition authority for the whole UK
communications market. Its main duties are:


to further the interests of citizens in relation to communications matters.
to further the interests of consumers in relevant markets, where appropriate by
promoting competition.
Under the powers of the Communications Act, Ofcom sets conditions that Communications
Providers (CPs) must comply with and can issue directions under these conditions. Some
conditions, known as General Conditions, apply to all CPs. Others apply to certain individual
companies that Ofcom has decided are universal service providers or have Significant
Market Power (SMP) in a particular market. Anyone can appeal against Ofcom’s decisions
through a number of routes, including to the Competition Appeal Tribunal (CAT) or to the
High Court.

Accounting separation - Which requires the operator to maintain accounting
systems such that the financial results of each SMP market can be separately
presented and that costs relating to products and markets are allocated in a
transparent and appropriate way. Accounting separation is also used to ensure
that there is no undue discrimination.
Cost accounting - Wholesale cost accounting obligations apply where there is an
obligation in relation to price controls, cost orientation or cost recovery.
Wholesale activities include products and services sold to other CPs such as the
provision of network access, the use of the network and the availability of various
facilities. Obligations may include price controls for specified SMP products, cost
orientation of prices for SMP products and the recovery of costs for the purpose of
demonstrating transparency.
Publication - The annual Current Cost Financial Statements satisfy the obligation
relating to publication of financial information for SMP markets. The publication
of information relating to SMP markets is intended to provide public assurance
that we have complied with our cost accounting and accounting separation
obligations. Ofcom also imposes certain audit requirements in respect of the
published Current Cost Financial Statements.
Impact of Ofcom regulation
The General Conditions that apply to all CPs are mainly about protecting consumers’ general
access and interconnection, planning for emergencies, providing information to Ofcom, and
allocating and transferring phone numbers.
There are a number of regulatory decisions and outcomes of appeals that affected us during
the year and will impact us in the future.
We are the designated universal service provider for the UK (except for the Hull area where
it is KCOM Group) and so we have certain universal service obligations. This is an important
responsibility and we take it seriously. Our main obligation is to make sure that basic fixedline services are available at an affordable price to all consumers in the UK. We are also
obliged to provide public payphones.

SMP designations
The European directives require Ofcom to review relevant communications markets
regularly, usually every three years, and to decide whether any CP has SMP in those markets.
If Ofcom decides that a CP has SMP, it could put controls in place, typically on the prices
which the CP can charge. Ofcom will generally try to set charges that are reasonably based
on costs and an appropriate return on the capital invested.

Page 4
Ofcom finished its review of the business connectivity markets, which cover
products such as Ethernet and private circuits. It renewed price controls for
another three years. The main changes were an increase in the size of the
deregulated area to Western, Eastern and Central London Area including Slough
(WECLA) and deregulation of long distance wholesale private circuits and some
retail leased lines. We also now have SMP in high bandwidth Ethernet services
outside the deregulated London area which will be subject to a charge control.
These changes will be implemented in the Current Costs Financial Statements from
2013/2014.
In December 2012 Ofcom issued its final determinations on disputes over historic
Ethernet pricing. Ofcom concluded that between April 2006 and March 2011 the
Section 1 – Introduction to the Current Cost Financial Statements


prices we set for certain Ethernet services were too high resulting in an overcharge
over this period. We disagree with the determinations and have submitted an
appeal to the CAT. This ruling had no impact on the Current Cost Financial
Statements of any SMP markets for the years ended 31 March 2013 and 31 March
2012.
In July 2012 the Court of Appeal overturned the CAT’s August 2011 decision in
relation to wholesale ladder pricing. Ladder pricing links the amounts that BT
charges mobile operators for mobile calls to 0800, 0845 and 0870 numbers
terminating on our network to the retail price charged by mobile operators to
their customers. We have been granted permission to appeal this decision to the
Supreme Court and the hearing is expected in early 2014. This ruling had no
impact on the Current Cost Financial Statements of any SMP markets for the years
ended 31 March 2013 and 31 March 2012.
In March 2011 we lost an appeal to the CAT relating to Ofcom’s decision in a
dispute over our charges to other CPs for trunk components of wholesale partial
private circuits. In July 2012 the Court of Appeal issued its judgment on our
appeal against the CAT’s decision. The appeal failed to set aside Ofcom’s
determination or the CAT judgment, but provided helpful clarification of Ofcom’s
powers. This ruling had no impact on the Current Cost Financial Statements of any
SMP markets for the years ended 31 March 2013 and 31 March 2012.
BT’s Undertakings
In response to Ofcom’s 2005 strategic review of telecommunications, we put forward some
legally binding undertakings under the Enterprise Act 2002. These Undertakings (which
include the creation of Openreach) began in September 2005.
They aim to give clarity and certainty to the UK telecoms industry about the way we provide
‘upstream’ regulated products. This in turn supports effective and fair competition in related
‘downstream’ markets.
Most of the commitments in the Undertakings have been delivered, but we were unable to
move a small percentage of certain customer records to separated computer systems by the
target date of 31 December 2012. Ofcom has issued a Direction, which we have accepted,
that gives us until 30 November 2013 to meet this commitment.
Next Generation Access Regulation
In March 2009, following consultation, Ofcom published a policy statement setting out a
regulatory framework for Next Generation Access (NGA). This gave sufficient regulatory
certainty for BT to commit to an investment of £2.5bn on a commercial basis to make fibre
broadband available to around two-thirds of UK premises. Ofcom maintained its supportive
approach to fibre regulation in the 2010 Wholesale Local Access Market Review and has
recently commenced another review, the Fixed Access Market Review in July 2013.
Currently Ofcom does not price regulate Openreach’s GEA prices or mandate prescriptive
product specifications allowing flexibility for the market to develop going forward. Looking
beyond this, we believe that with funds from Broadband Delivery UK (BDUK), local
government and other sources, as well as further private investment, around 90% of UK
premises could have access to fibre broadband by approximately 2016. BT is already rolling
out NGA infrastructure in areas such as Cornwall, Northern Ireland and the Isles of Scilly
which are funded by public private partnerships, as well as winning a significant number of
BDUK bids and continuing to compete strongly for the remaining contracts.
The charge controls for Wholesale Line Rental (WLR), Local Loop Unbundling (LLU) and
ISDN30 products became effective in April 2012 and impacted the prices we can charge for
these products.
During 2013/14, Ofcom is expected to complete its reviews of:



the Fixed Access market (including WLR, LLU, Generic Ethernet Access (GEA),
ISDN2 and ISDN30 products).
the Wholesale Broadband Access market (including IPstream, Datastream and
WBC).
the Wholesale narrowband market (comprising calls and interconnection
services).
Where we are found to have SMP, Ofcom will carry out consultations on setting controls.
These could change the prices we charge for these products.
See the Ofcom website at www.ofcom.org.uk for further details on regulation.
SMP Charge Controls
As a result of SMP designations, the charges we can make for a number of wholesale
services are subject to charge controls. Details of charge controls are provided in the Market
Financial Reviews at Section 7 and Section 8.
Page 5
Section 1 – Introduction to the Current Cost Financial Statements
Section 1.2 - Regulatory Financial Reporting Obligations

The form and content of these Current Cost Financial Statements is based on the reporting
obligations set out by Ofcom. We refer to these obligations as “the Final Statements and
Notifications”, which consists of:











“The Regulatory Financial Reporting Obligations on BT and Kingston
Communications” issued 22 July 2004
“Changes to BT’s Regulatory Financial Reporting Framework” issued 31 August
2005
“Changes to BT’s Regulatory Financial Reporting and Audit Requirements” issued
16 August 2006
“Changes to BT’s Regulatory Financial Reporting and Audit Requirements” issued
30 May 2007
“Changes to BT’s 2007/08 Regulatory Financial Statements” issued 26 June 2008
“Changes to BT and KCOM’s Regulatory Financial Reporting – 2008/09 update”
issued 15 June 2009
“Changes to BT and KCOM’s regulatory and financial reporting 2009/10 update”
issued 4 June 2010
“Changes to BT and KCOM’s regulatory and financial reporting 2010/11 update”
issued 2 June 2011
“Changes to BT and KCOM’s regulatory and financial reporting 2011/12 update”
issued 17 April 2012
“Changes to BT and KCOM’s regulatory and financial reporting 2012/13 update”
issued 25 April 2013
Other Wholesale markets (including technical areas)








Openreach
We are also required by the Undertakings (section 5.31) to disclose the results of Openreach
separately and to reconcile the results to the Openreach segmental information shown in BT
Group plc’s Annual Report. We have included this information in Section 10.
In the Current Cost Financial Statements for 2013, we are obliged to report on the following
SMP markets:
Wholesale Access markets


Call origination on fixed public narrowband networks*
Single transit on fixed public narrowband networks
Technical areas (Interconnect Circuits)*
Fixed call termination*
Wholesale trunk segments*
Technical areas (Point of Handover)*
Wholesale Broadband Access (Market 1)*
Wholesale Broadband Access (Market 2)*
The markets marked with * in the list above have both cost accounting and accounting
separation requirements. For these markets, we report within these Current Cost Financial
Statements details of costs and charges for individual services within each market. The
remaining markets have accounting separation requirements only.
We are also required by Ofcom to provide additional detailed information to enable them to
regulate effectively and efficiently. This additional information is not published by either
party, nor is it subject to any independent examination.




Alternative interface symmetric broadband origination (up to and including
1Gbit/s)*
Wholesale local access*
Wholesale analogue exchange line services*
Wholesale ISDN2 exchange line services*
Wholesale business ISDN30 exchange line services
Traditional interface symmetric broadband origination (up to and including
8Mbit/s)*
Traditional interface symmetric broadband origination (above 8Mbit/s up to and
including 45Mbit/s)*
Traditional interface symmetric broadband origination (above 45Mbit/s up to and
including 155Mbit/s)*
Page 6
Section 1 – Introduction to the Current Cost Financial Statements
Section 1.3 - Regulatory Financial Review (Annex 4)
To help a user of the Current Cost Financial Statements understand the changes in the
performance of products and services in each market, we are required to prepare
“regulatory financial reviews”. These are included in Section 7 and 8 at the grouped market
level, as defined by Ofcom, and at the individual SMP market level to explain:

The main factors and influences that underlie each market or groups of markets.

New products and services.
Page 7
Section 2 – Basis of Preparation
Section 2
Basis of Preparation
Page 8
Section 2 – Basis of Preparation
Section 2.1 - Introduction to the Basis of Preparation
The ultimate holding company of British Telecommunications plc (the “Company”) is BT
Group plc (referred to together with its subsidiary and associated undertakings and joint
ventures as the “Group” or “BT”). Substantially all the businesses and activities of the Group
are carried out by British Telecommunications plc, its subsidiaries, associated undertakings
and joint ventures.
Where there are any inconsistencies in the Primary and Secondary Accounting Documents,
the Current Cost Financial Statements are prepared in accordance with the Primary
Accounting Documents in the order of priority as listed above.
The Secondary Accounting Documents consists of the Detailed Attribution Methods (DAM),
the Detailed Valuation Methodology (DVM), the Long Run Incremental Cost Model:
Relationships and Parameters (R&P) and the Wholesale Catalogue. These documents contain
more detailed descriptions of the policies, methodologies, systems, processes and
procedures for deriving and calculating the costs, revenues, assets and liabilities underlying
the Current Cost Financial Statements.
BT Group plc’s Annual Report dated 9 May 2013 details the basis of preparation and
explains the accounting policies adopted by the Group. BT’s Annual Report for 2013, on
which the auditors made an unqualified report, did not contain a statement under Section
498(2) or 498(3) of the Companies Act 2006 and has been delivered to the Registrar of
Companies.
The economic Markets defined by Ofcom’s Final Statements and Notifications do not
correspond to how the Group is organised for management and accounting purposes. The
Current Cost Financial Statements are therefore produced by overlaying the requirements of
the regulatory reporting framework on the management and accounting structure of the
Group.
The Company has, by agreement with BT Group plc, prepared the Current Cost Financial
Statements in accordance with the Accounting Documents, by disaggregating balances
recorded in the general ledgers and other accounting records of the Group.
The Accounting Documents means together the Primary Accounting Documents and the
Secondary Accounting Documents.
As far as possible, revenues, costs, assets and liabilities are directly associated with a product
group or component using information held within the Group’s accounting records and are
directly attributed to that item. Where no such direct association is possible, the remaining
revenues, costs, assets and liabilities are apportioned between two or more markets, services
or components using a fully allocated accounting system. This system uses apportionment
bases that reflect, as far as possible, the causality of the revenue, cost, asset or liability.
The Primary Accounting Documents set out the framework under which the Statements are
prepared:





Regulatory Accounting Principles - the principles we apply or use in the preparation of
the Current Cost Financial Statements, for example, that all costs should be fully
allocated.
Attribution Methods - a high level summary of the practices we use to attribute
revenue (including appropriate Transfer Charges), costs (including appropriate Transfer
Charges), assets and liabilities to activities or, where those activities have been
aggregated to wholesale segments in a given Market or Technical Area (as applicable),
to each wholesale segment.
Transfer Charge System Methodology - the approach used by our system that enables
an activity to use a service from another activity and to account for it as though it had
purchased that service from an unrelated party (including accounting for it at an
appropriate amount).
Accounting Policies - the way we apply the requirements of the Companies Act 2006,
Article 4 of the International Accounting Standards (IAS) Regulation, and our
accounting policies, whenever not superseded by the Regulatory Accounting
Principles, in each of the Current Cost Financial Statements. This document details the
accounting policies adopted in preparing the underlying financial information.
Long Run Incremental Cost (LRIC) Methodology - the long run incremental cost
principles, procedures and processes which form the framework we use to decide what
the long run incremental costs are. This document sets out the principles followed to
derive the long run incremental network costs.
The amounts of revenue, cost and capital employed attributed to markets, services and
components depend critically on the methods of attribution adopted. Typically, in a fully
allocated accounting system, a range of attribution methods is available. In selecting
appropriate attribution methods and appropriate non-financial data for use within the
attribution models, that are employed in the production of these Current Cost Financial
Statements, we have had to make certain estimates and exercise our judgement. We do this
with regard to the regulatory accounting principles, including cost causality and objectivity,
in order to comply with the requirements of the Primary Accounting Documents.
However, in some cases, when preparing financial statements at a very granular level a
directly cost causal and objective method of apportionment cannot be determined or
implemented and the Company adopts the most appropriate basis practically available.
We review and update non-financial data used within the attribution models at least
annually. Certain non-financial data employed for the purposes of the Current Cost Financial
Statements has been determined by sampling techniques appropriate to that data.
We review and update attribution and valuation methodologies and non-financial data
sources on an ongoing basis and, where deemed appropriate, will make improvements.
Depending on the nature of the change, and where practical the Final Statements and
Page 9
Section 2 – Basis of Preparation

Notifications require significant detail in the Current Cost Financial Statements. When
preparing financial statements at such a granular level it is not always possible to develop a
directly cost causal and objective method of cost apportionment and so these Financial
Statements have been prepared on the basis of the methodologies we consider to be the
most appropriate.

In respect of the very small wholesale services within certain wholesale markets, we are
aware that, in following the generic methodologies for attribution of common costs set out
in the DAM, anomalies may exist in the year on year cost trends in some services. Costing
methodologies and non-financial data sources are kept under review and, where
appropriate, improvements are made. Depending on the nature of the change restatements
may be required.

Other changes in fixed asset values CCA adjustments (e.g. one-off changes in
valuations due to a revised methodology) are referred to as Other CCA Adjustments and
are included in the current cost valuations and are also attributed between all Markets,
Technical Areas, Components and Wholesale Services.
A supplementary depreciation adjustment on fixed assets arising from differences
between historical cost accounting (HCA) and CCA valuations is also attributed between
the various Markets, Technical Areas, Components and Wholesale Services.
The inflation adjustment to ordinary shareholders’ funds is not relevant to the SMP
Markets, Technical Areas and Wholesale Services for which Current Cost Financial
Statements are prepared. No CCA adjustment has been made to the valuation of
goodwill as this is also not relevant to the SMP Markets, Technical Areas and Wholesale
Services.
Our costing systems used in the preparation of the Current Cost Financial Statements to
attribute revenues, costs, assets and liabilities to SMP Markets use the general ledgers of the
Group as their starting point. These ledgers are maintained to the nearest penny and this
level of detail is maintained throughout the costing process. However, for consistency with
the presentation of the results of the Group in BT Group plc’s Annual Report, the results for
each SMP Market are presented in figures rounded to the nearest whole million pounds.
(b) The CCA valuation of assets is affected by external factors such as changes in market
prices and changes to our CCA policies and practices. For the year ended 31 March 2013,
this resulted in a net decrease in the operating costs in SMP Markets and Technical Areas in
these Current Cost Financial Statements of £158m, of which £59m relates to Residual
markets, and is mainly attributed to:
Charges from Wholesale Markets to Retail Residual

The Mean Capital Employed Statements for the Wholesale Markets include balances relating
to the charges from the Wholesale Markets to Retail Residual. Retail Residual is deemed to
settle these charges in the same 22 day period (2011/12 restated: 22 days) as other
operators.


The Network Activity Statements show component unit costs on a 24-hour basis. Charges to
Retail Residual and other CPs for call conveyance services vary by the time of day at which
the service was purchased. The charges for other Wholesale Services to Retail Residual and
other CPs do not require adjustment for the time of day at which they are purchased.
Regulatory Valuation of Copper-Based Local Access Network Assets
In August 2005, Ofcom introduced an alternative methodology for determining its view of
the current cost regulatory asset value of the copper-based local access network
(Regulatory Asset Valuation adjustment or the RAV adjustment). This RAV adjustment,
which results in a lower valuation, is used only by Ofcom for regulatory purposes and is not
reflected in the methodologies we use to produce the Current Cost Financial Statements.
Current Cost Accounting (CCA) adjustments
(a) The Current Cost Financial Statements for the Group are prepared under the Financial
Capital Maintenance (FCM) convention in accordance with the principles set out in the
handbook “Accounting for the Effects of Changing Prices”, published in 1986 by the
Accounting Standards Committee.
As agreed with Ofcom, the RAV adjustment has not been implemented in the Current Cost
Financial Statements for 2013.
We summarise below the treatment of CCA adjustments within the Current Cost Financial
Statements:

Change in valuation methodology of Power and Accommodation Plant classes of work
from historical to indexed historical due to the divergence in the two forms of valuation
methods.
Change of index used for dropwire to RPI in order to align with the valuation method of
copper assets.
General price increases on the remaining classes of work offset by reductions due to
supplementary depreciation.
Comparability of current and prior year results
There have been a number of changes in the year that impact on the comparability of the
current and prior year results:
Changes in fixed asset values arising from price changes taking place in the year are
referred to as holding gains or losses arising during the year and are attributed between
all SMP Markets, Technical Areas, Components and Wholesale Services on the same
basis as the associated assets.
(a) Changes to BT’s financial reporting obligations as set out in the Current Cost Financial
Statements and Notifications explained in Section 2.2.
Page 10
Section 2 – Basis of Preparation
(b) The prior year comparatives have been restated to reflect for the following methodology
improvements implemented in the current year:
(v) The average debtor days has been restated from 28 days to 22 days to better align
with the calculation of debtor days used by Ofcom when modelling costs for charge
control purposes. This change did not impact any market materially.
(i) The CCA valuation of duct and copper assets was reviewed during the year and has
been changed from an absolute basis to an indexed RPI approach. Both an absolute
valuation and indexation are acceptable methodologies under CCA principles. In the
specific circumstances of our valuation of access network assets we consider indexation
is the more appropriate method as the complexity, size and nature of any
telecommunications access network means significant estimates and assumptions are
made that lead to a level of uncertainty in any absolute valuation. Changes in these
estimates and assumptions, improvements in data capture and varying commodity
prices used in an absolute valuation also introduce volatility into the Current Cost
Financial Statements. In comparison, indexation provides a valuation which is easy to
understand and transparent for all users of the data.
The impact of these restatements on the Access Markets and Other Wholesale Markets is
shown below:
Restated
As originally reported
Difference
Total CCA
Mean Total CCA
Total CCA
Operating
Capital Operating Mean Capital Operating Mean Capital
For the year ended 31 March 2012
Costs Employed
Costs
Employed
Costs
Employed
£m
£m
£m
£m
£m
£m
Wholesale analogue exchange line services
1,439
6,918
1,526
6,938
(87)
(20)
Wholesale ISDN2 exchange line services
66
244
69
245
(3)
(1)
Wholesale business ISDN30 exchange line services
123
235
129
240
(6)
(5)
TISBO (up to and including 8Mbit/s)
353
857
387
905
(34)
(48)
TISBO (above 8Mbit/s up to and including 45Mbit/s)
25
63
30
75
(5)
(12)
TISBO (above 45Mbit/s up to and including 155Mbit/s)
19
59
25
72
(6)
(13)
AISBO (up to and including 1Gbit/s)(g)
510
1,326
530
1,357
(20)
(31)
Wholesale local access
616
2,101
628
2,108
(12)
(7)
Total Access Markets
3,151
11,803
3,324
11,940
(173)
(137)
The change in valuation for 2011/12 resulted in a net £65m increase in duct and copper
assets and impacted a number of markets.
Further details are provided in the publication Detailed Valuation Methodology 2013.
(ii) During 2012/13 we reviewed the attribution of property costs. The methodology for
attributing vacant space in exchanges has been changed from an allocation of vacant
space pro-rata on the basis of the current usage of occupied space to a two stage
allocation which recognises the need to provide space for LLU operators followed by an
allocation of remaining vacant space to main distribution frames and cable chambers as
the high costs incurred from moving to smaller and more economic exchanges, and the
disruption to services that would be incurred in moving cable chambers and main
distribution frames, prevents us from reducing the size of the operational building
portfolio. A more appropriate allocation is achieved by allocating space in this way.
For the year ended 31 March 2012
Call origination on FPN networks
Single transit on FPN networks
Technical areas (Interconnect Circuits)
Fixed call termination
Wholesale trunk segments
Technical areas (Point of Handover)
Wholesale Broadband Access - Market 1
Wholesale Broadband Access - Market 2
Total Other Wholesale Markets
Restated
As originally reported
Difference
Total CCA
Mean Total CCA
Total CCA
Operating
Capital Operating Mean Capital Operating Mean Capital
Costs Employed
Costs
Employed
Costs
Employed
£m
£m
£m
£m
£m
£m
132
305
142
310
(10)
(5)
3
10
3
10
0
0
26
53
28
54
(2)
(1)
108
312
120
317
(12)
(5)
23
157
27
164
(4)
(7)
11
18
11
18
0
0
349
417
338
417
11
0
186
196
179
195
7
1
838
1,468
848
1,485
(10)
(17)
We have also updated our exchange space methodology to reflect planning rules
requiring additional space to be retained around equipment for ventilation.
Whilst there were no other restatements or re-presentations the ongoing review of cost
attribution and valuation methodologies resulted in a number of additional improvements
and updates to reflect changes in group structure for which the restatement of comparative
information for the year ended 31 March 2012 was either not practicable or was not
required as the impact was not material. These changes include:
Both changes to property costs impacted a number of different markets.
(iii) In 2012/13 we reviewed the attribution of costs of certain 21C equipment and
found the planned use of this equipment had changed and therefore had to be
appropriately allocated. This had resulted in £20m of costs moving from the TISBO
markets to WBA Market 1, WBA Market 2 and Residual markets.

(iv) During 2012/13 we reviewed the attribution of costs of Time Division Multiplexing
(TDM) cards. This resulted in £2m of costs moving from the TISBO (above 8Mbit/s up to
and including 45Mbit/s) market to the TISBO (up to and including 8Mbit/s), TISBO
(above 45Mbit/s up to and including 155Mbit/s), Technical Areas (Point of Handover),
Wholesale business ISDN30 exchange line services, and Residual markets.
Page 11
The merger of BT Innovate & Design and BT Operate to create BT Technology,
Service & Operations (BT TSO) – the creation of BT TSO led to a review of the cost
attribution methodologies for the new division. Certain methodologies have been
changed as the previous cost allocation methodology was no longer practical due
to a change in the nature of cost centre structure for the new division. In addition,
improved analysis of costs within the new structure has allowed the development
of a number of new methodologies which better reflect the nature of the
Section 2 – Basis of Preparation






underlying costs. It is has not been practicable to restate comparative information
for these methodology changes as they are integrally linked to the structural
change.
Career Transition Centre (CTC) – allocate costs as a group overhead as employees
within the CTC can be utilised across BT.
Provisions – allocation of certain health related provisions to services that caused
the claims.
Openreach overheads – some categories of overheads changed from being
allocated using pay to using pay and return on assets as they support the network
as well as people.
Broadband equipment – change in allocation to separately attribute the fixed and
variable element of costs for Digital subscriber line access multiplexers (DSLAMs).
Engineering Services – updated data sources for services such as Special Fault
Investigations.
WBA bandwidth volumes – updated data source to more accurately reflect the
usage of backhaul capacity between the WBA markets.
At Ofcom’s request we will be providing a separate unaudited report showing the impact of
the most significant of these changes on the Access Markets and Other Wholesale Markets
for the year ended 31 March 2013 including estimated impacts, where practicable, for
elements of the BT TSO changes. We plan to publish a version of this report in September
2013.
Page 12
Section 2 – Basis of Preparation
Section 2.2 - Other Aspects to the Basis of Preparation (Annex 22)
Section 2.2.1 - Key changes as a result of certain regulatory decisions
Implementation of LLU/WLR charge control review

The notes below refer to key changes as a result of Ofcom’s Statement “Changes to BT and
KCOM’s regulatory and financial reporting 2012/13 update” issued 25 April 2013 that
impact the Current Cost Financial Statements for the year ended 31 March 2013.
Extended and changed disclosure of services in the AISBO market



Ethernet Access Direct Local Access connections and rentals have been separately
disclosed by bandwidth.
Backhaul Extension Service and Wholesale Extension Service connections have
been amalgamated.
Internal EBD volumes have been separately disclosed.
Extended and changed disclosure of services in WBA markets 1 and 2


Wholesale Broadband Connect services have been separately disclosed.
Datastream services have been amalgamated.
Changed disclosure of services in the Call Origination on Fixed Public Narrowband
Networks market

The ‘Internal Wholesale call origination local exchange stick’ service has been
amalgamated with the ‘Internal Wholesale call origination local exchange stick
(ISDN)’ service.
Changed disclosure of services in the Fixed Call Termination market

The ‘Internal Wholesale call termination local exchange stick’ service has been
amalgamated with the ‘Internal Wholesale call termination local exchange stick
(ISDN)’ service.
Changed disclosure of services in the Technical Areas (Point of Handover) market


Reporting of external third party point of handover rentals have been split
between charges for equipment and charges for circuits.
Point of handover services by bandwidth have only been reported where revenue
is over £1m.
Removal of average price/FAC column

The average price/FAC column has been removed from Annex 11, 12 and 13.
Page 13
The reporting of DSAC and DLRIC data has been removed for the following
services: MPF rental; MPF ceases; SMPF ceases; analogue core WLR rental; and
analogue core WLR transfer.
Section 3 – Statement of Responsibility
Section 3
Statement of Responsibility
Page 14
Section 3 – Statement of Responsibility
Section 3.1 - Statement of Responsibility (Annex 2)
British Telecommunications plc (the “Company”) is required to prepare Current Cost
Financial Statements in accordance with the Final Statements and Notifications as described
in Section 1.2.
The directors are responsible for the maintenance and integrity of the corporate and
financial information included on the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Under the Financial Capital Maintenance (FCM) concept of Current Cost Accounting we have
revalued our assets in 2013. The approach taken in the Current Cost Financial Statements is
described in Section 2.1.
Openreach
We are also required in accordance with the Undertakings to separately report the financial
results of Openreach within our Current Cost Financial Statements as explained in Sections
1.1 and 1.2. The Undertakings are attached to Annex A of Part 2 of Ofcom’s “Final
Statements on the Strategic Review of Telecommunications, and undertakings in lieu of a
reference under the Enterprise Act 2002”, issued on the 22 September 2005.
The Current Cost Financial Statements include comparative information for the year ended
31 March 2012 first published on 31 July 2012 subject to certain restatements and representations detailed in Section 2.1.
We have prepared the Current Cost Financial Statements in accordance with the Primary
Accounting Documents and Secondary Accounting Documents (these are the Detailed
Attribution Methods; the Detailed Valuation Methodology; the Long Run Incremental Cost
Model: Relationships and Parameters and the Wholesale Catalogue). If there are any
inconsistencies in the Primary and Secondary Accounting Documents, the Current Cost
Financial Statements are prepared in accordance with the Primary Accounting Documents in
the following order of priority:





The Undertakings require us to report the financial results of Openreach, including the
following:

the Regulatory Accounting Principles;
the Attribution Methods;
the Transfer Charging System;
the Accounting Policies; and
the Long Run Incremental Cost Methodology.

Openreach financial information such as headline revenue, cost of sales (or gross
margin), SG&A, EBITDA, depreciation, operating profit and capital expenditure,
revenues broken down into the broad product groups that Openreach provides and
further split between internal and external revenues, separately identified payments
to other parts of the Company for products that form inputs to Openreach products
(e.g. electronics); and
Reconciliation of Openreach’s revenue and operating profit (and other such items as
may be agreed between us and Ofcom) with information about Openreach shown in
BT Group plc’s Annual Report.
We reconcile the Current Cost Financial Statements to BT Group plc’s Annual Report and we
explain any differences.
The Openreach Financial Statements can be found in Section 10 and include comparative
information for the year ended 31 March 2012.
We confirm that the Current Cost Financial Statements for the year ended 31 March 2013
have been prepared in accordance with the requirements of the Final Statements and
Notifications and the Primary and Secondary Accounting Documents dated 31 July 2013.
The form, content and basis of preparation of the financial results of Openreach follow those
used in the preparation of the Current Cost Financial Statements as described above, except
where differences are agreed with Ofcom.
We confirm that the Current Cost Financial Statements for the year ended 31 March 2012
have been prepared in accordance with the requirements of the Final Statements and
Notifications and the Primary and Secondary Accounting Documents dated 31 July 2012
subject to certain restatements and re-presentations as detailed in Section 2.1.
We confirm that the Openreach Financial Statements for the year ended 31 March 2013,
which have been prepared in accordance with the Primary Accounting Documents dated 31
July 2013, comply with the requirements of the Undertakings dated 22 September 2005.
We confirm that the Detailed Attribution Methods, the Detailed Valuation Methodology, the
Long Run Incremental Cost Model: Relationships and Parameters and the Wholesale
Catalogue all dated 31 July 2013 are appropriate to implement the principles contained in
the Primary Accounting Documents dated 31 July 2013, including the Transparency
Principle.
Warren Clements
Group Controller
31 July 2013
Page 15
Section 4 – Audit Report
Section 4
Audit Report
Page 16
Section 4 – Audit Report
Section 4.1 - Report of Independent Auditors (Annex 23)
Report of the Independent Auditors to British Telecommunications plc and Ofcom issued in accordance with the Final Statement and Notification entitled “The regulatory financial reporting
obligations on BT and Kingston Communications” issued by Ofcom on 22 July 2004 as amended by the annual “Notifications” of changes to regulatory financial reporting issued by Ofcom
following consultation as set out below.
1.
We have examined the Current Cost Financial Statements for 2013 (the “Financial
Statements”) which include information in respect of economic markets (the “Market
Financial Statements”) and Openreach (the “Openreach Information”).
2.
The Market Financial Statements are prepared by British Telecommunications plc (the
“Company”) under the current cost convention in accordance with:

3.
to BT’s 2007/08 regulatory financial statements” issued by Ofcom on 26 June
2008, “Changes to BT and KCOM’s regulatory financial reporting 2008/9 update”
issued by Ofcom on 15 June 2009, “Changes to BT and KCOM’s regulatory and
financial reporting 2009/10 update” issued by Ofcom on 4 June 2010, “Changes
to BT and KCOM’s regulatory financial reporting 2010/11 update” issued by
Ofcom on 2 June 2011, “Changes to BT and KCOM’s regulatory financial
reporting 2011/12 update” issued by Ofcom on 17 April 2012 and “Changes to
BT and KCOM’s regulatory and financial reporting 2012/13 update” issued by
Ofcom on 25 April 2013 (together the “Openreach Final Statement and
Notifications”); and
the Final Statement and Notification entitled “The regulatory financial reporting
obligations on BT and Kingston Communications” issued by Ofcom on 22 July
2004 as amended by the Statements and Notifications entitled “Changes to BT’s
regulatory financial reporting framework” issued by Ofcom on 31 August 2005,
“Changes to BT’s regulatory financial reporting and audit requirements” issued by
Ofcom on 16 August 2006, “Changes to BT’s regulatory financial reporting and
audit requirements” issued by Ofcom on 30 May 2007, “Changes to BT’s
2007/08 regulatory financial statements” issued by Ofcom on 26 June 2008,
“Changes to BT and KCOM’s regulatory financial reporting 2008/09 update”
issued by Ofcom on 15 June 2009, “Changes to BT and KCOM’s regulatory and
financial reporting 2009/10 update” issued by Ofcom on 4 June 2010, “Changes
to BT and KCOM’s regulatory financial reporting 2010/11 update” issued by
Ofcom on 2 June 2011, “Changes to BT and KCOM’s regulatory financial
reporting 2011/12 update” issued by Ofcom on 17 April 2012 and “Changes to
BT and KCOM’s regulatory and financial reporting 2012/13 update” issued by
Ofcom on 25 April 2013 (together the “Final Statements and Notifications”);

the Primary Accounting Documents; and

the Secondary Accounting Documents, namely the Detailed Attribution Methods;
the Detailed Valuation Methodology and the Wholesale Catalogue.

4.
The Openreach Information is prepared by the Company under the current cost
convention in accordance with:

the undertakings given to Ofcom by the Company pursuant to the Enterprise Act
2002 on 22 September 2005 (the “Undertakings”);

the Statements and Notifications entitled “Changes to BT’s regulatory financial
reporting and audit requirements” issued by Ofcom on 30 May 2007, “Changes
5.
Page 17
the Primary Accounting Documents.
The Market Financial Statements comprise the following statements for the year
ended 31 March 2013 for the Markets and Technical Areas listed on page 6:

The summary of Financial Performance (Section 5) on page 22;

The statement of Financial Performance in Access Markets (Annex 7) on page 31;

The statement of Financial Performance in Other Wholesale Markets (Annex 8) on
page 83; and

the related notes comprising: Section 2 (pages 9 to 13); the statements of
Attribution of Wholesale Current Costs and Mean Capital Employed (Annexes 5A
and 6A) on pages 24 to 29; Annex 11 (pages 34, 35, 39, 40, 48 to 53, 58, 59,
64, 65, 69 to 74, 78, 79, 93, 94, 102, 103, 107, 108, 112 to 115 and 119 to
122); Annex 12 (pages 44 and 45); Annex 13 (pages 86, 87, 91 and 98); Annex
16 (pages 36, 37, 41, 42, 54, 55, 60, 61, 66, 67, 75, 76, 80, 81, 88, 89, 95, 96,
99, 100, 104, 105, 109, 110, 116, 117, 123 and 124); the Reconciliation
Statements on pages 126 to 128; and Appendix 1 on pages 139 to 151, other
than the LRIC Floors and LRIC ceilings.
The Openreach Information comprises the following information for the year ended
31 March 2013 on pages 130 to 137:
Section 4 – Audit Report
6.

The Openreach Income Statement;

The Openreach MCE Statement; and

The Reconciliation of Openreach Income Statement.

the statement of financial performance for each of the following markets and
technical areas (the “FPIA Markets”) shown within the statement of Financial
Performance in Access Markets on page 31 and the statement of Financial
Performance in Other Wholesale Markets on page 83:
o
o
o
The Market Financial Statements and The Openreach Information include
comparative information for the year ended 31 March 2012 first published on 31 July
2012 which have been restated and re-presented as described in “Comparability of
current and prior year results” on pages 10 to 12. All comparative information for the
year ended 31 March 2012 is prepared by the Company to comply with the Final
Statements and Notifications, and in accordance with the Primary Accounting
Documents and the Secondary Documents dated 30 July 2012 as amended, where
applicable, in accordance with “Comparability of current and prior year results” on
pages 10 to 12.
o
o
o
o
o
o
Management’s responsibility for the Financial Statements
7.

As described on page 15 of the Financial Statements, management is responsible for
preparing and approving the Financial Statements.
Our responsibilities, as independent auditors, are established in the United Kingdom
by the Final Statements and Notifications, the Undertakings, the Auditing Practices
Board and our profession's ethical guidance.
9.
Our responsibility is to examine the Financial Statements in accordance with relevant
legal and regulatory requirements and International Standards on Auditing (UK and
Ireland) issued by the Auditing Practices Board. This report, including the opinion, has
been prepared for and only for the Company and Ofcom and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
11. We also report our opinion as to whether the statement of financial performance for
each of the following markets and technical areas (the “PPIA Markets”) shown within
the statement of Financial Performance in Access Markets on page 31 and the
statement of Financial Performance in Other Wholesale Markets on page 83:


10. We report our opinions as to whether:

the Market Financial Statements as a whole;

each of the market group statements comprising the statement of financial
performance in Total Access Markets and the statement of financial performance
in Total Other Wholesale Markets shown within the statements of Financial
Performance in Access Markets on page 31 and the statement of Financial
Performance in Other Wholesale Markets on page 83 (the “Market Group
Statements”);
the Openreach Information on pages 130 to 137.
are fairly presented in accordance with the Primary Accounting Documents and
comply with the requirements of the Final Statements and Notifications and the
Undertakings. In respect of the Market Financial Statements as a whole, each of
the Market Group Statements and each of the FPIA Markets, we also report
whether, in forming that opinion, having reviewed the Primary and Secondary
Accounting Documents, the Secondary Accounting Documents are appropriate to
implement the principles contained in the Primary Accounting Documents.
Auditor’s Responsibility
8.
Wholesale analogue exchange line services;
Wholesale business ISDN30 exchange line services;
Traditional interface symmetric broadband origination (up to and
including 8Mbit/s);
Alternative interface symmetric broadband origination;
Wholesale local access;
Wholesale broadband access market 1;
Wholesale broadband access market 2;
Call Origination on fixed public narrowband networks; and
Fixed call termination.


Traditional interface symmetric broadband origination (above 8mbit/s up to
and inc. 45Mbit/s);
Traditional interface symmetric broadband origination (above 45mbit/s up
to and inc. 155Mbit/s);
Technical areas (interconnect circuits); and
Wholesale trunk segments;
are properly prepared in accordance with the relevant procedures, defined in the
Primary and Secondary Accounting Documents, and comply with the requirements of
the Final Statements and Notifications. We also report whether, in forming that
opinion, having reviewed the Primary and Secondary Accounting Documents,
anything has come to our attention that would lead us to conclude that the principles
Page 18
Section 4 – Audit Report
17. In conducting our subsequent examination of the Financial Statements, and in
providing the opinions in paragraph 20 below, we have not performed any additional
tests of the transactions and balances which are recorded in the general ledgers and
other accounting records beyond those already performed for the purpose of the
audits of the Statutory Financial Statements.
and procedures contained in the Primary and Secondary Accounting Documents have
not been properly applied in the preparation of the Market Summary Statements for
the PPIA Markets.
12. We report our opinions as to whether the restated Market Financial Statements as a
whole for the year ended 31 March 2012 are fairly presented in accordance with the
Primary Accounting Documents dated 30 July 2012 subject to the changes described
in “Comparability of current and prior year results” on pages 10 to 12, and comply
with the requirements of the Final Statements and Notifications.
18. Having regard to the above:
a.
we conducted our examination of the Financial Statements in
accordance with International Standards on Auditing (UK and Ireland)
issued by the Auditing Practices Board. Our work included examination,
on a test basis, of evidence relevant to the amounts and disclosures in
the Financial Statements. In respect of the Market Financial Statements
as a whole, each of the Market Group Statements, each of the FPIA
Markets and the Openreach Information it also included an assessment
of the significant estimates and judgements made by the Company in
their preparation;
b.
we planned and performed our examination of the Financial
Statements so as to obtain all the information and explanations which
we considered necessary in order to provide us with sufficient evidence
to give reasonable assurance that the Market Financial Statements as a
whole, each of the Market Group Statements, the Market Summary
Statements for the each of the FPIA Markets and the Openreach
Information are fairly presented in accordance with the relevant
Primary Accounting Documents and, on that basis, are free from
material misstatement, whether caused by fraud or other irregularity or
error. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the Financial Statements;
c.
we planned and performed our examination of the PPIA Markets so as
to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give
reasonable assurance that the Market Summary Statements for the
each of the PPIA Markets are properly prepared in accordance with the
procedures, defined in the relevant Primary and Secondary Accounting
Documents. However, as explained in the introduction to the Primary
Accounting Documents, the Primary Accounting Documents contain
only the high level principles of attribution. The Secondary Accounting
Documents contain only the procedures describing how these high
level principles are applied. In forming our opinion we also evaluated
the overall adequacy of the presentation of information in the PPIA
Market Statements.
13. In addition, we report if, in our opinion, the “Introduction to the Current Cost
Financial Statements”, setting out the basis upon which the Financial Statements
have been prepared, is not consistent with the Financial Statements, if the Company
has not kept proper accounting records, if we have not received all the information
and explanations we require for our examination, or if information specified by the
Final Statements and Notifications is not disclosed.
14. We read the financial and non-financial information presented with the Financial
Statements to identify material inconsistencies with the Financial Statements. If we
become aware of any apparent material misstatements or inconsistencies we consider
the implications for our report. The other information comprises the Review of Access
Markets on page 32, the individual Access Market Reviews on pages 33, 38, 43, 46 to
47, 56 to 57, 62 to 63, 68 and 77, the Review of Other Wholesale Markets on page
84, the individual Other Wholesale Market Reviews on pages 85, 90, 92, 97, 101,
106, 111 and 118, the Price Control Statements on page 153, the Glossary and
Footnotes on pages 155 to 157 and the Additional Information on pages 159.
Basis for opinions
15. As explained in "Basis of preparation" on pages 9 to 13, the Company has, by
agreement with BT Group plc, its ultimate parent company, prepared the Financial
Statements by disaggregating balances recorded in the general ledgers and other
accounting records of BT Group plc and its subsidiaries ("the Group") maintained in
accordance with the Companies Act 2006 and used, in accordance with that Act, for
the preparation of the Company's statutory consolidated financial statements for the
years ended 31 March 2013 and 31 March 2012 ("the Statutory Financial
Statements").
16. PricewaterhouseCoopers LLP audited the Statutory Financial Statements on which
they expressed unqualified audit opinions. Their audit report on the Statutory
Financial Statements describes the scope of their audit of those Statutory Financial
Statements.
Page 19
Section 4 – Audit Report
(f)
19. In forming our opinions on the Market Financial Statements as a whole, each of the
Market Group Statements and each of the FPIA Markets we also reviewed the
Company's Secondary Accounting Documents which describe how the principles
contained in the Primary Accounting Documents are implemented. Our review
consisted of reading the Secondary Accounting Documents and considering whether
each of the significant attribution and valuation methodologies described in these
documents are consistent with the principles described on pages 13 and 14 of the
Primary Accounting Documents.
the Openreach Information for the year ended 31 March 2013, which has been
prepared in accordance with the Primary Accounting Documents dated 31 July
2013, fairly presents in accordance with the Primary Accounting Documents
dated 31 July 2013 the results, mean capital employed and costs incurred by the
Company and complies with the requirements of the Undertakings and the
Openreach Final Statement and Notifications; and
(g) In the context of (a) and (b) and (c) above, the Secondary Accounting Documents
all dated 31 July 2013 are appropriate to implement the principles contained in
the Primary Accounting Documents dated 31 July 2013.
Opinions
20. In our opinion:
(a) the Market Financial Statements as a whole for the year ended 31 March 2013,
which have been prepared in accordance with the Primary Accounting
Documents dated 31 July 2013, fairly present in accordance with the Primary
Accounting Documents dated 31 July 2013 the results, mean capital employed
and costs incurred by the Group and comply with the requirements of the Final
Statements and Notifications;
PricewaterhouseCoopers LLP
Chartered Accountants and Registered Auditors
London, 31 July 2013
(b) each of the Market Group Statements for the year ended 31 March 2013, fairly
presents in accordance with the Primary Accounting Documents dated 31 July
2013 the results, mean capital employed and costs incurred by the Market Group
and complies with the requirements of the Final Statements and Notifications;
(c) the statement of financial performance for each of the FPIA Markets for the year
ended 31 March 2013, fairly presents in accordance with the Primary Accounting
Documents dated 31 July 2013 the results, mean capital employed and costs
incurred by each of the markets and complies with the requirements of the Final
Statements and Notifications;
(d) the statement of financial performance for each of the PPIA Markets for the year
ended 31 March 2013 have been properly prepared in accordance with the
procedures, if any, defined in the Primary and Secondary Accounting Documents
all dated 31 July 2013 and complies with the requirements of the Final
Statements and Notifications;
(e) the restated Market Financial Statements as a whole for the year ended 31 March
2012 are fairly presented in accordance with the Primary Accounting Documents
dated 31 July 2012, and comply with the requirements of the Final Statements
and Notifications as amended, where applicable, in accordance with
“Comparability of current and prior year results” on pages 10 to 12;
Page 20
Section 5 – Summary of Financial Performance
Section 5
Summary of Financial Performance
Page 21
Section 5 – Summary of Financial Performance
Section 5.1 – Consolidated Performance Summary (Annex 3)
For the year ended 31 March 2013
Markets
Access Markets
Other Wholesale Markets
Residual Activities
Wholesale residual activities
Retail residual activities
Roundings
Total Markets & Activities
Restated for the year ended 31 March 2012 (h)
Markets
Access Markets
Other Wholesale Markets
Residual Activities
Wholesale residual activities
Retail residual activities
Roundings
Total Markets & Activities
Revenue
£m
CCA
operating
costs
£m
CCA return
before
taxation
£m
MCE
£m
Return on
MCE
%
Supporting
information
Section 7
Section 8
4,495
1,053
5,548
3,072
794
3,866
1,423
259
1,682
11,640
1,478
13,118
12.2 %
17.5 %
12.8 %
2,565
14,615
17,180
1,966
13,650
15,616
599
965
1,564
2,437
103
2,540
24.6 %
936.9 %
61.6 %
2
(1)
3
1
22,730
19,481
3,249
15,659
Revenue
£m
CCA
operating
costs
£m
CCA return
before
taxation
£m
MCE
£m
n/a
20.7 %
Return on
MCE
%
Supporting
information
Section 7
Section 8
4,687
1,140
5,827
3,151
838
3,989
1,536
302
1,838
11,803
1,468
13,271
13.0 %
20.6 %
13.8 %
2,773
15,252
18,025
2,513
14,267
16,780
260
985
1,245
1,907
474
2,381
13.6 %
207.8 %
52.3 %
(1)
1
(1)
20,768
3,084
15,651
23,852
(h) See Section 2 - Basis of Preparation for explanation of restatement.
Page 22
n/a
19.7 %
Section 6 – Attribution of Wholesale Current Costs and Mean Capital Employed
Section 6
Attribution of Wholesale Current Costs and Mean Capital Employed
Page 23
Section 6 – Attribution of Wholesale Current Costs and Mean Capital Employed
Section 6.1 - Attribution of Wholesale Current Costs 2013 (Annex 5A)
TISBO (above 45Mbit/s up to
and including 155Mbit/s)
AISBO (up to and including
1Gbit/s)
Wholesale local access
Total Access Markets
Call origination on fixed public
narrowband networks
Single transit on fixed public
narrowband networks
Technical areas (Interconnect
Circuits)
Fixed call termination
Wholesale trunk segments
Technical areas (Point of
Handover)
Sub-total Other Wholesale &
SMP National Markets
Wholesale broadband access Market 1
Wholesale broadband access Market 2
Wholesale Residual
Total Markets
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
0
169
111
178
261
10
126
0
22
16
414
28
107
565
0
8
4
7
10
0
10
0
2
2
13
3
4
22
0
10
5
13
18
1
12
0
3
2
12
17
6
37
0
36
19
36
47
2
50
0
10
10
35
55
18
118
0
2
1
2
3
0
3
0
1
1
2
5
1
9
0
2
1
2
3
0
4
0
1
1
2
9
1
13
0
11
28
67
93
3
16
0
8
4
74
59
54
191
0
120
51
98
115
5
91
0
13
22
143
8
90
263
0
358
220
403
550
21
312
0
60
58
695
184
281
1,218
0
12
3
12
21
0
41
0
5
6
2
16
10
34
0
0
0
0
1
0
1
0
0
0
0
1
0
1
0
2
1
2
5
0
6
0
1
1
1
4
1
7
0
11
3
7
12
0
43
0
5
7
2
18
9
36
0
2
1
2
4
0
4
0
1
1
2
9
1
13
0
1
0
1
1
0
1
0
0
0
1
1
1
3
0
28
8
24
44
0
96
0
12
15
8
49
22
94
119
17
3
14
33
1
47
0
8
9
21
64
27
121
59
7
1
6
15
0
14
0
3
3
6
29
11
49
178
52
12
44
92
1
157
0
23
27
35
142
60
264
(178)
197
55
178
286
11
130
0
754
28
78
226
260
592
0
607
287
625
928
33
599
0
837
113
808
552
601
2,074
1,442
63
99
318
21
26
417
756
3,142
128
3
24
117
27
7
306
363
154
823
(6)
6
0
-
(3)
(1)
2
-
(14)
(2)
2
-
(1)
(1)
0
-
(2)
(1)
0
-
(23)
(5)
11
-
(69)
71
(15)
-
0
0
0
-
(1)
0
0
-
(5)
2
0
-
0
0
0
-
(14)
6
2
-
(4)
(10)
(2)
-
63
97
304
19
23
400
743
3
23
24
7
300
347
(203)
203
(19)
1,423
(321)
270
(19)
3,072
(4)
2
1
127
Page 24
(4)
2
1
116
(1)
(6)
0
147
Total Other Wholesale & SMP
Markets
TISBO (above 8Mbit/s up to and
including 45Mbit/s)
Total CCA Operating Costs
TISBO (up to and including
8Mbit/s)
CCA Adjustments:
Holding Loss/(Gain)
Supplementary Depreciation
Other Adjustments
Roundings
Wholesale business ISDN30
exchange line services
Sub Total HCA Operating Costs
Wholesale ISDN2 exchange
line services
Operating Costs of Wholesale Services:
EOI Charges
Provision/Maintenance
Network Support
General Support
General Management
Finance and Billing
Accommodation
Bad Debts
Other Costs
Depreciation - Land & Buildings
- Access
- Switch and Transmission
- Other related
Sub Total Depreciation
Wholesale analogue exchange
line services
For the year ended 31 March 2013
(19)
(10)
0
794
2,025
(22)
(26)
(11)
1,966
5,990
(362)
234
(30)
5,832
Section 6 – Attribution of Wholesale Current Costs and Mean Capital Employed
Section 6.1.1 - Notes on Wholesale sector costs
Other Costs
The notes below are intended to provide a brief description of the sectors reported in the
Attribution of Wholesale Current Cost Statement and the key drivers of these sectors to aid
the user of the Current Cost Financial Statements 2013. Further details of these sectors can
be found in the Detailed Attribution Methods (DAM) which outlines in detail the key bases,
descriptions and drivers of the network components.
Other Costs are dominated by payments to other UK communications providers, but also
include payments to overseas administrations and internal product transfer charge costs.
The key drivers include the pence per minute charging of the other operators for BT traffic
on their network.
Depreciation
Provision/Maintenance
Depreciation is analysed between land and buildings, access, switch and transmission and
other (including network power, computers and software). The key drivers are engineering
models and direct mapping of BT classes of work to network components and then onto the
appropriate service, based on usage factors and actual service volumes
Provision/Maintenance includes costs of network provision, installation and maintenance.
The most material cost relates to D-side copper maintenance which is apportioned to
services on the basis of the number of lines, relative fault rates and service levels.
Network Support
Network Support contains costs of activities necessary to support the running of BT’s
network such as time booked by engineers to non-operational activities. Most of these
costs are apportioned used previously allocated engineers pay.
General Support
General Support includes planning, development, supplies, transport, computing, customer
service, personnel & administration, customer support and other general support costs. The
key drivers for the apportionment of General Support include previously allocated pay
costs, time recording systems and activity surveys.
General Management
General Management includes operator services, costs of general management activities
and other general expenses. The key drivers are activity surveys, pay costs and asset values.
Finance and Billing
Finance and Billing includes costs associated with activities of a financial nature, such as
budget building, management reporting, and billing and collection costs. The key drivers
for the apportionment of Finance and Billing include activity surveys, pay costs and asset
values.
Accommodation
The Accommodation sector includes exchange and office building costs. Accommodation
costs are mainly apportioned based on the use of floor space.
Bad Debts
Bad debts include costs associated with writing off amounts that cannot be collected from
customers. The key driver is revenue.
Page 25
Section 6 – Attribution of Wholesale Current Costs and Mean Capital Employed
Section 6.2 - Attribution of Wholesale Current Costs 2012 (Annex 5A) (h)
TISBO (above 8Mbit/s up to
and including 45Mbit/s)
TISBO (above 45Mbit/s up
to and including 155Mbit/s)
AISBO (up to and including
1Gbit/s)
Wholesale local access
Total Access Markets
Call origination on fixed
public narrowband
networks
Single transit on fixed
public narrowband
networks
Technical areas
(Interconnect Circuits)
Fixed call termination
Wholesale trunk segments
Technical areas (Point of
Handover)
Sub-total Other Wholesale
& SMP National Markets
Wholesale broadband
access - Market 1
Wholesale broadband
access - Market 2
Total Other Wholesale &
SMP Markets
Wholesale Residual
Total Markets
Total CCA Operating Costs
TISBO (up to and including
8Mbit/s)
CCA Adjustments:
Holding Loss/(Gain)
Supplementary Depreciation
Other Adjustments
Roundings
Wholesale business
ISDN30 exchange line
services
Sub Total HCA Operating Costs
Wholesale ISDN2
exchange line services
Operating Costs of Wholesale Services:
EOI Charges
Provision/Maintenance
Network Support
General Support
General Management
Finance and Billing
Accommodation
Bad Debts
Other Costs
Depreciation - Land & Buildings
- Access
- Switch and Transmission
- Other related
Sub Total Depreciation
Wholesale analogue
exchange line services
Restated for the year ended 31 March 2012
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
0
166
123
173
238
12
149
0
9
16
433
39
76
564
0
7
4
8
11
0
11
0
0
2
14
4
4
24
0
9
6
14
22
1
18
0
1
2
12
20
8
42
0
30
22
42
58
4
62
0
4
9
38
64
24
135
0
1
1
3
4
0
3
0
0
1
3
7
1
12
0
1
1
2
3
0
3
0
0
1
1
8
1
11
0
12
32
57
114
4
21
0
6
2
67
58
88
215
0
96
46
81
96
5
85
0
4
21
114
8
60
203
0
322
235
380
546
26
352
0
24
54
682
208
262
1,206
0
9
3
15
27
2
41
0
1
6
2
24
9
41
0
0
0
0
0
0
2
0
0
0
0
1
0
1
0
2
1
3
5
1
6
0
0
1
1
5
3
10
0
7
3
10
13
0
41
0
1
6
2
25
8
41
0
2
1
2
4
0
5
0
0
1
2
15
2
20
0
1
1
1
1
0
1
0
0
0
1
2
2
5
0
21
9
31
50
3
96
0
2
14
8
72
24
118
143
15
3
14
29
3
36
0
3
7
17
51
33
108
84
6
1
7
15
2
17
0
1
4
6
26
17
53
227
42
13
52
94
8
149
0
6
25
31
149
74
279
(227)
275
54
158
365
21
151
0
1,121
23
75
216
269
583
0
639
302
590
1,005
55
652
0
1,151
102
788
573
605
2,068
1,434
65
113
357
24
21
461
616
3,091
139
3
28
116
34
10
330
354
186
870
2,501
6,462
(211)
211
5
-
(6)
6
1
-
(5)
(1)
16
-
(20)
(2)
18
-
(1)
(1)
3
-
(1)
(1)
0
-
(31)
(2)
82
-
(55)
56
(1)
-
(330)
266
124
-
(5)
0
(2)
-
0
0
0
-
(2)
0
0
-
(6)
0
(2)
-
(5)
0
(6)
-
0
0
1
-
(18)
0
(9)
-
(3)
(9)
7
-
0
(5)
5
-
(21)
(14)
3
-
(11)
(24)
47
-
(362)
228
174
-
1,439
66
123
353
25
19
510
616
3,151
132
3
26
108
23
11
303
349
186
838
2,513
6,502
(h) See Section 2 - Basis of Preparation for explanation of restatement.
Page 26
Section 6 – Attribution of Wholesale Current Costs and Mean Capital Employed
Section 6.3 - Attribution of Wholesale Current Cost Mean Capital Employed 2013 (Annex 6A)
Investments
Total Non-current Assets
AISBO (up to and
including 1Gbit/s)
Total Access Markets
Call origination on fixed
public narrowband
networks
Single transit on fixed
public narrowband
networks
Technical areas
(Interconnect Circuits)
Fixed call termination
Wholesale trunk
segments
Technical areas (Point of
Handover)
Wholesale broadband
access - Market 1
Wholesale broadband
access - Market 2
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
95
15
164
271
0
169
76
6
0
12
19
0
14
5
9
0
7
31
0
23
6
21
0
459
448
0
271
156
231
1,124
0
904
16
47
284
525
4,437
713
4,490
132
709
908
66
0
0
79
48
51
34
1
0
0
0
2
5
1
10
0
2
19
5
11
5
71
0
0
85
51
55
32
10
0
0
92
0
41
6
1
0
8
3
0
3
1
159
0
10
278
106
166
79
105
40
0
97
0
182
92
30
11
0
24
0
83
33
294
51
10
399
106
431
204
277
195
374
317
78
666
651
1,096
4,683
1,097
5,206
316
1,806
1,763
Total Markets
TISBO (above 45Mbit/s
up to and including
155Mbit/s)
£m
18
11
71
51
8
40
22
Wholesale Residual
TISBO (above 8Mbit/s up
to and including
45Mbit/s)
£m
16
100
0
87
14
6
15
Total Other Wholesale &
SMP Markets
TISBO (up to and
including 8Mbit/s)
£m
Sub-total Other
Wholesale & SMP
National Markets
Wholesale business
ISDN30 exchange line
services
£m
129
3,187
0
2,679
94
139
344
Wholesale local access
Wholesale ISDN2
exchange line services
Non-current Assets
Land & Buildings
Access - Copper
Access - Fibre
Access - Duct
Switch
Transmission
Other
Wholesale analogue
exchange line services
For the year ended 31 March 2013
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6,572
238
221
790
56
76
1,355
2,606
11,914
278
9
52
294
149
16
798
516
181
1,495
2,558
15,967
Current Assets
Inventories
Receivables
- Internal
- External
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
1
117
436
8
26
17
79
27
118
2
10
3
18
48
203
49
146
271
1,036
10
40
0
2
3
10
9
34
5
25
0
3
27
114
24
113
12
62
63
289
(52)
1,246
282
2,571
Total Current Assets
553
34
96
145
12
21
251
195
1,307
50
2
13
43
30
3
141
138
74
353
1,213
2,873
0
(615)
(615)
0
(34)
(34)
0
(92)
(92)
0
(149)
(149)
0
(12)
(12)
0
(19)
(19)
0
(279)
(279)
0
(245)
(245)
0
(1,445)
(1,445)
0
(51)
(51)
0
(2)
(2)
0
(13)
(13)
0
(44)
(44)
0
(25)
(25)
0
(4)
(4)
0
(139)
(139)
(7)
(130)
(137)
(4)
(66)
(70)
(11)
(335)
(346)
11
(1,166)
(1,155)
0
(2,946)
(2,946)
(1)
0
0
9
52
0
(1)
(4)
-
-
-
-
51
289
154
15
Payables falling due within one year
- Internal
- External
Total payables falling due within one year
Net Current Assets/(Payables)
Total Assets less Current Payables
Provisions for liabilities & charges
Roundings
Mean Capital Employed
(62)
6,510
(69)
6,441
0
4
238
225
(4)
786
0
2
56
78
(3)
(4)
(7)
-
-
-
-
0
-
0
235
221
779
56
78
(28)
1,327
(50)
2,556
(138)
11,776
(17)
(36)
(136)
-
-
-
1,310
2,520
11,640
277
(5)
272
Non-current assets are net of government grants of £7.5m (2011/12: nil).
Page 27
9
(1)
293
5
154
0
(1)
19
2
1
4
7
58
15
800
517
185
1,502
2,616
0
(10)
(10)
-
-
-
790
507
181
(4)
(24)
(179)
-
-
1,478
2,437
20
(73)
15,894
(339)
15,555
Section 6 – Attribution of Wholesale Current Costs and Mean Capital Employed
Section 6.3.1 - Notes on Wholesale MCE sector costs
The notes below are intended to provide a brief description of the non-current assets
sectors and Working Capital reported in the Attribution of Wholesale Current Cost Mean
Capital Employed statement and the key drivers of the sector to aid the user of the Financial
Statements. Further details of these sectors can be found in the Detailed Attribution
Methods which outlines in detail the key bases, descriptions and drivers of the network
components.
Transmission
This sector contains the asset values for transmission. Transmission includes core
transmission Synchronous Digital Hierarchy (SDH), Plesiochronous Digital Hierarchy (PDH),
Asynchronous Transfer Mode (ATM), cables and repeaters. The core transmission is used to
link exchanges. The key drivers are engineering inventories and models that allocate CoW to
network components and then onto the appropriate service based on usage factors and
actual service volumes.
Land & Buildings
This sector contains the asset values that are booked to BT Classes of Work for land and
buildings, including freehold, long leases and short leases. The sector includes corporate
office and network buildings owned by BT. Asset values are mainly apportioned based on
the use of floor space and utilities.
Other
This sector contains the asset values for a range of assets used by BT businesses including
categories such as Software, Motor Transport and 21CN. The key drivers are surveys,
engineering models and direct mapping of CoW to network components and then onto the
appropriate service based on usage factors and actual service volumes.
Access - Copper
This sector contains the asset values for access copper (all the copper cables in the access
network and all other necessary equipment required to carry signals between the user and
the exchange). The key driver is direct mapping of Class of Work (CoW) to network
components and then onto the appropriate service based on usage factors and actual
service volumes.
Working Capital
The figures for debtors and creditors include an approximation of the internal “notional”
receivables and payables that would be incurred if trades between BT’s lines of business
were undertaken to a third party and at arm’s length. They are based upon the average
trading terms of BT Group’s external trades. External receivables reflect BT’s external debts
being allocated to services and products.
Access - Fibre
This sector contains the asset values for access fibre. The key driver is the mapping of CoW
to network components and then onto the appropriate service based on usage factors and
actual service volumes.
Access - Duct
This sector contains the asset values for duct. Duct is a pipe, tube or conduit through which
underground cables are passed. The key driver is a duct occupancy model that allocates
CoW to network cable components and then onto the appropriate service based on usage
factors and actual service volumes.
Switch
This sector contains the asset values for switching equipment. This equipment is located in
BT exchanges. The key drivers are engineering models that allocate CoW to network
component and then onto the appropriate service based on usage factors and actual service
volumes.
Page 28
Section 6 – Attribution of Wholesale Current Costs and Mean Capital Employed
Section 6.4 - Attribution of Wholesale Current Cost Mean Capital Employed 2012 (Annex 6A) (h)
Investments
Total Non-current Assets
TISBO (above 45Mbit/s
up to and including
155Mbit/s)
AISBO (up to and
including 1Gbit/s)
Total Access Markets
Call origination on fixed
public narrowband
networks
Single transit on fixed
public narrowband
networks
Technical areas
(Interconnect Circuits)
Fixed call termination
Wholesale trunk
segments
Technical areas (Point of
Handover)
Sub-total Other
Wholesale & SMP
National Markets
Wholesale broadband
access - Market 1
Wholesale broadband
access - Market 2
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
19
13
71
52
10
48
26
102
18
187
299
0
196
93
6
0
16
20
0
16
6
8
0
6
19
0
19
6
21
0
423
429
0
253
264
223
920
0
721
18
39
244
522
4,504
703
4,465
166
733
950
67
0
0
96
59
62
41
1
0
0
0
3
6
1
11
0
2
15
6
12
9
69
0
0
98
62
64
38
12
0
0
85
0
50
8
1
0
9
3
0
5
2
161
0
11
297
130
199
99
95
74
0
54
0
123
86
46
21
0
21
0
67
45
302
95
11
372
130
389
230
210
135
263
334
91
716
736
1,034
4,734
977
5,171
387
1,838
1,916
Total Markets
TISBO (above 8Mbit/s up
to and including
45Mbit/s)
£m
16
105
0
86
18
6
15
Wholesale Residual
TISBO (up to and
including 8Mbit/s)
£m
Total Other Wholesale &
SMP Markets
Wholesale business
ISDN30 exchange line
services
£m
127
3,448
0
2,839
120
156
296
Wholesale local access
Wholesale ISDN2
exchange line services
Non-current Assets
Land & Buildings
Access - Copper
Access - Fibre
Access - Duct
Switch
Transmission
Other
Wholesale analogue
exchange line services
Restated for the year ended 31 March 2012
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
6,986
246
239
895
64
58
1,390
2,165
12,043
325
11
55
331
155
20
897
432
200
1,529
2,485
16,057
Current Assets
Inventories
Receivables
- Internal
- External
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(6)
(3)
128
409
8
20
18
64
33
75
2
6
3
10
44
78
46
108
282
770
11
23
0
1
3
8
9
15
5
16
0
1
28
64
25
72
15
44
68
180
(55)
753
295
1,703
Total Current Assets
741
2,032
(9)
43
34
537
28
82
108
8
13
122
154
1,052
34
1
11
24
21
1
92
91
56
239
Payables falling due within one year
- Internal
- External
0
(512)
0
(25)
0
(77)
0
(122)
0
(8)
0
(11)
0
(165)
0
(171)
0
(1,091)
0
(38)
0
(2)
0
(11)
0
(28)
0
(18)
0
(2)
0
(99)
(9)
(84)
(5)
(49)
(14)
(232)
14
(1,060)
0
(2,383)
Total payables falling due within one year
(512)
(25)
(77)
(122)
(8)
(11)
(165)
(171)
(1,091)
(38)
(2)
(11)
(28)
(18)
(2)
(99)
(93)
(54)
(246)
(1,046)
(2,383)
25
3
5
(14)
0
2
(43)
(17)
(39)
(4)
(1)
0
(4)
3
(1)
(7)
(2)
2
(7)
(305)
7,011
249
244
881
64
60
10
55
327
(24)
0
(2)
(15)
Net Current Assets/(Payables)
Total Assets less Current Payables
Provisions for liabilities & charges
Roundings
Mean Capital Employed
(93)
6,918
(5)
(9)
(1)
(1)
-
-
-
-
-
244
235
857
63
59
1,347
2,148
12,004
321
158
19
890
430
202
(21)
(47)
(201)
(16)
(1)
(1)
(35)
(13)
-
-
-
-
-
-
-
-
-
-
-
-
305
10
53
312
157
18
855
417
196
1,326
2,101
11,803
(h) See Section 2 - Basis of Preparation for explanation of restatement.
Page 29
(6)
1,522
2,180
(54)
(273)
-
-
1,468
1,907
(351)
15,706
(528)
15,178
Section 7 – Review of Access Markets
Section 7
Review of Access Markets
Page 30
Section 7 – Review of Access Markets
Section 7.1 - Financial Performance in Access Markets (Annex 7)
For the year ended 31 March 2013
Wholesale analogue exchange line services
Wholesale ISDN2 exchange line services
Wholesale business ISDN30 exchange line services
TISBO (up to and including 8Mbit/s)
TISBO (above 8Mbit/s up to and including 45Mbit/s)
TISBO (above 45Mbit/s up to and including 155Mbit/s)
AISBO (up to and including 1Gbit/s)
Wholesale local access
Total Access Markets
Restated for the year ended 31 March 2012 (h)
Wholesale analogue exchange line services
Wholesale ISDN2 exchange line services
Wholesale business ISDN30 exchange line services
TISBO (up to and including 8Mbit/s)
TISBO (above 8Mbit/s up to and including 45Mbit/s)
TISBO (above 45Mbit/s up to and including 155Mbit/s)
AISBO (up to and including 1Gbit/s)
Wholesale local access
Total Access Markets
Internal
Revenue
£m
1,404
65
151
193
20
31
477
0
External
Revenue
£m
529
67
126
261
12
19
326
814
Total
Revenue
£m
1,933
132
277
454
32
50
803
814
2,341
2,154
4,495
Internal
Revenue
£m
1,568
73
175
253
24
32
445
0
External
Revenue
£m
555
61
130
301
13
18
280
759
Total
Revenue
£m
2,123
134
305
554
37
50
725
759
2,570
2,117
4,687
Operating
Costs Depreciation
£m
£m
877
565
41
22
62
37
200
118
12
9
13
13
226
191
493
263
1,924
1,218
Operating
Costs Depreciation
£m
£m
870
564
41
24
71
42
222
135
12
12
10
11
246
215
413
203
1,885
1,206
(h) See Section 2 - Basis of Preparation for explanation of restatement.
Page 31
Holding
(gain)/loss Supp. Dep. Other Adjs.
£m
£m
£m
(203)
203
(19)
(6)
6
0
(3)
(1)
2
(14)
(2)
2
(1)
(1)
0
(2)
(1)
0
(23)
(5)
11
(69)
71
(15)
(321)
270
Holding
(gain)/loss Supp. Dep.
£m
£m
(211)
211
(6)
6
(5)
(1)
(20)
(2)
(1)
(1)
(1)
(1)
(31)
(2)
(55)
56
(330)
266
(19)
Other Adjs
£m
5
1
16
18
3
0
82
(1)
124
Roundings
£m
-
Roundings
£m
-
Total CCA
Operating
Costs
£m
1,423
63
97
304
19
23
400
743
3,072
Total CCA
Operating
Costs
£m
1,439
66
123
353
25
19
510
616
3,151
Return
£m
510
69
180
150
13
27
403
71
Mean Capital
Employed
£m
6,441
235
221
779
56
78
1,310
2,520
Return on
MCE
%
7.9 %
29.5 %
81.6 %
19.3 %
23.3 %
35.5 %
30.8 %
2.8 %
1,423
11,640
12.2 %
Return
£m
684
68
182
201
12
31
215
143
Mean Capital
Employed
£m
6,918
244
235
857
63
59
1,326
2,101
Return on
MCE
%
9.9 %
28.1 %
77.5 %
23.5 %
19.5 %
52.6 %
16.2 %
6.8 %
1,536
11,803
13.0 %
Section 7 – Review of Access Markets
Section 7.2 - Access Markets Review (Annex 10 & 11)
Section 7.2.1 - Access Markets Group Level Review (Annex 10)



In the Wholesale Line Rentals (WLR) Access markets, the reduction in WLR lines has
continued, primarily due to migrations to Metallic Path Facilities (MPF) and the
increasing number of mobile-only households. Local Loop Unbundling LLU operators
have continued to migrate significant numbers of lines to MPF from WLR and Shared
Metallic Path Facilities (SMPF).
For Partial Private Circuits (PPCs), competition and customer demand for alternative
technologies is resulting in falling volumes in these markets. Price changes in these
markets took place in October 2012 to enable compliance with charge controls and
regulatory obligations.
The Alternative Interface Symmetric Broadband Origination (AISBO) Market has
continued to show growth. Ethernet Access Direct (EAD) access products have grown in
particular, due to the increased demand from mobile operators and a general migration
from older technologies including products within the Traditional Interface Symmetric
Broadband Origination (TISBO) Market.
Access Markets Openreach Level Review

A calculation of the return for all Openreach markets has been performed and is
described as part of the Openreach Notes in Section 10.7. This explains the return
before and after adjusting for a number of significant items.
Page 32
Section 7 – Review of Access Markets
Section 7.3 - Wholesale Analogue Exchange Line Services
Definition
Summary Market Performance
Wholesale Analogue Exchange Line Services are the links between an end user and the
remote concentrator unit by means of analogue technology.
An analogue exchange line provides a single 64kbit/s channel, designed originally to
support voice traffic, but also capable of supporting data modems with bandwidths of up to
56kbit/s, DSL Services, and facsimile traffic. These are the most common types of exchange
lines.
Year
2013
2012
Revenue
£m
1,933
2,123
Total CCA
Operating
Costs Return
£m
£m
1,423
510
1,439
684
Return on
MCE
%
7.9%
9.9%
Key Market Changes
Key Regulatory Changes
The mix of regulated copper products in the market has changed significantly since the last
Wholesale Fixed Access Exchange Line review in 2010. The volume of WLR PSTN lines
continues to decline, and as indicated by Ofcom’s data in its final copper charge control
statement in March 2012, MPF lines are now anticipated to move from being just under one
in ten copper lines in 2009/10 to a forecast of just under one in three in 2013/14. Hence
competition between services based on fully unbundled lines (MPF) and shared unbundling
(WLR/SMPF) has now reached maturity and BT have argued that any previous regulatory
measures designed to support MPF market entry should now be removed.
Ofcom published its review of wholesale fixed analogue exchange lines markets on 20
December 2010. This review found that there is a single market for wholesale analogue
exchange line services and that BT continues to have SMP.
In its WLR charge control statements in 26 October 2009 and 23 February 2010, Ofcom
removed the cost orientation obligation for the WLR Premium product, which is generally
used by business customers, and for repair service levels beyond those contained within the
WLR Basic or “Core” rental product.
In addition to the impact of MPF, there are a number of other factors continuing to drive
changes in the market, such as changes in mobile only households, cable growth and new
household formation.
The WLR Charge Control expired on 31 March 2011. In the absence of the new charge
control being set by Ofcom from 1 April 2011, Openreach provided a voluntary commitment
to Ofcom regarding the prices that it would charge for the period 1 April 2011 until 31
March 2012. These prices were agreed and based upon the cost modelling used by Ofcom to
calculate the previous charge controls and adjusted to reflect the Competition Appeal
Tribunal (CAT) ruling following the appeal by Carphone Warehouse Group of Ofcom’s 2009
Local Loop Unbundling and WLR charge controls statements.
On 7 March 2012, Ofcom published a new charge control for WLR services which will apply
from 1 April 2012 to 31 March 2014.
The new charge control was subsequently appealed by both BT and Sky/TalkTalk Group
during 2012 on a range of different issues. Following detailed submissions by all parties and
review by the Competition Commission (CC) and CAT some prices were changed with effect
from 1 May 2013. In parallel Ofcom has also commenced work on its next charge control
which will apply from April 2014.
Page 33
Section 7 – Review of Access Markets
Section 7.3.1 - Wholesale Analogue Exchange Line Services (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale analogue exchange line services
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited
Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Service
Wholesale basic analogue internal service rentals
Wholesale basic analogue external service rentals
1,049
316
10,613,479 lines
3,198,332 lines
13,811,811
98.81
98.81
102.30
102.30
Wholesale premium analogue internal service rentals
Wholesale premium analogue external service rentals
309
183
2,806,032 lines
1,660,975 lines
4,467,007
110.00
110.00
105.05
105.05
Wholesale basic analogue internal service connections
24
477,997 conns
50.44
45.46
36.91
90.30
Wholesale premium analogue internal service connections
Wholesale premium and basic analogue external service connections
12
21
245,640 conns
419,773 conns
665,413
50.44
50.44
45.46
45.46
36.91
36.91
90.30
90.30
Wholesale premium and basic analogue internal service transfers
Wholesale premium and basic analogue external service transfers
10
9
1,210,667 transfer
1,154,507 transfer
2,365,174
8.29
7.93
(ux)
(ux)
Roundings
TOTAL
1,933
Page 34
Section 7 – Review of Access Markets
Section 7.3.1 - Wholesale Analogue Exchange Line Services (Continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale analogue exchange line services
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited
Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
Wholesale basic analogue internal service rentals
Wholesale basic analogue external service rentals
1,184
331
11,418,728 lines
3,191,445 lines
14,610,173
103.68
103.68
101.27
101.27
56.70
56.70
138.67
138.67
Wholesale premium analogue internal service rentals
Wholesale premium analogue external service rentals
333
194
3,026,492 lines
1,762,117 lines
4,788,609
110.00
110.00
103.01
103.01
57.82
57.82
141.17
141.17
Wholesale basic analogue internal service connections
27
569,401 conns
48.22
39.00
36.77
84.41
Wholesale premium analogue internal service connections
Wholesale premium and basic analogue external service connections
15
26
317,101 conns
534,313 conns
851,414
48.22
48.22
39.00
39.00
36.77
36.77
84.41
84.41
(sx)
(sx)
(ux)
(ux)
Wholesale premium and basic analogue internal service transfers
Wholesale premium and basic analogue external service transfers
9
4
Roundings
-
TOTAL
(ux)
(ux)
2,123
Page 35
Section 7 – Review of Access Markets
Section 7.3.2 - Wholesale Analogue Exchange Line Services calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
£
Components
Unit (d)
Wholesale Access specific
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
PSTN line cards
Broadband line testing systems
Combi Card voice
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
Directories (q)
£/trans
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
%
%
%
%
Fully Allocated Costs (£)
12.37
4.50
17.13
9.36
1.82
51.38
7.01
1.80
0.86
0.20
15.10
3.66
7.31
2.50
0.24
£29m
£17m
£112m
£37m
£
£
9.32
1.82
51.21
7.02
1.81
0.86
0.20
15.10
3.67
7.31
0.69
0.24
0.82
0.17
9.33
2.19
51.23
8.42
1.81
1.04
0.20
15.11
4.40
7.32
0.69
0.24
0.82
0.19
2.06
2.06
102.30
105.05
Wholesale premium and basic analogue
connections
Wholesale premium analogue internal
service connections
Wholesale basic analogue internal service
connections
Wholesale premium analogue rentals
Fully Allocated Cost (£)
Wholesale basic analogue rentals
Average cost per unit (from annex 15)
Wholesale analogue exchange line services
£
£
12.40
4.50
17.17
12.40
4.50
17.17
12.40
4.50
17.17
0.09
11.30
0.09
11.30
0.09
11.30
45.46
45.46
45.46
Page 36
Section 7 – Review of Access Markets
Section 7.3.2 - Wholesale Analogue Exchange Line Services calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
Wholesale Access specific
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
PSTN line cards
Pair gain
Broadband line testing systems
Combi Card voice
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
Directories (q)
£/trans
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/eq
£/line
£/line
%
%
%
%
Fully Allocated Costs (£)
(b)
(ux)
(sx)
(d)
(q)
(h)
1.28
6.10
21.32
9.66
2.04
46.31
6.49
1.71
1.17
0.17
18.26
4.52
7.73
0.10
2.09
0.24
£45m
£20m
£124m
£27m
£
£
£
£
9.66
2.04
46.31
6.49
1.72
1.17
0.17
18.26
4.52
7.73
0.10
0.49
0.24
0.74
0.21
9.66
2.04
46.31
6.49
1.72
1.17
0.17
18.26
4.52
7.73
0.10
0.49
0.24
0.74
0.21
9.66
2.45
46.32
7.79
1.72
1.17
0.17
18.27
4.52
7.73
0.10
0.49
0.24
0.74
0.22
9.66
2.45
46.32
7.79
1.72
1.17
0.17
18.27
4.52
7.73
0.10
0.49
0.24
0.74
0.22
1.42
1.42
1.42
1.42
101.27
101.27
103.01
103.01
£
Wholesale premium and basic analogue
external service connections
Wholesale premium analogue internal
service connections
Wholesale basic analogue internal service
connections
Wholesale premium analogue external
service rentals
Wholesale premium analogue internal
service rentals
Wholesale basic analogue external service
rentals
Fully Allocated Cost (£)
Wholesale basic analogue internal service
rentals
Average cost per unit (from annex 15)
Wholesale analogue exchange line services
£
1.28
6.10
21.36
1.28
6.10
21.36
1.28
6.10
21.36
0.10
10.16
0.10
10.16
0.10
10.16
39.00
39.00
39.00
See glossary for volume unit descriptors.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 37
Section 7 – Review of Access Markets
Section 7.4 - Wholesale ISDN2 Exchange Line Services
Definition
Wholesale ISDN2 Exchange Line Services are the links between an end user and the remote
concentrator unit by means of ISDN2 technology.
Digital ISDN2 exchange lines are basic rate ISDN lines, which provide a means to deploy a
wide range of digital services over a standard local loop. A single ISDN2 line supports two
64kbit/s channels for voice and data calls, plus a 16kbit/s channel for signalling.
Key Regulatory Changes
The existing regime was set in the Wholesale Fixed Narrowband Market Review published by
Ofcom in September 2009. ISDN2 regulation is now being reviewed as part of the Fixed
Access Market Review (FAMR) published on 4 July 2013. BT has already set out its position
that the cost orientation regulation should be removed as part of its submission to the FAMR
Call for Inputs in January 2013. Ofcom’s final statement is expected in Q4 2013/14 which
will set the regulation from April 2014.
Summary Market Performance
Year
2013
2012
Revenue
£m
132
134
Total CCA
Operating
Costs
£m
63
66
Return
£m
69
68
Return on
MCE
%
29.5%
28.1%
Key Market Changes
ISDN2 volumes have continued to decline over many years as alternatives including SIP
Trunking, broadband and NGA services, along with further broadband penetration, provide
opportunities for substitution. Broadband has completely superseded ISDN2 in the
residential segment and, where internet access is the primary requirement, broadband has
replaced ISDN2 in the business segment.
The service is in long term decline and barriers to customers switching to alternatives are
low.
Page 38
Section 7 – Review of Access Markets
Section 7.4.1 - Wholesale ISDN2 Exchange Line Services (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale ISDN2 exchange line services
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Cost orientation
Average
price
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
For the year ended 31 March 2013
Service
Wholesale ISDN2 internal service rentals
Wholesale ISDN2 external service rentals
62
64
556,891 channels
580,944 channels
1,137,835
110.49
110.50
71.77
71.70
42.32
42.26
106.87
106.60
Wholesale ISDN2 internal service connections
Wholesale ISDN2 external service connections
4
2
41,414 channels
27,644 channels
69,058
89.76
75.79
28.31
28.18
20.84
20.72
64.39
63.99
Wholesale ISDN2 internal service transfers
Wholesale ISDN2 external service transfers
0
1
1,753 channels
38,178 channels
39,931
24.57
20.91
17.65
17.62
10.62
10.60
47.73
47.62
Roundings
TOTAL
(1)
132
Page 39
Section 7 – Review of Access Markets
Section 7.4.1 - Wholesale ISDN2 Exchange Line Services (Continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale ISDN2 exchange line services
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
FAC
£
Cost orientation
Unaudited
Unaudited
(D)LRIC
DSAC
£
£
Restated for the year ended 31 March 2012 (h)
Service
Wholesale ISDN2 internal service rentals
Wholesale ISDN2 external service rentals
68
58
616,257 channels
524,051 channels
1,140,308
110.00
110.00
74.05
74.08
45.39
45.41
111.96
111.97
Wholesale ISDN2 internal service connections
Wholesale ISDN2 external service connections
6
2
48,820 channels
19,598 channels
68,418
116.49
116.49
26.93
26.93
24.97
24.97
64.81
64.81
Wholesale ISDN2 internal service transfers
Wholesale ISDN2 external service transfers
0
1
6,439 channels
103,642 channels
110,081
5.65
5.65
10.78
10.78
9.33
9.33
36.29
36.29
Roundings
TOTAL
(1)
134
Page 40
Section 7 – Review of Access Markets
Section 7.4.2 - Wholesale ISDN2 Exchange Line Services calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
£
Components
Unit (d)
Wholesale Access specific
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
ISDN2 drop maintenance
ISDN2 line cards
ISDN2 NTE
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
£/trans
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/channel
£/channel
£/channel
%
%
%
Fully Allocated Costs (£)
12.37
4.50
17.13
9.36
1.82
51.38
7.01
1.80
0.86
0.20
15.10
2.01
17.46
3.77
£29m
£17m
£112m
£
4.69
1.56
25.75
6.01
0.90
0.52
0.16
7.57
2.01
17.46
3.77
0.82
0.55
4.69
1.56
25.75
6.01
0.90
0.52
0.16
7.57
2.01
17.46
3.77
0.82
0.48
71.77
71.70
£
£
Wholesale ISDN2 external service transfers
Wholesale ISDN2 internal service transfers
Wholesale ISDN2 external service
connections
Wholesale ISDN2 internal service
connections
Wholesale ISDN2 internal service rentals
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
Wholesale ISDN2 external service rentals
Wholesale ISDN2 exchange line services
£
£
6.26
1.52
8.70
6.25
1.52
8.67
6.22
6.21
0.42
11.41
0.36
11.38
0.11
11.32
0.10
11.31
28.31
28.18
17.65
17.62
Page 41
Section 7 – Review of Access Markets
Section 7.4.2 - Wholesale ISDN2 Exchange Line Services calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
Wholesale Access specific
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
ISDN2 drop maintenance
ISDN2 line cards
ISDN2 NTE
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
£/trans
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/channel
£/channel
£/channel
%
%
%
Fully Allocated Costs (£)
(b)
(d)
(q)
(h)
1.28
6.10
21.32
9.66
2.04
46.31
6.49
1.71
1.17
0.17
18.26
2.36
19.52
5.67
£45m
£20m
£124m
£
4.84
1.75
23.21
5.56
0.43
0.29
0.13
9.15
2.36
19.51
5.67
0.74
0.41
4.84
1.75
23.22
5.56
0.43
0.29
0.13
9.16
2.36
19.52
5.67
0.74
0.41
74.05
74.08
£
£
Wholesale ISDN2 external service transfers
Wholesale ISDN2 internal service transfers
Wholesale ISDN2 external service
connections
Wholesale ISDN2 internal service
connections
Wholesale ISDN2 internal service rentals
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
Wholesale ISDN2 external service rentals
Wholesale ISDN2 exchange line services
£
£
0.65
4.65
10.84
0.66
4.65
10.84
0.64
0.64
0.45
10.34
0.45
10.33
0.02
10.12
0.02
10.12
26.93
26.93
10.78
10.78
See glossary for volume unit descriptors.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 42
Section 7 – Review of Access Markets
Section 7.5 - Wholesale Business ISDN30 Exchange Line Services
Definition
Key Market Changes
Wholesale Business ISDN30 Exchange Line Services are the links between a business end
user and the remote concentrator unit by means of ISDN30 technology.
ISDN30 rental volumes have continued to decline as customers migrate to alternative
cheaper technologies such as Session Initiation Protocol (SIP) Trunking product. It is a
service which is under strong competitive pressure from new substitute services, most
notably IP based technologies such as SIP Trunking, but also other technologies such as
Hosted VoIP and Centrex. In our view the imposition of a charge control over the last year
has potentially extended the product life and slowed the natural process of technology
migration as prices have been reduced by regulation.
Digital ISDN30 exchange lines are primary rate ISDN lines, which provide a means to deploy
a wide range of digital services over a 2Mbit/s bearer. A single ISDN30 line supports thirty
64kbit/s channels for voice and data calls, plus a 64kbit/s channel for signalling. ISDN30
lines are used only by business customers, and always in conjunction with a business Private
Branch Exchange (PBX).
Despite the regulatory constraints at the wholesale level, there has still been considerable
competitive activity - most notably Vodafone and Virgin Media now have substantial
wholesale ISDN30 businesses. Additionally, TalkTalk Group recently announced its launch
plans for their ISDN30 proposition. Furthermore, the ISDN30 market has seen more
aggressive competition with CPs promoting a switch from ISDN30 to IP Voice services as a
way to reduce costs without compromising quality.
Key Regulatory Changes
On 20 August 2010, Ofcom published its market review statement for wholesale and retail
ISDN30 services. In this, Ofcom concluded that Openreach continues to have SMP in the
provision of wholesale ISDN30 services. A number of general remedies were imposed in the
market review, including the requirement to supply services and the requirement to provide
services on the basis of no undue discrimination. Ofcom imposed price caps on key ISDN30
services at the prevailing price. Ofcom also concluded that the introduction of a price
control for wholesale ISDN30 services may be appropriate.
On 12 April 2012, Ofcom published its statement which implemented a charge control on
ISDN30 services. The charge control applies from 11 May 2012 to 31 March 2014.
ISDN30 is being reviewed as part of the FAMR published on 4 July 2013. Ofcom are issued
their consultation in May 2013 and in Q4 2013/14 Ofcom’s Final Statements is due out. BT
set out its view that the charge control should be removed in its response to the FAMR Call
for Inputs consultation in January 2013.
Summary Market Performance
Year
2013
2012
Revenue
£m
277
305
Total CCA
Operating
Costs Return
£m
£m
97
180
123
182
Return on
MCE
%
81.6%
77.5%
Page 43
Section 7 – Review of Access Markets
Section 7.5.1 - Wholesale ISDN30 Exchange Line Services (Annex 12)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with non-discrimination obligations
Wholesale business ISDN30 exchange line services
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
For the year ended 31 March 2013
Service
Wholesale business ISDN30 internal service connections
Wholesale business ISDN30 external service connections
2
3
2
101,735 channels
95,379 channels
197,114
25.70
24.39
123
149
123
1,110,489 channels
921,823 channels
2,032,312
133.81
133.75
Wholesale business ISDN30 internal service transfers
Wholesale business ISDN30 external service transfers
1
0
1
12,174 channels
161,207 channels
173,381
4.58
4.57
Roundings
-
(1)
126
277
Wholesale business ISDN30 internal service rentals
Wholesale business ISDN30 external service rentals
TOTAL
Page 44
Section 7 – Review of Access Markets
Section 7.5.1 - Wholesale ISDN30 Exchange Line Services (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with non-discrimination obligations
Wholesale business ISDN30 exchange line services
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Restated for the year ended 31 March 2012 (h)
Service
Wholesale business ISDN30 internal service connections
Wholesale business ISDN30 external service connections
3
4
3
92,095 channels
80,731 channels
172,826
40.71
40.71
125
171
125
1,216,234 channels
888,536 channels
2,104,770
141.00
141.00
Wholesale business ISDN30 internal service transfers
Wholesale business ISDN30 external service transfers
1
0
1
29,181 channels
193,319 channels
222,500
4.36
4.36
Roundings
-
1
129
305
Wholesale business ISDN30 internal service rentals
Wholesale business ISDN30 external service rentals
TOTAL
(b)
(h)
See glossary for volume unit descriptors.
See Section 2 Basis of Preparation for explanation of restatement.
Page 45
Section 7 – Review of Access Markets
Section 7.6 - TISBO (up to and including 8Mbit/s)
RPI-1.75% from 1 October 2010. Ofcom also directed new lower prices for 2Mbit/s local
end rentals.
Definition
TISBO services include:

Wholesale terminating segments (64kbit/s and 2Mbit/s PPCs).
Basket & services
Value of X
Sub Caps

Radio base station (RBS) backhaul (sub 2Mbit/s and 2Mbit/s circuits including the
Core Conveyance element).

LLU backhaul which consists of LLU backhaul trunk and LLU backhaul link. LLU
backhaul links are regarded as a symmetric broadband origination service and
should therefore be included within the TISBO or AISBO markets, depending on
the technology in use – bandwidth considerations being taken into account in the
case of the Synchronous Digital Hierarchy (SDH) technology.
TI Basket
TI - Low bandwidth connection
and rental.
RPI-3.25% (up to 30
Sept 2010);
RPI-1.75% (from 1
Oct 2010);
RPI+0% from 1 Oct
2012.

Netstream 16 Long Line (2Mbit/s circuits including the Core Conveyance
element).
RPI-0% sub-cap on subbasket of TISBO terminating
segments.
RPI+5% sub-cap on each
charge (excluding POH
charges).
RPI-0% sub-cap on each
charge (POH charges only).
Point of Connection end and
third party end equipment
charges.
RPI-0%
No charge can increase
more than 5% in nominal
terms.
All relevant ancillary services
used in the provision of TI
services in scope of the TI
Basket.
RPI-0%
None.
Ofcom also views Symmetric Digital Subscriber Line (SDSL) as a symmetric broadband
origination service and it is therefore included within the TISBO market.
Ofcom has concluded that BT has SMP in the low bandwidth TISBO market across the UK.
Consequently, it has imposed regulation on all relevant circuits and technical areas that fall
within these markets, including RBS backhaul circuits.
Key Regulatory Changes
These controls run from 1 October 2009 to 30 September 2012. Ofcom’s market review
statement published 28 March 2013 did not come into effect until 1 April 2013. From 1
October 2012 BT was allowed to increase its TI basket prices by RPI+0% which applied to
the end of the financial year on 31 March 2013.
On 8 December 2008, Ofcom published its Final Statement on the Business Connectivity
Market Review (BCMR). Ofcom found BT to continue to have SMP in the low bandwidth
TISBO market.
Following a separate Consultation, Ofcom published its Statement on the Leased Lines
Charge Control on 2 July 2009, imposing a RPI–X charge control where X is 3.25% on low
bandwidth TISBO services as a remedy to its finding of SMP for BT. Note that there is a
single overall Traditional Interface (TI) basket comprising connection and rental for low
bandwidth, high bandwidth and very high bandwidth TISBO services as well as rental for
Trunk services.
Ofcom reviewed the Business Connectivity Market during 2012/13 and issued their final
statement on 28 March 2013.
The key changes are:
In addition, Ofcom determined starting charges for terminating and trunk segments and
required the introduction of separate Point of Handover (POH) rental charges to replace the
current local end uplift factor included in the rental price of external local ends. To balance
the introduction of the new separate POH charges, Ofcom required a corresponding
reduction to external local end prices.
On 2 September 2009, Cable & Wireless lodged an appeal with the CAT contesting certain
parts of Ofcom’s Leased Line Charge Control Statement. The Tribunal issued a direction on
20 September 2010 directing the controlling percentage for the TI basket to be amended to
•
The Charge control moved to RPI+2.25% applied to a single basket.
•
The remedy of Cost Orientation was removed from all services.
•
RBS services are now included within the basket.
•
For the High and Very High TISBO markets, the unregulated area CELA has been
extended to WECLA (West, East and Central London Area).
•
Trunk has been split into two parts, with national trunk now de-regulated.
These changes will be effective for the Current Cost Financial Statements 2014.
Page 46
Section 7 – Review of Access Markets
Section 7.6 - TISBO (up to and including 8Mbit/s) (continued)
Summary Market Performance
Year
2013
2012
Revenue
£m
454
554
Total CCA
Operating
Costs Return
£m
£m
304
150
353
201
Return on
MCE
%
19.3%
23.5%
Key Market Changes
Within the low bandwidth market there continues to be a fall in demand for traditional TDM
circuits as customers migrate to 21CN services like Ethernet, and other services like
Broadband. Overall competition and customer demand for alternative technologies is
resulting in falling volumes in this market.
Price changes in the market took place in October 2012 to enable compliance with the
charge control and regulatory obligations.
Page 47
Section 7 – Review of Access Markets
Section 7.6.1 - TISBO (up to and including 8Mbit/s (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Traditional interface symmetric broadband origination (up to and including 8Mbit/s)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
0
0
325 circuits
178 circuits
503
Cost orientation
Average Proportion
price per included in
price list calculation Average price
£
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
603.27
603.27
1,960.96
1,960.96
1,157.85
1,157.85
3,173.94
3,173.94
147.07
13.09
160.16
176.18
132.44
432.02
147.07
8.86
155.93
176.18
132.44
432.02
2.09
0.03
2.12
4.12
1.91
16.22
2.09
0.03
2.12
4.12
1.91
16.22
5.19
0.05
5.24
4.29
2.04
16.88
5.19
0.05
5.24
4.29
2.04
16.88
562.21
64.40
626.61
494.23
370.15
1,283.97
562.21
64.40
626.61
494.23
370.15
1,283.97
For the year ended 31 March 2013
Service
Internal Partial and Private Circuits 64kbit/s - connections
External Partial and Private Circuits 64kbit/s - connections
Partial and Private Circuits 64kbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total Internal
-
147.07
90.05
16.00
Main link fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total External
Partial and Private Circuits 64kbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
5.00
Local end fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total External
5
3.00
3
1
6
3
30
6
1.00
0.72
47,684 le
562.21
90.05
6.00
1.00
1.00
500,536 km
562.21
90.05
30.00
1.00
1.00
1,098,954 km
5.19
0.05
3.00
1.00
1.00
644,465 km
5.19
0.05
6.00
1.00
1.00
1,414,958 km
2.09
0.03
1.00
1.00
0.10
31,395 links
2.09
0.03
Trunk segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 64kbit/s - local end
Local end fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total Internal
98,570 links
147.07
90.05
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 64kbit/s - trunk
Trunk segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
16
1.00
0.15
8,969 le
Page 48
1.00
0.72
Section 7 – Review of Access Markets
Section 7.6.1 - TISBO (up to and including 8Mbit/s) (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
5
5
2,357 circuits
2,491 circuits
4,848
Cost orientation
Average Proportion
price per included in
price list calculation Average price
£
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
For the year ended 31 March 2013
Internal Partial and Private Circuits 2Mbit/s - connections
External Partial and Private Circuits 2Mbit/s - connections
Partial and Private Circuits 2Mbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total internal
5.00
5.00
398.14
151.54
19.00
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total External
Partial and Private Circuits 2Mbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
15.00
Partial and Private Circuits 2Mbit/s - local end non CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal non CLZ
Partial and Private Circuits 2Mbit/s - local end CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External CLZ
Partial and Private Circuits 2Mbit/s - local end non CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External non CLZ
15
36
4.00
27
4
56.00
56
1.00
36.00
1
36
4,895.75
4,895.75
14,173.44
14,173.44
1.00
0.12
398.14
18.19
416.33
195.71
155.33
484.26
398.14
19.93
418.07
195.71
155.33
484.26
57.26
1.68
58.94
36.09
22.52
118.10
57.26
1.68
58.94
36.09
22.52
118.10
551.31
282.87
1,247.42
1.00
0.13
1.00
1.00
603,287 km
57.26
1.68
27.00
5,510.81
5,510.81
35,000 links
57.26
1.68
36.00
2,045.40
2,045.40
44,886 links
398.14
151.54
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 2Mbit/s - local end CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal CLZ
19
1.00
1.00
1.00
1.00
457,604 km
313.78
151.54
1.00
0.88
313.78
133.54
447.32
714.05
151.54
1.00
0.90
714.05
136.24
850.29
313.78
151.54
1.00
0.88
313.78
133.54
447.32
714.05
151.54
1.00
0.90
714.05
136.24
850.29
8,474 le
66,159 le
3,034 le
42,033 le
Weighted average local end price for CLZ/non CLZ // Nationally averaged cost
811.55
Page 49
Section 7 – Review of Access Markets
Section 7.6.1 - TISBO (up to and including 8Mbit/s) (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Cost orientation
Average Proportion
price per included in
price list calculation Average price
£
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
(sx)
n/a
n/a
n/a
603.27
2,714.40
1,600.11
4,366.63
(sx)
n/a
n/a
n/a
1,752.14
1,752.14
5,494.82
5,494.82
4,882.60
4,882.60
14,112.73
14,112.73
(sx)
(sx)
n/a
n/a
n/a
n/a
n/a
n/a
700.00
5,437.00
4,835.02
13,893.14
For the year ended 31 March 2013
Internal SDSL
6.00
External Radio Backhaul Service - sub 2Mbit/s connections
External Radio Backhaul Service - sub 2Mbit/s rentals
Internal Radio Backhaul Service - 2Mbit/s connections
External Radio Backhaul Service - 2Mbit/s connections
1.00
Internal Radio Backhaul Service - 2Mbit/s rentals
External Radio Backhaul Service - 2Mbit/s rentals
7.00
External Netstream 16 LL 2Mbit/s connections
-
19.00
19
3.00
1
3
116.00
7
116
(ux)
531 circuits
1,807 circuits
(ux)
(ux)
10
(ux)
(sx)
n/a
n/a
n/a
-
0
(ux)
(sx)
n/a
n/a
n/a
4.00
1
4
(ux)
(ux)
(sx)
(sx)
-
0
8.00
2
8
(un)
(un)
(un)
(un)
Estimated matched cost of £1.7m (*)
Estimated matched cost of £8.3m (*)
2.00
2
2
(un)
(un)
(un)
(un)
Estimated matched cost of £1.5m (*)
Estimated matched cost of £1.1m (*)
1.00
-
(1)
193
261
454
-
Internal Third Party Customer Infrastructure
External Third Party Customer Infrastructure
2.00
Internal Excess construction charges
External Excess construction charges
2.00
-
50 circuits
10.00
1.00
Equipment depreciation
TOTAL
0
0
External Netstream 16 LL 2Mbit/s rentals CLZ
Roundings
-
(ux)
-
External Netstream 16 LL 2Mbit/s rentals non CLZ
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
6
1 circuits
Estimated cost of £0.1m
Estimated cost of £0.3m
Estimated equipment depreciation of £23.4m
Page 50
Section 7 – Review of Access Markets
Section 7.6.1 - TISBO (up to and including 8Mbit/s) (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Traditional interface symmetric broadband origination (up to and including 8Mbit/s)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
0
0
462 circuits
263 circuits
725
Cost orientation
Average Proportion
price per included in
price list calculation Average price
£
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
576.60
576.60
1,768.46
1,768.46
1,176.48
1,176.48
4,640.33
4,640.33
143.44
10.48
153.92
133.68
102.84
319.54
143.44
10.48
153.92
133.68
102.84
319.54
1.99
0.03
2.02
2.47
0.62
9.56
1.99
0.03
2.02
2.47
0.62
9.56
4.88
0.05
4.93
2.62
0.74
10.21
4.88
0.05
4.93
2.62
0.74
10.21
540.45
56.51
596.96
416.55
307.96
1,077.11
540.45
56.51
596.96
416.55
307.96
1,077.11
Restated for the year ended 31 March 2012 (h)
Service
Internal Partial and Private Circuits 64kbit/s - connections
External Partial and Private Circuits 64kbit/s - connections
Partial and Private Circuits 64kbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total Internal
-
143.43
96.50
22.00
Main link fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total External
Partial and Private Circuits 64kbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
7.00
Local end fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total External
7
4.00
4
2
8
4
719,628 km
32
53,924 le
540.45
96.50
32.00
540.45
96.50
7.00
7
1.00
1.00
1,570,182 km
4.88
0.05
4.00
1.00
1.00
990,950 km
4.88
0.05
8.00
1.00
1.00
2,162,189 km
1.99
0.03
2.00
1.00
0.11
47,534 links
1.99
0.03
Trunk segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 64kbit/s - local end
Local end fixed charge per year
Enhanced maintenance fixed charge per year (ao)
Total Internal
145,325 links
143.43
96.50
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 64kbit/s - trunk
Trunk segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
22
1.00
0.11
12,462 le
Page 51
1.00
1.00
1.00
0.59
1.00
0.59
Section 7 – Review of Access Markets
Section 7.6.1 - TISBO (up to and including 8Mbit/s) (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
8
9
3,872 circuits
4,525 circuits
8,397
Cost orientation
Average Proportion
price per included in
price list calculation Average price
£
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
Restated for the year ended 31 March 2012 (h)
Internal Partial and Private Circuits 2Mbit/s - connections
External Partial and Private Circuits 2Mbit/s - connections
Partial and Private Circuits 2Mbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total internal
8.00
9.00
443.23
149.23
24.00
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total External
Partial and Private Circuits 2Mbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
21.00
Partial and Private Circuits 2Mbit/s - local end non CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal non CLZ
Partial and Private Circuits 2Mbit/s - local end CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External CLZ
Partial and Private Circuits 2Mbit/s - local end non CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External non CLZ
21
40
5.00
38
5
52.00
52
2.00
39.00
2
39
3,662.29
3,662.29
13,390.29
13,390.29
1.00
0.11
443.23
16.91
460.14
160.84
128.30
396.15
443.23
16.86
460.09
160.84
128.30
396.15
53.76
1.68
55.44
27.39
16.17
80.01
53.76
1.68
55.44
27.39
16.17
80.01
722.79
333.66
1,486.64
1.00
0.11
1.00
1.00
718,894 km
53.76
1.68
38.00
4,009.31
4,009.31
45,382 links
53.76
1.68
40.00
1,954.97
1,954.97
51,783 links
443.23
149.23
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 2Mbit/s - local end CLZ
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal CLZ
24
1.00
1.00
1.00
1.00
678,461 km
298.93
149.23
1.00
0.88
298.93
130.74
429.67
656.42
149.23
1.00
0.91
656.42
135.14
791.56
298.93
149.23
1.00
0.88
298.93
130.74
429.67
656.42
149.23
1.00
0.91
656.42
135.14
791.56
10,622 le
66,035 le
3,688 le
49,499 le
Weighted average local end price for CLZ/non CLZ // Nationally averaged cost
751.67
Page 52
Section 7 – Review of Access Markets
Section 7.6.1 - TISBO (up to and including 8Mbit/s) (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Cost orientation
Average Proportion
price per included in
price list calculation Average price
£
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
(sx)
n/a
n/a
n/a
562.17
3,290.74
2,183.32
8,590.39
(sx)
n/a
n/a
n/a
2,053.74
2,053.74
4,015.24
4,015.24
3,667.69
3,667.69
13,415.93
13,415.93
(sx)
(sx)
n/a
n/a
n/a
n/a
n/a
n/a
700.00
3,944.50
3,603.34
13,108.81
Restated for the year ended 31 March 2012 (h)
Internal SDSL
8.00
External Radio Backhaul Service - sub 2Mbit/s connections
External Radio Backhaul Service - sub 2Mbit/s rentals
Internal Radio Backhaul Service - 2Mbit/s connections
External Radio Backhaul Service - 2Mbit/s connections
Internal Radio Backhaul Service - 2Mbit/s rentals
External Radio Backhaul Service - 2Mbit/s rentals
External Netstream 16 LL 2Mbit/s connections
-
122 circuits
19.00
19
5.00
1
5
114.00
41
114
(ux)
666 circuits
2,505 circuits
(ux)
(ux)
0
14.00
14
(ux)
(sx)
n/a
n/a
n/a
-
0
(ux)
(sx)
n/a
n/a
n/a
4.00
3
4
(ux)
(ux)
(sx)
(sx)
-
0
14.00
1
14
(un)
(un)
(un)
(un)
Estimated matched cost of £1.2m (*)
Estimated matched cost of £13.5m (*)
1.00
4
1
(un)
(un)
(un)
(un)
Estimated matched cost of £2.4m (*)
Estimated matched cost of £1m (*)
-
1.00
1
253
301
554
3.00
1.00
Internal Excess construction charges
External Excess construction charges
4.00
TOTAL
0
-
Internal Third Party Customer Infrastructure
External Third Party Customer Infrastructure
Roundings
-
41.00
External Netstream 16 LL 2Mbit/s rentals CLZ
Equipment depreciation
(ux)
1.00
External Netstream 16 LL 2Mbit/s rentals non CLZ
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
8
20 circuits
Estimated cost of £0.2m
Estimated cost of £0.3m
Estimated equipment depreciation of £28.3m
Page 53
Section 7 – Review of Access Markets
Section 7.6.2 - TISBO (up to and including 8Mbit/s) calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
£
Components
Unit (d)
PC rental 2Mbit/s link per km distribution
PC rental 64kbit/s link
PC rental 2Mbit/s link
PC rental 64kbit/s link per km transmission
64kbit/s PC link connection cct provision (y)
2Mbit/s and above PC link connection cct provision
PC rental 64kbit/s link local end
PC rental 2Mbit/s local end copper
PC rental 2Mbit/s local end fibre
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
SG & A partial private circuits (q)
£/km
£/link
£/link
£/km
£/circuit
£/circuit
£/le
£/le
£/le
£/line
£/line
£/line
£/line
£/line
%
%
%
Fully Allocated Costs (£)
33.06
168.09
174.32
4.02
1,999.40
5,409.66
392.94
263.18
650.76
9.36
1.82
51.38
7.01
1.80
£0m
£25m
£31m
£
£
£
£
£
£
£
£
£
£
External Netstream 16 LL 2Mbit/s
connections
Radio Backhaul Service - 2 Mbit/s
connections
Radio Backhaul Service - sub 2 Mbit/s
connections
Partial and Private Circuits 2Mbit/s local end
Partial and Private Circuits 2Mbit/s distribution
Partial and Private Circuits 2Mbit/s - link
Partial and Private Circuits 2Mbit/s connections
Partial and Private Circuits 64kbit/s local end
Partial and Private Circuits 64kbit/s trunk
Partial and Private Circuits 64kbit/s distribution
Partial and Private Circuits 64kbit/s link
Fully Allocated Cost (£)
Partial and Private Circuits 64kbit/s connections
Average cost per unit (from annex 15)
Traditional interface symmetric broadband origination (up to and including 8Mbit/s)
£
33.19
168.35
175.18
4.02
4.03
1,931.28
2,684.72
5,410.17
5,408.61
5,403.00
392.08
24.52
464.90
2.25
0.16
12.36
0.62
0.43
9.36
1.82
51.40
7.02
1.81
0.01
29.68
7.83
0.10
0.26
30.74
100.64
20.52
2.90
6.16
39.91
29.68
86.21
34.00
1,960.96
176.18
4.12
4.29
494.23
5,510.81
195.71
36.09
551.31
2,714.40
5,494.82
5,437.00
Page 54
Section 7 – Review of Access Markets
Section 7.6.2 - TISBO (up to and including 8Mbit/s) calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
PC rental 2Mbit/s link per km distribution
PC rental 64kbit/s link
PC rental 2Mbit/s link
PC rental 64kbit/s link per km transmission
64kbit/s PC link connection cct provision (y)
2Mbit/s and above PC link connection cct provision
PC rental 64kbit/s link local end
PC rental 2Mbit/s local end copper
PC rental 2Mbit/s local end fibre
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
SG & A partial private circuits (q)
SG & A private circuits (q)
£/km
£/link
£/link
£/km
£/circuit
£/circuit
£/le
£/le
£/le
£/line
£/line
£/line
£/line
£/line
%
%
%
%
Fully Allocated Costs (£)
(b)
(ao)
(ux)
(sx)
(un)
(*)
(d)
(y)
(q)
(h)
24.71
126.34
140.33
2.37
1,961.11
3,918.86
324.10
355.11
856.16
9.66
2.04
46.31
6.49
1.71
£14m
£45m
£28m
£6m
£
£
£
£
£
£
£
£
£
£
External Netstream 16 LL 2Mbit/s
connections
Radio Backhaul Service - 2 Mbit/s
connections
Radio Backhaul Service - sub 2 Mbit/s
connections
Partial and Private Circuits 2Mbit/s - local
end
Partial and Private Circuits 2Mbit/s distribution
Partial and Private Circuits 2Mbit/s - link
Partial and Private Circuits 2Mbit/s connections
Partial and Private Circuits 64kbit/s - local
end
Partial and Private Circuits 64kbit/s - trunk
Partial and Private Circuits 64kbit/s distribution
Partial and Private Circuits 64kbit/s - link
Fully Allocated Cost (£)
Partial and Private Circuits 64kbit/s connections
Average cost per unit (from annex 15)
Traditional interface symmetric broadband origination (up to and including 8Mbit/s)
£
24.82
126.55
139.69
2.37
2.39
1,741.75
3,264.69
3,918.73
3,919.26
3,912.05
322.82
36.66
630.91
2.30
0.18
11.02
0.57
0.41
9.68
2.05
46.44
6.50
1.72
(0.16)
21.44
5.27
5.71
1.42
0.08
0.02
0.18
0.05
22.08
5.26
72.88
17.70
17.13
4.18
2.07
0.50
5.98
27.94
6.82
21.10
4.95
77.73
18.25
25.90
6.55
1,768.46
133.68
2.47
2.62
416.55
4,009.31
160.84
27.39
722.79
3,290.74
4,015.24
3,944.50
See glossary for volume unit descriptors.
The price for 64kbit/s enhanced maintenance is weighted to include different 64kbit/s equivalent services.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
This service comprises a large number of volumetrics and prices.
This component is attributed on a % basis so no volume or unit cost is derivable.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
Unit costs calculated as a weighted average of the 64kbit PC link connection cct provision & 64kbit PC link connection cct rearrangements.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 55
Section 7 – Review of Access Markets
Section 7.7 - TISBO (above 8Mbit/s up to and including 45Mbit/s)
The key changes are:
Definition
TISBO services include:

The Charge control moved to RPI+2.25% applied to a single basket.

Wholesale terminating segments (PPCs).

The remedy of Cost Orientation was removed from all services.

LLU backhaul which consists of LLU backhaul trunk and LLU backhaul link. LLU
backhaul links are regarded as a symmetric broadband origination service and should
therefore be included within the TISBO or AISBO markets, depending on the
technology in use – bandwidth considerations being taken into account in the case of
the SDH technology.

RBS services are now included within the basket.

For the High and Very High TISBO markets, the unregulated area CELA has been
extended to WECLA (West, East and Central London Area).

Trunk has been split into two parts, with national trunk now de-regulated.

Netstream 16 Long Line (including the Core Conveyance element).
Ofcom has concluded that BT has SMP in the high bandwidth TISBO market outside the
Central and East London Area (CELA). Consequently it has imposed regulation on all relevant
circuits and technical areas that fall within this market.
Key Regulatory Changes
Basket
Value of X
Sub Caps
TI Basket.
TI-High bandwidth connection and rental (outside CELA).
RPI-3.25% (up
to 30 Sept
2010);
RPI-1.75%
(from 1 Oct
2010)
RPI-0% sub-cap on sub-basket
of TISBO terminating segments.
RPI+5% sub-cap on each
charge
(excluding
POH
charges).
RPI-0% sub-cap on each charge
(POH charges only).
Point of Connection end and
third party end equipment
charges.
RPI-0%
No charge can increase more
than 5% in nominal terms.
All relevant ancillary services
used in the provision of TI
services in scope of the TI
Basket.
RPI-0%
None.
In December 2008, Ofcom published its Final Statement on the BCMR. Ofcom found BT to
continue to have SMP in the high bandwidth TISBO market (but only outside CELA).
Following a separate Consultation, Ofcom published its Statement on the Leased Lines
Charge Control on 2 July 2009, imposing a RPI-X charge control where X is 3.25% on high
bandwidth TISBO services as a remedy to its finding of SMP for BT. Note that there is a
single overall TI basket comprising connection and rental for low bandwidth, high
bandwidth and very high bandwidth TISBO services as well as rental for Trunk services.
In addition, Ofcom determined starting charges for terminating and trunk segments and
required the introduction of separate Point of Handover rental charges to replace the
current local end uplift factor included in the rental price of external local ends. To balance
the introduction of the new separate Point of Handover charges, Ofcom required a
corresponding reduction to external local end prices.
These controls run from 1 October 2009 to 30 September 2012. Ofcom’s market review
statement published 28 March 2013 did not come into effect until 1 April 2013. From 1
October 2012 BT was allowed to increase its TI basket prices by RPI+0% which applied to
the end of the financial year on 31 March 2013.
On 2 September 2009, Cable & Wireless lodged an appeal with the CAT contesting certain
parts of Ofcom’s Leased Line Charge Control Statement. The Tribunal issued a direction on
20 September 2010 directing the controlling percentage for the TI basket to be amended to
RPI-1.75% from 1 October 2010.
Ofcom reviewed the Business Connectivity Market during 2012/13 and issued their final
statement on 28 March 2013. Ofcom reviewed the Business Connectivity Market during
2012/13 and issued their final statement on 28 March 2013. This will impact the Current
Costs Financial Statements 2014.
Page 56
Section 7 – Review of Access Markets
Section 7.7 - TISBO (above 8Mbit/s up to and including 45Mbit/s) (continued)
Summary Market Performance
Year
2013
2012
Revenue
£m
32
37
Total CCA
Operating
Costs Return
£m
£m
19
13
25
12
Return on
MCE
%
23.3%
19.5%
Key Market Changes
Within the high bandwidth market there continues to be a fall in demand for traditional
TDM as customers migrate to 21CN services like Ethernet. Overall competition and customer
demand for alternative technologies is resulting in falling volumes in this market. Price
changes in the market took place in October 2012 to enable compliance with the charge
control and regulatory obligations.
Page 57
Section 7 – Review of Access Markets
Section 7.7.1 - TISBO (above 8Mbit/s up to and including 45Mbit/s) (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Traditional interface symmetric broadband origination (above 8Mbit/s up to and including 45Mbit/s)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
0
0
8 circuits
40 circuits
48
Average price
per price list
£
Cost orientation
Proportion
included in
calculation
Average
price
£
FAC
£
Unaudited Unaudited
(D)LRIC
DSAC
£
£
1,922.80
1,922.80
5,504.12
5,504.12
4,890.26
4,890.26
14,148.06
14,148.06
For the year ended 31 March 2013
Service
Internal Partial and Private Circuits 34/45Mbit/s - connections
External Partial and Private Circuits 34/45Mbit/s - connections
Partial and Private Circuits 34/45Mbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total External
Partial and Private Circuits 34/45Mbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 34/45Mbit/s - local end
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
4
2
3,159.81
225.46
1.00
0.12
3,159.81
26.76
3,186.57
1,403.83
1,137.91
3,160.25
3,159.81
225.46
1.00
0.12
3,159.81
26.42
3,186.23
1,403.83
1,137.91
3,160.25
518.97
2.51
521.48
298.70
198.66
921.51
518.97
2.51
521.48
298.70
198.66
921.51
2,918.93
202.45
3,121.38
3,793.72
1,503.66
7,620.61
2,918.93
202.45
3,121.38
3,793.72
1,503.66
7,620.61
n/a
n/a
n/a
1,104 links
781 links
518.97
2.51
11
518.97
2.51
6
1.00
1.00
10,676 km
2,918.93
225.46
5
1.00
1.00
20,232 km
1.00
0.90
1,615 le
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External
3
897 le
Netstream 16 LL 45Mbit/s rentals
0
(ux)
(sx)
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
0
1
(ux)
(ux)
(sx)
(sx)
Equipment depreciation
0
Roundings
-
TOTAL
2,918.93
225.46
1.00
0.90
Estimated cost of £0.2m
Estimated cost of £0.5m
Estimated equipment depreciation of £1.8m
32
Page 58
Section 7 – Review of Access Markets
Section 7.7.1 - TISBO (above 8Mbit/s up to and including 45Mbit/s) (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Traditional interface symmetric broadband origination (above 8Mbit/s up to and including 45Mbit/s)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
0
0
14 circuits
92 circuits
106
Average price
per price list
£
Cost orientation
Proportion
included in
calculation
Average
price
£
FAC
£
Unaudited Unaudited
(D)LRIC
DSAC
£
£
1,837.79
1,837.79
4,003.25
4,003.25
3,656.79
3,656.79
13,363.83
13,363.83
3,255.26
23.87
3,279.13
1,140.99
936.27
2,623.61
3,255.26
23.87
3,279.13
1,140.99
936.27
2,623.61
511.05
2.51
513.56
222.56
145.78
612.21
511.05
2.51
513.56
222.56
145.78
612.21
2,748.50
201.36
2,949.86
5,074.32
1,510.96
9,587.26
2,748.50
201.36
2,949.86
5,074.32
1,510.96
9,587.26
n/a
n/a
n/a
Restated for the year ended 31 March 2012 (h)
Service
Internal Partial and Private Circuits 34/45Mbit/s - connections
External Partial and Private Circuits 34/45Mbit/s - connections
Partial and Private Circuits 34/45Mbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
4
1,328 links
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total External
3
771 links
Partial and Private Circuits 34/45Mbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
3,255.26
222.02
3,255.26
222.02
511.05
2.51
14
1.00
0.11
1.00
1.00
26,860 km
511.05
2.51
6
1.00
0.11
1.00
1.00
12,397 km
Partial and Private Circuits 34/45Mbit/s - local end
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
6
1,964 le
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External
3
891 le
Netstream 16 LL 45Mbit/s rentals
0
(ux)
(sx)
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
0
1
(ux)
(ux)
(sx)
(sx)
Equipment depreciation
0
Roundings
TOTAL
2,748.50
222.02
2,748.50
222.02
1.00
0.91
1.00
0.91
Estimated cost of £0.2m
Estimated cost of £0.5m
Estimated equipment depreciation of £3.8m
37
Page 59
Section 7 – Review of Access Markets
Section 7.7.2 - TISBO (above 8Mbit/s up to and including 45Mbit/s) calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
Unit (d)
PC rental 34Mbit/s link per km distribution
PC rental 34Mbit/s link
2Mbit/s and above PC link connection cct provision
PC rental 34Mbit/s link local end
Edge Ethernet ports (q)
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
SG & A partial private circuits (q)
£/km
£/link
£/circuit
£/le
%
%
%
%
Fully Allocated Costs (£)
273.05
1,246.82
5,409.66
3,553.49
£9m
£0m
£25m
£31m
Partial and Private Circuits 34/45Mbit/s local end
£
Partial and Private Circuits 34/45Mbit/s distribution
£
Components
Partial and Private Circuits 34/45Mbit/s - link
Fully Allocated Cost (£)
Partial and Private Circuits 34/45Mbit/s connections
Average cost per unit (from annex 15)
Traditional interface symmetric
broadband origination (above
8Mbit/s up to and including
45Mbit/s)
£
£
273.04
1,246.81
5,409.52
3,508.60
0.01
0.26
94.60
156.75
25.66
131.54
153.58
5,504.12
1,403.83
298.70
3,793.72
Page 60
Section 7 – Review of Access Markets
Section 7.7.2 - TISBO (above 8Mbit/s up to and including 45Mbit/s) calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
Unit (d)
PC rental 34Mbit/s link per km distribution
PC rental 34Mbit/s link
2Mbit/s and above PC link connection cct provision
PC rental 34Mbit/s link local end
Edge Ethernet ports (q)
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
SG & A partial private circuits (q)
SG & A private circuits (q)
£/km
£/link
£/circuit
£/le
%
%
%
%
%
Fully Allocated Costs (£)
(b)
(ux)
(sx)
(d)
(q)
(h)
198.78
991.89
3,918.86
4,901.33
£5m
£14m
£45m
£28m
£6m
Partial and Private Circuits 34/45Mbit/s local end
£
Partial and Private Circuits 34/45Mbit/s distribution
£
Components
Partial and Private Circuits 34/45Mbit/s - link
Fully Allocated Cost (£)
Partial and Private Circuits 34/45Mbit/s connections
Average cost per unit (from annex 15)
Traditional interface symmetric
broadband origination (above
8Mbit/s up to and including
45Mbit/s)
£
£
198.77
991.86
3,918.11
4,809.68
(0.07)
(2.73)
121.94
29.99
19.08
4.71
127.97
109.61
27.06
4,003.25 1,140.99
222.56
5,074.32
68.83
16.31
See glossary for volume unit descriptors.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 61
Section 7 – Review of Access Markets
Section 7.8 - TISBO (above 45Mbit/s up to and including 155Mbit/s)
Definition
•
RBS services are now included within the basket.
TISBO services include:
•


For the High and Very High TISBO markets, the unregulated area CELA has been
extended to WECLA (West, East and Central London area).
•
Trunk has been split into two parts, with national trunk now de-regulated.

Wholesale terminating segments (PPCs).
LLU backhaul which consists of LLU backhaul trunk and LLU backhaul link. LLU
backhaul links are regarded as a symmetric broadband origination service and should
therefore be included within the TISBO or AISBO markets, depending on the
technology in use – bandwidth considerations being taken into account in the case of
the SDH technology.
Netstream 16 Long Line (including the Core Conveyance element).
These changes will be effective for the Current Costs Financial Statements 2014.
Ofcom has concluded that BT has SMP in the very high bandwidth TISBO market outside
CELA. Consequently, it has imposed regulation on all relevant circuits and technical areas
that fall within these markets, including RBS backhaul circuits.
Basket
Value of X
Sub Caps
TI Basket
Very high bandwidth
connection and rental (outside
CELA).
RPI-3.25% (up
to 30 Sept
2010);
RPI-1.75%
(from 1 Oct
2010)
RPI–0% sub-cap on sub-basket
of TISBO terminating segments.
RPI+5% sub-cap on each
charge (excluding POH
charges).
RPI–0% sub-cap on each charge
(POH charges only).
Point of Connection end and
third party end equipment
charges.
RPI-0%
No charge can increase more
than 5% in nominal terms.
All relevant ancillary services
used in the provision of TI
services in scope of the TI
Basket.
RPI-0%
None.
Key Regulatory Changes
In December 2008 Ofcom published its Final Statement on the BCMR. Ofcom found BT to
continue to have SMP in the very high bandwidth TISBO market (but only outside CELA).
Following a separate Consultation, Ofcom published its Statement on the Leased Lines
Charge Control on 2 July 2009, imposing a RPI-X charge control where X is 3.25% on very
high bandwidth TISBO services as a remedy to its finding of SMP for BT. Note that there is a
single overall TI basket comprising connection and rental for low bandwidth, high
bandwidth and very high bandwidth TISBO services as well as rental for Trunk services.
In addition, Ofcom determined starting charges for terminating and trunk segments and
required the introduction of separate Point of Handover rental charges to replace the
current local end uplift factor included in the rental price of external local ends. To balance
the introduction of the new separate Point of Handover charges, Ofcom required a
corresponding reduction to external local end prices.
These controls run from 1 October 2009 to 30 September 2012. The values of X in the
charge control apply to BT’s prices after these adjustments have been made.
Summary Market Performance
On 2 September 2009, Cable & Wireless lodged an appeal with the CAT contesting certain
parts of Ofcom’s Leased Line Charge Control Statement. The Tribunal issued a direction on
20 September 2010 directing the controlling percentage for the TI basket to be amended to
RPI-1.75% from 1 October 2010.
Year
2013
2012
Ofcom reviewed the Business Connectivity Market during 2012/13 and issued their final
statement on 28 March 2013.
The key changes are:
•
The Charge control moved to RPI+2.25% applied to a single basket.
•
The remedy of Cost Orientation was removed from all services.
Page 62
Revenue
£m
50
50
Total CCA
Operating
Costs Return
£m
£m
23
27
19
31
Return on
MCE
%
35.5%
52.6%
Section 7 – Review of Access Markets
Section 7.8 - TISBO (above 45Mbit/s up to and including
155Mbit/s) (continued)
Key Market Changes
Within the very high bandwidth market there continues to be a fall in demand for traditional
TDM circuits as customers continue to migrate to 21CN services like Ethernet. Overall
competition and customer demand for alternative technologies is resulting in falling
volumes in this market.
Price changes in the market took place in October 2012 to enable compliance with the
charge control and regulatory obligations.
Page 63
Section 7 – Review of Access Markets
Section 7.8.1 - TISBO (above 45Mbit/s up to and including 155Mbit/s) (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Traditional interface symmetric broadband origination (above 45Mbit/s up to and including 155Mbit/s)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
0
0
8 circuits
7 circuits
15
Average
price per
price list
£
Cost orientation
Proportion
included in
calculation
Average
price
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
2,175.77
2,175.77
5,517.87
5,517.87
4,901.57
4,901.57
14,200.22
14,200.22
For the year ended 31 March 2013
Service
Internal Partial and Private Circuits 140/155Mbit/s - connections
External Partial and Private Circuits 140/155Mbit/s - connections
Partial and Private Circuits 140/155Mbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
0
0
6
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total External
Partial and Private Circuits 140/155Mbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
1
6
1
12
Netstream 16 LL 155Mbit/s rentals
TOTAL
1
12
6,290.61
5,084.74
13,785.12
9,447.51
422.98
1.00
0.41
9,447.51
175.39
9,622.90
6,290.61
5,084.74
13,785.12
458.99
4.31
463.30
543.50
324.70
1,808.97
458.99
4.31
463.30
543.50
324.70
1,808.97
665 links
92 links
1,128 km
10,817.41
422.98
1.00
0.63
10,817.41
266.32
11,083.73
6,538.84
3,755.26
13,715.99
10,817.41
422.98
1.00
0.63
10,817.41
266.32
11,083.73
6,538.84
3,755.26
13,715.99
n/a
n/a
n/a
1,077 le
103 le
16
16
(ux)
(sx)
1
6
1
(ux)
(ux)
(sx)
(sx)
0
31
1.00
1.00
1
6
1 -
1.00
1.00
13,924 km
1
Equipment Depreciation
Roundings
9,447.51
188.93
9,636.44
458.99
4.31
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
1
1.00
0.45
458.99
4.31
6
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 140/155Mbit/s - local end
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
6
9,447.51
422.98
1
-
19
50
Estimated cost of £1.7m
Estimated cost of £0.1m
Estimated equipment depreciation of £0.5m
Page 64
Section 7 – Review of Access Markets
Section 7.8.1 - TISBO (above 45Mbit/s up to and including 155Mbit/s) (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Traditional interface symmetric broadband origination (above 45Mbit/s up to and including 155Mbit/s)
Annex 11
Detailed service analysis
Revenue
£m
Non-discrimination
Average
price per
Volume Unit (b)
price list
£
Cost orientation
Proportion
included in
calculation
Average
price
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
2,080.48
2,080.48
4,015.77
4,015.77
3,668.17
3,668.17
13,418.38
13,418.38
Restated for the year ended 31 March 2012 (h)
Service
Internal Partial and Private Circuits 140/155Mbit/s - connections
External Partial and Private Circuits 140/155Mbit/s - connections
Partial and Private Circuits 140/155Mbit/s - link
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
0
0
7
Main link fixed charge per year
Enhanced maintenance fixed charge per year
Total External
Partial and Private Circuits 140/155Mbit/s - distribution
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total Internal
12
1.00
0.42
9,081.80
175.48
9,257.28
4,623.78
3,784.21
10,148.58
9,081.80
416.52
1.00
0.42
9,081.80
175.48
9,257.28
4,623.78
3,784.21
10,148.58
451.92
4.31
456.23
402.18
233.26
1,139.90
451.92
4.31
456.23
402.18
233.26
1,139.90
759 links
79 links
7
16,368 km
1
1,302 km
12
10,000.66
416.52
1.00
0.63
10,000.66
264.18
10,264.84
7,292.92
4,160.85
14,762.21
10,000.66
416.52
1.00
0.63
10,000.66
264.18
10,264.84
7,292.92
4,160.85
14,762.21
n/a
n/a
n/a
1,191 le
1
15
(ux)
91 le
(sx)
0
6
0
(ux)
(ux)
(sx)
(sx)
0
- -
1.00
1.00
1
6
32
1.00
1.00
15
Equipment Depreciation
TOTAL
9,081.80
416.52
451.92
4.31
1
Netstream 16 LL 155Mbit/s rentals
Roundings
1
6 circuits
7 circuits
13
451.92
4.31
7
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total External
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
7
1
Terminating segment charge per year
Enhanced maintenance per kilometre charge per year
Total External
Partial and Private Circuits 140/155Mbit/s - local end
Local end fixed charge per year
Enhanced maintenance fixed charge per year
Total Internal
0
0
1
-
17
50
Estimated cost of £1.3m
Estimated cost of £0.4m
Estimated equipment depreciation of £0.4m
Page 65
Section 7 – Review of Access Markets
Section 7.8.2 - TISBO (above 45Mbit/s up to and including 155Mbit/s) calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
Components
Unit (d)
PC rental 140Mbit/s link per km distribution
PC rental 140Mbit/s link
2Mbit/s and above PC link connection cct provision
PC rental 140Mbit/s link local end
Edge Ethernet ports (q)
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
SG & A partial private circuits (q)
£/km
£/link
£/circuit
£/le
%
%
%
%
Fully Allocated Costs (£)
520.20
5,803.25
5,409.66
5,989.94
£9m
£0m
£25m
£31m
Partial and Private Circuits 140/155Mbit/s link
Partial and Private Circuits 140/155Mbit/s distribution
Partial and Private Circuits 140/155Mbit/s local end
Fully Allocated Cost (£)
Partial and Private Circuits 140/155Mbit/s connections
Average cost per unit (from annex 15)
Traditional interface symmetric
broadband origination (above
45Mbit/s up to and including
155Mbit/s)
£
£
£
£
520.70
5,816.00
5,410.87
5,861.94
0.04
1.05
107.00
473.52
22.80
131.54
545.36
5,517.87
6,290.61
543.50
6,538.84
Page 66
Section 7 – Review of Access Markets
Section 7.8.2 - TISBO (above 45Mbit/s up to and including 155Mbit/s) calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
Unit (d)
PC rental 140Mbit/s link per km distribution
PC rental 140Mbit/s link
2Mbit/s and above PC link connection cct provision
PC rental 140Mbit/s link local end
Edge Ethernet ports (q)
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
SG & A partial private circuits (q)
SG & A private circuits (q)
£/km
£/link
£/circuit
£/le
%
%
%
%
%
Fully Allocated Costs (£)
(b)
(ux)
(sx)
(d)
(q)
(h)
381.01
4,276.36
3,918.86
6,725.65
£5m
£14m
£45m
£28m
£6m
Partial and Private Circuits 140/155Mbit/s local end
£
Components
Partial and Private Circuits 140/155Mbit/s distribution
Fully Allocated Cost (£)
Partial and Private Circuits 140/155Mbit/s link
Average cost per unit (from annex 15)
Partial and Private Circuits 140/155Mbit/s connections
Traditional interface symmetric
broadband origination (above
45Mbit/s up to and including
155Mbit/s)
£
£
£
381.05
4,206.41
3,919.38
6,689.37
(0.30)
(11.23)
77.54
18.85
342.90
86.00
16.89
4.24
127.97
380.09
95.49
4,015.77
4,623.78
402.18
7,292.92
See glossary for volume unit descriptors.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 67
Section 7 – Review of Access Markets
Section 7.9 - AISBO (up to and including 1Gbit/s)
Definition
Summary Market Performance
AISBO services include:
Total CCA
Operating
Costs Return
£m
£m
400
403
510
215
Return on
MCE
%
30.8%
16.2%

Wholesale Extension Services (WES)

Backhaul Extension Services (BES)

Backhaul Network Services (BNS)

Openreach Network Backhaul Services (ONBS)
Key Market Changes

Ethernet Backhaul Direct (EBD)

Ethernet Access Direct (EAD)

Wholesale End to End Ethernet Services (WEES)
There was strong growth in the supply of EAD access products, while volumes of WES
products decreased overall. The main drivers of growth were mobile operators, customers’
requirements to migrate from TDM products, and growing demand for high speed Ethernet
connectivity from corporate and CPs.
Year
2013
2012
Ofcom concluded in the BCMR that BT has SMP in the wholesale AISBO market (UK
excluding Hull) and, as such, it is appropriate that regulation be imposed on all bandwidths
that fall within this market. These products are covered by the Undertakings obligations and
as such will be managed out of Openreach.
Key Regulatory Changes
WES, WEES and BES are specifically covered by the Undertakings, and as such are managed
out of Openreach. BNS, ONBS, EAD and EBD are products which have been developed since
the Undertakings were agreed but are also covered by these obligations and as such are also
managed out of Openreach. All these products, with the exception of AISBO circuits above
1Gbit/s, fell within a currently regulated market during the 2012/13 year and continued to
be subject to a cost orientation pricing regime as specified by the relevant SMP conditions in
the BCMR published 8 December 2008.
Ofcom published the Leased Line Charge Control statement on 3 July 2009 in which they
introduced RPI-7% charge controls for low bandwidth AISBO services. These controls were
effective to 30 September 2012. Openreach made further price reductions on certain
1Gbit/s Ethernet products with effect from 1 October 2012.
Ofcom reviewed the Business Connectivity Market during 2012/13 and have issued their
final statement on 28 March 2013 which will be effective for the Current Cost Financial
Statements 2014.
The Key changes are:

Ofcom identified two separate geographic markets that Openreach operate within
- WECLA and UK outside of WECLA and Hull.

Ofcom identified a new market for Multiple Interface Symmetric Broadband
Origination (MISBO) with regulatory remedies outside of WECLA.
Page 68
Revenue
£m
803
725
Section 7 – Review of Access Markets
Section 7.9.1 - AISBO (up to and including 1Gbit/s) (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Alternative interface symmetric broadband origination (up to and including 1Gbit/s)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Service
Wholesale extension services 10Mbit/s rentals - Internal
Wholesale extension services 10Mbit/s rentals - External
35
Wholesale extension services 100Mbit/s rentals - Internal
Wholesale extension services 100Mbit/s rentals - External
45
Wholesale extension services 1000Mbit/s rentals - Internal
Wholesale extension services 1000Mbit/s rentals - External
18
Wholesale extension services other bandwidth rentals - Internal
Wholesale extension services other bandwidth rentals - External
29
35
29
21,109 le
17,744 le
38,853
1,653.07
1,642.08
1,623.34
1,623.34
886.75
886.75
4,090.61
4,090.61
35
45
35
20,509 le
16,043 le
36,552
2,203.91
2,152.50
1,708.91
1,708.91
965.52
965.52
4,321.26
4,321.26
14
18
14
3,387 le
2,688 le
6,075
5,320.67
5,164.13
3,017.69
3,017.69
1,985.74
1,985.74
7,740.79
7,740.79
0
9
0
(ux) le
(ux) le
(sx)
(sx)
1,165.07
1,293.16
459.63
573.38
3,011.80
3,322.92
22
22
5,923 le
3,762.41
2,923.44
1,766.57
6,607.38
6
6
3,545 le
1631.71
1,904.99
919.14
4,051.95
9
Backhaul extension services 1000Mbit/s rentals - External
Backhaul extension services other bandwidth rentals - External
Other internal Ethernet rentals
Other internal Ethernet connections
8
1
0
8
1
5,157 ccts
(ux)
1617.09
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
Other external Ethernet rentals
Other external Ethernet connection
0
1
5
1
5
6,523 ccts
(ux)
139.76
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
Page 69
Section 7 – Review of Access Markets
Section 7.9.1 - AISBO (up to and including 1Gbit/s) (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
EAD Local Access 10Mbit/s rentals - Internal
EAD Local Access 10Mbit/s rentals - External
18
EAD Local Access 100Mbit/s rentals - Internal
EAD Local Access 100Mbit/s rentals - External
41
EAD Local Access 1000Mbit/s rentals - Internal
EAD Local Access 1000Mbit/s rentals - External
12
EAD Other 10Mbit/s rentals - Internal
EAD Other 10Mbit/s rentals - External
11
EAD Other 100Mbit/s rentals - Internal
EAD Other 100Mbit/s rentals - External
34
EAD Other 1000Mbit/s rentals - Internal
EAD Other 1000Mbit/s rentals - External
65
EAD Local Access 10Mbit/s connections - Internal
EAD Local Access 10Mbit/s connections - External
5
EAD Local Access 100Mbit/s connections - Internal
EAD Local Access 100Mbit/s connections - External
14
EAD Local Access 1000Mbit/s connections - Internal
EAD Local Access 1000Mbit/s connections - External
5
EAD Other 10Mbit/s connections - Internal
EAD Other 10Mbit/s connections - External
2
EAD Other 100Mbit/s connections - Internal
EAD Other 100Mbit/s connections - External
6
EAD Other 1000Mbit/s connections - Internal
EAD Other 1000Mbit/s connections - External
15
4.000
18
4
9,103 ccts
2,202 ccts
11,305
2,016.09
1,899.91
1,840.31
1,838.89
1,157.93
1,157.02
4,576.77
4,572.31
12.000
41
12
18,482 ccts
5,534 ccts
24,016
2,201.49
2,142.60
1,893.20
1,892.48
1,193.56
1,193.09
4,732.49
4,730.22
2.000
12
2
2,418 ccts
369 ccts
2,787
4,916.61
4,697.94
2,589.88
2,587.21
1,700.22
1,698.50
6,690.27
6,681.91
9
11
9
3,588 ccts
2,926 ccts
6,514
3,169.20
3,094.86
2,999.39
3,024.88
1,607.91
1,617.48
7,563.63
7,628.61
22.000
34
22
8,936 ccts
6,028 ccts
14,964
3,781.23
3,664.85
3,123.86
3,166.26
1,672.46
1,688.41
7,906.30
8,014.43
23.000
65
23
7,208 ccts
2,709 ccts
9,917
8,954.36
8,654.78
4,725.63
4,747.10
2,535.48
2,542.79
12,207.35
12,260.43
2.000
5
2
4,467 ccts
1,492 ccts
5,959
1,150.18
1,093.71
948.42
947.73
416.71
416.09
2,951.11
2,949.01
6.000
14
6
7,369 ccts
3,031 ccts
10,400
1,929.32
1,893.43
957.93
957.49
425.27
424.88
2,979.92
2,978.60
1.000
5
1
2,763 ccts
282 ccts
3,045
1,742.97
2,388.09
955.66
963.52
423.23
430.31
2,973.04
2,996.89
2
2
2
1,942 ccts
1,763 ccts
3,705
1,070.59
1,016.87
947.45
946.80
415.84
415.25
2,948.16
2,946.19
7.000
6
7
3,418 ccts
3,511 ccts
6,929
1,882.84
1,880.25
957.36
957.33
424.76
424.73
2,978.20
2,978.10
8.000
15
8
5,008 ccts
2,045 ccts
7,053
3,022.86
4,037.98
971.26
983.64
437.28
448.44
3,020.36
3,057.91
Page 70
Section 7 – Review of Access Markets
Section 7.9.1 - AISBO (up to and including 1Gbit/s) (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
98
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Ethernet Backhaul Direct rentals - External
Ethernet Backhaul Direct connections - External
Main link rental charges - Internal
Main link rental charges - External
15
2
15
2
1,788 ccts
477 ccts
2,265
87
98
87
274,004 fibre km
239,368 fibre km
513,372
98
Support Service
Equipment depreciation
Excess construction charges - Internal
Excess construction charges - External
Roundings
TOTAL
Internal EBD rentals
Internal EBD connections
8,170.88
3,606.29
5,006.67
962.76
3,566.16
425.68
19,787.24
3,019.29
357.64
365.36
138.76
138.76
51.37
51.37
607.81
607.81
0
35
10
35
10
-
2
2
477
326
Estimated equipment depreciation of £5.2m
(ux)
(ux)
803
3,965 ccts
1,168 ccts
Page 71
(sx)
(sx)
Estimated matched cost of £22.9m (*)
Estimated matched cost of £6.6m (*)
Section 7 – Review of Access Markets
Section 7.9.1 - AISBO (up to and including 1Gbit/s) (Continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Alternative interface symmetric broadband origination (up to and including 1Gbit/s)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
Wholesale extension services 10Mbit/s rentals - Internal
Wholesale extension services 10Mbit/s rentals - External
46
Wholesale extension services 100Mbit/s rentals - Internal
Wholesale extension services 100Mbit/s rentals - External
58
Wholesale extension services 1000Mbit/s rentals - Internal
Wholesale extension services 1000Mbit/s rentals - External
25
Wholesale extension services other bandwidth rentals - Internal
Wholesale extension services other bandwidth rentals - External
10
Wholesale extension services connections - Internal
Wholesale extension services connections - External
34
46
34
28,240 le
20,888 le
49,128
1,645.09
1,638.87
2,109.64
2,109.64
1,020.03
1,020.03
4,339.33
4,339.33
38
58
38
26,348 le
17,582 le
43,930
2,188.58
2,141.53
2,248.42
2,248.42
1,105.68
1,105.68
4,662.05
4,662.05
15
25
15
4,289 le
2,764 le
7,053
5,808.98
5,483.79
3,786.33
3,786.33
2,284.91
2,284.91
8,049.64
8,049.64
3
10
3
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
4
1
4
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
1
Page 72
Section 7 – Review of Access Markets
Section 7.9.1 - AISBO (up to and including 1Gbit/s) (Continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Backhaul extension services 1000Mbit/s rentals - External
Backhaul extension services other bandwidth rentals - External
Backhaul extension services other bandwidth connections - External
Other internal Ethernet rentals
Other internal Ethernet connections
19
5,385 le
3,520.92
3,665.61
1,971.64
7,020.31
7
2
7
2
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
7
4
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
2
2
2
2
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
6
16
6
6,531 ccts
2,125 ccts
8,656
2,503.77
2,808.63
3,042.89
3,419.92
1,592.37
1,733.47
6,219.59
6,997.43
17.000
48
17
17,054 ccts
5,667 ccts
22,721
2,823.63
2,972.40
3,310.61
3,481.91
1,739.77
1,803.91
6,835.61
7,189.10
10.000
49
10
4,983 ccts
1,069 ccts
6,052
9,881.25
9,235.53
5,936.12
6,001.84
3,316.06
3,338.62
12,869.38
13,000.09
4
10
4
6,307 ccts
2,927 ccts
9,234
1,548.55
1,516.58
1,575.45
1,574.46
1,194.79
1,193.87
4,939.67
4,937.59
11.000
23
11
11,673 ccts
5,663 ccts
17,336
1,935.80
1,898.60
1,579.83
1,578.78
1,198.83
1,197.85
4,950.82
4,948.59
6.000
20
6
5,247 ccts
1,621 ccts
6,868
3,769.34
3,857.89
1,600.51
1,600.93
1,217.90
1,218.27
5,003.40
5,004.98
12
1
12
1
1,488 ccts
144 ccts
1,632
8,136.13
4,670.31
9,456.95
1,610.23
5,557.18
1,210.46
20,087.88
5,025.64
7
4
Other external Ethernet rentals
Other external Ethernet connections
Ethernet Access Direct 10Mbit/s rentals - Internal
Ethernet Access Direct 10Mbit/s rentals - External
16
Ethernet Access Direct 100Mbit/s rentals - Internal
Ethernet Access Direct 100Mbit/s rentals - External
48
Ethernet Access Direct 1000Mbit/s rentals - Internal
Ethernet Access Direct 1000Mbit/s rentals - External
49
Ethernet Access Direct 10Mbit/s connections - Internal
Ethernet Access Direct 10Mbit/s connections - External
10
Ethernet Access Direct 100Mbit/s connections - Internal
Ethernet Access Direct 100Mbit/s connections - External
23
Ethernet Access Direct 1000Mbit/s connections - Internal
Ethernet Access Direct 1000Mbit/s connections - External
20
Ethernet Backhaul Direct rentals - External
Ethernet Backhaul Direct connections - External
19
Page 73
Section 7 – Review of Access Markets
Section 7.9.1 - AISBO (up to and including 1Gbit/s) (Continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
84
75
243,360 fibre km
211,439 fibre km
454,799
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Main link rental charges - Internal
Main link rental charges - External
84
75
Support Service
Equipment depreciation
Excess construction charges - Internal
Excess construction charges - External
Roundings
TOTAL
344.01
356.61
0
44
- 445
13
44
13
1
(1)
280
725
140.34
140.34
28.08
28.08
485.98
485.98
Estimated equipment depreciation of £5.2m
(ux)
(ux)
(sx)
(sx)
Page 74
Estimated matched cost of £29m (*)
Estimated matched cost of £8.3m (*)
Section 7 – Review of Access Markets
Section 7.9.2 - AISBO (up to and including 1Gbit/s) calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
£
Components
Unit (d)
Wholesale & LAN extension services fibre etc
Backhaul extension services fibre etc
Ethernet Electronics
Ethernet main links
21CN Backhaul Link & Length
Access Cards (other services) (q)
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
£/le
£/le
£/le
£/le
£/le
%
%
%
£/le
2,564.33
1,094.43
527.23
113.98
7,423.01
£25m
£29m
£17m
£112m
Fully Allocated Costs (£)
£
£
£
£
£
£
1,124.82
1,100.47
1,201.02
468.79
523.55
1,199.46
99.65
1,078.60
1,165.01
99.65
1,062.56
465.86
521.66
711.23
528.11
5.62
10.10
14.01
56.25
10.10
18.54
562.48
10.10
44.63
562.48
10.10
7.60
263.52
10.10
3.30
1,623.34
1,708.91
3,017.69
2,923.44
£
£
£
£
£
£
£
£
Ethernet Access Direct 100Mbit/s rentals External
Ethernet Access Direct 100Mbit/s rentals Internal
Ethernet Access Direct 10Mbit/s rentals External
Ethernet Access Direct 10Mbit/s rentals Internal
EAD LA 1000 External Rentals
EAD LA 1000 Internal Rentals
EAD LA 100 External Rentals
EAD LA 100 Internal Rentals
EAD LA 10 External Rentals
EAD LA 10 Internal Rentals
Other internal Ethernet rental
Backhaul extension services other bandwidth
rental - External
Backhaul extension services 1000Mbit/s rentals
- External
Wholesale extension services 1000Mbit/s
rentals
Fully Allocated Cost (£)
Wholesale extension services 100Mbit/s
rentals
Average cost per unit (from annex 15)
Wholesale extension services 10Mbit/s rentals
Alternative interface symmetric broadband origination (up to and including 1Gbit/s)
£
986.89
986.21
987.97
987.63
1,003.85
1,002.57
2,138.65
2,164.61
2,208.60
2,251.74
814.80
814.80
814.80
814.80
972.13
972.13
814.80
814.80
814.80
814.80
20.20
13.74
5.62
20.20
12.80
5.62
20.20
12.06
56.25
20.20
13.98
56.25
20.20
13.60
562.48
20.20
31.22
562.48
20.20
29.83
5.62
20.20
20.12
5.62
20.20
19.65
56.25
20.20
24.01
56.25
20.20
23.27
1,904.99 1,794.94
1,840.31
1,838.89
1,893.20
1,892.48
2,589.88
2,587.21
2,999.39
3,024.88
3,123.86
3,166.26
For the year ended 31 March 2013
£
Components
Unit (d)
Wholesale & LAN extension services fibre etc
Ethernet Electronics
Ethernet main links
21CN Backhaul Link & Length
Access Cards (other services) (q)
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
£/le
£/le
£/fibre km
£/circuit
%
%
%
%
Fully Allocated Costs (£)
3,113.97
972.13
£
3,137.34
972.13
£
£
199.30
6.72
199.30
6.39
£
199.30
11.28
£
199.30
11.07
£
199.30
10.19
£
199.30
13.96
£
199.30
6.26
£
199.30
5.94
£
£
199.30
11.01
199.30
10.99
£
£
199.30
17.67
199.30
23.61
£
£
97.34
Main link rental charges
Ethernet Backhaul Direct connections External
Ethernet Backhaul Direct rentals - External
Ethernet Access Direct 1000Mbit/s connections External
Ethernet Access Direct 1000Mbit/s connections Internal
Ethernet Access Direct 100Mbit/s connections External
Ethernet Access Direct 100Mbit/s connections Internal
Ethernet Access Direct 10Mbit/s connections External
Ethernet Access Direct 10Mbit/s connections Internal
EAD LA 1000 External Connections
EAD LA 1000 Internal Connections
EAD LA 100 External Connections
EAD LA 100 Internal Connections
EAD LA 10 External Connections
EAD LA 10 Internal Connections
Fully Allocated Cost (£)
Ethernet Access Direct 1000Mbit/s rentals External
Ethernet Access Direct 1000Mbit/s rentals Internal
Alternative interface symmetric broadband origination (up to and including 1Gbit/s)
£
199.30
24.06
113.97
4,872.62
562.48
20.20
56.85
562.48
20.20
54.95
4,725.63
4,747.10
7.30
735.10
6.94
735.10
12.25
735.10
12.02
735.10
11.07
735.10
15.16
735.10
6.79
735.10
6.46
735.10
11.95
735.10
11.94
735.10
19.19
735.10
25.63
735.10
948.42
947.73
957.93
957.49
955.66
963.52
947.45
946.80
957.36
957.33
971.26
983.64
Page 75
20.20
16.51
5,006.67
21.08
7.28
735.10
0.73
962.76
138.76
Section 7 – Review of Access Markets
Section 7.9.2 - AISBO (up to and including 1Gbit/s) calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
Wholesale & LAN extension services electronics
Wholesale & LAN extension services fibre etc
Backhaul extension services electronics
Backhaul extension services fibre etc
Ethernet main links
21CN Backhaul Link & Length
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
£/le
£/le
£/le
£/le
£/fibre km
£/circuit
%
%
%
%
%
759.26
3,004.15
363.76
1,531.33
81.21
3,274.88
£14m
£45m
£45m
£20m
£124m
Fully Allocated Costs (£)
0
£
£
£
£
356.53
1,685.27
368.76
1,720.37
981.31
1,754.18
9.40
37.18
21.26
94.01
37.18
28.10
940.08
37.18
73.58
940.08
37.18
10.84
2,109.64
2,248.42
3,786.33
3,665.61
169.81
966.38
1,541.32
£
£
721.96
721.96
2,214.06 2,589.42
Ethernet Access Direct 1000Mbit/s rentals - Internal
Ethernet Access Direct 100Mbit/s rentals - External
Ethernet Access Direct 100Mbit/s rentals - Internal
Ethernet Access Direct 10Mbit/s rentals - External
Ethernet Access Direct 10Mbit/s rentals - Internal
Wholesale extension services 1000Mbit/s rentals
Wholesale extension services 100Mbit/s rentals
Wholesale extension services 10Mbit/s rentals
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
Backhaul extension services 1000Mbit/s rentals - External
Alternative interface symmetric broadband origination (up to and including 1Gbit/s)
£
£
721.96
2,310.80
721.96
2,481.29
915.63
3,011.84
18.80
74.36
15.38
188.02
74.36
15.47
188.02
74.36
16.28
1,880.17
74.36
54.12
3,042.89 3,419.92
3,310.61
3,481.91
5,936.12
18.80
74.36
13.71
Restated for the year ended 31 March 2012 (h)
Unit (d)
Wholesale & LAN extension services electronics
Wholesale & LAN extension services fibre etc
Backhaul extension services electronics
Backhaul extension services fibre etc
Ethernet main links
21CN Backhaul Link & Length
MSAN-METRO Connectivity Link (q)
Access Cards (other services) (q)
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
£/le
£/le
£/le
£/le
£/fibre km
£/circuit
%
%
%
%
%
(b)
(ux)
(sx)
(*)
(d)
(q)
(h)
915.63
3,081.09
£
£
19.09
339.62
18.27
339.62
21.35
339.62
£
20.50
339.62
£
£
£
Main link rental charges
Ethernet Backhaul Direct connections - External
31.95
339.62
£
Ethernet Backhaul Direct rentals - External
32.07
339.62
Ethernet Access Direct 100Mbit/s connections - External
Ethernet Access Direct 100Mbit/s connections - Internal
Ethernet Access Direct 10Mbit/s connections - External
£
Ethernet Access Direct 1000Mbit/s connections - External
£
Components
Fully Allocated Costs (£)
Ethernet Access Direct 10Mbit/s connections - Internal
Ethernet Access Direct 1000Mbit/s rentals - External
Fully Allocated Cost (£)
Ethernet Access Direct 1000Mbit/s connections - Internal
Alternative interface symmetric broadband origination (up to and including 1Gbit/s)
£
313.31
339.62
9,044.69
48.22
51.08
81.20
7.00
1,880.17
74.36
50.59
6,001.84
8.48
1,208.26
8.31
1,208.26
10.60
1,208.26
10.40
1,208.26
20.56
21.10
1,208.26 1,208.26
1,575.45
1,574.46
1,579.83
1,578.78
1,600.51 1,600.93
74.36
24.59
9,456.95
14.13
1,208.26
1.06
1,610.23
140.34
See glossary for volume unit descriptors.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
This component is attributed on a % basis so no volume or unit cost is derivable.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 76
Section 7 – Review of Access Markets
Section 7.10 - Wholesale Local Access (WLA)
Definition
Summary Market Performance
Ofcom determined in December 2004 and again in October 2010 that BT has SMP in the
market for "wholesale local access in the UK excluding the Hull Area".
Local Access can be defined as those network components that comprise and constitute
metallic (typically copper) local loop access networks, 'cable' access networks or fibre-based
local access networks between end-user premises and the facility at which those access
networks connect to other communications infrastructure. In practice, this is generally a
Main Distribution Frame (for a metallic loop access network), a cable head-end (for a 'cable'
access network) or an Optical Distribution Frame (for a fibre-based local access network).
Year
2013
2012
Revenue
£m
814
759
Total CCA
Operating
Costs Return
£m
£m
743
71
616
143
Return on
MCE
%
2.8%
6.8%
Key Market Changes
There has been further growth in LLU over the last 12 months, primarily due to external CPs
migrating their end users from WLR and SMPF to MPF.
In response to the finding that BT had SMP in the WLA market Ofcom imposed a variety of
different access remedies. These included maintaining the existing remedies of LLU and
Sub-Loop Unbundling (SLU), but also introducing two new remedies known as Virtual
Unbundled Local Access (VULA) and Physical Infrastructure Access (PIA). Ofcom regard
these new remedies as being important in controlling SMP in the evolving NGA space. VULA
allows CPs equivalent access to BT's NGA network by purchasing Generic Ethernet Access
(GEA) a "virtually unbundled" product, and PIA enables CPs to build their own NGA networks
directly through the purchase of duct and pole sharing from BT.
Key Regulatory Changes
The previous charge control that applied to LLU services expired on 31 March 2011. In the
absence of the new charge control being set by Ofcom from 1 April 2011, Openreach
provided a voluntary commitment to Ofcom regarding the prices that it would charge for
the period 1 April 2011 until 31 March 2012. These prices were agreed and based upon the
cost modelling that was used by Ofcom to calculate the previous charge controls and
adjusted to reflect the Competition Appeal Tribunal (CAT) ruling, following the appeal by
Carphone Warehouse Group of Ofcom’s 2009 LLU and WLR charge controls statements.
On 7 March 2012, Ofcom published a new charge control for LLU services which will apply
from 1 April 2012 to 31 March 2014.
The new charge control was subsequently appealed by both BT and Sky/TalkTalk Group
during 2012 on a range of different issues. Following detailed submissions by all parties and
review by the Competition Commission (CC) and CAT some prices were changed with effect
from 1 May 2013. In parallel Ofcom has also commenced work on its next charge control
which will apply from April 2014.
Page 77
Section 7 – Review of Access Markets
Section 7.10.1 - Wholesale Local Access (WLA) (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale local access
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited
Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Service
MPF New Provides
81
81
1,725,551 conns
46.92
36.23
31.93
64.41
MPF Single Migrations
21
21
638,910 conns
33.54
30.74
27.33
53.37
5
5
173,930 conns
30.94
21.78
18.75
39.94
MPF Ceases
11
11
442,178 ceases
25.08
20.26
MPF Rentals
537
537
87.41
109.88
Co-mingling New Provides
20
20
2,028 rooms
9,714.74
16,157.35
11,188.84
29,894.19
Co-mingling Rentals
67
67
14,338 hostels
4,670.22
7,756.23
7,377.63
15,810.14
Tie Cables
23
23
348,940 cables
67.18
44.05
22.27
57.11
SMPF New Provides
12
12
353,529 conns
33.54
26.38
23.08
46.98
SMPF Single Migrations
3
3
81,254 conns
33.54
30.21
26.82
52.48
SMPF Bulk Migrations
1
1
20,409 conns
30.68
21.71
18.70
39.69
SMPF Ceases
3
3
111,684 ceases
25.02
20.30
SMPF Rentals
30
30
11.92
8.37
6.93
12.78
-
-
814
814
MPF Bulk Migrations
Roundings
TOTAL
6,143,677 lines
2,497,249 lines
Page 78
Section 7 – Review of Access Markets
Section 7.10.1 - Wholesale Local Access (WLA) (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale local access
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited
Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
MPF New Provides
58
58
1,173,972 conns
49.35
40.27
38.89
74.04
MPF Single Migrations
31
31
768,307 conns
39.79
34.34
33.25
63.51
MPF Bulk Migrations
15
15
410,480 conns
35.84
23.44
22.56
45.18
MPF Ceases
11
11
1,143,533 ceases
9.20
10.14
9.55
22.58
MPF Rentals
451
451
91.50
106.61
64.61
147.65
MPF Room Build
19
19
1,520 rooms
12,793.57
13,712.45
8,017.29
20,463.71
MPF Hostel Rentals
61
61
12,906 hostels
4,720.79
7,064.58
4,598.79
10,670.73
MPF Tie Cables
28
28
325,953 cables
86.89
47.08
26.51
66.63
SMPF New Provides
25
25
633,855 conns
39.79
28.87
27.89
54.19
SMPF Single Migrations
8
8
195,157 conns
39.79
33.64
32.57
62.16
SMPF Bulk Migrations
2
2
58,299 conns
34.13
23.32
22.47
44.83
SMPF Ceases
7
7
581,871 ceases
12.83
10.29
9.70
22.82
SMPF Rentals
43
43
14.70
7.26
6.43
12.40
-
-
759
759
Roundings
TOTAL
4,927,978 lines
2,930,588 lines
Page 79
Section 7 – Review of Access Markets
Section 7.10.2 - Wholesale Local Access (WLA) calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
Components
Unit (d)
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
Broadband line testing systems
Local Loop Unbundling room build
Local Loop Unbundling hostel rentals
Local Loop Unbundling hostel rentals power & vent
Local Loop Unbundling tie cables
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
Local Loop Unbundling systems development (q)
DSLAM capital/maintenance (q)
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/room
£/hostel rental
£/hostel rental
£/cable
%
%
%
%
%
Fully Allocated Costs (£)
4.50
17.13
9.36
1.82
51.38
7.01
1.80
0.86
0.20
15.10
3.66
2.50
16,133.42
2,859.57
4,884.75
39.91
£29m
£17m
£112m
£32m
£195m
£
£
£
£
4.50
24.60
24.81
16.07
17.11
£
£
£
£
£
£
20.45
£
24.33
£
16.07
SMPF Rentals
SMPF Ceases
SMPF Bulk Migrations
SMPF Single Migrations
SMPF New Provides
Tie Cables
Co-mingling Rentals
Co-mingling New Provides
MPF Rentals
MPF Ceases
MPF Buk Migrations
MPF Single Migrations
Fully Allocated Cost (£)
MPF New Provides
Average cost per unit
(from annex 15)
Wholesale local access
£
17.19
9.35
2.49
51.35
9.60
3.61
2.21
0.20
15.09
5.01
8.12
0.46
1.77
1.81
0.74
1.15
16,133.77
2,859.49
4,884.62
0.25
5.55
1.33
0.17
4.44
1.32
0.16
4.23
1.32
0.13
1.70
1.32
36.23
30.74
21.78
20.26
0.94
0.18
0.41
1.32
20.55
1.71
1.32
109.88 16,157.35
Page 80
1.32
39.91
0.95
0.14
1.72
1.33
0.13
4.47
1.33
0.12
4.44
1.32
0.11
4.21
1.32
0.09
1.70
1.32
0.19
0.05
0.01
1.33
0.86
7,756.23
44.05
26.38
30.21
21.71
20.30
8.37
0.94
9.86
Section 7 – Review of Access Markets
Section 7.10.2 - Wholesale Local Access (WLA) calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
Broadband line testing systems
Local Loop Unbundling room build
Local Loop Unbundling hostel rentals
Local Loop Unbundling hostel rentals power & vent
Local Loop Unbundling tie cables
Service Centres - Assurance (q)
Sales product management (q)
Service Centres - Provision (q)
Local Loop Unbundling systems development (q)
DSLAM capital/maintenance (q)
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/line
£/room
£/hostel rental
£/hostel rental
£/cable
%
%
%
%
%
Fully Allocated Costs (£)
(b)
(d)
(q)
(h)
6.10
21.32
9.66
2.04
46.31
6.49
1.71
1.17
0.17
18.26
4.52
2.09
13,671.71
2,902.30
4,146.14
41.14
£45m
£20m
£124m
£4m
£225m
£
6.10
30.61
£
30.87
£
19.99
£
£
£
£
£
6.87
£
25.47
£
30.27
£
19.98
SMPF Rentals
SMPF Ceases
SMPF Bulk Migrations
SMPF Single Migrations
SMPF New Provides
MPF Tie Cables
MPF Hostel Rentals
MPF Room Build
MPF Rentals
MPF Ceases
MPF Buk Migrations
MPF Single Migrations
Fully Allocated Cost (£) (h)
MPF New Provides
Average cost per unit
(from annex 15)
Wholesale local access
£
7.03
9.65
2.54
46.28
8.10
3.43
2.34
0.17
18.25
4.52
8.43
0.37
1.17
1.72
1.17
0.85
13,671.71
2,902.36
4,146.21
0.33
3.07
0.16
0.26
3.05
0.16
0.24
3.05
0.16
0.06
3.05
0.16
40.27
34.34
23.44
10.14
2.51
0.23
0.16
37.50
3.07
0.17
106.61 13,712.45
0.16
41.14
2.52
0.18
3.08
0.16
0.16
3.08
0.16
0.16
3.05
0.16
0.13
3.05
0.16
0.05
3.05
0.16
7,064.58
47.08
28.87
33.64
23.32
10.29
2.51
13.34
See glossary for volume unit descriptors.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 81
0.45
0.06
0.16
1.31
7.26
Section 8 – Review of Other Wholesale Markets
Section 8
Review of Other Wholesale Markets
Page 82
Section 8 – Review of Other Wholesale Markets
Section 8.1 - Financial Performance in Other Wholesale Markets (Annex 8)
For the year ended 31 March 2013
Call origination on FPN networks
Single transit on FPN networks
Technical areas (Interconnect Circuits)
Fixed call termination
Wholesale trunk segments
Technical areas (Point of Handover)
Wholesale Broadband Access - Market 1
Wholesale Broadband Access - Market 2
Total Other Wholesale Markets
Restated for the year ended 31 March 2012 (h)
Call origination on FPN networks
Single transit on FPN networks
Technical areas (Interconnect Circuits)
Fixed call termination
Wholesale trunk segments
Technical areas (Point of Handover)
Wholesale Broadband Access - Market 1
Wholesale Broadband Access - Market 2
Total Other Wholesale Markets
Internal
Revenue
£m
126
0
10
56
66
0
295
138
External
Revenue
£m
43
3
33
93
10
3
109
68
Total
Revenue
£m
169
3
43
149
76
3
404
206
691
362
1,053
Internal
Revenue
£m
136
0
15
50
75
0
266
171
External
Revenue
£m
45
4
34
103
15
6
149
71
Total
Revenue
£m
181
4
49
153
90
6
415
242
713
427
1,140
Operating
Costs Depreciation
£m
£m
94
34
2
1
17
7
81
36
14
13
4
3
242
121
105
49
559
264
Operating
Costs Depreciation
£m
£m
98
41
2
1
18
10
75
41
14
20
5
5
246
108
133
53
591
(h) See Section 2 - Basis of Preparation for explanation of restatement.
Page 83
279
Holding
(gain)/loss Supp. Dep. Other Adjs.
£m
£m
£m
(4)
2
1
0
0
0
(1)
0
0
(4)
2
1
(5)
2
0
0
0
0
(4)
(10)
(2)
(1)
(6)
0
(19)
(10)
Holding
(gain)/loss Supp. Dep.
£m
£m
(5)
0
0
0
(2)
0
(6)
0
(5)
0
0
0
(3)
(9)
0
(5)
(21)
(14)
0
Other Adjs
£m
(2)
0
0
(2)
(6)
1
7
5
3
Roundings
£m
-
Roundings
£m
-
Total CCA
Operating
Costs
£m
127
3
23
116
24
7
347
147
794
Total CCA
Operating
Costs
£m
132
3
26
108
23
11
349
186
838
Return
£m
42
0
20
33
52
(4)
57
59
259
Return
£m
49
1
23
45
67
(5)
66
56
302
Mean Capital
Employed
£m
272
9
51
289
154
15
507
181
Return on
MCE
%
15.3 %
6.4 %
38.9 %
11.3 %
34.2 %
(25.2)%
11.3 %
32.4 %
1,478
17.5 %
Mean Capital
Employed
£m
305
10
53
312
157
18
417
196
Return on
MCE
%
16.6 %
11.4 %
44.1 %
14.6 %
42.5 %
(26.3)%
16.0 %
30.2 %
1,468
20.6 %
Section 8 – Review of Other Wholesale Markets
Section 8.2 - Review of Other Wholesale Markets (Annex 10 & 14)
Section 8.2.1 - Market Group Level Review (Annex 10)
Overall the markets for calls (call origination, call termination and single transit) continue to
show a decline in revenue due to reducing volumes. The substitution of fixed Public
Switched Telephone Network (PSTN) calls continues with migration to Voice over Internet
Protocol (VoIP), mobile, LLU operators and other alternatives. As volumes reduce there is a
consequential reduction in the revenue for interconnect circuits, the fixed links that carry
calls traffic between the networks of different operators.
Wholesale trunk segments are bought by Communications Providers in combination with
partial private circuits in the TISBO markets. There continues to be a decline for traditional
TDM circuits as customers migrate to 21CN services like Ethernet. Competition and customer
demand for alternative technologies has resulted in falling volumes in this market.
Point of Handover charges relate to the cost of providing interconnection between
operators’ networks for TISBO services. Revenue has decreased as customers have looked to
rationalise their networks and new prices were introduced in October 2012.
The wholesale broadband market has continued to show growth over the last year due to
the combined Digital Subscriber Line (DSL) (including LLU) and cable market.
Page 84
Section 8 – Review of Other Wholesale Markets
Section 8.3 - Call origination on fixed public narrowband networks
Definition
Summary Market Performance
Call Origination is the conveyance of a call originating on a customer’s exchange line from
the remote concentrator to and over the local exchange.
“Call Origination Services” are defined by Ofcom in the Fixed Narrowband Services
Wholesale Market Review Statement as “any and all of the following specific services
provided by the Dominant Provider:
Year
2013
2012
Call origination has declined steadily throughout the year driven by several factors:
Call origination (including emergency intermediate services).”

Key Regulatory Changes

In 2009/10 Ofcom carried out a review of the Fixed Narrowband Services Wholesale Market
and a review of the Network Charge Controls. It was concluded that BT still has SMP in the
call origination market. Ofcom also determined that due to decline in the market BT no
longer has an obligation to supply Flat Rate Internet Access Call Origination (FRIACO). As of
1 October 2009 the price control on both DLE FRIACO and Single Tandem FRIACO fell away.

The Determination on PPP (Product Management, Policy and Planning) was implemented
by Ofcom on 1 July 2004. The interconnect costs are pooled with the costs of providing end
to end calls for BT’s retail activities and the costs are recovered over all calls on an equivalent
basis. Each physical call crossing BT’s network is charged PPP only once. As PPP is incurred
on all calls in markets where BT has SMP, it is relevant for the Call Origination market.
The charge controls for the services in this market are as follows:
Current NCC
(1 Oct 2009 – 30 Sept 2013)
Call Origination
RPI+2.75%
PPP
RPI+1.5%
Return on
MCE
%
15.3%
16.6%
Key Market Changes
Call origination (including operator assistance and emergency intermediate services); and
Service
Revenue
£m
169
181
Total CCA
Operating
Costs Return
£m
£m
127
42
132
49
Page 85
The on-going migration of call origination minutes from fixed public narrowband
networks to mobile networks.
The substitution impact of Voice over Internet Protocol (VoIP) calls is growing and
will potentially have a greater impact in the future as Broadband Service Providers
move towards double and triple play offerings in a move to consolidate market
share and grow revenue.
Growth in Local Loop Unbundling (LLU) lines has eroded call origination volumes
with major players marketing double play offerings to their customer base, where
voice services are provided alongside high speed data.
Section 8 – Review of Other Wholesale Markets
Section 8.3.1 - Call origination on fixed public narrowband networks (Annex 13)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Call origination on fixed public narrowband networks
Detailed service analysis
Non- discrimination
Cost orientation
NCC traffic - millions of minutes (mm)
Revenue
£m
Day Evening Weekend 24 hours
Average NCC rates - pence per minute (ppm)
Weighted
Day Evening Weekend Average
ppm
ppm
ppm
ppm
FAC
Unaudited
(D)LRIC
Unaudited
DSAC
ppm
ppm
ppm
For the year ended 31 March 2013
Service
Internal Wholesale call originating local exchange segment PSTN and ISDN (excl OA)
External Wholesale call originating local exchange segment PSTN and ISDN (excl OA)
0
25
78
7,450
77
1,094
55
874
210
9,418
0.299
0.299
0.137
0.137
0.108
0.108
0.190
0.262
0.264
0.264
0.182
0.182
0.743
0.743
Internal Wholesale call originating local exchange segment (incl Operator Assistance)
External Wholesale call originating local exchange segment (incl Operator Assistance)
105
8
26,651
2,207
9,142
489
9,213
463
45,006
3,159
0.307
0.307
0.141
0.141
0.111
0.111
0.233
0.253
0.220
0.220
0.152
0.152
0.629
0.629
11
3,423
307
255
3,985
0.307
0.141
0.111
0.282
0.284
0.194
0.796
3
1,242
386
452
2,080
0.186
0.085
0.067
0.141
0.136
0.084
0.360
35,710 10,463
47,907 15,838
10,442
13,093
56,615
76,838
0.016
0.016
0.007
0.007
0.006
0.006
0.012
0.012
0.006
0.006
0.005
0.005
0.034
0.034
Internal Wholesale call originating local exchange segment (ISDN) (incl OA)
Internal Wholesale call origination local exchange Stick (PSTN & ISDN)
Internal Wholesale PPP
External Wholesale PPP
Roundings
TOTAL
7
10
169
Page 86
Section 8 – Review of Other Wholesale Markets
Section 8.3.1 - Call origination on fixed public narrowband networks (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Call origination on fixed public narrowband networks
Annex 13
Detailed service analysis
Non- discrimination
NCC traffic - millions of minutes (mm)
Revenue
£m
Day Evening Weekend 24 hours
Average NCC rates - pence per minute (ppm)
Weighted
Day Evening Weekend Average
ppm
ppm
ppm
ppm
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
ppm
ppm
ppm
Restated for the year ended 31 March 2012 (h)
Service
Internal Wholesale call originating local exchange segment PSTN and ISDN (excl OA)
External Wholesale call originating local exchange segment PSTN and ISDN (excl OA)
1
25
Internal Wholesale call originating local exchange segment (incl Operator Assistance)
External Wholesale call originating local exchange segment (incl Operator Assistance)
115
9
Internal Wholesale call originating local exchange segment (ISDN) (incl OA)
153
8,369
135
1,337
104
1,065
392
10,771
0.272
0.272
0.124
0.124
0.098
0.098
0.175
0.236
0.220
0.220
0.144
0.144
0.640
0.640
31,756 11,219
2,717
679
10,834
657
53,809
4,053
0.281
0.281
0.129
0.129
0.101
0.101
0.213
0.226
0.183
0.183
0.123
0.123
0.541
0.541
11
3,767
352
277
4,396
0.281
0.129
0.101
0.258
0.241
0.157
0.688
Internal Wholesale call origination local exchange Stick
2
1,033
253
347
1,633
0.159
0.073
0.057
0.124
0.120
0.071
0.328
Internal Wholesale call origination local exchange Stick (ISDN)
0
115
5
7
127
0.159
0.073
0.057
0.149
0.162
0.092
0.439
43,075 12,913
56,104 21,100
12,413
16,992
68,401
94,196
0.014
0.014
0.007
0.007
0.005
0.005
0.011
0.011
0.011
0.011
0.010
0.010
0.049
0.049
Internal Wholesale PPP
External Wholesale PPP
Roundings
TOTAL
8
10
181
Page 87
Section 8 – Review of Other Wholesale Markets
Section 8.3.2 - Call origination on fixed public narrowband networks calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
Call origination on fixed public narrowband
networks
Components
Unit (d)
Local exchange concentrator
Local exchange processor
Remote - local transmission link
Remote - local transmission length
Product management policy & planning
Emergency OA (999) non chargeable
Core/Metro (voice)
iNode (call set up and features) (q)
ppm
ppm
ppm
ppm (per 10km)
ppm
ppm
ppm
%
Fully Allocated Costs (ppm)
0.067
0.063
0.039
0.023
0.006
0.021
0.001
£17m
ppm
ppm
0.079
0.074
0.037
0.040
0.064
0.060
0.031
0.034
0.086
0.080
0.040
0.043
0.021
0.003
0.010
0.021
0.002
0.008
0.021
0.003
0.011
0.002
0.008
0.264
0.220
0.284
0.136
PPP
Basket
Internal and External Wholesale PPP
ppm
Retail
Sticks
Internal Wholesale call origination local
exchange Stick (PSTN & ISDN)
ppm
Internal Wholesale call originating local
exchange segment (ISDN) (incl OA)
Internal and External Wholesale call
originating local exchange segment (incl
Operator Assistance)
Fully Allocated Cost (£)
Internal and External Wholesale call
originating local exchange segment PSTN
and ISDN (excl OA)
Average cost per unit (from annex 15)
Call Origination Basket (ad)
ppm
0.064
0.030
0.032
0.006
Page 88
0.006
Section 8 – Review of Other Wholesale Markets
Section 8.3.2 - Call origination on fixed public narrowband networks calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
Call origination on fixed public narrowband
networks
Components
Unit (d)
Local exchange concentrator
Local exchange processor
Remote - local transmission link
Remote - local transmission length
Product management policy & planning
Emergency OA (999) non chargeable
Core/Metro (voice)
iNode (call set up and features) (q)
ppm
ppm
ppm
ppm (per 10km)
ppm
ppm
ppm
%
Fully Allocated Costs (ppm)
0.060
0.054
0.032
0.017
0.011
0.015
0.002
£17m
ppm
ppm
ppm
0.070
0.063
0.031
0.028
0.058
0.052
0.025
0.023
0.077
0.070
0.034
0.031
0.060
0.081
0.026
0.024
0.035
0.032
0.015
0.004
0.009
0.015
0.003
0.007
0.016
0.004
0.009
0.003
0.007
0.004
0.010
0.220
0.183
0.241
0.120
0.162
PPP
Basket
Internal and External Wholesale PPP
Internal Wholesale call origination local
exchange Stick (ISDN)
ppm
Retail Sticks
Internal Wholesale call origination local
exchange Stick
ppm
Internal Wholesale call originating local
exchange segment (ISDN) (incl OA)
Internal and External Wholesale call
originating local exchange segment (incl
Operator Assistance)
Fully Allocated Cost (£)
Internal and External Wholesale call
originating local exchange segment PSTN
and ISDN (excl OA)
Average cost per unit (from annex 15)
Call Origination Basket (ad)
ppm
0.011
(d)
0.011
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
(ad) Does not include the service Wholesale Call originating local exchange segment (ISDN) (excl. Operator Assistance) due to immaterial volumes.
(q) This is the total cost not unit cost for this component.
(h) See Section 2 Basis of Preparation for explanation of restatement.
Page 89
Section 8 – Review of Other Wholesale Markets
Section 8.4 - Single transit on fixed public narrowband networks
Definition
Summary Market Performance
Single transit is the service an operator provides when a call originates and terminates on
networks other than its own and the originating and terminating operators are directly
connected at the same transit operator’s tandem exchange. The call is therefore transited
through a single tandem exchange.
Year
2013
2012
While Inter-tandem conveyance (ITC) and Inter-tandem transit (ITT) are essentially
transmission services, single transit is a connection service that connects two operators who
are not directly connected.
Volumes of transit calls declined during the year as CPs continue to pass more traffic
between each other or hand over traffic to other transit providers.
In 2009/10 Ofcom carried out a review of the Fixed Narrowband Services Wholesale Market
and a review of the Network Charge Controls. It was concluded that Single Transit is in a
separate market to that containing ITC and ITT. The final Statement confirmed Ofcom’s view
that the market for Single Transit is not effectively competitive and that the finding of SMP
still applies. However, given the nature of the market no price control remedy is needed.
This means that the market is not bound by the RPI-X formula beyond 30 September 2009.
Ofcom also confirmed that the ITT and ITC market remained competitive, and as a result no
SMP was found.
The Single Transit market is still subject to some SMP obligations, including the obligation
not to unduly discriminate. In assessing the level of financial reporting obligations, the
review concluded that for the year ended 31 March 2011, cost accounting obligations
would be removed but accounting separation obligations would remain.
The Determination on Product Management, Policy and Planning (PPP) was implemented
by Ofcom on 1 July 2004. The interconnect costs are pooled with the costs of providing end
to end calls for BT’s retail activities and the costs are recovered over all calls on an equivalent
basis. Each call crossing BT’s network is charged PPP only once. As PPP is incurred on all calls
in markets where BT has SMP, it is relevant for the Single Transit market.
The charge controls for the services in this market are as follows:
Current NCC
(1 Oct 2009 – 30 Sept 2013)
PPP
RPI+1.50%
Return on
MCE
%
6.4%
11.4%
Key Market Changes
Key Regulatory Changes
Service
Revenue
£m
3
4
Total CCA
Operating
Costs Return
£m
£m
3
3
1
Ofcom is in the process of carrying out a review of the Narrowband Market and the Network
Charge Controls. This is planned to be completed by the summer of 2013. It is expected that
the new Charge Controls will come into effect on 1 October 2013.
Page 90
Section 8 – Review of Other Wholesale Markets
Section 8.4.1 - Single transit on fixed public narrowband networks (Annex 13)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Single transit on fixed public narrowband networks
Detailed service analysis
Non- discrimination
NCC traffic - millions of minutes (mm)
Revenue
£m
Day
Internal Wholesale single transit segment PSTN & ISDN
External Wholesale single transit segment PSTN & ISDN
0
3
79
10,987
10
4,028
3
3,311
Roundings
-
TOTAL
3
78
12,601
11
5,083
3
4,141
Average NCC rates - pence per minute (ppm)
Day
ppm
Evening
ppm
Weekend
ppm
Weighted
Average
ppm
92
18,326
0.024
0.024
0.011
0.011
0.009
0.009
0.021
0.018
92
21,825
0.024
0.024
0.011
0.011
0.009
0.009
0.020
0.018
Evening Weekend 24 hours
For the year ended 31 March 2013
Service
Restated for the year ended 31 March 2012 (h)
Service
Internal Wholesale single transit segment PSTN & ISDN
External Wholesale single transit segment PSTN & ISDN
(h)
0
4
Roundings
-
TOTAL
4
See Section 2 Basis of Preparation for explanation of restatement.
Page 91
Section 8 – Review of Other Wholesale Markets
Section 8.5 - Technical Areas (Interconnect Circuits)
Definition
The charge controls for the services in this market are as follows:
Interconnect Circuits provide the physical connection between interconnected networks.
They link the exchanges of two interconnecting CPs in order to enable traffic to pass
between their networks. Interconnection circuits are a necessary facility for interconnection
and hence are regulated as a ‘technical area’ needed for the fulfilment of BT’s obligations
under remedies imposed in SMP markets.
Service
Current NCC
(1 Oct 2009 – 30 Sept 2013)
Interconnect Circuits Technical Area
RPI+3.75%
Ofcom is in the process of carrying out a review of the Narrowband Market and the Network
Charge Controls. This should be completed by the summer of 2013. It is expected that the
new Charge Controls will come into effect on 1 October 2013.
BT provides the following types of Interconnect Circuits:




Customer-Sited Interconnect (CSI): BT provides a point of interconnection at the
site of the interconnecting CP by extending its network using a 2Mbit/s circuit;
Intra-Building Circuit (IBC): BT provides a 2Mbit connection between the
transmission infrastructure and the switch. An IBC is not ordered separately by
customers, it will be included with a CSI or ISI circuit ordered;
In-Span Interconnect (ISI): BT and the other CP build out their networks to a
handover point located between their switches. The handover point is normally
close to the BT exchange and therefore most of the build is the responsibility of
the interconnecting CP; and
Interconnection Extension Circuit (IEC): IECs allow an interconnecting CP with an
existing ISI to extend this point of interconnection to a new building. In order to
do this, BT provides a 2Mbit/s circuit between the two buildings. An IEC is subject
to the same per km charge as a CSI but has a reduced fixed charge.
Key Market Changes
Overall the fixed line calls market is shrinking. The contraction of the fixed market is driven
by substitution of broadband and mobile.
Interconnect Circuit volumes have declined slowly throughout the year driven by several
factors:




Summary Market Performance
Year
2013
2012
Revenue
£m
43
49
Total CCA
Operating
Costs Return
£m
£m
23
20
26
23
On-going migration from fixed public narrowband networks to mobile
networks.
CPs building their own 21CN networks and considering requirements for NGN
inter-connects with the BT network.
CPs rationalising their existing interconnections with BT.
CPs moving to Wholesale Calls packages and IP solutions – removing the
requirement for Interconnect Circuits.
Another factor is the substitution impact of Voice over Internet Protocol (VoIP) calls growing
as Broadband Service Providers move towards double and triple play offerings in a move to
consolidate market share and grow revenue.
Return on
MCE
%
38.9%
44.1%
Key Regulatory Changes
In 2009/10 Ofcom carried out a review of the Fixed Narrowband Services Wholesale Market
and a review of the Network Charge Controls. It was concluded that BT still has SMP in the
Technical Area for Interconnect Circuits.
Page 92
Section 8 – Review of Other Wholesale Markets
Section 8.5.1 - Technical Areas (Interconnect Circuits) (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Technical areas (Interconnect Circuits)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Service
Customer Sited Interconnect (end to end circuit)
External Wholesale standard CSI connections (v)
External Wholesale standard CSI rentals - fixed (v)
External Wholesale standard CSI rentals - per km (v)
2
8
4
2
8
4
984 circuits
6,955 circuits
188,506 km
1,790.74
1,204.56
22.00
1,205.82
608.32
11.72
1,051.58
410.21
6.44
3,386.19
1,391.20
31.27
In Span Interconnect with Interconnect Extension Circuit (end to end circuit)
External Wholesale IEC connections
External Wholesale IEC rentals - fixed
External Wholesale IEC rentals - per km
0
7
6
0
7
6
42 circuits
11,108 circuits
267,802 km
968.57
593.88
22.00
537.72
351.88
11.71
465.47
259.30
6.43
1,512.42
873.12
31.26
In Span Interconnect
External Wholesale intra-building circuits connections
External Wholesale intra-building circuits rentals
External Wholesale ISI rentals
1
3
0
1
3
-
1,088 circuits
34,439 circuits
6,069 100m
808.36
100.92
0.00
407.53
101.14
291.78
351.25
65.13
210.45
1,147.31
245.95
659.98
External Nominated ISI - per km
1
1
18,141 100m
68.75
59.49
30.86
155.47
External Wholesale rearrangements
1
1
1,322 circuits
448.81
515.86
455.08
1,433.54
4,809 circuits
1,103.64
507.18
345.08
1,145.26
22.00
11.72
6.44
31.27
100.92
101.14
65.13
245.95
Internal Wholesale standard CSI rentals - fixed
5
5
Internal Wholesale standard CSI rentals - per km
3
3
Internal Wholesale intra-building circuits rentals
2
2
Roundings
-
-
-
10.000
33.000
43
TOTAL
130,342 km
18,135 circuits
Page 93
Section 8 – Review of Other Wholesale Markets
Section 8.5.1 - Technical Areas (Interconnect Circuits) (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Technical areas (Interconnect Circuits)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
Customer Sited Interconnect (end to end circuit)
External Wholesale standard CSI connections (v)
External Wholesale standard CSI rentals - fixed (v)
External Wholesale standard CSI rentals - per km (v)
1
9
4
1
9
4
512 circuits
7,220 circuits
195,077 km
1,790.74
1,196.52
22.80
1,836.12
689.83
9.43
1,627.51
475.16
5.80
5,636.19
1,544.44
29.11
In Span Interconnect with Interconnect Extension Circuit (end to end circuit)
External Wholesale IEC connections
External Wholesale IEC rentals - fixed
External Wholesale IEC rentals - per km
0
7
6
0
7
6
474 circuits
11,394 circuits
272,146 km
968.57
585.84
22.80
631.52
391.54
9.43
575.10
297.89
5.80
2,097.52
910.97
29.11
In Span Interconnect
External Wholesale intra-building circuits connections
External Wholesale intra-building circuits rentals
External Wholesale ISI rentals
2
3
0
2
3
0
2,068 circuits
35,115 circuits
7,954 100m
808.36
92.88
0.00
396.78
99.10
170.09
370.03
64.07
124.55
1,407.97
223.06
370.33
External Nominated ISI - per km
1
1
20,300 100m
68.75
48.19
22.03
162.13
1
External Wholesale rearrangements
1
1,808 circuits
412.87
916.30
800.92
2,678.82
Internal Wholesale standard CSI rentals - fixed
8
8
7,481 circuits
1,103.64
590.73
411.09
1,321.37
Internal Wholesale standard CSI rentals - per km
5
5
22.80
9.43
5.80
29.11
Internal Wholesale intra-building circuits rentals
2
2
92.88
99.10
64.07
223.06
Roundings
-
-
-
15.000
34.000
49
TOTAL
202,129 km
18,585 circuits
Page 94
Section 8 – Review of Other Wholesale Markets
Section 8.5.2 - Technical Areas (Interconnect Circuits) calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
Technical areas (Interconnect Circuits)
£
Components
Unit (d)
Interconnect local end rental 2Mbit/s
Interconnect 2Mbit/s connection
Interconnect extension circuits (IEC) 2Mbit/s link
Customer Sited Interconnect cct (CSI) 2Mbit/s link
Interconnect extension circuits (IEC) 2Mbit per km
Customer Sited Interconnect cct (CSI) 2Mbit per km
In Span Interconnect circuits (ISI) transmission
Nominated In Span I/Connect cct (ISI) transmission
Intra Building Circuit (IBC) connection
Intra Building Circuit (IBC) rental
SG&A Interconnect (q)
£/circuit
£/circuit
£/circuit
£/circuit
£/km
£/km
£/100m
£/100m
£/circuit
£/circuit
%
Fully Allocated Costs (£)
181.24
984.56
196.82
205.23
9.30
9.31
291.78
51.97
319.12
90.10
£5m
£
£
£
£
£
£
£
£
£
181.24
£
£
Internal Wholesale intra-building circuits rentals
Internal Wholesale standard CSI rentals - fixed
External Wholesale rearrangements
External Nominated ISI - per km
External Wholesale ISI rentals
£
Internal Wholesale standard CSI rentals - per km
Internal Interconnect
External Wholesale intra-building circuits rentals
External Wholesale intra-building circuits connections
In span Interconnect
External Wholesale IEC rentals - per km
External Wholesale IEC rentals - fixed
External Wholesale IEC connections
External Wholesale standard CSI rentals - fixed
External Wholesale standard CSI connections
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
External Wholesale standard CSI rentals - per km
In Span Interconnect with
Customer Sited Interconnect
Interconnect Extension Circuit
(end to end circuit)
(end to end circuit)
£
181.24
690.84
112.67
466.77
196.82
205.23
205.23
9.30
9.31
9.31
291.78
51.97
319.12
319.12
195.86
90.10
131.75
2.41
1,205.82
608.32
11.72
Page 95
319.12
105.93
90.10
64.96
2.41
88.41
90.10
11.04
537.72
351.88
11.71
407.53
101.14
291.78
7.52
49.09
120.71
2.41
90.10
11.04
59.49
515.86
507.18
11.72
101.14
Section 8 – Review of Other Wholesale Markets
Section 8.5.2 - Technical Areas (Interconnect Circuits) calculation of FAC based on component costs and usage factors 2012 (continued)
Restated for the year ended 31 March 2012 (h)
Technical areas (Interconnect Circuits)
£
Components
Unit (d)
Interconnect local end rental 2Mbit/s
Interconnect 2Mbit/s connection
Interconnect extension circuits (IEC) 2Mbit/s link
Customer Sited Interconnect cct (CSI) 2Mbit/s link
Interconnect extension circuits (IEC) 2Mbit per km
Customer Sited Interconnect cct (CSI) 2Mbit per km
In Span Interconnect circuits (ISI) transmission
Nominated In Span I/Connect cct (ISI) transmission
Intra Building Circuit (IBC) connection
Intra Building Circuit (IBC) rental
SG&A Interconnect (q)
£/circuit
£/circuit
£/circuit
£/circuit
£/km
£/km
£/100m
£/100m
£/circuit
£/circuit
%
Fully Allocated Costs (£)
(b)
(v)
(d)
(q)
(h)
194.78
1,269.20
214.28
220.96
5.81
5.81
170.09
37.29
268.61
84.37
£8m
£
£
£
£
£
£
£
£
£
194.78
£
£
Internal Wholesale intra-building circuits rentals
Internal Wholesale standard CSI rentals - fixed
External Wholesale rearrangements
External Nominated ISI - per km
External Wholesale ISI rentals
£
Internal Wholesale standard CSI rentals - per km
Internal Interconnect
External Wholesale intra-building circuits rentals
External Wholesale intra-building circuits connections
In span Interconnect
External Wholesale IEC rentals - per km
External Wholesale IEC rentals - fixed
External Wholesale IEC connections
External Wholesale standard CSI rentals - fixed
External Wholesale standard CSI connections
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
External Wholesale standard CSI rentals - per km
In Span Interconnect with
Customer Sited Interconnect
Interconnect Extension Circuit
(end to end circuit)
(end to end circuit)
£
194.78
1,283.57
209.33
850.84
214.28
220.96
220.96
5.81
5.81
5.81
170.09
37.29
268.61
283.94
1,836.12
268.61
84.37
189.72
3.62
153.58
689.83
9.43
631.52
268.61
84.37
92.89
391.54
3.62
128.17
84.37
14.73
9.43
396.78
99.10
10.90
170.09
See glossary for volume unit descriptors.
Revenues shown are prior to the 'revenue share' between BT and Other Communication Providers.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 96
48.19
65.46
916.30
174.99
3.62
84.37
14.73
590.73
9.43
99.10
Section 8 – Review of Other Wholesale Markets
Section 8.6 - Fixed Call Termination
Definition
Summary Market Performance
Call termination includes the conveyance of all signals (including relevant control signals)
required to terminate calls on a customer’s exchange line from the first point in the network
where those signals can be accessed by another communications provider.
Year
2013
2012
The economic market is defined as fixed geographic call termination on each individual
Public Electronic Communications Network (PECN). This definition is slightly narrower than
that recommended by the European Commission, which could be adjusted to include nongeographic call termination services as well. The difference is deemed justifiable in that
non-geographic call termination markets are subject to different payment arrangements
that are not purely ‘calling party pays’ and, moreover, they are competitive in the UK.
Overall the fixed line calls market is shrinking. The contraction of the fixed market is driven
by substitution of mobile and VoIP services.
Call termination has declined steadily throughout the year driven by several factors:

The on-going migration of call termination minutes from fixed public narrowband
networks to mobile networks.

The substitution impact of VoIP and social networking websites is growing and has
a greater impact as Broadband penetration and speed increase. This will improve
the availability and quality of VoIP services.

Similarly growth in LLU lines is eroding call termination volumes.
Key Regulatory Changes
In 2009/10 Ofcom carried out a review of the Fixed Narrowband Services Wholesale Market
and a review of the Network Charge Controls. It was concluded that BT still has SMP in the
call termination market. In the Market Review, Ofcom also found that all providers of fixed
geographic call termination had SMP for termination on their own networks.
The Determination on Product Management, Policy and Planning (PPP) was implemented
by Ofcom on 1 July 2004. The interconnect costs are pooled with the costs of providing end
to end calls for BT’s retail activities and the costs are recovered over all calls on an equivalent
basis. Each call crossing BT’s network is charged PPP only once. As PPP is incurred on all calls
in markets where BT has SMP, it is relevant for the Fixed Call Termination market.
The charge controls for the services in this market are as follows:
Current NCC
(1 Oct 2009 – 30 Sept 2013)
Call Termination
RPI+3.75%
PPP
RPI+1.50%
Return on
MCE
%
11.3%
14.6%
Key Market Changes
“Fixed Call Termination Wholesale Service” is defined by Ofcom in the Fixed Narrowband
Services Wholesale Market Review Statement as “an Electronic Communications Service
provided by the Dominant Provider from (and over) the local exchange to (but not including
the conveyance of Signals over) an Exchange Line.”
Service
Revenue
£m
149
153
Total CCA
Operating
Costs Return
£m
£m
116
33
108
45
Ofcom is in the process of carrying out a review of the Narrowband Market and the Network
Charge Controls. This is planned to be completed by the summer of 2013. It is expected that
the new Charge Controls will come into effect on 1 October 2013.
Page 97
Section 8 – Review of Other Wholesale Markets
Section 8.6.1 - Fixed Call Termination (Annex 13)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Fixed call termination
Detailed service analysis
Non- discrimination
Cost orientation
NCC traffic - millions of minutes (mm)
Revenue
For the year ended 31 March 2013
Service
Internal Wholesale call termination local exchange segment
External Wholesale call termination local exchange segment
Day
Evening Weekend 24 hours
£m
Average NCC rates - pence per minute (ppm)
FAC
Unaudited Unaudited
(D)LRIC
DSAC
Day
Evening
Weekend
Weighted
Average
ppm
ppm
ppm
ppm
ppm
ppm
ppm
0.215
0.212
0.205
0.205
0.137
0.137
0.543
0.543
49
93
14,612
26,996
3,827
9,222
4,321
7,624
22,760
43,842
0.273
0.273
0.125
0.125
0.099
0.099
Internal Wholesale call termination local exchange segment (ISDN)
4
1,545
106
119
1,770
0.273
0.125
0.099
0.252
0.266
0.178
0.701
Internal Wholesale call termination local exchange stick (PSTN & ISDN)
3
1,242
386
452
2,080
0.186
0.085
0.067
0.141
0.136
0.084
0.360
Roundings
-
45
103
15,305
32,145
3,003
12,859
3,906
10,208
22,214
55,212
0.247
0.247
0.113
0.113
0.089
0.089
0.201
0.187
0.170
0.170
0.109
0.109
0.442
0.442
Internal Wholesale call termination local exchange segment (ISDN)
4
1,450
81
98
1,629
0.247
0.113
0.089
0.231
0.233
0.147
0.597
Internal Wholesale call termination local exchange stick
2
1,033
253
347
1,633
0.159
0.073
0.057
0.124
0.120
0.071
0.328
Internal Wholesale call termination local exchange stick (ISDN)
0
115
5
7
127
0.159
0.073
0.057
0.149
0.162
0.092
0.439
TOTAL
149
Restated for the year ended 31 March 2012 (h)
Internal Wholesale call termination local exchange segment
External Wholesale call termination local exchange segment
Roundings
TOTAL
(1)
153
Page 98
Section 8 – Review of Other Wholesale Markets
Section 8.6.2 - Fixed Call Termination calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
Fixed call termination
ppm
Components
Unit (d)
Local exchange concentrator
Local exchange processor
Remote - local transmission link
Remote - local transmission length
Core/Metro (voice)
iNode (call set up and features) (q)
ppm
ppm
ppm
ppm (per 10km)
ppm
%
Fully Allocated Costs (ppm)
0.067
0.063
0.039
0.023
0.001
£17m
ppm
Retail
Stick
Internal Wholesale call termination local
exchange stick (PSTN & ISDN)
Internal Wholesale call termination local
exchange segment (ISDN)
Fully Allocated Cost (£)
Wholesale call termination local exchange
segment
Average cost per unit (from annex 15)
Call
Termination
basket
ppm
0.066
0.062
0.032
0.034
0.002
0.009
0.087
0.081
0.040
0.044
0.003
0.011
0.064
0.205
0.266
0.136
0.030
0.032
0.002
0.008
Page 99
Section 8 – Review of Other Wholesale Markets
Section 8.6.2 - Fixed Call Termination calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
Fixed call termination
ppm
ppm
ppm
Internal Wholesale call termination local
exchange stick (ISDN)
Internal Wholesale call termination local
exchange stick
Retail Sticks
ppm
Components
Unit (d)
Local exchange concentrator
Local exchange processor
Remote - local transmission link
ppm
ppm
ppm
0.060
0.054
0.032
0.059
0.053
0.025
0.080
0.072
0.035
0.060
0.081
0.026
0.035
Remote - local transmission length
Core/Metro (voice)
iNode (call set up and features) (q)
ppm (per 10km)
ppm
%
0.017
0.002
£17m
0.023
0.003
0.007
0.032
0.004
0.010
0.024
0.003
0.007
0.032
0.004
0.010
0.170
0.233
0.120
0.162
Fully Allocated Costs (ppm)
(d)
Internal Wholesale call termination local
exchange segment (ISDN)
Fully Allocated Cost (£)
Wholesale call termination local exchange
segment
Average cost per unit (from annex 15)
Call Termination
basket
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
(q)
(h)
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 100
Section 8 – Review of Other Wholesale Markets
Section 8.7 - Wholesale Trunk Segments
Definition
Basket
Value of X
Sub Caps
This market covers the provision of trunk segments across core transmission networks. These
trunk services are often used to provide a link between origination services where a
communications provider does not have available network to its nearest point of
connection. As in the case of symmetric broadband origination services, trunk segment
services may be used to provide a wide range of downstream retail services.
TI Basket
TI-Trunk (all bandwidths –
rental).
3.25% (up to
30 Sept
2010);
RPI-1.75%
(from 1 Oct
2010);
RPI+0% from
1 Oct 2012
RPI - 0% sub-cap on sub-basket
of TISBO terminating segments.
RPI + 5% sub-cap on each charge
(excluding POH charges).
RPI - 0% sub-cap on each charge
(POH charges only).
POC end and third party end
equipment charges.
RPI – 0%
No charge can increase more
than 5% in nominal terms.
All relevant ancillary services
used in the provision of TI
services in scope of the TI
Basket.
RPI – 0%
None.
The particular services provided are the same as described above for symmetric broadband
origination. No stand alone trunk segment services were sold to third parties, although such
a service may be requested at some point in the future.
Additionally, LLU backhaul services, RBS backhaul circuits and Netstream 16 Longline may,
in particular circumstances, involve some trunk segment services as part of the overall
service. This would correspond to intra core transmission on the BT network. This element
for RBS and Netstream circuits is included in the relevant TISBO market.
Ofcom concluded that a national market exists for trunk segments and that BT has SMP in
the national market for wholesale trunk segments.
Key Regulatory Changes
These controls run from 1 October 2009 to 30 September 2012. Ofcom’s market review
statement published 28 March 2013 did not come into effect until 1 April 2013. From 1
October 2012 BT was allowed to increase its TI basket prices by RPI+0% which applied to
the end of the financial year on 31 March 2013.
In December 2008 Ofcom published its Final Statement on the BCMR. Ofcom found BT to
continue to have SMP in the market for trunk segments at all bandwidths.
Ofcom increased regulation in the trunk market by imposing a charge control and requiring
prices to be notified at 90 days. In addition, Ofcom changed the definition of trunk
segments from one based on links between two BT SDH Tier 1 nodes to one based on routes
between defined major urban areas and imposed additional Service Level
Agreement/Service Level Guarantee requirements from December 2008.
Summary Market Performance
Following a separate Consultation, Ofcom published its Statement on the Leased Lines
Charge Control on 2 July 2009, imposing a RPI – X% charge control on Trunk services as a
remedy to its finding of SMP for BT. Note that there is a single overall TI basket comprising
connection and rental for low bandwidth, high bandwidth and very high bandwidth TISBO
services as well as rental for Trunk services.
Year
2013
2012
Revenue
£m
76
90
Total CCA
Operating
Costs Return
£m
£m
24
52
23
67
Return on
MCE
%
34.2%
42.5%
Key Market Changes
For PPCs, there continues to be a fall in demand for traditional TDM circuits as customers
continue to migrate to 21CN services like Ethernet, and other services like Broadband.
Competition and customer demand for alternative technologies is resulting in falling
volumes in this market.
On 2 September 2009, Cable & Wireless lodged an appeal with the CAT contesting certain
parts of Ofcom’s Leased Line Charge Control Statement. The Tribunal issued a direction on
20 September 2010 directing the controlling percentage for the TI basket to be amended to
RPI-1.75% from 1 October 2010.
Price changes in the market took place in October 2012 to enable compliance with the
charge control and regulatory obligations.
Page 101
Section 8 – Review of Other Wholesale Markets
Section 8.7.1 - Wholesale Trunk Segments (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale trunk segments
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Service
Partial and Private circuits 2Mbit/s - trunk
Trunk charge per year
Enhanced maintenance per km charge per year
Total Internal
36
Trunk charge per year
Enhanced maintenance per km charge per year
Total External
Partial and Private circuits 34/45Mbit/s - trunk
Trunk charge per year
Enhanced maintenance per km charge per year
Total Internal
7
16
Trunk charge per year
Enhanced maintenance per km charge per year
Total External
Partial and Private circuits 140/155Mbit/s - trunk
Trunk charge per year
Enhanced maintenance per km charge per year
Total Internal
36
2
7
Trunk charge per year
Enhanced maintenance per km charge per year
Total External
km
15.01
9.04
46.98
15.01
9.04
46.98
7
152,562
km
45.77
1.68
47.45
16
43,201
km
374.01
2.51
376.52
139.38
86.58
419.88
km
374.01
2.51
376.52
139.38
86.58
419.88
km
186.69
4.31
191.00
208.39
107.62
681.13
208.39
107.62
681.13
986.18
513.91
3,172.39
2
7
6,070
34,872
0
1,254
km
186.69
4.31
191.00
5
10,029
km
499.38
1
2
1
(ux)
(ux)
0
Internal Partial and Private circuits 622Mbit/s - trunk
5
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
2
Roundings
-
-
-
66
10
76
TOTAL
767,550
45.77
1.68
47.45
(sx)
(sx)
Page 102
Estimated cost of £0.5m
Estimated cost of £0.4m
Section 8 – Review of Other Wholesale Markets
Section 8.7.1 - Wholesale Trunk Segments (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale trunk segments
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
Partial and Private circuits 2Mbit/s - trunk
Trunk charge per year
Enhanced maintenance per km charge per year
Total Internal
Trunk charge per year
Enhanced maintenance per km charge per year
Total External
41
10
Partial and Private circuits 34/45Mbit/s - trunk
Trunk charge per year
Enhanced maintenance per km charge per year
Total Internal
Trunk charge per year
Enhanced maintenance per km charge per year
Total External
4
Partial and Private circuits 140/155Mbit/s - trunk
Trunk charge per year
Enhanced maintenance per km charge per year
Total Internal
Trunk charge per year
Enhanced maintenance per km charge per year
Total External
Roundings
TOTAL
km
13.99
8.17
42.92
13.99
8.17
42.92
10
213,342
km
43.95
1.68
45.63
19
47,201
km
394.79
2.51
397.30
116.35
72.55
343.71
116.35
72.55
343.71
4
9,316
km
394.79
2.51
397.30
8
38,685
km
210.21
4.31
214.52
154.49
79.22
471.32
154.49
79.22
471.32
834.61
432.76
2,481.46
0
1,765
km
210.21
4.31
214.52
7
10,871
km
640.83
1
1
1
(ux)
(ux)
-
(1)
15
90
0
Internal Partial and Private circuits 622Mbit/s - trunk
Support Service
Internal Protected Path Variants and Resilience
External Protected Path Variants and Resilience
889,692
43.95
1.68
45.63
(sx)
(sx)
Page 103
Estimated cost of £0.5m
Estimated cost of £0.4m
Section 8 – Review of Other Wholesale Markets
Section 8.7.2 - Wholesale Trunk Segments calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
£
Components
Unit (d)
PC rental 2Mbit/s link per km trunk
PC rental 34Mbit/s link per km trunk
PC rental 140Mbit/s link per km trunk
PC rental 622Mbit/s link per km trunk
SG & A partial private circuits (q)
£/km
£/km
£/km
£/km
%
Fully Allocated Costs (£)
12.60
120.97
200.13
960.93
£31m
£
Partial and Private circuits 622Mbit/s - trunk
Partial and Private circuits 140/155Mbit/s trunk
Fully Allocated Cost (£)
Partial and Private circuits 34/45Mbit/s trunk
Average cost per unit (from annex 15)
Partial and Private circuits 2Mbit/s - trunk
Wholesale trunk segments
£
£
12.68
120.85
198.99
2.33
18.53
9.40
960.93
25.25
15.01
139.38
208.39
986.18
Page 104
Section 8 – Review of Other Wholesale Markets
Section 8.7.2 - Wholesale Trunk Segments calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
PC rental 2Mbit/s link per km trunk
PC rental 34Mbit/s link per km trunk
PC rental 140Mbit/s link per km trunk
PC rental 622Mbit/s link per km trunk
MSAN-METRO Connectivity Link (q)
SG & A partial private circuits (q)
SG & A private circuits (q)
£/km
£/km
£/km
£/km
%
%
%
Fully Allocated Costs (£)
(b)
(ux)
(sx)
(d)
(q)
(h)
11.82
98.28
146.18
805.19
£14m
£28m
£6m
£
£
Partial and Private circuits 622Mbit/s - trunk
Partial and Private circuits 140/155Mbit/s trunk
Fully Allocated Cost (£)
Partial and Private circuits 34/45Mbit/s trunk
Average cost per unit (from annex 15)
Partial and Private circuits 2Mbit/s - trunk
Wholesale trunk segments
£
11.88
97.94
144.55
1.69
0.42
14.78
3.63
7.96
1.98
805.19
(0.02)
23.78
5.66
13.99
116.35
154.49
834.61
See glossary for volume unit descriptors.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 105
Section 8 – Review of Other Wholesale Markets
Section 8.8 - Technical Areas (Point of Handover)
Definition
Summary Market Performance
Point of Handover (PoH) is a Technical Area associated with the Traditional Interface
Symmetric Broadband Origination (TISBO) market, rather than a market in itself. It is a
necessary technical function to enable network interconnection, in order to allow the
provision of wholesale products in the TISBO market.
Year
2013
2012
In all TISBO markets where BT has SMP, we are required to provide PoH services in two
varieties: Customer Sited Handover (CSH) and In-Span Handover, including ISH Extension.
When providing CSH, BT delivers TISBO services to the premises of its wholesale customers.
When providing ISH, BT and the wholesale customer connect their networks at a notional
mid-point.
PoH has been impacted by customers rationalising their networks, i.e. reducing the number
of sites and consequently points of handover, and instead increasing the bandwidth to
remaining sites.
Price changes in the market took place in October 2012 to enable compliance with the
charge control and regulatory obligations.
As part of the Leased Lines Charge Control on 2 July 2009, Ofcom required the introduction
of separate Point of Handover rental charges to replace the current local end uplift factor
included in the rental price of external local ends. To balance the introduction of the new
separate Point of Handover charges, Ofcom required a corresponding reduction to external
local end prices.
Value of X
Sub Caps
TI Basket
TI - Low bandwidth
connection
and rental.
3.25% (up to
30th Sept
2010);
RPI-1.75%
(from 1st Oct
2010);
RPI+0% (from 1
Oct 2012)
RPI - 0% sub-cap on sub-basket
of TISBO terminating segments.
RPI + 5% sub-cap on each charge
(excluding POH charges).
RPI - 0% sub-cap on each charge
(POH charges only).
POC end and third party end
equipment charges.
RPI-0%
No charge can increase more
than 5% in nominal terms.
All relevant ancillary services
used in the provision of TI
services in scope of the TI
Basket.
RPI-0%
None.
Return on
MCE
%
(25.2)%
(26.3)%
Key Market Changes
Key Regulatory Changes
Basket
Revenue
£m
3
6
Total CCA
Operating
Costs Return
£m
£m
7
(4)
11
(5)
These controls run from 1 October 2009 to 30 September 2012. Ofcom’s market review
statement published 28 March 2013 did not come into effect until 1 April 2013. From 1
October 2012 BT was allowed to increase its TI basket prices by RPI+0% which applied to
the end of the financial year on 31 March 2013.
Page 106
Section 8 – Review of Other Wholesale Markets
Section 8.8.1 - Market: Technical Areas (Point of Handover) (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Technical Areas (Point of Handover)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Service
External Customer Sited Handover connections
0
-
-
External Customer Sited Handover rentals
0
0
369 lines
External In Span Handover connections
0
-
-
External In Span Handover rentals
0
0
526 lines
External 3rd Party POH Rentals - equipment
1
1
External 3rd Party POH Rental 64kbit/s - circuit
0
External 3rd Party POH Rental 2Mbit/s non CLZ - circuit
conns
1,326.50
1,776.80
1,684.30
2,447.11
-
-
-
-
565.34
52.21
45.97
139.82
46,152 le
16.29
141.27
73.55
317.47
0
3,865 le
115.61
76.46
61.65
216.39
1
1
4,889 le
197.02
142.61
77.21
339.14
External 3rd Party POH Rental Other - circuit
0
0
678 le
217.41
167.27
82.38
368.06
Roundings
-
1
TOTAL
3
3
Page 107
conns
-
Section 8 – Review of Other Wholesale Markets
Section 8.8.1 - Market: Technical Areas (Point of Handover) (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Technical Areas (Point of Handover)
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
External Customer Sited Handover connections
0
0
External Customer Sited Handover rentals
0
0
External In Span Handover connections
0
0
External In Span Handover rentals
0
0
External 3rd Party POH Rental 64kbit/s
1
1
External 3rd Party POH Rental 2Mbit/s non CLZ
3
External 3rd Party POH Rental 2Mbit/s CLZ
83 conns
2,891.02
1,822.84
1,710.62
2,989.06
1,279.38
3,479.77
3,271.67
5,115.16
2,009.64
2,380.00
2,236.03
3,656.69
618.77
390.14
366.13
639.75
12,462 le
57.92
62.75
50.40
174.38
3
49,977 le
54.20
164.46
77.73
338.04
0
0
3,688 le
71.30
177.82
76.09
344.21
External 3rd Party POH Rental 34/45Mbit/s
1
1
1,098 le
621.75
1,075.41
311.93
2,022.59
External 3rd Party POH Rental 155Mbit/s
0
0
123 le
2,309.11
1,421.93
831.57
3,006.17
Roundings
1
1
TOTAL
6
6
376 lines
1 conns
497 lines
Page 108
Section 8 – Review of Other Wholesale Markets
Section 8.8.2 - Technical Areas (Point of Handover) calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
Point of Handover electronics
PC rental 64kbit/s link local end
PC rental 34Mbit/s link local end
PC rental 140Mbit/s link local end
PC rental 2Mbit/s local end copper
PC rental 2Mbit/s local end fibre
Access Cards (other services) (q)
SG & A partial private circuits (q)
£/eq
£/le
£/le
£/le
£/le
£/le
%
%
Fully Allocated Costs (£)
£
1,141.05
392.94
3,553.49
5,989.94
263.18
650.76
£25m
£31m
£
£
70.78
27.52
7.76
14.98
2.61
9.57
99.71
5.75
0.89
52.21
141.27
In Span Handover rentals
External 3rd Party POH Rental Other - circuit
External 3rd Party POH Rentals - equipment
£
£
24.69
64.56
1,776.80
£
£
1,712.24
-
External 3rd Party POH Rental 2Mbit/s non
CLZ - circuit
Unit (d)
External 3rd Party POH Rental 64kbit/s circuit
£
Components
In Span Handover connections
Fully Allocated Cost (£)
Customer Sited Handover rentals
Average cost per unit (from annex 15)
Customer Sited Handover connections
Technical Areas (Point of Handover)
-
Page 109
9.56
6.29
5.68
11.91
114.75
6.26
9.69
133.80
6.92
10.70
76.46
142.61
167.27
Section 8 – Review of Other Wholesale Markets
Section 8.8.2 - Technical Areas (Point of Handover) calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
Point of Handover electronics
PC rental 64kbit/s link local end
PC rental 34Mbit/s link local end
PC rental 140Mbit/s link local end
PC rental 2Mbit/s local end copper
PC rental 2Mbit/s local end fibre
Access Cards (other services) (q)
SG & A partial private circuits (q)
SG & A private circuits (q)
£/eq
£/le
£/le
£/le
£/le
£/le
%
%
%
Fully Allocated Costs (£)
(b)
(d)
(q)
(h)
0.94
324.10
4,901.33
6,725.65
355.11
856.16
£45m
£28m
£6m
1,690.43
£
3,421.18
£
£
2,288.00
£
£
£
£
External 3rd Party POH Rentals 155Mbit/s
External 3rd Party POH Rentals 34/45Mbit/s
External 3rd Party POH Rentals 2Mbit/s CLZ
External 3rd Party POH Rentals 2Mbit/s non
CLZ
External 3rd Party POH Rentals 64kbit/s
In Span Handover rentals
In Span Handover connections
Fully Allocated Cost (£)
Customer Sited Handover rentals
Average cost per unit (from annex 15)
Customer Sited Handover connections
Technical Areas (Point of Handover)
£
361.80
60.02
1,043.37
1,174.87
106.94
25.47
47.32
11.27
74.00
18.00
22.89
5.45
2.22
0.51
14.24
141.44
6.09
2.21
0.48
1,822.84
3,479.77
2,380.00
390.14
62.75
164.46
168.27
6.09
2.83
0.63
26.56
5.48
127.97
98.76
20.33
177.82
1,075.41
1,421.93
See glossary for volume unit descriptors.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
See Section 2 Basis of Preparation for explanation of restatement.
Page 110
Section 8 – Review of Other Wholesale Markets
Section 8.9 - Wholesale Broadband Access Market 1
Definition
Summary Market Performance
Market 1 covers BT exchange areas where only BT provides Wholesale Broadband Access.
Key Regulatory Changes
Year
2013
2012
BT Wholesale continues to have regulatory and Equivalence of Input (EOI) obligations in
relation to the supply of Wholesale Broadband Access products in Market 1.
BT Wholesale continues to have regulatory and EOI obligations in relation to the supply of
Wholesale Broadband Access products in Market 1. The market has remained relatively
stable, with a small decline in revenue due to changes in product mix, primarily from
regrades from IPstream to Wholesale Broadband Connect.
BT continues to be required to report Market 1 on an EOI basis as a result of the Ofcom
February 2011 consultation document ‘Changes to BT and KCOM’s Regulatory and Financial
Reporting 2010/11 Update’.
In July 2011, Ofcom published its Final Statement for the Wholesale Broadband Access
Charge Control. Ofcom imposed an RPI-X charge control where X is 12% on IPStream Max
and Max Premium end user access services within Market 1. There is a single overall basket
for end user access (EUA) connections, rentals, end user bandwidth charges, contracted
bandwidth per node rental charges, re-grades, migrations, cancellations, handover rentals,
and 20CN interconnect link rentals at the 1Gbit/s and 10Gbit/s bandwidths. In addition,
Ofcom imposed sub-cap RPI-X where X is 0% controls on contracted bandwidth per node
rental charges, re-grades, migrations and cancellations.
Value of X
RPI-12.00%
Return on
MCE
%
11.3%
16.0%
Key Market Changes
In their final statement on the SMP review in December 2010, Ofcom confirmed that the
SMP obligations applying to Wholesale Broadband products would include a cost
orientation obligation on BT in Market 1.
Basket
IPStream Max and
Max Premium (up
to 8 Mbit/s)
Revenue
£m
404
415
Total CCA
Operating
Costs Return
£m
£m
347
57
349
66
Sub Caps
RPI-0% sub cap on IPS Connect contracted
bandwidth per Mbit/s per node rental.
RPI-0% sub cap on IPS Connect EUA re-grade.
RPI-0% sub cap on IPS Connect EUA migration.
RPI-0% sub cap on IPS Connect EUA cancellation.
The current charge controls run from 17 August 2011 to March 2014.
Page 111
Section 8 – Review of Other Wholesale Markets
Section 8.9.1 - Wholesale Broadband Access Market 1 (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale broadband access market 1 - BT only operator
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Cost orientation
Average
price
£
FAC
£
Unaudited
(D)LRIC
£
Unaudited
DSAC
£
38.32
33.54
5.15
38.69
33.54
4.94
38.48
33.54
12.74
46.28
38.32
33.54
5.15
38.69
33.54
4.94
38.48
33.54
12.74
46.28
74.31
25.69
77.38
103.07
25.69
62.46
88.15
25.69
153.23
178.92
76.64
26.44
77.09
103.53
26.44
62.25
88.69
26.44
153.11
179.55
98.82
7.19
60.12
67.31
7.19
41.27
48.46
7.19
400.97
408.16
102.52
7.39
64.08
71.47
7.39
44.49
51.88
7.39
407.48
414.87
For the year ended 31 March 2013
Service
Internal End user access connections Mkt 1
EOI
Wholesale Costs
12
309,795 conns
External end user access connections Mkt 1
EOI
Wholesale Costs
4
105,368 conns
Internal IPstream Connect End user access Rentals Mkt 1
EOI
Wholesale Costs
85
1,145,572 rentals
External IPstream Connect End user access Rentals Mkt 1
EOI
Wholesale Costs
50
655,810 rentals
Internal IPstream Connect Bandwidth Mkt 1
EOI
Wholesale Costs
139
1,401,799 bandwidth
External IPstream Connect Bandwidth Mkt 1
EOI
Wholesale Costs
43
417,826 bandwidth
Page 112
Section 8 – Review of Other Wholesale Markets
Section 8.9.1 - Wholesale Broadband Access Market 1 (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
For the year ended 31 March 2013
Internal WBC end user access Rentals Mkt 1
EOI
Wholesale Costs
23
326,585 rentals
70.56
18.03
26.60
44.63
2
27,507 rentals
70.56
18.03
26.60
44.63
18.03
21.09
39.12
18.03
71.12
89.15
6.04
13.97
20.01
6.04
55.59
61.63
External WBC end user access Rentals Mkt 1
EOI
Wholesale Costs
Internal WBC bandwidth Mkt 1
EOI
Wholesale Costs
18.03
21.09
39.12
18.03
71.12
89.15
19
475,629 bandwidth
40.00
6.04
18.56
24.60
1
21,951 bandwidth
40.00
5.90
18.57
24.47
5.90
13.98
19.88
5.90
55.60
61.50
External WBC bandwidth Mkt 1
EOI
Wholesale Costs
Internal Ancillary Charges and Other Mkt 1
EOI
Wholesale Costs
0
18
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
External Ancillary Charges and Other Mkt 1
EOI
Wholesale Costs
0
9
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
Roundings
TOTAL
(1)
404
Page 113
Section 8 – Review of Other Wholesale Markets
Section 8.9.1 - Wholesale Broadband Access Market 1 (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale broadband access market 1 - BT only operator
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
Internal End user access connections Mkt 1
EOI
Wholesale Costs
12
278,566 conns
41.31
39.79
5.00
44.79
39.79
4.65
44.44
39.79
14.00
53.79
41.31
39.79
5.00
44.79
39.79
4.65
44.44
39.79
14.00
53.79
89.30
29.59
53.61
83.20
29.59
43.86
73.45
29.59
110.93
140.52
79.30
30.47
64.24
94.71
30.47
52.55
83.02
30.47
126.36
156.83
78.13
31.82
64.54
96.36
31.82
52.78
84.60
31.82
126.66
158.48
1,022.21
8.22
347.32
355.54
8.22
243.33
251.55
8.22
2,049.12
2,057.34
119.42
7.14
56.33
63.47
7.14
38.45
45.59
7.14
272.63
279.77
121.79
8.65
56.34
64.99
8.65
38.54
47.19
8.65
272.07
280.72
External end user access connections Mkt 1
EOI
Wholesale Costs
4
107,078 conns
External Datastream End user access Rentals Mkt 1
EOI
Wholesale Costs
0
3,578 rentals
Internal IPstream Connect End user access Rentals Mkt 1
EOI
Wholesale Costs
106
1,332,433 rentals
External IPstream Connect End user access Rentals Mkt 1
EOI
Wholesale Costs
68
872,707 rentals
External Datastream Virtual Paths Mkt 1
EOI
Wholesale Costs
2
2,380 vp
Internal IPstream Connect Bandwidth Mkt 1
EOI
Wholesale Costs
126
1,055,136 bandwidth
External IPstream Connect Bandwidth Mkt 1
EOI
Wholesale Costs
68
558,332 bandwidth
Page 114
Section 8 – Review of Other Wholesale Markets
Section 8.9.1 - Wholesale Broadband Access Market 1 (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Internal Ancillary Charges and Other Mkt 1
EOI
Wholesale Costs
0
22
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
External Ancillary Charges and Other Mkt 1
EOI
Wholesale Costs
0
6
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
Roundings
1
TOTAL
415
Page 115
Section 8 – Review of Other Wholesale Markets
Section 8.9.2 - Wholesale Broadband Access Market 1 calculation of FAC based on component costs and usage factors (Annex 16)
For the year ended 31 March 2013
£
Components
Unit (d)
Broadband line testing systems
ADSL connections
Combi Card Broadband Access
ATM customer interface 2Mbit/s
ATM customer interface 34Mbit/s
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
Inter ATM transmissions
21CN Backhaul Link & Length
Core/Metro (broadband)
SG&A Broadband (q)
Broadband backhaul circuits (excl Virtual Paths) (q)
Edge Ethernet ports (q)
Core/Metro connectivity (q)
DSLAM capital/maintenance (q)
EOI Notional Creditors (ap)
£/line
£/conn
£/line
£/port
£/port
£/port
£/port
£/use
£/use
£/circuit
£/circuit
%
%
%
%
%
Fully Allocated Costs (£)
2.50
2.66
19.91
92.26
982.59
286.23
98.13
3.01
42.88
7,423.01
10.78
£92m
£52m
£9m
£47m
£195m
0.00
£
2.65
£
£
£
1.85
1.86
19.91
19.91
£
£
£
1.83
1.83
19.91
19.91
External WBC BW - Revenues Mkt 1
Internal WBC BW - Revenues Mkt 1
External WBC end user access-Rentals Mkt 1
Internal WBC end user access-Rentals Mkt 1
£
£
2.65
(0.20)
(0.20)
50.54
(0.15)
50.08
(0.15)
0.01
0.08
0.99
0.43
2.57
10.84
4.30
10.39
7.56
16.24
0.86
1.60
4.29
(0.04)
5.15
5.15
77.38
77.09
60.12
2.70
External IPstream Connect Bandwidth Mkt 1
Internal IPstream Connect Bandwidth Mkt 1
External IPstream Connect End user access
Rentals Mkt 1
Internal IPstream Connect End user access
Rentals Mkt 1
Internal End user access connections Mkt 1
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
External end user access connections Mkt 1
Wholesale broadband access market 1 - BT only operator
2.70
5.23
5.39
Page 116
0.01
0.08
0.99
0.43
2.57
10.84
4.30
10.39
7.64
16.24
0.86
1.60
8.17
(0.04)
(0.11)
64.08
26.60
4.97
4.30
10.39
3.05
4.30
10.39
3.05
0.86
0.86
(0.11)
(0.04)
(0.03)
26.60
18.56
18.57
4.97
Section 8 – Review of Other Wholesale Markets
Section 8.9.2 - Wholesale Broadband Access Market 1 calculation of FAC based on component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
Broadband line testing systems
ADSL connections
Combi Card Broadband Access
ATM customer interface 2Mbit/s
ATM customer interface 34Mbit/s
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
Inter ATM transmissions
Core/Metro (broadband)
SG&A Broadband (q)
Broadband backhaul circuits (excl Virtual Paths) (q)
Edge Ethernet ports (q)
Core/Metro connectivity (q)
DSLAM capital/maintenance (q)
EOI Notional Creditors (ap)
£/line
£/conn
£/line
£/port
£/port
£/port
£/port
£/use
£/use
£/circuit
%
%
%
%
%
Fully Allocated Costs (£)
(b)
(ux)
(sx)
(d)
(q)
(ap)
(h)
2.09
1.72
19.17
128.27
1,457.37
454.99
332.72
4.70
30.06
16.11
£111m
£43m
£5m
£63m
£225m
£
1.72
£
£
£
£
1.98
1.92
1.92
19.17
19.17
19.17
External IPstream Connect Bandwidth Mkt 1
Internal IPstream Connect Bandwidth Mkt 1
External Datastream Virtual Paths Mkt 1
External IPstream Connect End user access
Rentals Mkt 1
Internal IPstream Connect End user access
Rentals Mkt 1
External Datastream End user access
Rentals Mkt 1
Internal End user access connections Mkt 1
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
External end user access connections Mkt 1
Wholesale broadband access market 1 - BT only operator
£
£
1.72
0.01
0.46
12.67
7.33
27.65
75.11
15.46
92.92
115.25
0.51
0.02
0.13
1.70
0.56
3.77
8.06
15.46
10.86
14.16
0.51
1.14
0.02
0.13
1.69
0.55
3.74
8.01
15.46
11.07
14.07
0.51
1.14
3.51
3.51
7.60
6.74
6.65
(0.23)
(0.23)
25.03
(0.17)
36.59
(0.18)
36.99
(0.19)
(0.05)
(0.04)
(0.05)
5.00
5.00
53.61
64.24
64.54
347.32
56.33
56.34
See glossary for volume unit descriptors.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
Reduction in FAC due to notional creditor generated by the EOI charge from Openreach to WBA markets.
See Section 2 Basis of Preparation for explanation of restatement.
Page 117
Section 8 – Review of Other Wholesale Markets
Section 8.10 - Wholesale Broadband Access Market 2
Definition
Market 2 covers BT exchange areas where two operators are present and exchanges where
three operators are present or forecast but where BT’s share is greater than or equal to 50%
of the customers in that exchange area.
Key Regulatory Changes
BT Wholesale continues to have regulatory and EOI obligations in relation to the supply of
Wholesale Broadband Access products in Market 2.
In their final statement on the SMP review in December 2010, Ofcom confirmed that the
SMP obligations applying to Wholesale Broadband products would include a cost
orientation obligation on BT in Market 2 but no charge control.
BT continues to be required to report market 2 on an EOI basis as a result of the Ofcom
February 2011 consultation document ‘Changes to BT and KCOM’s Regulatory and Financial
Reporting 2010/11 Update’.
Summary Market Performance
Year
2013
2012
Revenue
£m
206
242
Total CCA
Operating
Costs Return
£m
£m
147
59
186
56
Return on
MCE
%
32.4%
30.2%
Key Market Changes
The wholesale broadband market has continued to show growth over the last year. The
combined Digital Subscriber Line (DSL) (including Local Loop Unbundled lines) and Cable
market has grown by 5% in the year to March 2013. Cable lines have increased to 4.3m,
whilst Local Loop Unbundling (LLU) lines have grown 7% in the year (from 8.3 to 8.9m
lines). BT’s DSL lines have increased by 3% in the year from 8.5 to 8.8m lines in March
2013.
Page 118
Section 8 – Review of Other Wholesale Markets
Section 8.10.1 - Wholesale Broadband Access Market 2 (Annex 11)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale broadband access market 2 - 2 to 3 principal operators
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Cost orientation
Average
price
£
FAC
£
Unaudited Unaudited
(D)LRIC
DSAC
£
£
33.54
5.13
38.67
33.54
13.46
47.00
For the year ended 31 March 2013
Service
Internal End user access connections Mkt 2
EOI
Wholesale Costs
7
173,271 conns
40.98
33.54
5.35
38.89
2
50,780 conns
40.98
33.54
5.35
38.89
33.54
5.13
38.67
33.54
13.46
47.00
17
208,826 rentals
82.00
26.33
86.36
112.69
26.33
69.84
96.17
26.33
168.78
195.11
17
203,360 rentals
83.74
26.70
89.52
116.22
26.70
72.42
99.12
26.70
174.13
200.83
22
171,447 bandwidth
129.44
8.36
59.71
68.07
8.36
41.60
49.96
8.36
387.41
395.77
34
269,273 bandwidth
126.85
4.06
58.81
62.87
4.06
40.88
44.94
4.06
386.07
390.13
External end user access connections Mkt 2
EOI
Wholesale Costs
Internal IPstream Connect End user access Rentals Mkt 2
EOI
Wholesale Costs
External IPstream Connect End user access Rentals Mkt 2
EOI
Wholesale Costs
Internal IPstream Connect Bandwidth Mkt 2
EOI
Wholesale Costs
External IPstream Connect Bandwidth Mkt 2
EOI
Wholesale Costs
Page 119
Section 8 – Review of Other Wholesale Markets
Section 8.10.1 - Wholesale Broadband Access Market 2 (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Internal WBC end user access-Rentals Mkt 1
Internal WBC end user access Rentals Mkt 2
EOI
Wholesale Costs
47
659,557 rentals
70.56
18.03
26.60
44.63
18.03
21.09
39.12
18.03
71.12
89.15
70.56
18.03
26.60
44.63
18.03
21.09
39.12
18.03
71.12
89.15
40.00
5.44
18.57
24.01
5.44
13.98
19.42
5.44
55.60
61.04
40.00
5.45
18.57
24.02
5.45
13.98
19.43
5.45
55.60
61.05
External WBC end user access Rentals Mkt 2
EOI
Wholesale Costs
6
87,759 rentals
Internal WBC bandwidth Mkt 2
EOI
Wholesale Costs
33
831,906 bandwidth
External WBC bandwidth Mkt 2
EOI
Wholesale Costs
3
86,510 bandwidth
Internal Ancillary Charges and Other Mkt 2
EOI
Wholesale Costs
0
12
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
External Ancillary Charges and Other Mkt 2
EOI
Wholesale Costs
0
5
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
Roundings
TOTAL
1
206
Page 120
Section 8 – Review of Other Wholesale Markets
Section 8.10.1 - Wholesale Broadband Access Market 2 (continued)
Purpose of statement: to provide more detail on financial performance and first order tests of compliance with cost orientation and non-discrimination obligations
Wholesale broadband access market 2 - 2 to 3 principal operators
Annex 11
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Restated for the year ended 31 March 2012 (h)
Service
Internal End user access connections Mkt 2
EOI
Wholesale Costs
8
205,455 conns
41.31
39.79
5.00
44.79
3
76,601 conns
41.31
39.79
5.00
44.79
39.79
4.65
44.44
39.79
14.00
53.79
89.30
29.59
95.00
124.59
29.59
78.06
107.65
29.59
176.55
206.14
79.62
30.38
58.98
89.36
30.38
48.20
78.58
30.38
118.06
148.44
78.71
31.87
59.02
90.89
31.87
48.22
80.09
31.87
118.01
149.88
1,022.21
8.99
270.30
279.29
8.99
197.40
206.39
8.99
1,464.80
1,473.79
129.71
8.69
50.39
59.08
8.69
35.11
43.80
8.69
226.16
234.85
131.24
9.78
48.86
58.64
9.78
34.22
44.00
9.78
215.04
224.82
External end user access connections Mkt 2
EOI
Wholesale Costs
External Datastream End user access Rentals Mkt 2
EOI
Wholesale Costs
0
2,192 rentals
Internal IPstream Connect End user access Rentals Mkt 2
EOI
Wholesale Costs
58
734,282 rentals
External IPstream Connect End user access Rentals Mkt 2
EOI
Wholesale Costs
29
367,648 rentals
External Datastream Virtual Paths Mkt 2
EOI
Wholesale Costs
1
1,465 vp
Internal IPstream Connect Bandwidth Mkt 2
EOI
Wholesale Costs
68
523,810 bandwidth
External IPstream Connect Bandwidth Mkt 2
EOI
Wholesale Costs
30
226,968 bandwidth
Page 121
39.79
4.65
44.44
39.79
14.00
53.79
Section 8 – Review of Other Wholesale Markets
Section 8.10.1 - Wholesale Broadband Access Market 2 (continued)
Detailed service analysis
Non-discrimination
Revenue
£m
Volume Unit (b)
Average
price
£
Cost orientation
Unaudited Unaudited
FAC
(D)LRIC
DSAC
£
£
£
Internal Ancillary Charges and Other Mkt 2
EOI
Wholesale Costs
0
36
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
External Ancillary Charges and Other Mkt 2
EOI
Wholesale Costs
0
8
(ux)
(ux)
(sx)
(sx)
(ux)
(ux)
(ux)
(ux)
(ux)
(ux)
Roundings
TOTAL
1
242
Page 122
Section 8 – Review of Other Wholesale Markets
Section 8.10.2 - Wholesale Broadband Access Market 2 calculation of FAC based component costs and usage factors (Annex 16)
For the year ended 31 March 2013
£
Components
Unit (d)
Broadband line testing systems
ADSL connections
Combi Card Broadband Access
ATM customer interface 34Mbit/s
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
Inter ATM transmissions
21CN Backhaul Link & Length
Core/Metro (broadband)
SG&A Broadband (q)
Broadband backhaul circuits (excl Virtual Paths) (q)
Edge Ethernet ports (q)
Core/Metro connectivity (q)
DSLAM capital/maintenance (q)
EOI Notional Creditors (ap)
£/line
£/conn
£/line
£/port
£/port
£/port
£/use
£/use
£/circuit
£/circuit
%
%
%
%
%
Fully Allocated Costs (£)
2.50
2.66
19.91
982.59
286.23
98.13
3.01
42.88
7,423.01
10.78
£92m
£52m
£9m
£47m
£195m
0.00
£
2.67
£
£
£
1.90
1.91
19.91
19.91
£
£
£
1.83
1.83
19.91
19.91
External WBC BW - Revenues Mkt 2
Internal WBC BW - Revenues Mkt 2
External WBC end user access-Rentals Mkt 2
Internal WBC end user access-Rentals Mkt 2
£
£
2.67
2.88
5.77
5.89
(0.20)
(0.20)
58.93
(0.15)
61.97
(0.16)
0.07
1.13
0.47
2.92
10.89
4.30
10.39
9.77
14.56
0.86
1.60
2.80
(0.05)
5.35
5.35
86.36
89.52
59.71
2.88
External IPstream Connect Bandwidth Mkt 2
Internal IPstream Connect Bandwidth Mkt 2
External IPstream Connect End user access
Rentals Mkt 2
Internal IPstream Connect End user access
Rentals Mkt 2
Internal End user access connections Mkt 2
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
External end user access connections Mkt 2
Wholesale broadband access market 2 - 2 to 3 principal operators
Page 123
0.07
1.13
0.47
2.92
10.89
4.30
10.39
9.82
14.56
0.86
1.60
1.82
(0.02)
(0.11)
58.81
26.60
4.97
4.30
10.39
3.05
4.30
10.39
3.05
0.86
0.86
(0.11)
(0.03)
(0.03)
26.60
18.57
18.57
4.97
Section 8 – Review of Other Wholesale Markets
Section 8.10.2 - Wholesale Broadband Access Market 2 calculation of FAC based component costs and usage factors (continued)
Restated for the year ended 31 March 2012 (h)
£
Components
Unit (d)
Broadband line testing systems
ADSL connections
Combi Card Broadband Access
ATM customer interface 2Mbit/s
ATM customer interface 34Mbit/s
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
Inter ATM transmissions
Core/Metro (broadband)
SG&A Broadband (q)
Broadband backhaul circuits (excl Virtual Paths) (q)
Edge Ethernet ports (q)
Core/Metro connectivity (q)
DSLAM capital/maintenance (q)
EOI Notional Creditors (ap)
£/line
£/conn
£/line
£/port
£/port
£/port
£/port
£/use
£/use
£/circuit
%
%
%
%
%
Fully Allocated Costs (£)
(b)
(ux)
(sx)
(d)
(q)
(ap)
(h)
2.09
1.72
19.17
128.27
1,457.37
454.99
332.72
4.70
30.06
16.11
£111m
£43m
£5m
£63m
£225m
£
1.72
£
£
£
1.98
1.93
1.92
19.17
19.17
19.17
External IPstream Connect Bandwidth Mkt 2
Internal IPstream Connect Bandwidth Mkt 2
External Datastream Virtual Paths Mkt 2
External IPstream Connect End user access
Rentals Mkt 2
Internal IPstream Connect End user access
Rentals Mkt 2
External Datastream End user access
Rentals Mkt 2
Internal End user access connections Mkt 2
Average cost per unit (from annex 15)
Fully Allocated Cost (£)
External end user access connections Mkt 2
Wholesale broadband access market 2 - 2 to 3 principal operators
£
£
£
9.81
6.45
21.38
63.53
15.46
92.92
60.29
0.51
0.09
1.28
0.64
2.83
8.63
15.46
11.79
8.07
0.51
1.14
0.08
1.18
0.59
2.61
7.97
15.46
11.93
7.45
0.51
1.14
1.72
3.51
3.51
7.60
6.77
6.69
(0.23)
(0.23)
66.42
(0.17)
31.29
(0.18)
31.43
(0.19)
(0.05)
(0.05)
(0.06)
5.00
5.00
95.00
58.98
59.02
270.30
50.39
48.86
See glossary for volume unit descriptors.
This service comprises a number of individual volumetrics.
This service comprises a number of individual prices.
ppm = pence per minute; £/2Mbit cct = £ per 2Mbit/s circuit; £/km = £ per kilometre; £/100m = £ per 100 metres; £/trans = £ per transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel rental; % = % utilisation;
£/line = £ per line; £/room = £ per room; £/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment units; £/le = £ per local end; £/conn = £ per connection; £/channel = £ per channel; £/fibre km = £ per fibre km.
This is the total cost not unit cost for this component.
Reduction in FAC due to notional creditor generated by the EOI charge from Openreach to WBA markets.
See Section 2 Basis of Preparation for explanation of restatement.
Page 124
Section 9 – Reconciliation Statements
Section 9
Reconciliation Statements
Page 125
Section 9 – Reconciliation Statements
Section 9.1 - BT Reconciliation Statement 2013 (Annex 19)
Consolidated profit and loss account
For the year ended 31 March 2013
Turnover
£m
Return or
Operating Profit before
Costs
taxation
£m
£m
As in the Annual Report
18,017
15,430
2,501
Adjustments
Elimination of inter-market turnover and costs
Other Operating Income
Share of post tax profits of associates and joint ventures
Profit on disposal of interest in associate
Net short term interest
Net pension interest
Long term interest payable
Total BT Markets (HCA)
4,715
22,732
4,715
(399)
(9)
(130)
33
19,640
(31)
620
3,090
Holding (gain)/loss
Supplementary Depreciation
Other CCA adjustments
Adjustments
Total BT Markets (CCA) - Note 1
(2)
22,730
(362)
234
(30)
(1)
19,481
362
(234)
30
1
3,249
-
Note 1 - Agrees to Annex 3 Consolidated Performance Summary.
Page 126
Section 9 – Reconciliation Statements
Section 9.1.1 - BT Reconciliation Statement 2012 (Annex 19) (h)
Restated consolidated profit and loss account
For the year ended 31 March 2012
Turnover
£m
Return or
Operating Profit before
Costs
taxation
£m
£m
As in the Annual Report
18,897
16,346
2,445
Adjustments
Elimination of inter-market turnover and costs
Other Operating Income
Share of post tax profits of associates and joint ventures
Net short term interest
Long term interest payable
Total BT Markets (HCA)
4,955
23,852
4,955
(368)
(10)
(190)
20,733
674
3,119
Holding (gain)/loss
Supplementary Depreciation
Other CCA adjustments
Adjustments
Total BT Markets (CCA) - Note 1
23,852
(362)
228
174
(5)
20,768
362
(228)
(174)
5
3,084
Note 1 - Agrees to Annex 3 Consolidated Performance Summary.
(h) See Section 2 Basis of Preparation for explanation of restatement.
Page 127
Section 9 – Reconciliation Statements
Section 9.1.2 - BT Reconciliation Statement MCE 2013 (Annex 20)
For the year ended 31 March 2013
2013
Restated
2012 (h)
£m
(262)
2,501
2,239
£m
1,308
2,343
3,651
Goodwill
(1,410)
(1,339)
Derivative financial instruments - assets
(1,207)
(1,022)
1,209
1,100
Shareholders’ funds as in the 2013 Annual Report
CCA adjustments
Mean capital employed of BT Markets
2013
Adjustments
Deferred tax liabilities
Deferred tax assets
(1,438)
(626)
Current tax assets
(16)
(139)
Current tax liabilities
Long term loans and other borrowings:
Due in less than one year
100
66
576
1,940
8,277
7,599
864
832
883
5,856
875
2,448
Closing CCA capital employed at 31 March
15,933
15,385
Opening CCA capital employed at 1 April (h)
15,385
15,917
Total CCA mean capital employed
15,659
15,651
Due in more than one year
Derivative financial instruments - liabilities
Other payables
Retirement benefit obligations
Access markets
Other Wholesale markets
£m
11,640
1,478
£m
11,803
1,468
Sub total BT Markets
13,118
13,271
Residual activities
Wholesale residual activity
Retail residual activity
2,437
103
1,907
474
Sub total residual activities
2,540
2,381
Roundings and other adjustments
Wholesale markets
Retail markets & activities
1
(1)
Sub total roundings and other adjustments
1
(1)
Total CCA mean capital employed
(h) See Section 2 Basis of Preparation for explanation of restatement.
Page 128
Restated
2012 (h)
15,659
15,651
Section 10 – Openreach Information
Section 10
Openreach Information
Page 129
Section 10 – Openreach Information
Section 10.1 - Openreach Income Statement 2013
Revenue
Internal Revenue
-service(s) which are also available externally:
- Internal LLU equivalent
- Other
-service(s) provided internally only:
- e-PPCs
- Other
External Revenue
Roundings
Total Revenue
Operating Costs
Provision/Maintenance
Network Support
General Support
General Management
Finance and Billing
Accommodation
Bad Debts
Other Costs
Depreciation
- Land & Building
- Access
- Switch and Transmission
- Other related
Sub total Depreciation
Sub total HCA operating costs
CCA adjustments
Holding loss/(gain)
Supplementary depreciation
Other adjustments
Roundings
Total CCA Operating Costs
Return
Return on mean capital employed
Wholesale ISDN2 exchange
line services
Wholesale business ISDN30
exchange line services
Wholesale local access
Sub Total full SMP services
(excluding AISBO)
AISBO (up to and including
1Gbit/s)
Sub Total full SMP services
(including AISBO)
Other Openreach Markets &
Activities (with no SMP
reporting obligations)
Total: Openreach Services by regulated market
Openreach Services (by regulated market)
Full service provision
Wholesale analogue
exchange line services
For the year ended 31 March 2013
£m
£m
£m
£m
£m
£m
£m
£m
£m
-
-
-
-
-
-
1,404
65
151
0
1,620
477
-
-
-
-
-
-
529
67
126
814
1,536
326
2,097
322
403
322
2,500
222
105
189
222
105
2,051
-
-
-
-
-
-
1,933
132
277
814
3,156
803
1,862
3,959
169
111
178
261
10
126
0
22
8
4
7
10
0
10
0
2
10
5
13
18
1
12
0
3
120
51
98
115
5
91
0
13
307
171
296
404
16
239
0
40
11
28
67
93
3
16
0
8
318
199
363
497
19
255
0
48
16
414
28
107
565
2
13
3
4
22
2
12
17
6
37
22
143
8
90
263
42
582
56
207
887
4
74
59
54
191
46
656
115
261
1,078
27
117
170
102
416
73
773
285
363
1,494
1,442
63
99
756
2,360
417
2,777
1,078
3,855
(6)
6
0
(3)
(1)
2
(69)
71
(15)
(203)
203
(19)
(281)
279
(32)
(23)
(5)
11
(304)
274
(21)
0
-
-
1,241
5,200
163
70
151
306
7
138
0
(173)
(40)
(10)
7
2
481
269
514
803
26
393
0
(125)
(344)
264
(14)
-
-
-
-
-
-
1,423
63
97
743
2,326
400
2,726
1,037
3,763
510
69
180
71
830
403
1,233
204
1,437
11.5 %
8.1 %
10.8 %
7.9 %
29.5 %
81.6 %
2.8 %
Page 130
8.8 %
30.8 %
2
Section 10 – Openreach Information
Section 10.2 - Openreach Income Statement 2012 (h)
Revenue
Internal Revenue
-service(s) which are also available externally:
- Internal LLU equivalent
- Other
-service(s) provided internally only:
- e-PPCs
- Other
External Revenue
Roundings
Total Revenue
Operating Costs
Provision/Maintenance
Network Support
General Support
General Management
Finance and Billing
Accommodation
Bad Debts
Other Costs
Depreciation
- Land & Building
- Access
- Switch and Transmission
- Other related
Sub total Depreciation
Sub total HCA operating costs
CCA adjustments
Holding loss/(gain)
Supplementary depreciation
Other adjustments
Roundings
Total CCA Operating Costs
Return
Return on mean capital employed
Wholesale ISDN2 exchange line
services
Wholesale business ISDN30
exchange line services
Wholesale local access
Sub Total full SMP services
(excluding AISBO)
AISBO (up to and including
1Gbit/s)
Sub Total full SMP services
(including AISBO)
Other Openreach Markets &
Activities (with no SMP reporting
obligations)
Total: Openreach Services - by
regulated market
Openreach Services (by regulated market)
Full service provision
Wholesale analogue exchange
line services
Restated for the year ended 31 March 2012
£m
£m
£m
£m
£m
£m
£m
£m
£m
-
-
-
-
-
-
-
478
1,568
73
175
0
1,816
445
2,261
-
478
2,261
-
-
-
-
-
-
-
61
130
759
1,505
280
1,785
268
377
96
268
377
1,881
555
-
-
-
-
-
-
-
-
-
2,123
134
305
759
3,321
725
4,046
1,219
5,265
166
123
173
238
12
149
0
9
7
4
8
11
0
11
0
0
9
6
14
22
1
18
0
1
96
46
81
96
5
85
0
4
278
179
276
367
18
263
0
14
12
32
57
114
4
21
0
6
290
211
333
481
22
284
0
20
16
433
39
76
564
2
14
4
4
24
2
12
20
8
42
21
114
8
60
203
41
573
71
148
833
2
67
58
88
215
43
640
129
236
1,048
21
101
182
95
399
64
741
311
331
1,447
1,434
65
113
616
2,228
461
2,689
1,141
3,830
(211)
211
5
(6)
6
1
(5)
(1)
16
(55)
56
(1)
(277)
272
21
(31)
(2)
82
(308)
270
103
248
73
155
264
12
161
0
(171)
(48)
(10)
68
538
284
488
745
34
445
0
(151)
(356)
260
171
-
-
-
-
-
-
-
-
-
1,439
66
123
616
2,244
510
2,754
1,151
3,905
684
68
182
143
1,077
215
1,292
68
1,360
6.8 %
11.3 %
9.9 %
28.1 %
77.5 %
(h) See Section 2 Basis of Preparation for explanation of restatement.
Page 131
16.2 %
11.9 %
2.9 %
10.3 %
Section 10 – Openreach Information
Section 10.3 - Openreach MCE Statement 2013
Wholesale business ISDN30
exchange line services
Wholesale local access
Sub Total full SMP services
(excluding AISBO)
AISBO (up to and including
1Gbit/s)
Sub Total full SMP services
(including AISBO)
Other Openreach Markets &
Activities (with no SMP reporting
obligations)
Total: Openreach Services - by
regulated market
Openreach Services (by regulated market)
Wholesale ISDN2 exchange line
services
Full service provision
Wholesale analogue exchange
line services
For the year ended 31 March 2013
£m
£m
£m
£m
£m
£m
£m
£m
£m
Non-current Assets
Tangible fixed assets:
Land & Buildings
Access - Copper
Access - Fibre
Access - Duct
Switch and Transmission
- Switch
- Transmission
Other
Investments
Total Non-current assets
129
3,187
0
2,679
94
139
344
16
100
0
87
14
6
15
18
11
71
51
8
40
22
231
1,124
0
904
16
47
284
394
4,422
71
3,721
132
232
665
21
0
459
448
0
271
156
415
4,422
530
4,169
132
503
821
0
0
0
0
0
0
0
0
0
238
221
2,606
9,637
1,355
10,992
2,732
13,724
17
17
0
0
0
0
0
0
0
117
436
8
26
17
79
49
146
191
687
48
203
239
890
Total Current Assets
553
34
96
195
878
251
Payables falling due within one year
- Internal
- External
0
(615)
0
(34)
0
(92)
0
(245)
0
(986)
Total Payables falling due within one year
(615)
(34)
(92)
(245)
(50)
Total Assets less Current Payables
Provisions for liabilities and charges
Roundings
Mean capital employed
696
4,625
1,095
4,918
155
1,081
1,154
6,572
Current Assets
Inventories
Receivables
- Internal
- External
Net Current Assets/(Payables)
281
203
565
749
23
578
333
(62)
6,510
(69)
0
4
238
225
2,556
(36)
(49)
319
190
1,209
1,129
287
1,416
0
(279)
0
(1,265)
0
(455)
0
(1,720)
(986)
(279)
(1,265)
(455)
(1,720)
(108)
(28)
(136)
(168)
(304)
9,529
1,327
(112)
(17)
10,856
(4)
-
-
-
-
-
-
-
-
-
6,441
235
221
2,520
9,417
1,310
10,727
2,524
13,251
Page 132
(40)
13,420
(3)
Non-current assets are net of government grants of £7.5m (2011/12: nil).
(129)
2,564
(169)
Section 10 – Openreach Information
Section 10.4 - Openreach MCE Statement 2012 (h)
Non-current Assets
Tangible fixed assets:
Land & Buildings
Access - Copper
Access - Fibre
Access - Duct
Switch and Transmission
- Switch
- Transmission
Other
Investments
Total Non-current assets
Wholesale ISDN2 exchange line
services
Wholesale business ISDN30
exchange line services
Wholesale local access
Sub Total full SMP services
(excluding AISBO)
AISBO (up to and including
1Gbit/s)
Sub Total full SMP services
(including AISBO)
Other Openreach Markets &
Activities (with no SMP reporting
obligations)
Total: Openreach Services - by
regulated market
Openreach Services (by regulated market)
Full service provision
Wholesale analogue exchange
line services
Restated for the year ended 31 March 2012
£m
£m
£m
£m
£m
£m
£m
£m
£m
127
3,448
0
2,839
120
156
296
16
105
0
86
18
6
15
19
13
71
52
10
48
26
223
920
0
721
18
39
244
385
4,486
71
3,698
166
249
581
21
0
423
429
0
253
264
406
4,486
494
4,127
166
502
845
232
175
482
755
25
625
364
638
4,661
976
4,882
191
1,127
1,209
0
0
0
0
0
0
0
0
0
6,986
246
239
2,165
9,636
1,390
11,026
2,658
13,684
33
33
Current Assets
Inventories
Receivables
- Internal
- External
0
0
0
0
0
0
0
128
409
8
20
18
64
46
108
200
601
44
78
244
679
(40)
96
Total Current Assets
537
28
82
154
801
122
923
89
Payables falling due within one year
- Internal
- External
0
(512)
0
(25)
0
(77)
0
(171)
0
(785)
0
(165)
0
(950)
0
(299)
0
(1,249)
Total Payables falling due within one year
(512)
(25)
(77)
(171)
(785)
(165)
(950)
(299)
(1,249)
(43)
(27)
(210)
(237)
Net Current Assets/(Payables)
Total Assets less Current Payables
Provisions for liabilities and charges
25
3
5
7,011
249
244
(93)
(5)
(9)
(17)
2,148
(47)
16
9,652
1,347
(154)
(21)
10,999
(175)
2,448
(90)
204
775
1,012
13,447
(265)
Roundings
Mean capital employed
6,918
244
235
2,101
9,498
1,326
(h) See Section 2 Basis of Preparation for explanation of restatement.
Page 133
10,824
2,358
13,182
Section 10 – Openreach Information
Section 10.5 - Reconciliation of Openreach Income Statement 2013
For the year ended 31 March 2013
Revenue
Operating Return or
Cost
Profit
before
taxation
£m
£m
£m
As in the Annual report
Restatement to Openreach segmental results announced 13 June 2013
As restated
5,067
3,725
1,342
48
176
(128)
5,115
3,901
1,214
Reconciliation differences:
Internal trading restatement not included in the Current Cost Financial Statements
Use of BT TSO assets
Northern Ireland
Non-traded costs
Other trading differences
Total reconciliation differences
(f)
(b)
(c)
(e)
(d)
(48)
133
85
(48)
(134)
103
35
(44)
134
30
(35)
129
CCA adjustments
(a)
-
(94)
94
5,200
3,763
1,437
Regulatory Openreach
Page 134
Section 10 – Openreach Information
Section 10.6 - Reconciliation of Openreach Income Statement 2012 (h)
Restated for the year ended 31 March 2012
Revenue
Operating Return or
Cost
Profit
before
taxation
£m
£m
£m
As in the Annual report
Restatement to Openreach segmental results announced 13 June 2013
As restated
Reconciliation differences:
Internal trading restatement not included in the Current Cost Financial Statements
Use of BTO assets
Northern Ireland
Non-traded costs
Other trading differences
Total reconciliation differences
(f)
(b)
(c)
(e)
(d)
CCA adjustments
(a)
Regulatory Openreach
5,136
3,776
51
209
5,187
3,985
(51)
129
78
1,360
(158)
1,202
(51)
(171)
97
62
(92)
(155)
171
32
(62)
92
233
-
75
(75)
5,265
3,905
1,360
(h) See Section 2 Basis of Preparation for explanation of restatement.
Page 135
Section 10 – Openreach Information
Section 10.7 - Openreach Notes
for the financial year 2011/12 including non-SMP activity and 8.8% in 2012/13 and 11.3%
in 2011/12 excluding non-SMP results and Openreach Ethernet services (AISBO market).
Such returns are impacted significantly due to changes in the CCA valuation and other
accounting policies making it difficult to understand the underlying returns. To allow
comparison year on year on a more consistent basis, adjustments should be made for these
items. After making these adjustments to Openreach’s markets, for comparability purposes,
the return is £517m for 2012/13 and £823m for 2011/12 resulting in a ROCE of 5.5% and
8.7% respectively. The adjustments are as follows:
Openreach Statements
As noted in Section 1.1 - Introduction: Regulation in the UK, on 22 September 2005, BT
offered certain undertakings to Ofcom in lieu of a reference under the Enterprise Act 2002
(“the Undertakings”). In accordance with section 5.31 of the Undertakings, with effect from
the start of BT’s 2006/07 financial year, BT’s Regulatory Financial Statements need to
separately present the financial results of Openreach and include a reconciliation of
Openreach’s revenue, operating profit (and other items agreed between BT and Ofcom)
with the financial information about Openreach as shown in BT Group plc’s Annual Report.
Wholesale Local Access Co-location activity has been excluded. BT charges customers
upfront for the cost of equipment and the installation of its exchanges. Revenue is
recognised and received in the year of connection but the capitalised costs are depreciated
over the life of the asset. The non-matched element between revenue and costs of these
items distorts the reported return in the local access market.
The form, content and basis of preparation of the financial results of Openreach follow, to
the fullest extent possible, those used in the preparation of the Current Cost Financial
Statements.
The Primary Accounting Documents outline the methodologies used to present the financial
results of Openreach within the Current Cost Financial Statements for 2013 (Openreach
regulatory statement). The reconciliation of that statement to the Openreach segmental
financial information as shown in BT Group plc’s Annual Report is shown for the Profit and
Loss Account above.
Remove the Current Cost Accounting (CCA) Holding Gains and losses from each year, as
these items are the change in valuation driven by price effects in the year and can swing
significantly in amount and direction from year to year.
Remove Other CCA adjustments, as these items are principally due to methodology changes,
where any changes resulting from change or modification to the valuation methodology are
taken through the Profit and Loss account. The specific adjustments are not, in general,
expected to recur.
BT’s Current Cost Financial Statements have been prepared in accordance with the Final
Statements and Notifications imposed on BT by Ofcom, where Ofcom has defined certain
markets where BT is deemed to have SMP in the UK. However, the products sold by
Openreach do not align directly with these definitions of these economic markets.
Reconciling Differences
The Primary Accounting Documents, dated 31 July 2013, show how BT has disaggregated
the SMP definitions in order to produce the Openreach regulatory statement and
reconciliation of the statement to the Openreach financial information shown in BT Group
plc’s Annual Report.
The reconciling differences between the Openreach regulatory statement and the
Openreach segmental financial information reported in BT Group plc’s Annual Report fall
into the following main categories:
Within the Openreach regulatory statement, separate columns are shown for each “Full
Openreach market” and the remaining “Part Openreach market” activities have been
consolidated into a single column.
a)
Basis of preparation under CCA
BT Group plc’s Annual Report has been prepared under the historical cost convention
(‘HCA’), modified for the revaluation of certain financial assets and liabilities at fair value. As
directed by Ofcom through the Explanatory Statement and Notification, BT’s Current Cost
Financial Statements have been prepared on a CCA basis, in accordance with the Primary
Accounting Documents and the Detailed Valuation Methods, all of which are annually
updated. As such, a reconciliation entry has been made to exclude the aggregated CCA
adjustments included within the Openreach regulatory statement.
The Openreach Information includes comparative information for the year ended 31 March
2012 first published on 31 July 2012, subject to certain restatements and re-presentations
detailed in section 2.1, and prepared in accordance with the Primary Accounting Documents
with the same date.
Access Markets Openreach Level Review
b)
To assess the underlying performance of Openreach's markets on a like for like basis each
year it is necessary to adjust for a number of significant one off items which impact the
operating profit in one year and not in another. The return shown in these statements for
total Openreach before these items was 10.8% for the financial year 2012/13 and 10.3%
Rental charge to Openreach for use of assets owned by BT TSO
Within the Openreach segmental financial information reported in BT Group plc’s Annual
Report, the results of BT Wholesale include a charge for an appropriate return on capital
where assets are owned by BT TSO (e.g. for line cards, electronics and network features) but
Page 136
Section 10 – Openreach Information
are used by Openreach. The Openreach regulatory statements do not include this charge, as
the basis for attribution of costs and assets to products in the regulatory accounts is actual
costs and assets.
c)
Results relating to Northern Ireland’s operations
The Current Cost Financial Statements have been prepared in accordance with the Final
Statements and Notifications imposed on BT where Ofcom has defined certain markets in
which BT is deemed to have SMP in the UK. This definition includes BT’s Northern Ireland
operations. The Openreach segmental financial information reported in BT Group plc’s
Annual Report excludes BT’s operations in Northern Ireland. Accordingly, the results of the
access network element of BT’s Northern Ireland operations form part of the reconciliation.
d)
Other Trading Differences
The Openreach segmental financial information reported in BT Group plc's Annual Report
reflect the internal charges between BT's lines of business rather than the allocation of
actual costs and capital employed as shown in the Current Cost Financial Statements. The
other trading differences reflect the total of these timing differences across the year.
e)
Non-traded costs
Non-traded costs are shown separately from the Openreach segmented results in BT Group
plc’s Annual Report. They are included as a separate line to enable reconciliation between
the accounts.
f)
Internal trading restatement not included in the Current Cost Financial
Statements
On 13 June 2013 BT announced a restatement and re-presentation to its results for the
years ended 31 March 2013 and 31 March 2012. Some staff in BT TSO, who provided
engineering services to the rest of BT, were transferred to Openreach and consequently
Openreach recharges these staff costs to the rest of BT. This adjustment was not included in
the Current Cost Financial Statements 2013.
Page 137
Appendix 1 – Other Information
Appendix 1
Other Information
Page 138
Appendix 1 – Other Information
Appendix 1.1 - Network Activity Statements Consolidated 2013 (Annex 15)
Fully Allocated Cost (£m)
Footnotes
For the year ended 31 March 2013
Network Activity Statement - Consolidated (this is a consolidation of all markets where there are cost accounting obligations)
HCA operating cost
Supplementary
depreciation
Holding gain
and other CCA
adjustments
Total CCA
operating
costs
Applicable
CCA mean
rate of return
capital employed on capital %
Capital costs
Total of
operating
costs and
capital costs
relating to
current year
Volume (b)
Units
Average costs
per min/unit on a
current cost
basis relating to
current year
SMP Cost Accounting components
Local exchange concentrator
Local exchange processor
Remote - local transmission link
Remote - local transmission length
Product management policy & planning
Interconnect local end rental 2Mbit/s
Interconnect 2Mbit/s connection
Interconnect extension circuits (IEC) 2Mbit/s link
Customer Sited Interconnect cct (CSI) 2Mbit/s link
Interconnect extension circuits (IEC) 2Mbit per km
Customer Sited Interconnect cct (CSI) 2Mbit per km
In Span Interconnect circuits (ISI) transmission
Nominated In Span I/Connect cct (ISI) transmission
Intra Building Circuit (IBC) connection
Intra Building Circuit (IBC) rental
PC rental 2Mbit/s link per km distribution
PC rental 2Mbit/s link per km trunk
PC rental 34Mbit/s link per km distribution
PC rental 34Mbit/s link per km trunk
PC rental 140Mbit/s link per km distribution
PC rental 140Mbit/s link per km trunk
PC rental 622Mbit/s link per km trunk
Point of Handover electronics
PC rental 64kbit/s link
PC rental 2Mbit/s link
PC rental 34Mbit/s link
PC rental 140Mbit/s link
PC rental 64kbit/s link per km transmission
64kbit/s PC link connection cct provision
2Mbit/s and above PC link connection cct provision
PC rental 64kbit/s link local end
PC rental 34Mbit/s link local end
PC rental 140Mbit/s link local end
PC rental 2Mbit/s local end copper
PC rental 2Mbit/s local end fibre
Wholesale & LAN extension services fibre etc
Backhaul extension services fibre etc
Ethernet Electronics
Ethernet main links
SG & A partial private circuits
National OA non chargeable
Emergency OA (999) non chargeable
Wholesale Access specific
(c)
78
73
39
26
7
2
1
2
2
2
2
2
1
1
5
45
12
7
4
8
6
6
2
29
21
2
5
14
1
39
21
8
7
7
88
212
11
130
30
28
0
13
37
(1)
(1)
0
5
0
0
0
0
0
0
0
0
0
0
0
1
1
0
0
0
1
1
0
0
(1)
0
0
2
0
0
0
(1)
(1)
0
(4)
(11)
(1)
0
8
0
0
0
0
2
1
(1)
(7)
0
0
0
0
0
0
0
0
0
0
0
(5)
(2)
(1)
(1)
(1)
(1)
(1)
0
(1)
(1)
0
0
(4)
0
0
(1)
0
0
0
0
2
0
0
(11)
0
0
0
0
79
73
38
24
7
2
1
2
2
2
2
2
1
1
5
41
11
6
3
7
6
6
2
28
19
2
5
12
1
39
20
7
6
7
84
203
10
130
27
28
0
13
37
(a) This component is attributed on a % basis so no volume or unit cost is derivable.
(b) See glossary for volume unit descriptors.
(c) Unit of length is 10 kilometres.
Page 139
124
106
53
234
6
4
0
3
4
10
12
3
4
0
10
193
71
26
23
40
43
45
2
39
33
4
9
107
0
0
29
25
20
1
227
614
36
192
347
32
0
(1)
82
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
8.8
12
10
5
23
1
0
0
0
0
1
1
0
0
0
1
19
7
3
2
4
4
4
0
4
3
0
1
10
0
0
3
2
2
0
22
60
4
19
34
3
0
0
7
91
83
43
47
8
2
1
2
2
3
3
2
1
1
6
60
18
9
5
11
10
10
2
32
22
2
6
22
1
39
23
9
8
7
106
263
14
149
61
31
0
13
44
134,312
132,820
110,823
200,847
133,452
11,764
1,322
11,108
11,764
267,802
318,848
6,069
18,141
2,114
70,637
1,809,195
1,399,309
31,045
49,717
21,349
46,915
10,029
1,676
187,696
130,595
1,893
987
5,653,602
553
7,251
58,805
2,686
1,437
26,628
162,792
102,322
12,967
281,159
530,231
(a)
52,152
61,779
3,587,019
mm
mm
mm
mm
mm
circuits
circuits
circuits
circuits
km
km
100m
100m
circuits
circuits
km
km
km
km
km
km
km
eq
links
links
links
links
km
circuits
circuits
le
le
le
le
le
le
le
le
fibre km
mm
mm
trans
0.067p
0.063p
0.039p
0.023p
0.006p
£181.24
£984.56
£196.82
£205.23
£9.30
£9.31
£291.78
£51.97
£319.12
£90.10
£33.06
£12.60
£273.05
£120.97
£520.20
£200.13
£960.93
£1,141.05
£168.09
£174.32
£1,246.82
£5,803.25
£4.02
£1,999.40
£5,409.66
£392.94
£3,553.49
£5,989.94
£263.18
£650.76
£2,564.33
£1,094.43
£527.23
£113.98
(a)
0.000p
0.021p
£12.37
Appendix 1 – Other Information
Appendix 1.1 - Network Activity Statement Consolidated 2013 (Continued)
Fully Allocated Cost (£m)
Footnotes
For the year ended 31 March 2013
Network Activity Statement - Consolidated (this is a consolidation of all markets where there are cost accounting obligations)
HCA operating cost
Supplementary
depreciation
Holding gain
and other CCA
adjustments
Total CCA
operating
costs
Applicable
CCA mean
rate of return
capital employed on capital %
Capital costs
Total of
operating
costs and
capital costs
relating to
current year
Average costs
per unit on a
current cost
basis relating to
current year
Volume (b)
SMP Cost Accounting components
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
ISDN2 drop maintenance
PSTN line cards
ISDN2 line cards
Pair gain
ISDN2 NTE
Broadband line testing systems
DSLAM capital/maintenance
ADSL connections
Local Loop Unbundling room build
Local Loop Unbundling hostel rentals
Local Loop Unbundling hostel rentals power & vent
Local Loop Unbundling tie cables
Local Loop Unbundling systems development
Directories
Service Centres - Provision
Sales product management
Service Centres - Assurance
Combi Card voice
Combi Card Broadband Access
Access Cards (ISDN2 services)
Core/Metro (voice)
Border gateway & signalling firewall
MSAN-POSI Voice Link
Access Cards (other services)
MSAN-METRO Connectivity Link
Core/Metro connectivity
Edge Ethernet ports
iNode (call set up and features)
ATM customer interface 2Mbit/s
ATM customer interface 34Mbit/s
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
13
179
159
57
730
219
72
38
4
308
101
2
116
16
0
4
70
176
4
25
35
68
9
27
38
112
19
29
4
139
0
3
0
0
23
0
48
9
12
0
1
4
2
11
0
0
26
0
218
0
0
0
0
41
0
0
(1)
0
0
0
0
2
0
0
0
1
1
0
0
0
0
0
(1)
(32)
0
0
0
0
(2)
0
(3)
(1)
0
0
0
0
0
0
0
0
(28)
0
(219)
0
0
0
0
(64)
0
0
1
0
0
0
0
(10)
0
(2)
0
(5)
(2)
0
0
0
0
0
0
24
0
0
0
0
1
0
(8)
0
0
0
0
0
0
0
13
179
157
57
729
219
72
38
4
285
101
2
116
16
0
4
70
168
4
23
35
64
8
27
38
112
19
29
3
131
0
3
0
0
22
0
37
8
12
0
1
4
2
11
(a) This component is attributed on a % basis so no volume or unit cost is derivable.
(b) See glossary for volume unit descriptors.
Page 140
0
4
904
2
6,531
9
37
2
9
1,051
6
0
195
33
0
7
195
275
9
112
66
74
55
60
(7)
(1)
(20)
1
6
226
0
4
0
0
34
0
103
14
54
0
1
4
2
13
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
9.7
8.8
9.7
8.8
9.7
9.0
9.7
9.7
8.8
8.8
8.8
8.8
8.8
8.8
9.3
8.8
9.2
8.8
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
0
0
80
0
575
1
3
0
1
92
1
0
17
3
0
1
18
27
1
10
6
7
5
5
(1)
0
(2)
0
0
22
0
0
0
0
3
0
10
1
5
0
0
0
0
1
13
179
237
57
1,304
220
75
38
5
377
102
2
133
19
0
5
88
195
5
33
41
71
13
32
37
112
17
29
3
153
0
3
0
0
25
0
47
9
17
0
1
4
2
12
2,912,052
10,498,323
25,380,248
31,380,432
25,380,248
31,380,432
41,805,541
44,419,476
25,446,022
24,997,742
27,600,073
1,137,834
18,278,817
1,137,834
18,278,817
1,137,834
35,053,425
(a)
1,724,885
2,028
14,338
14,338
348,940
(a)
(a)
(a)
(a)
(a)
18,278,817
7,722,603
1,137,834
236,996
141,900
136,980
(a)
(a)
(a)
(a)
(a)
2,118
803
13,914
20,494
4,130,538
lines
lines
lines
lines
lines
lines
lines
lines
lines
lines
lines
channels
lines
channels
eq
channels
lines
conns
rooms
hostels
hostels
cables
lines
lines
channels
mm
mm
mm
ports
ports
ports
ports
usage
£4.50
£17.13
£9.36
£1.82
£51.38
£7.01
£1.80
£0.86
£0.20
£15.10
£3.66
£2.01
£7.31
£17.46
£0.00
£3.77
£2.50
(a)
£2.66
£16,133.42
£2,859.57
£4,884.75
£39.91
(a)
(a)
(a)
(a)
(a)
£0.24
£19.91
£0.00
0.001p
0.000p
0.000p
(a)
(a)
(a)
(a)
(a)
£92.26
£982.59
£286.23
£98.13
£3.01
Appendix 1 – Other Information
Appendix 1.1 - Network Activity Statement Consolidated 2013 (Continued)
Fully Allocated Cost (£m)
Footnotes
For the year ended 31 March 2013
Network Activity Statement - Consolidated (this is a consolidation of all markets where there are cost accounting obligations)
HCA operating cost
Supplementary
depreciation
Holding gain
and other CCA
adjustments
Total CCA
operating
costs
Applicable
CCA mean
rate of return
capital employed on capital %
Capital costs
Total of
operating
costs and
capital costs
relating to
current year
Volume (b)
Average costs
per unit on a
current cost
basis relating to
current year
SMP Cost Accounting components
Inter ATM transmissions
Broadband backhaul circuits (excl Virtual Paths)
21CN Backhaul Link & Length
Core/Metro (broadband)
Low Tisbo Equipment Depn
High Tisbo Equipment Depn
Very High Tisbo Equipment Depn
Low Tisbo Excess Construction
AISBO Excess Construction
SG&A Broadband
SG&A Interconnect
Main exchange switching
ISDN30 connections
ISDN30 access
ISDN30 line cards
Access Cards (ISDN30 services)
32
40
81
122
20
2
0
3
5
81
5
1
0
(7)
(8)
0
0
0
0
0
0
0
(5)
(4)
(9)
(15)
0
0
0
0
0
0
0
28
36
65
99
20
2
0
3
5
81
5
162
161
177
230
0
0
0
71
145
113
0
9.7
9.7
9.7
9.7
9.7
9.7
0.0
9.7
9.7
9.7
9.7
16
16
17
22
0
0
0
7
14
11
0
44
52
82
121
20
2
0
10
19
92
5
(n)
(n)
(n)
(n)
(n)
SMP Accounting Separation components
Residual components
Roundings
Total
1,015,272 usage
(a)
11,094 circuits
11,272,969 circuits
(a)
(a)
(a)
(a)
(a)
(a)
(a)
£42.88
(a)
£7,423.01
£10.78
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(n)
(n)
(n)
(n)
(n)
107
(2)
0
105
233
23
128
n/a
n/a
1,565
1
(8)
1,558
1,374
133
1,691
n/a
n/a
5
2
(6)
1
7
2
3
n/a
n/a
5,990
234
(392)
5,832
15,555
1,424
7,256
(a) This component is attributed on a % basis so no volume or unit cost is derivable.
(b) See glossary for volume unit descriptors.
(n) Accounting Separation components require no costs to be disclosed.
Page 141
Appendix 1 – Other Information
Appendix 1.1.1 - Network Activity Statements Consolidated 2012 (Annex 15) (h)
Fully Allocated Cost (£m)
Footnotes
Restated for the year ended 31 March 2012
Network Activity Statement - Consolidated (this is a consolidation of all markets where there are cost accounting obligations)
HCA operating cost
Supplementary
depreciation
Holding gain
and other CCA
adjustments
Total CCA
operating
costs
Applicable
CCA mean
rate of return
capital employed on capital %
Capital costs
Total of
operating
costs and
capital costs
relating to
current year
Volume (b)
Units
Average costs
per min/unit on a
current cost
basis relating to
current year
SMP Cost Accounting components
Local exchange concentrator
Local exchange processor
Remote - local transmission link
Remote - local transmission length
Product management policy & planning
Interconnect local end rental 2Mbit/s
Interconnect 2Mbit/s connection
Interconnect extension circuits (IEC) 2Mbit/s link
Customer Sited Interconnect cct (CSI) 2Mbit/s link
Interconnect extension circuits (IEC) 2Mbit per km
Customer Sited Interconnect cct (CSI) 2Mbit per km
In Span Interconnect circuits (ISI) transmission
Nominated In Span I/Connect cct (ISI) transmission
Intra Building Circuit (IBC) connection
Intra Building Circuit (IBC) rental
PC rental 2Mbit/s link per km distribution
PC rental 2Mbit/s link per km trunk
PC rental 34Mbit/s link per km distribution
PC rental 34Mbit/s link per km trunk
PC rental 140Mbit/s link per km distribution
PC rental 140Mbit/s link per km trunk
PC rental 622Mbit/s link per km trunk
Point of Handover electronics
PC rental 64kbit/s link
PC rental 2Mbit/s link
PC rental 34Mbit/s link
PC rental 140Mbit/s link
PC rental 64kbit/s link per km transmission
64kbit/s PC link connection cct provision
2Mbit/s and above PC link connection cct provision
PC rental 64kbit/s link local end
PC rental 34Mbit/s link local end
PC rental 140Mbit/s link local end
PC rental 2Mbit/s local end copper
PC rental 2Mbit/s local end fibre
Wholesale & LAN extension services electronics
Wholesale & LAN extension services fibre etc
Backhaul extension services electronics
Backhaul extension services fibre etc
Ethernet main links
SG & A private circuits
SG & A partial private circuits
National OA non chargeable
(c)
79
72
36
28
18
2
2
2
3
1
2
1
1
1
5
48
16
7
5
7
6
8
3
29
21
2
4
15
1
45
20
10
8
10
111
87
241
7
12
28
6
26
0
(3)
(2)
0
6
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
(1)
(1)
0
0
2
0
0
0
(1)
(1)
0
(4)
0
(7)
0
(1)
8
0
0
0
5
3
0
(23)
0
0
0
0
0
(1)
(1)
0
0
0
0
(13)
(6)
(1)
(2)
(2)
(3)
(3)
0
0
0
0
0
(11)
0
0
0
3
1
0
27
0
65
0
5
(30)
0
0
0
81
73
36
11
18
2
2
2
3
0
1
1
1
1
5
35
10
6
3
5
3
5
3
28
20
2
4
6
1
45
20
12
8
10
134
87
299
7
16
6
6
26
0
(a) This component is attributed on a % basis so no volume or unit cost is derivable.
(b) See glossary for volume unit descriptors.
(c) Unit of length is 10 kilometres.
Page 142
131
112
49
270
5
5
1
4
6
8
11
2
4
1
10
207
79
27
24
33
32
42
3
39
40
4
8
126
0
9
29
32
18
6
289
141
715
12
36
337
5
21
0
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
13
11
5
26
0
0
0
0
1
1
1
0
0
0
1
20
8
3
2
3
3
4
0
4
4
0
1
12
0
1
3
3
2
1
28
14
69
1
4
33
0
2
0
94
84
41
37
18
2
2
2
4
1
2
1
1
1
6
55
18
9
5
8
6
9
3
32
24
2
5
18
1
46
23
15
10
11
162
101
368
8
20
39
6
28
0
155,994
154,935
124,587
220,117
162,598
14,701
1,808
11,394
14,701
272,146
397,206
7,954
20,300
3,054
72,314
2,216,889
1,516,111
39,625
59,085
21,549
46,375
10,871
2,799,051
256,537
172,077
2,137
1,042
7,603,970
847
11,707
69,187
3,083
1,508
29,684
189,374
132,168
122,631
23,166
13,215
468,781
(a)
(a)
62,258
mm
mm
mm
mm
mm
circuits
circuits
circuits
circuits
km
km
100m
100m
circuits
circuits
km
km
km
km
km
km
km
eq
links
links
links
links
km
circuits
circuits
le
le
le
le
le
le
le
le
le
fibre km
mm
0.060p
0.054p
0.032p
0.017p
0.011p
£194.78
£1,269.20
£214.28
£220.96
£5.81
£5.81
£170.09
£37.29
£268.61
£84.37
£24.71
£11.82
£198.78
£98.28
£381.01
£146.18
£805.19
£0.94
£126.34
£140.33
£991.89
£4,276.36
£2.37
£1,961.11
£3,918.86
£324.10
£4,901.33
£6,725.65
£355.11
£856.16
£759.26
£3,004.15
£363.76
£1,531.33
£81.21
(a)
(a)
0.000p
Appendix 1 – Other Information
Appendix 1.1.1 - Network Activity Statements Consolidated 2012 (Continued)
Fully Allocated Cost (£m)
Footnotes
Restated for the year ended 31 March 2012
Network Activity Statement - Consolidated (this is a consolidation of all markets where there are cost accounting obligations)
HCA operating cost
Supplementary
depreciation
Holding gain
and other CCA
adjustments
Total CCA
operating
costs
Applicable
CCA mean
rate of return
capital employed on capital %
Capital costs
Total of
operating
costs and
capital costs
relating to
current year
Average costs
per unit on a
current cost
basis relating to
current year
Volume (b)
SMP Cost Accounting components
Emergency OA (999) non chargeable
Wholesale Access specific
Routeing & records
MDF Hardware jumpering
Software jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
ISDN2 drop maintenance
PSTN line cards
ISDN2 line cards
Pair gain
ISDN2 NTE
Broadband line testing systems
DSLAM capital/maintenance
ADSL connections
Local Loop Unbundling room build
Local Loop Unbundling hostel rentals
Local Loop Unbundling hostel rentals power & vent
Local Loop Unbundling tie cables
Local Loop Unbundling systems development
Directories
Service Centres - Provision
Sales product management
Service Centres - Assurance
Combi Card voice
Combi Card Broadband Access
Access Cards (ISDN2 services)
Core/Metro (voice)
Border gateway & signalling firewall
MSAN-POSI Voice Link
Access Cards (other services)
MSAN-METRO Connectivity Link
Core/Metro connectivity
Edge Ethernet ports
iNode (call set up and features)
ATM customer interface 2Mbit/s
ATM customer interface 34Mbit/s
11
3
16
229
0
170
60
600
192
67
47
3
336
110
3
129
18
0
6
56
196
2
12
31
49
9
3
28
124
22
45
4
110
0
5
0
0
32
10
54
4
11
0
2
0
0
0
0
0
25
0
214
0
0
0
0
38
0
0
(4)
(1)
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
(25)
0
0
0
0
(2)
(1)
(4)
0
0
0
0
0
0
0
0
0
(30)
0
(235)
0
0
0
0
(12)
0
0
7
1
0
0
0
0
0
0
0
0
(2)
0
0
0
0
0
1
50
0
(1)
0
0
11
2
1
0
0
0
0
11
3
16
229
0
165
60
579
192
67
47
3
362
110
3
132
18
0
6
56
196
2
12
31
49
8
3
28
124
22
45
5
135
0
4
0
0
41
11
51
4
11
0
2
(a) This component is attributed on a % basis so no volume or unit cost is derivable.
(b) See glossary for volume unit descriptors.
Page 143
(1)
10
1
3
0
875
3
6,635
8
40
3
10
1,054
5
0
207
35
18
11
211
297
13
96
74
56
51
9
(8)
1
(24)
2
8
239
0
10
0
0
39
30
124
8
61
0
1
9.7
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
8.8
9.7
8.8
9.7
8.8
9.7
9.2
9.6
9.7
8.8
8.8
8.8
8.8
8.8
8.8
7.6
8.8
9.2
8.8
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
9.7
0
1
0
0
0
77
0
584
1
4
0
1
93
0
0
18
3
2
1
19
29
1
8
7
5
4
1
(1)
0
(2)
0
1
23
0
1
0
0
4
3
12
1
6
0
0
11
4
16
229
0
242
60
1,163
193
71
47
4
455
110
3
150
21
2
7
75
225
3
20
38
54
12
4
27
124
20
45
6
158
0
5
0
0
45
14
63
5
17
0
2
73,422
3,268,533
2,653,833
10,769,017
11,223,715
25,110,634
29,616,293
25,110,161
29,616,293
40,883,824
40,769,548
25,387,700
24,905,902
24,335,749
1,140,308
19,398,781
1,140,308
19,398,781
1,140,308
35,903,433
(a)
1,973,980
1,520
12,906
12,906
325,953
(a)
(a)
(a)
(a)
(a)
19,398,781
8,207,292
1,140,308
274,731
170,360
154,063
(a)
(a)
(a)
(a)
(a)
2,968
1,177
mm
trans
lines
lines
lines
lines
lines
lines
lines
lines
lines
lines
lines
lines
channels
lines
channels
eq
channels
lines
conns
rooms
hostels
hostels
cables
lines
lines
channels
mm
mm
mm
ports
ports
0.015p
£1.28
£6.10
£21.32
£0.00
£9.66
£2.04
£46.31
£6.49
£1.71
£1.17
£0.17
£18.26
£4.52
£2.36
£7.73
£19.52
£0.10
£5.67
£2.09
(a)
£1.72
£13,671.71
£2,902.30
£4,146.14
£41.14
(a)
(a)
(a)
(a)
(a)
£0.24
£19.17
£0.00
0.002p
0.000p
0.000p
(a)
(a)
(a)
(a)
(a)
£128.27
£1,457.37
Appendix 1 – Other Information
Appendix 1.1.1 - Network Activity Statements Consolidated 2012 (Continued)
Footnotes
Restated for the year ended 31 March 2012
Network Activity Statement - Consolidated (this is a consolidation of all markets where there are cost accounting obligations)
Fully Allocated Cost (£m)
HCA operating cost
Supplementary
depreciation
Holding gain
and other CCA
adjustments
Total CCA
operating
costs
Applicable
CCA mean
rate of return
capital employed on capital %
Capital costs
Total of
operating
costs and
capital costs
relating to
current year
Average costs
per unit on a
current cost
basis relating to
current year
Volume (b)
SMP Cost Accounting components
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
Inter ATM transmissions
Broadband backhaul circuits (excl Virtual Paths)
21CN Backhaul Link & Length
Core/Metro (broadband)
Low Tisbo Equipment Depn
High Tisbo Equipment Depn
Very High Tisbo Equipment Depn
Low Tisbo Excess Construction
AISBO Excess Construction
SG&A Broadband
SG&A Interconnect
ISDN30 connections
ISDN30 access
ISDN30 line cards
Access Cards (ISDN30 services)
7
4
20
37
39
44
108
25
4
0
3
5
101
8
0
0
0
(1)
(1)
(3)
(8)
0
0
0
0
0
0
0
0
0
0
(11)
(10)
22
1
0
0
0
0
0
0
0
7
4
20
25
28
63
101
25
4
0
3
5
101
8
5
3
14
153
158
107
239
0
0
0
43
81
102
2
9.7
9.7
9.7
9.7
9.7
9.7
9.7
0.0
0.0
0.0
9.7
9.7
9.7
9.7
0
0
1
15
15
10
23
0
0
0
4
8
10
0
7
4
21
40
43
73
124
25
4
0
7
13
111
8
(n)
(n)
(n)
(n)
SMP Accounting Separation components
Residual components
Roundings
Total
16,565
11,434
4,454,508
1,318,728
(a)
22,352
7,671,109
(a)
(a)
(a)
(a)
(a)
(a)
(a)
ports
ports
usage
usage
circuits
circuits
£454.99
£332.72
£4.70
£30.06
(a)
£3,274.88
£16.11
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(n)
(n)
(n)
(n)
100
(1)
12
111
206
20
131
n/a
n/a
7
(8)
2,109
917
85
2,194
n/a
n/a
2
(1)
0
1
0
6
6
n/a
n/a
6,462
228
6,502
15,178
1,388
7,889
2,110
(188)
(a) This component is attributed on a % basis so no volume or unit cost is derivable.
(b) See glossary for volume unit descriptors.
(n) Accounting Separation components require no costs to be disclosed.
Page 144
927
Appendix 1 – Other Information
Appendix 1.2 - BT Network Services Reconciliation 2013 (Annex 17)
Non cost accounting, roundings and residual
Residual
AS SMP Components
Wholesale broadband access market 2 - 2 to 3
principal operators
Wholesale broadband access market 1 - BT only
operator
Alternative interface symmetric broadband
origination (up to and including 1Gbit/s)
Technical Areas (Point of Handover)
Technical areas (Interconnect Circuits)
Fixed call termination
Call origination on fixed public narrowband
networks
Wholesale trunk segments
Traditional interface symmetric broadband
origination (above 45Mbit/s up to and including
155Mbit/s)
Traditional interface symmetric broadband
origination (above 8Mbit/s up to and including
45Mbit/s)
Traditional interface symmetric broadband
origination (up to and including 8Mbit/s)
Wholesale local access
Wholesale ISDN2 exchange line services
Total (from annex 15)
Fully Allocated Cost (£m)
Wholesale analogue exchange line services
Consolidation Statement (a summary of all wholesale markets where there are cost accounting obligations)
Components
Local exchange concentrator
91
43
47
Local exchange processor
83
39
43
1
Remote - local transmission link
43
21
23
(1)
Remote - local transmission length
24
1
47
22
Product management policy & planning
8
8
Interconnect local end rental 2Mbit/s
2
2
-
Interconnect 2Mbit/s connection
1
1
-
Interconnect extension circuits (IEC) 2Mbit/s link
2
2
-
Customer Sited Interconnect cct (CSI) 2Mbit/s link
2
2
-
Interconnect extension circuits (IEC) 2Mbit per km
3
2
Customer Sited Interconnect cct (CSI) 2Mbit per km
3
3
-
In Span Interconnect circuits (ISI) transmission
2
2
-
Nominated In Span I/Connect cct (ISI) transmission
1
1
-
Intra Building Circuit (IBC) connection
1
1
-
Intra Building Circuit (IBC) rental
6
6
-
PC rental 2Mbit/s link per km distribution
60
60
PC rental 2Mbit/s link per km trunk
18
6
PC rental 34Mbit/s link per km distribution
9
PC rental 34Mbit/s link per km trunk
5
1
6
11
10
10
2
PC rental 622Mbit/s link per km trunk
10
2
1
32
32
PC rental 2Mbit/s link
22
23
PC rental 34Mbit/s link
2
64kbit/s PC link connection cct provision
1
(1)
2
5
1
23
1
1
2Mbit/s and above PC link connection cct provision
39
39
PC rental 64kbit/s link local end
23
22
PC rental 34Mbit/s link local end
9
PC rental 140Mbit/s link local end
8
PC rental 2Mbit/s local end copper
1
7
1
6
22
(1)
10
PC rental 64kbit/s link
PC rental 64kbit/s link per km transmission
-
8
PC rental 140Mbit/s link per km trunk
PC rental 140Mbit/s link
1
12
PC rental 140Mbit/s link per km distribution
Point of Handover electronics
1
-
(1)
0
0
1
9
-
1
8
(1)
0
-
7
7
0
PC rental 2Mbit/s local end fibre
106
101
5
Wholesale & LAN extension services fibre etc
263
255
14
14
149
116
Backhaul extension services fibre etc
Ethernet Electronics
Page 145
8
33
Appendix 1 – Other Information
Appendix 1.2 - BT Network Services Reconciliation 2013 (Continued)
Non cost accounting, roundings and residual
Residual
AS SMP Components
Wholesale broadband access market 2 - 2 to 3
principal operators
Wholesale broadband access market 1 - BT only
operator
Alternative interface symmetric broadband
origination (up to and including 1Gbit/s)
Technical Areas (Point of Handover)
Technical areas (Interconnect Circuits)
Fixed call termination
Call origination on fixed public narrowband
networks
Wholesale trunk segments
Traditional interface symmetric broadband
origination (above 45Mbit/s up to and including
155Mbit/s)
Traditional interface symmetric broadband
origination (above 8Mbit/s up to and including
45Mbit/s)
Traditional interface symmetric broadband
origination (up to and including 8Mbit/s)
Wholesale local access
Wholesale ISDN2 exchange line services
Wholesale analogue exchange line services
Fully Allocated Cost (£m)
Total (from annex 15)
Consolidation Statement (a summary of all wholesale markets where there are cost accounting obligations)
Components
Ethernet main links
SG & A partial private circuits
National OA non chargeable
Emergency OA (999) non chargeable
Wholesale Access specific
Routeing & records
MDF Hardware jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
ISDN2 drop maintenance
PSTN line cards
ISDN2 line cards
Pair gain
ISDN2 NTE
Broadband line testing systems
DSLAM capital/maintenance
ADSL connections
Local Loop Unbundling room build
Local Loop Unbundling hostel rentals
Local Loop Unbundling hostel rentals power & vent
Local Loop Unbundling tie cables
Local Loop Unbundling systems development
Directories
Service Centres - Provision
Sales product management
Service Centres - Assurance
Combi Card voice
Combi Card Broadband Access
Access Cards (ISDN2 services)
Core/Metro (voice)
Border gateway & signalling firewall
61
31
13
44
13
179
237
57
1,304
220
75
38
5
377
102
2
133
19
5
88
195
5
33
41
71
13
32
37
112
17
29
3
153
3
-
59
22
2
2
4
2
1
0
0
13
43
5
20
170
35
936
135
33
17
4
276
70
1
0
1
5
2
29
7
1
1
0
9
8
80
57
16
316
63
27
15
1
93
31
0
0
1
0
5
1
0
0
0
0
0
53
2
0
0
33
41
70
14
17
0
19
2
7
0
0
0
2
134
20
0
4
13
38
40
3
15
4
1
1
1
4
101
1
2
27
1
43
23
30
4
3
0
1
Page 146
1
78
4
4
18
14
14
5
(1)
1
(1)
(1)
1
16
65
3
1
(1)
15
(1)
22
7
3
(1)
87
1
-
Appendix 1 – Other Information
Appendix 1.2 - BT Network Services Reconciliation 2013 (Continued)
Non cost accounting, roundings and residual
Residual
AS SMP Components
Wholesale broadband access market 2 - 2 to 3
principal operators
Wholesale broadband access market 1 - BT only
operator
Alternative interface symmetric broadband
origination (up to and including 1Gbit/s)
Technical Areas (Point of Handover)
Technical areas (Interconnect Circuits)
Fixed call termination
Call origination on fixed public narrowband
networks
Wholesale trunk segments
Traditional interface symmetric broadband
origination (above 45Mbit/s up to and including
155Mbit/s)
Traditional interface symmetric broadband
origination (above 8Mbit/s up to and including
45Mbit/s)
Traditional interface symmetric broadband
origination (up to and including 8Mbit/s)
Wholesale local access
Wholesale ISDN2 exchange line services
Total (from annex 15)
Fully Allocated Cost (£m)
Wholesale analogue exchange line services
Consolidation Statement (a summary of all wholesale markets where there are cost accounting obligations)
Components
MSAN-POSI Voice Link
Access Cards (other services)
MSAN-METRO Connectivity Link
Core/Metro connectivity
Edge Ethernet ports
iNode (call set up and features)
ATM customer interface 2Mbit/s
ATM customer interface 34Mbit/s
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
Inter ATM transmissions
Broadband backhaul circuits (excl Virtual Paths)
21CN Backhaul Link & Length
Core/Metro (broadband)
Low Tisbo Equipment Depn
High Tisbo Equipment Depn
Very High Tisbo Equipment Depn
Low Tisbo Excess Construction
AISBO Excess Construction
SG&A Broadband
SG&A Interconnect
0
25
0
47
9
17
0
1
4
2
12
44
52
82
121
20
2
0
10
19
92
5
SMP Accounting Separation components
Residual components
Roundings
128
1,691
3
TOTAL
7,256
0
1
0
0
0
0
0
0
0
0
0
0
0
6
20
0
6
9
3
2
1
1
0
0
2
1
5
21
30
10
24
0
1
0
1
5
7
6
14
29
15
4
43
6
5
1
1
1
6
18
15
57
83
48
-
20
2
0
10
19
5
128
1,691
Page 147
Appendix 1 – Other Information
Appendix 1.2.1 - BT Network Services Reconciliation 2012 (Annex 17) (h)
Non cost accounting, roundings and
residual
Wholesale broadband access market 2
- 2 to 3 principal operators
Wholesale broadband access market 1
- BT only operator
Alternative interface symmetric
broadband origination (up to and
including 1Gbit/s)
Technical Areas (Point of Handover)
Technical areas (Interconnect Circuits)
Fixed call termination
Call origination on fixed public
narrowband networks
Wholesale trunk segments
Traditional interface symmetric
broadband origination (above 45Mbit/s
up to and including 155Mbit/s)
Traditional interface symmetric
broadband origination (above 8Mbit/s
up to and including 45Mbit/s)
Traditional interface symmetric
broadband origination (up to and
including 8Mbit/s)
Wholesale local access
Wholesale ISDN2 exchange line
services
Total (from annex 15)
Fully Allocated Cost (£m)
Wholesale analogue exchange line
services
Consolidation Statement (a summary of all wholesale markets where there are cost accounting obligations)
Components
Local exchange concentrator
94
46
48
Local exchange processor
84
40
43
Remote - local transmission link
41
20
20
Remote - local transmission length
37
18
19
Product management policy & planning
18
18
1
1
-
Interconnect local end rental 2Mbit/s
2
3
Interconnect 2Mbit/s connection
2
2
-
Interconnect extension circuits (IEC) 2Mbit/s link
2
2
-
Customer Sited Interconnect cct (CSI) 2Mbit/s link
4
3
1
Interconnect extension circuits (IEC) 2Mbit per km
1
2
(1)
Customer Sited Interconnect cct (CSI) 2Mbit per km
2
2
-
In Span Interconnect circuits (ISI) transmission
1
1
-
Nominated In Span I/Connect cct (ISI) transmission
1
1
-
Intra Building Circuit (IBC) connection
1
1
-
Intra Building Circuit (IBC) rental
6
6
-
PC rental 2Mbit/s link per km distribution
55
55
PC rental 2Mbit/s link per km trunk
18
5
13
PC rental 34Mbit/s link per km distribution
9
PC rental 34Mbit/s link per km trunk
5
PC rental 140Mbit/s link per km distribution
8
7
PC rental 140Mbit/s link per km trunk
6
0
PC rental 622Mbit/s link per km trunk
9
Point of Handover electronics
3
1
PC rental 64kbit/s link
32
32
PC rental 2Mbit/s link
24
24
PC rental 34Mbit/s link
2
PC rental 140Mbit/s link
5
PC rental 64kbit/s link per km transmission
64kbit/s PC link connection cct provision
18
(1)
-
8
1
6
(1)
1
6
-
9
2
-
2
4
1
18
1
1
2Mbit/s and above PC link connection cct provision
46
45
PC rental 64kbit/s link local end
23
22
PC rental 34Mbit/s link local end
15
PC rental 140Mbit/s link local end
10
PC rental 2Mbit/s local end copper
0
0
14
9
1
1
-
1
-
0
1
11
10
1
PC rental 2Mbit/s local end fibre
162
154
8
Wholesale & LAN extension services electronics
101
80
Wholesale & LAN extension services fibre etc
368
360
8
8
Backhaul extension services electronics
Page 148
21
8
-
Appendix 1 – Other Information
Appendix 1.2.1 - BT Network Services Reconciliation 2012 (Continued)
Non cost accounting,
roundings and residual
Wholesale broadband access
market 2 - 2 to 3 principal
operators
Wholesale broadband access
market 1 - BT only operator
Alternative interface symmetric
broadband origination (up to
and including 1Gbit/s)
Technical Areas (Point of
Handover)
Technical areas (Interconnect
Circuits)
Fixed call termination
Call origination on fixed public
narrowband networks
Wholesale trunk segments
Traditional interface symmetric
broadband origination (above
45Mbit/s up to and including
155Mbit/s)
Traditional interface symmetric
broadband origination (above
8Mbit/s up to and including
45Mbit/s)
Traditional interface symmetric
broadband origination (up to
and including 8Mbit/s)
Wholesale local access
Wholesale ISDN2 exchange
line services
Wholesale analogue exchange
line services
Fully Allocated Cost (£m)
Total (from annex 15)
Consolidation Statement (a summary of all wholesale markets where there are cost accounting obligations)
Components
Backhaul extension services fibre etc
Ethernet main links
SG & A private circuits
SG & A partial private circuits
National OA non chargeable
Emergency OA (999) non chargeable
Wholesale Access specific
Routeing & records
MDF Hardware jumpering
Software jumpering
E side copper capital
E side copper current
D side copper capital
D side copper current
Local exchanges general frames capital
Local exchanges general frames current
PSTN line test equipment
Dropwire capital & PSTN NTE
Residential PSTN drop maintenance
ISDN2 drop maintenance
PSTN line cards
ISDN2 line cards
Pair gain
ISDN2 NTE
Broadband line testing systems
DSLAM capital/maintenance
ADSL connections
Local Loop Unbundling room build
Local Loop Unbundling hostel rentals
Local Loop Unbundling hostel rentals power & vent
Local Loop Unbundling tie cables
Local Loop Unbundling systems development
Directories
Service Centres - Provision
Sales product management
Service Centres - Assurance
Combi Card voice
Combi Card Broadband Access
20
39
6
28
11
4
16
229
242
60
1,163
193
71
47
4
455
110
3
150
21
2
7
75
225
3
20
38
54
12
4
27
124
20
45
6
158
20
37
5
21
0
1
0
2
1
3
2
0
0
-
0
11
4
9
30
0
187
42
898
132
33
23
3
354
88
0
0
1
0
6
2
26
6
0
0
0
10
7
103
0
48
14
228
43
22
15
1
90
22
0
0
0
1
0
6
1
0
0
44
4
0
21
37
54
13
2
0
0
16
3
15
0
0
0
0
3
150
22
2
6
10
28
32
4
14
5
2
1
1
50
6
9
0
Page 149
4
81
1
2
35
0
0
0
43
24
1
95
2
5
11
16
9
1
(1)
1
15
105
2
(1)
1
(1)
2
(1)
24
6
6
1
91
Appendix 1 – Other Information
Appendix 1.2.1 - BT Network Services Reconciliation 2012 (Continued)
Non cost accounting,
roundings and residual
Wholesale broadband access
market 2 - 2 to 3 principal
operators
Wholesale broadband access
market 1 - BT only operator
Alternative interface symmetric
broadband origination (up to
and including 1Gbit/s)
Technical Areas (Point of
Handover)
Technical areas (Interconnect
Circuits)
Fixed call termination
Call origination on fixed public
narrowband networks
Wholesale trunk segments
Traditional interface symmetric
broadband origination (above
45Mbit/s up to and including
155Mbit/s)
Traditional interface symmetric
broadband origination (above
8Mbit/s up to and including
45Mbit/s)
Traditional interface symmetric
broadband origination (up to
and including 8Mbit/s)
Wholesale local access
Wholesale ISDN2 exchange
line services
Total (from annex 15)
Fully Allocated Cost (£m)
Wholesale analogue exchange
line services
Consolidation Statement (a summary of all wholesale markets where there are cost accounting obligations)
Components
Access Cards (ISDN2 services)
Core/Metro (voice)
Border gateway & signalling firewall
MSAN-POSI Voice Link
Access Cards (other services)
MSAN-METRO Connectivity Link
Core/Metro connectivity
Edge Ethernet ports
iNode (call set up and features)
ATM customer interface 2Mbit/s
ATM customer interface 34Mbit/s
ATM customer interface > 155Mbit/s
ATM network interface
ATM network switching
Inter ATM transmissions
Broadband backhaul circuits (excl Virtual Paths)
21CN Backhaul Link & Length
Core/Metro (broadband)
Low Tisbo Equipment Depn
High Tisbo Equipment Depn
Very High Tisbo Equipment Depn
Low Tisbo Excess Construction
AISBO Excess Construction
SG&A Broadband
SG&A Interconnect
0
5
0
0
45
14
63
5
17
0
2
7
4
21
40
43
73
124
25
4
0
7
13
111
8
SMP Accounting Separation components
Residual components
Roundings
131
2,194
6
TOTAL
7,889
0
2
0
0
1
0
0
0
0
0
0
0
0
2
0
0
1
0
0
0
6
37
3
0
6
2
1
1
1
0
0
3
1
6
13
23
0
1
1
2
7
6
26
16
36
21
13
25
4
0
7
13
8
Page 150
7
11
60
3
5
2
3
2
13
20
14
60
82
54
-
Appendix 1 – Other Information
Appendix 1.3 - Change of Current Cost Financial Statements Format 2013
The Current Cost Financial Statements are defined by a series of annexes to Direction 4 and the Schedule 5 FA10 Direction. The annexes are included in the following sections of the Current Cost
Financial Statements.
Format of Current Cost Financial Statements
2012
Section 1-Introduction to the Current Cost
Financial Statements
Section 2-Statement of Responsibility
Includes following Annexes
Includes following Annexes
Annex 2
Format of Current Cost Financial Statements
2013
Section 1-Introduction to the Current Cost
Financial Statements
Section 2-Basis of Preparation
Annex 4
Change in
format made?
No
Annex 22
Yes
Section 3-Audit Report
Annex 23
Section 3-Statement of Responsibility
Annex 2
Yes
Section 4-Basis of Preparation
Annex 22
Section 4-Audit Report
Annex 23
Yes
Section 5-Summary of Financial Performance
Annex 3
Section 5-Summary of Financial Performance
Annex 3
No
Section 6-Attribution of Wholesale Current
Costs and MCE
Section 7-Review of Access Markets
Annexes 5A, 6A
Annexes 5A, 6A
No
Annexes 7, 10, 11, 12, 14
Section 6-Attribution of Wholesale Current
Costs and MCE
Section 7-Review of Access Markets
Section 8-Review of Other Wholesale Markets
Annexes 8, 10, 11, 13, 14
Section 8-Review of Other Wholesale Markets
Annexes 5A, 6A, 8, 11, 13, 14, 16
Yes
Section 9-Reconciliation Statements
Annexes 19, 20
Section 9-Reconciliation Statements
Annexes 19, 20
No
Section 10-Openreach Information
n/a
Section 10-Openreach Information
n/a
No
Appendix 1-Other Information
Annexes 15, 16, 17
Appendix 1-Other Information
Annexes 15, 17
Yes
Appendix 2-Price Control Statements
Annex 24
Appendix 2-Price Control Statements
Annex 24
No
Glossary and Footnotes List
n/a
Glossary and Footnotes List
n/a
No
Additional Information
n/a
Additional Information
n/a
No
Annex 4
1
2
Annexes 7 , 11 , 12, 14, 16
3
1
Financial Performance in Access and Other Wholesale Markets (Annexes 7 & 8) has been expanded to include the P&L and MCE lines of the Market Summaries (in Annexes 11, 12 and 13).
2
The P&L and MCE lines of the Market Summaries (in Annexes 11, 12 and 13) have now been included in expanded Annexes 7 & 8.
3
Financial Performance in Access and Other Wholesale Markets (Annexes 7 & 8) has been expanded to include the P&L and MCE lines of the Market Summaries (in Annexes 11, 12 and 13).
Page 151
Yes
Appendix 2 – Price Control Statement
Appendix 2
Price Control Statements
Page 152
Appendix 2 – Price Control Statement
Appendix 2.1- Price Controls in Access and Other Wholesale Markets (Annex24) (Unaudited)
This appendix shows an extract from the most recent price control submissions to Ofcom to
meet BT’s price control obligations.
Price Control summary of ISDN30 information submitted to Ofcom.
Price control summary of calls information submitted to Ofcom.
Basket
RPI between
June 2011 &
June 2012
Actual
Charge Control Controlling % Basket Yield
Call Termination
4.95%
RPI+3.75%
8.70%
£14.2m
Call Origination
4.95%
RPI+2.75%
7.70%
£12.9m
Interconnect Specific
4.95%
RPI+3.75%
8.70%
£0.1m
PPP Basket
4.95%
RPI+1.5%
6.45%
£1.2m
Basket
ISDN30 (rental, connection
and enhanced care services)
Charge Control
TI Basket
5.00%
RPI-1.75%
3.25%
3.99%
Equipment
5.00%
RPI-0%
5.00%
4.41%
Ancillary
5.00%
RPI-0%
5.00%
2.69%
Controlling % to Price Change to
30 September
30 September
2012
2012
Charge Controlling % to Price Change to
Control 30 March 2013 31 March 2013
LLU SMPF Ancillary
5.40%
N/A
-7.60%
-£8.77m
LLU MPF Ancillary
5.40%
N/A
-3.6%
-£2.17m
LLU Co-mingling
5.40%
N/A
1.80%
£1.29m
Sub cap
MPF Connections
RPI between
November
2010 and
October 2011
5.40%
Charge Controlling % to Price Change to
Control 30 March 2013 31 March 2013
N/A
-3.60%
-£26.6m
Price Change to
30 September
2012
£1.34m
Charge Control
Ethernet core services
4.95%
RPI-7%
0.50%
Accommodation products
4.95%
N/A
N/A
N/A
Accommodation fee
4.95%
RPI-0%
4.95%
0.00%
Ethernet ancillary services
4.95%
RPI-0%
14.86%
£0.27m
RPI between
June 2011 and
June 2012
Charge Control
Controlling % to
30 September
2012
Price Change to
30 September
2012
4.95%
RPI-0%
4.95%
£0.43m
BES
Basket
-8.35%
Controlling % to
30 September
2012
Sub-cap
Price Control summary of LLU information submitted to Ofcom.
RPI between
November
2010 and
October 2011
RPI-3.75%
RPI between
June 2011 and
June 2012
Basket
Basket
5.40%
Charge Controlling % to Price Change to
Control 30 March 2013 31 March 2013
Price Control summary of AISBO information submitted to Ofcom.
Price Control summary of PPC information submitted to Ofcom.
RPI between
June 2010 &
June 2011
RPI between
November
2010 and
October 2011
-£1.16m
Page 153
Glossary and Footnotes List
Glossary and Footnotes List
Page 154
Glossary and Footnotes List
Glossary
21CN
Accounting
Documents
Accounting
Separation
ADSL
AISBO
Annual Report
ATM
Baskets
BES
BNS
ca
cct
CELA
chann
CLZ
Components
conn
Cost accounting
CP
CPS
CSH
CSI
Current Cost
Accounting
("CCA")
adjustments
st
21 Century Network
The Primary Accounting Documents, DAM, DVM, LRIC: R&P and
Wholesale Catalogue.
Accounting separation requirements arise where there is an obligation
to not unduly discriminate and/or there is a reasonable concern that a
Dominant Provider may make cross-subsidies, e.g. the means by
which a margin squeeze may be funded.
Asymmetric Digital Subscriber Line.
Alternative Interface Symmetric Broadband Origination.
BT Group plc's Consolidated Group Financial Statements for the year
ended 31 March. These are available on the BT website at:
http://www.btplc.com/Sharesandperformance/Annualreportandrevie
w/index.cfm
Asynchronous Transfer Mode.
Baskets are collections of services not considered to be competitive
and for which prices are subject to specific charge controls.
Backhaul Extension Services.
Backhaul Network Services.
Cables.
Circuits.
Central and East London Area.
Channels.
Central London Zone.
Within these Statements, the term component includes both network
components and network parts.
Connections
Cost accounting obligations are to meet the requirements where there
is an obligation in relation to:
Price controls.
Cost orientation.
Cost recovery.
Communication Providers.
Carrier Pre-Selection.
Customer Sited Handover.
Customer Sited Interconnect.
The change to historical costs arising from the revaluation of assets on
a current cost basis. In the statements for individual markets the
adjustments comprise the holding gains or losses arising from changes
in asset values, together with the effect on asset values and
Page 155
Cust
DAM
DLRIC
DSAC
D-side
DSL
DSLAM
DVM
EAD
EBD
EBITDA
Eq
EOI
E-side
FPN
FRIACO
HCA
IEC
ISH
ISI
ITC
ITT
km
le
Line
lk
LLCS
LLMR
LLU
depreciation of the appropriate allocation of current cost asset values
between markets, Technical Areas and Wholesale services.
Customer.
The Detailed Attribution Methods. This sets out the detailed processes
by which revenues and costs are attributed to the markets, Technical
Areas and Wholesale services.
LRIC plus a share of common costs.
Stand alone cost (SAC) excluding a share of core common costs.
Distribution side.
Digital Subscriber Line.
Digital Subscriber Line Access Multiplexer.
The Detailed Valuation Methodology. This sets out the methodology
by which current cost valuations are obtained.
Ethernet Access Direct.
Ethernet Backhaul Direct.
Earning before interest, tax, depreciation and amortisation.
Equipment units.
Equivalence of Input.
Exchange side.
Fixed public narrowband.
Flat Rate Internet Access Call Origination.
Historic Cost Accounting.
Interconnection Extension Circuit.
In-Span Handover.
In-Span Interconnect.
Inter-Tandem Conveyance.
Inter-Tandem Transit.
Kilometres.
Local ends.
Lines.
Links.
Local Lines Costing Study.
Leased Lines Market Review.
Local Loop Unbundling.
Glossary and Footnotes List
Glossary Continued.
Long Run
Incremental
Cost
("LRIC")
LTC
LTT
m
Mean capital
employed
(“MCE”)
MEA
mm
MPF
ms
n/a
Network Charge
Control regime
("NCC")
NGA
NTS
Ofcom
Other
Communications
Providers
PADS
PECN
PoH
PoPs
PPC
PPM
PPP
PRS
r
RBS
Relationships
and Parameters
("R&P")
Defined as the cost caused by the provision of a defined increment of
output given that costs can, if necessary, be varied and that some level
of output is already produced.
Local-tandem conveyance.
Local-tandem transmission.
Metres.
Mean capital employed is defined as total assets less current liabilities,
excluding corporate taxes and dividends payable, and provisions other
than those for deferred taxation. The mean is computed from the start
and end values for the period.
Modern Equivalent Asset.
Millions of minutes.
Metallic Path Facilities.
Million seconds.
Not applicable.
The basis on which interconnect charges have been set with effect
from 1October 1997.
Next Generation Access.
Number Translation Services.
Office of Communications.
Other telecommunication companies operating in the UK, which
purchase telecommunication services from BT.
reval. adj.
SDH
SDSL
Stand alone cost
("SAC")
SMP
SMPF
TDM
TISBO
tover
VIC
VoIP Voice over IP
Usage Factors
WECLA
WES
Wholesale cost
accounting
WLR
Zero
<1
Primary Accounting Documents which set out the framework within
which the Current Cost Financial Statements are prepared.
Public Electronic Communications Network.
Point of Handover.
Points of Presence.
Partial Private Circuit.
Pence per Minute.
Product management, policy and planning.
Premium Rate Services.
Rooms.
Radio Base Station Backhaul.
The BT publication "Long Run Incremental Cost Model: Relationships
and Parameters" describes in detail how BT has applied the principles
contained within the LRIC Methodology section of the Accounting
Documents to construct cost volume relationships and to calculate
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LRIC. The R&P also contains appendices which detail the relationships
and parameters used within the model.
CCA Revaluation Adjustment. See Section 2 - Basis of Preparation.
Synchronous Digital Hierarchy.
Symmetric Digital Subscriber Line.
The stand alone cost of an activity or subset of activities is the cost
incurred in providing that activity or activities of services by itself.
Stand alone cost will include all direct variable, activity specific fixed
costs, common fixed costs and joint costs associated with the activity
or subset of activities in question.
Significant Market Power.
Shared Metallic Path Facilities.
Time Division Multiplexing.
Traditional Interface Symmetric Broadband Origination.
Takeovers.
Virtual Interconnect Circuit.
Voice over IP.
Usage Factors refer to the usage of any network component, including
conveyance components.
Western, Eastern and Central London Area
Wholesale Extension Services.
Cost accounting in Wholesale markets deals with products and services
sold to Communications Providers.
Wholesale Line Rental.
A numerical value of zero.
A numerical value of <£0.5m and >£(0.5)m.
A value of below £1m.
Glossary and Footnotes List
Footnotes
(a)
(b)
(c)
(d)
(h)
(n)
(q)
(t)
(u)
(v)
(y)
(sx)
(ux)
(ad)
(ao)
(ap)
(un)
(*)
This component is attributed on a % basis so no volume or unit cost is
derivable.
See glossary for volume unit descriptors.
Unit of length is 10 kilometres.
ppm = pence per minute; £/2Mbit cct = £ per 2 Mbit/s circuit; £/km =
£ per kilometre; £/100m = £ per 100 metres; £/trans = £ per
transaction; £/circuit = £ per circuit; £/ hostel rental = £ per hostel
rental; % = % utilisation; £/line = £ per line; £/room = £ per room;
£/cable = £ per cable; £/link = £ per link; £/eq = £ per equipment
units; £/le = £ per local end; £/conn = £ per connection; £/channel =
£ per channel; £/fibre km = £ per fibre km.
See Section 2 - Basis of Preparation for explanation of restatement.
Accounting Separation components require no costs to be disclosed.
This is the total cost not unit cost for this component.
Revenue for this service is <£1m and hence shown within roundings
as agreed with Ofcom. Where revenue is immaterial, no volumes or
prices are shown.
Costs associated with these services are immaterial and included
within the above reported AISBO services and hence not disclosed
separately.
Revenues shown are prior to the 'revenue share' between BT and
Other Communications Providers (OCPs).
Unit costs calculated as a weighted average of the 64kbit PC link
connection cct provision & 64kbit PC link connection cct
rearrangements.
This service comprises a number of individual prices as indicated by
the value of x.
This service comprises a number of individual volumetrics as indicated
by the value of x.
Does not include the service Wholesale Call originating local
exchange segment (ISDN) (excl. Operator Assistance) due to
immaterial volumes.
The price for 64kbit/s enhanced maintenance is weighted to include
different 64kbit/s equivalent services.
Reduction in FAC due to notional creditor generated by the EOI
charge from Openreach to WBA markets.
This service comprises a large number of volumetrics and prices.
This component is attributed on a % basis so no volume or unit cost is
derivable.
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Additional Information
Additional Information
Page 158
Additional Information
Hard copy versions of the published Current Cost Financial Statements, Primary Accounting Documents, Detailed Attribution Methods, Detailed Valuation Methodology and Long Run Incremental
Cost Model: Relationships and Parameters can be obtained from:
Shareholder helpline
Tel: Freefone 0808 100 4141
Fax: 01903 833371
Textphone: Freefone 0800 169 6907
From outside the UK:
Tel: +44 121 415 7178
Fax: +44 1903 833371
Textphone: +44 121 415 7028
https://help.shareview.co.uk
The Registrar
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
United Kingdom
Website: www.equiniti.com
Electronic copies of the above documents are also available from the following website:
www.btplc.com/Thegroup/RegulatoryandPublicaffairs/Financialstatements/index.htm
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