A BACKROOM battle has broken out between BT and its telephony competitors over revenue-splitting arrangements for calls routed between operators.
With more than #1600m a year of inter-operator calls at stake, smaller telephone companies are desperate to retain their share of the revenues, but negotiations have already been disrupted by allegations of foul play and lying to customers.
A working party made up of BT, Scottish Telecom and representatives of a number of other phone companies has been meeting for the past two months to agree a formula for splitting call costs in 1999. At issue is the split of revenues when a BT customer calls a customer of another network.
BT has complained to Oftel that it is receiving an unduly small share of revenue from calls made to other operators' freephone and local-rate numbers. Oftel, in turn, is supervising negotiations between the phone companies
to produce a revised revenue
formula for 1999.
All parties to the discussion have agreed to keep their negotiations secret from the press, but The Herald has been shown confidential minutes from the meetings prepared by one of the companies involved.
Currently, when a BT customer calls another operator's 0845 numbers, BT retain approximately one-third of the call cost. The rest is passed on to the operator whose customer receives the call. BT argues that the rise in Internet use is unbalancing the market, with an ever-increasing number of Internet users dialling out from BT lines and none dialling back in.
As a consequence, the company claims, Internet service providers and their telephone companies are effectively being subsidised by BT. In 1996, according to the company's annual report, BT paid out #1383m to other telecoms companies, including overseas operators and Internet service providers, and received back #1166m. In 1998, BT paid out more than #1600m but received only #1269m in return.
At the core of BT's complaint is Internet providers' move to offering their services over local-call and freecall numbers. These numbers pull millions of calls from BT lines but don't generate equivalent numbers of calls back. In BT's view, the sudden jump in 0845 calls has distorted a system intended to ensure each telecoms company treated the other equitably.
Now BT's competitors are worried that their call-sharing revenues could be cut by 50% or more, as soon as March next year. At a meeting for Internet service providers held in London on November 30, a BT employee told the providers that other telecoms companies would lose half their current call-sharing revenues on 0845 numbers in 1999.
Such a cutback would have dramatic effects on Internet service providers' annual revenues. For instance, Demon's estimated 260,000 customers are reckoned by analysts to generate up to #11m each year in call-sharing revenues for ScottishPower's ScottishTelecom subsidiary. This cash stream - making up an estimated 20% of Demon's earnings - was one of the prime attractions when ScottishTelecom bought it earlier this year.
ScottishTelecom declined to comment on what changes in the revenue sharing formula it expected and on its potential effects on its own revenues.
Independent Internet service providers receive commissions from their telephone operators for each call made to their 0845 numbers. For smaller providers, that commission can make up more than a third of operating revenues.
After furious complaints from competitors, BT dissociated itself from the statements made to Internet service providers, stating that the figures given at the meeting were ''not true'' and should be seen as ''the comments of an over-zealous salesman''.
But some change in the revenue sharing formula is now inevitable. Oftel confirms that a public consultation on the formula will be held either later this month or in January. BT's competitors, while admitting that the formula has become distorted, hope to lose no more than 10% of their revenues, effective from October, 1999.
BT cited its agreement with other operators not to comment on the discussions now taking place and added: ''No conclusions have been reached.''
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