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S.1 The Communications Act 2003 ("the Act") provides for functions, powers and duties to be carried out by Ofcom which include, inter alia, functions, powers and duties flowing from the new EU Communications Directives. Those particular functions, powers and duties in the Act were, up to 29 December 2003, exercised by the Director General of Telecommunications (referred to below either as "the Director" or "Oftel")

S.2 Those Directives require National Regulatory Authorities ("NRAs"), amongst other things, to carry out reviews of competition in communications markets to ensure that regulation remains appropriate in the light of changing market conditions.

Consultations

S.3 In line with the new EU Communications Directives, on 15 May 2003 Oftel published a consultation document entitled Review of mobile wholesale call termination markets (referred to throughout this document as "the May consultation"). In that document, Oftel explained that the Director was reviewing competition in the provision of wholesale mobile call termination, and included proposals for identifying markets, making market power determinations and setting significant market power ("SMP") conditions on six mobile network operators ("MNOs"); O2, Orange, T-Mobile, Vodafone, '3' and Inquam. The period of consultation closed on 24 July 2002;14 responses were received (13 non-confidential).

S.4 Having considered responses to the May consultation, on 19 December 2003 Oftel published a Notification (under sections 48(2) and 80 of the Act) and Explanatory Statement. This set out revised proposals and invited responses from those likely to be affected. The period of consultation ended on 10 February 2004 (extended from 6 February). With functions including the undertaking of this review being passed to the Office of Communications ("Ofcom") on 29th December 2003, Ofcom received 10 representations issued by interested parties in response to the Oftel Notification and Explanatory Statement.

S.5 These responses included a submission from the European Commission, who, along with other NRAs, was sent the draft decisions in accordance with Article 7 of Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services (the "Framework Directive") and sections 50 and 51 of the Act. In its response, the European Commission did not exercise its powers under Article 7(4) of the Framework Directive to take a decision requiring Ofcom to withdraw the proposals.

Summary of conclusions

S.6 Having considered all responses, Ofcom has identified the markets set out below, and has concluded that each MNO has SMP in the market for the provision of wholesale voice call termination on its individual network(s):

• wholesale voice call termination provided by '3' (such termination provided via '3''s mobile network);
• wholesale voice call termination provided by Inquam (such termination provided via Inquam's mobile network);
• wholesale voice call termination provided by O2 (such termination provided via O2's mobile network);
• wholesale voice call termination provided by Orange (such termination provided via Orange's mobile network);
• wholesale voice call termination provided by T-Mobile (such termination provided via T-Mobile's mobile network); and
• wholesale voice call termination provided by Vodafone (such termination provided via Vodafone's mobile network).

S.7 As a result of these conclusions, Ofcom has set out SMP conditions to be imposed on the six MNOs in Schedules 1, 2, 3 and 4 to the Notification at Annex A. The proposed SMP conditions to be imposed vary between different sets of MNOs to reflect their different positions as mobile operators.

Regulatory remedies

S.8 Given the position of dominance held by all providers of mobile voice call termination services – i.e. their ability to behave to an appreciable extent independently of competitors, customers and ultimately consumers – Ofcom is imposing the following SMP conditions:

S.9 In respect of Vodafone, O2, T-Mobile and Orange for their 2G call termination services, requirements that they:

• provide network access (i.e. 2G call termination) on reasonable request;
• do not unduly discriminate in relations to matters connected with such network access;
• supply to Ofcom copies of any new or amended access contracts;
• give advance notification of price changes; and
• reduce termination charges in line with charge controls.

S.10 In respect of Inquam, a requirement that it gives advance notification of price changes.

S.11 In respect of 2G voice call termination services provided by '3', a requirement that it gives advance notification of price changes and supplies to Ofcom details of call volumes.

S.12 Ofcom has concluded that there should be no ex-ante regulation of 3G voice call termination services.

S.13 In relation to 2G voice termination, Vodafone, O2, Orange and T-Mobile ('the four MNOs') should be subject to a charge control, to last until 2006 (details of the proposed control can be found in Chapter 6).

Final steps

S.14 In line with paragraphs 9 and 22 of Schedule 18 to the Act, current relevant regulation contained in the Continuation Notices given by the Director in July 2003 shall be discontinued by way of issuing Discontinuation Notices to the relevant MNOs (and other operators where relevant). The Discontinuation Notices given in respect of regulation replacing the charge controls shall take effect on 2 September 2004 i.e. the day after the charge controls take effect. The Discontinuation Notice given in respect of other relevant regulation shall take effect in accordance with section 7 of the Interpretation Act 1978 and section 394(7) of the Act. Details of this discontinuation can be found in Chapter 7 of this statement, with copies of the Notices posted on 1 June 2004 at Annex G.

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