BT to pay £22M in interest for Ethernet overcharge
Fri 5 May 2017
Ofcom released a report today detailing the investigation into British Telecom practices of charging for Ethernet services, following a ruling by the Court of Appeal that BT is responsible for paying £22 million in interest on overcharges of £94 million on wholesale Ethernet services.
The appeals court upheld findings from an ongoing investigation which show that BT had, in fact, overcharged customers from 2006-2011 for Ethernet backhaul services in excess of £94 million, and should be required to pay back £22 million in interest.
The services in question were the Backhaul Extension Service and Wholesale Extension Service, wholesale Ethernet services that provide dedicated bandwidth to telecommunications providers. In 2010, Ofcom began investigating charges from Sky and TalkTalk alleging that the fees associated with these services were billed incorrectly. The investigation was later expanded to include Verizon, Virgin and Vodafone.
The company did, already, pay back the £94 million overcharge to the enterprise customers in question in the form of credit notes for continuing services. The question remained, however, as to which associated interest charges should be included in the repayment order.
The Competition Appeal Tribunal determined, in 2015, that the amount of interest on the overcharge totaled £22 million using a five-year time frame to calculate the interest, and that BT should be required to pay back that amount to the parties in the dispute.
British Telecom appealed that decision, arguing that it was actually Ofcom’s fault that the investigation took so long to complete and that the interest should have been calculated based on a much shorter time frame.
However, Ofcom follows a general guideline in the case of interest awards, called Interest Guidance, that says that interest rates should reflect the time value of the extra money gained by an overcharging firm. This rule is in place to help avoid creating an incentive for overcharging, although it is not considered a penalty, but rather an attempt to set a fair value for the extra money held by an overcharging firm.
The final ruling issued by the Court of Appeal held that British Telecom is responsible for repaying the full amount of interest calculated by the Competition Appeal Tribunal, and that the clients in the suit are due £22 million.
BT does have the option, now, to appeal the case to the Supreme Court, however, it has not yet announced whether it has chosen to appeal.