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Determination

DRAFT DETERMINATION UNDER SECTIONS 188 AND 190 OF THE COMMUNICATIONS ACT 2003 FOR RESOLVING A DISPUTE BETWEEN CABLE AND WIRELESS LIMITED AND BT GROUP PLC RELATING TO BT’S CHARGES FOR CONNECTING NEW CUSTOMERS TO FULLY UNBUNDLED LOOPS

WHEREAS:

A. Section 188(2) of the Communications Act 2003 (the “Act”) provides that where there is a dispute between different communications providers and Ofcom has decided pursuant to section 186(2) of the Act that it is appropriate for it to handle the dispute, Ofcom must consider the dispute and make a determination for resolving it. The determination that Ofcom makes for resolving the dispute must be notified to the parties in accordance with section 188(7) of the Act, together with a full statement of the reasons on which the determination is based.

B. Section 190 of the Act sets out the scope of Ofcom’s powers when resolving a dispute which may include, in accordance with section 190(2) of the Act;

1. making a declaration setting out the rights and obligations of the parties to the dispute;
2. giving a direction fixing the terms or conditions of transactions between the parties to the dispute;
3. giving a direction imposing an obligation, enforceable by the parties to the dispute, to enter into a transaction between themselves on the terms and conditions fixed by Ofcom; and
4. for the purpose of giving effect to a determination by Ofcom of the proper amount of a charge in respect of which amounts have been paid by one of the parties to the dispute to the other, giving a direction, enforceable by the party to whom sums are to be paid, requiring the payment of sums by way of adjustment of an underpayment or overpayment.

C. On 16 December 2004 Ofcom published its Review of the Wholesale Local Access Market (“RWLAM”), determining that BT Group plc (“BT”) has significant market power (“SMP”) in the wholesale local access market in the UK excluding the Hull Area. Ofcom imposed conditions on BT in the wholesale local access market:

1. to provide Network Access (as defined in the RWLAM) on reasonable request;
2. not to unduly discriminate;
3. to charge prices that were oriented to costs; and
4. governing requests for new Network Access.

D. Ofcom also imposed charge ceilings on specific local loop unbundling (“LLU”) services, including a charge ceiling of £168 per connection for the service known as ‘MPF new provide’ (the “New Provide” service). BT’s published service description for this service includes a visit by a BT engineer to the premises where the service is to be connected (a “site visit”). Ofcom’s published decision made it clear that the cost of a site visit was included in the setting of the connection charge ceiling.

E. On 1 and 18 August 2005, Ofcom published its conclusions in both the cost of capital and cost of copper studies. As a result the connection charge for a New Provide was reduced in December 2005 to £99.95 per line (as it is currently) as the cost of the site visit is now recovered in the rental charge.

F. On 1 July 2006, BT commenced providing another LLU-based service, known as the “Stopped Line Provide”. One of the features of this service is that it did not include a site visit.

G. On 22 November 2006 Cable & Wireless Access Limited (“C&WA”) referred to Ofcom for resolution a dispute between it and BT relating to the connection charges paid by C&WA to BT for the New Provide service during the period leading up to 1 July 2006.

H. On 5 January 2007 Ofcom decided pursuant to section 186(2) of the Act that it was appropriate for it to handle the dispute and info rmed the parties of its decision.

I. On 5 January 2007, following representations received from both parties, Ofcom published the scope of the dispute.

J. In order to resolve this dispute, Ofcom has considered, among other things, the current regulatory framework for LLU charges, the SMP conditions imposed upon BT in the wholesale local access market, the info rmation supplied by BT and C&WA and the relevant duties set out in the Act applicable to the resolution of regulatory disputes.

K. A fuller explanation of the background to the dispute and Ofcom’s reasons for making this determination is set out in the explanatory statement accompanying this determination.

L. This draft determination is published on 4 April 2007 , for which responses are invited by 20 April 2007

NOW, THEREFORE, PURSUANT TO SECTION 186 AND 190 OF THE ACT OFCOM MAKE THE FOLLOWING [DRAFT] DETERMINATION:

1. It is hereby declared that BT’s charge of £168  (as charged between 16 December 2004 and 14 December 2005) for the New Provide service and specifically the inclusion of a site visit within that charge, is consistent with its obligations under FA 1, FA 3 and FA 9 and is to regarded as having been provided at a fair and reasonable charge under FA 1.2 and FA 9.2 and at a charge which is reasonably derived from the costs of provision based on a forward looking long run incremental cost approach under FA 3.1. 

2. The charge of £99.95 (as charged between 15 December 2005 and 30 June 2006 ) for the New Provide service does not include the cost of a site visit. As the main issue submitted by C&WA is whether the inclusion of a site visit in the New Provide charge was consistent with the above mentioned SMP conditions, Ofcom has not taken a view, in reaching a decision on this dispute, on the cost orientation of this charge.

3. Ofcom considers that BT provided network access and local loop unbundling services in the form of the Stopped Line Provide service as soon as reasonably practicable in accordance with its obligations under FA 1.2 and FA 9.2.

4. The final Determination shall take effect on [ ] May 2007.

David Stewart

Director of Investigations

A person authorised under paragraph 18 of the Schedule to the Office of Communications Act 2002

 

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The full document is available below

• Draft Determination to resolve a Dispute between Cable & Wireless Access Limited and BT Group plc relating to BT’s charges for connecting new customers to fully unbundled local loops [pdf]
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