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Summary

1.1 Retail price controls (RPCs) have been an important part of the regulatory landscape in telecommunications since the privatisation of British Telecom (“BT”) in 1984. They are designed to protect consumers by reducing prices when competitive pressure alone is too weak. RPCs have brought about a steady reduction in prices to the point that the UK has some of the lowest prices for residential telephony among developed countries.^(-1-)

1.2 Over the last 20 years, there has been a great increase in the level of competition in the retail market, and it continues to grow and strengthen. This competition has been based on increasingly effective regulation in the wholesale telephony markets, which have been coupled with changes in other regulation including BT’s Universal Service Obligation (USO). As a result, even though BT retains Significant Market Power (SMP) in those markets, Ofcom proposes in this document that the RPCs are no longer a necessary or appropriate form of regulation and that they should consequently be allowed to lapse on their expiry on 31 July 2006.

1.3 The benefit of removing RPCs will be that, for the first time in respect of the services under consideration, it will be market forces that determine prices, rather than regulation. All communications providers will have full freedom to price their services as they see fit, in competition for customers. Regulatory intervention will be focused on wholesale markets.

1.4 In order to mitigate any risks associated with the ending of the RPC, Ofcom has sought from BT, and BT has indicated its willingness to provide, assurances for the period up to the end of 2007 which will help to safeguard certain low spending consumers.

1.5 Under the European regulatory framework, Ofcom is required to conduct periodic reviews of markets and intends to conduct the next full review of fixed narrowband retail services markets in 2007. This will provide Ofcom with the opportunity to assess the impact of bringing the RPCs to an end, and to take steps to address any adverse consequences if they should arise.

Footnotes:

1.- http://www.ofcom.org.uk/research/cm/cm05/telecommunications.pdf (Figure 3.56) The 11th EU Implementation report (Annex II Section 7) contains some benchmarking analysis of fixed line access and call prices across the EU and including some non-EU OECD countries. http://europa.eu.int/information_society/policy/ecomm/doc/implementation_enforcement/annualreports/11threport/sec_2006_193_vol2bis.pdf

The full document is available below

• Retail Price Controls - Explanatory Statement and Proposals [pdf]
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