The regulator sets out its approach to determining and refunding any unfair costs that universal service providers may incur.
Background: The UK Government introduced legislation to include broadband in the scope of the Universal Service Obligation (USO) to give homes and businesses the right to receive a decent and affordable broadband connection. This was identified as a 10Mbps connection. Ofcom was tasked with the implementation of the obligation, and designated BT and KCOM as the USO providers (USPs) for the respective regions. The obligation took effect on 20 March 2020.
Funding rules are set out: As USPs, BT and KCOM are entitled to be compensated for any costs that it would not be appropriate for them to cover. On 22 May 2020, Ofcom set out the rules providers should follow to claim these costs. The rules establish that USPs can ask Ofcom to review their request for funding for the cost of delivering the USO, minus any benefits associated with being the USP (net cost). Ofcom decides on the scope of a review and when the review will begin, and assess whether the costs incurred were efficient. If appropriate, an independent party can be appointed to check Ofcom’s calculations.
How will Ofcom decide on refunds? Once the regulator determines a net cost, it decides whether it would be unfair for a USP to bear some or all of it. In doing so, Ofcom will consider: the cost to Ofcom and industry of establishing an industry fund; the impact on the provider of bearing these costs alone; the method of designating the USPs; and the outcome of any previous determinations. If Ofcom finds unfair costs have been incurred, it may establish an industry fund, and determine who contributes to it, and how much. The regulator will also set out a threshold below which contributions will not be required. Once the fund is set up, USPs will receive payments on a monthly basis. Ofcom will shortly make the Electronic Communications (Universal Service) (Costs) Regulations (2020) to finalise the rules.
