BT pension deficit could push up broadband prices
By Jennifer Scott
Posted on 1 Dec 2009 at 17:03
BT’s competitors may have to make up the company’s shortfall for its pension scheme as a result of an Ofcom consultation.
The regulator will decide whether Openreach, the division of BT set up to lease its lines to other providers, should be allowed to increase its prices to make up for BT's pension deficit. If agreed, it could see costs rising by up to 4%.
BT’s pension scheme had a pre-tax deficit of £9 billion at the end of the last quarter, due to three times as many employees taking out from it as current employees paying in.
However, there are fears that increased prices for competitors could lead to increased prices for their customers.
A statement from Ofcom said: “So far Ofcom has not taken a view on whether it is appropriate or not to change its current principles in relation to pension costs.”
“If Ofcom changes its approach, any adjustments in wholesale charges would not necessarily be felt proportionately by consumers.”
A BT spokesperson said the company welcomed the consultation and added that the firm considers "it entirely reasonable that we should be able to recover an appropriate share of our pension deficit costs through regulated charges."
"There is good regulatory precedent for pension deficit costs to be recovered in this way in other regulated industries," BT added.
Ofcom is expected to publish a further consultation next Spring, with more statements to follow throughout the year.
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