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A new regulatory regime

1.1 A new regulatory framework for electronic communications networks and services entered into force on 25 July 2003. The framework is designed to create harmonised regulation across Europe and is aimed at reducing entry barriers and fostering prospects for effective competition to the benefit of consumers. The basis for the new regulatory framework is five EU Communications Directives.

1.2 The new Directives require national regulatory authorities (“NRAs”), such as Ofcom, to carry out reviews of competition in communications markets to ensure that regulation remains appropriate and proportionate in the light of changing market conditions. A series of market reviews has been carried out over the last 24 months and this review of the wholesale local access market has been one of the final reviews to be conducted.

Scope of this review

1.3 Ofcom has limited this review to setting out the overall framework for regulating the provision of wholesale local access services and co-location (by way of general remedies) and determining appropriate charges for specific services. Local loop unbundling (“LLU”) services fall within the wholesale local access market and co-location.

1.4 Ofcom considers that LLU process issues are dealt with more appropriately outside of this review. Ofcom has therefore appointed an independent Telecommunications Adjudicator (the “Adjudicator”) to work with industry to accelerate the implementation and delivery of fit for purpose and appropriately industrialised LLU products and processes. Progress of the work of the Adjudicator can be found at www.offta.org.uk. Ofcom will assist the Adjudicator and put in place formal obligations, if is appropriate and necessary for it to do so.

The previous consultations

1.5 Ofcom consulted on its proposals on market definition, findings of significant market power (“SMP”) and regulatory remedies on 13 May 2004 and 26 August 2004. Ofcom has considered all the responses to both consultations carefully and taken them into account in making its final decision.

Ofcom's decision

1.6 This document sets out Ofcom's final decision and concludes the wholesale local access market review.

1.7 Ofcom has identified the following markets for the purposes of assessing competition and imposing appropriate regulatory remedies:

• wholesale local access in the UK excluding the Hull Area; and
• wholesale local access in the Hull Area.

1.8 These market definitions are unchanged from those previously consulted on. The full detail of these market definitions, and the approach taken by Ofcom in identifying these markets, are contained in Section 3.

1.9 Ofcom concludes that BT holds a position of SMP in the wholesale local access market in the UK excluding the Hull Area, and that Kingston holds a position of SMP in the wholesale local access market in the Hull Area. Ofcom has also identified co-location as an appropriate technical area for the purposes of imposing appropriate regulatory remedies.

1.10 Ofcom's market power assessment and its treatment of co-location are unchanged from the previous consultations. The full detail of Ofcom’s market power assessment and its consideration of co-location are set out in Section 4.

1.11 Given its position of SMP, Ofcom has imposed the following SMP services conditions on BT in the wholesale local access market, and in respect of co-location, in the UK excluding the Hull Area:

• requirement to provide Network Access on reasonable request;
• requirement not to unduly discriminate;
• basis of charges (i.e. cost orientation);
• requirement to publish a reference offer;
• requirement to notify charges and terms and conditions;
• requirement to notify technical information;
• quality of service; and
• requests for new Network Access.

1.12 Given its position of SMP, Ofcom has imposed the following SMP services conditions on Kingston in the wholesale local access market and in respect of co-location in the Hull Area:

• requirement to provide Network Access on reasonable request;
• requirement not to unduly discriminate;
• basis of charges (i.e. cost orientation);
• requirement to publish a reference offer;
• requirement to notify charges and terms and conditions; and
• requirement to notify technical information.

1.13 In addition, Ofcom has imposed regulatory financial reporting obligations on BT in the wholesale local access market and in respect of co-location in the UK excluding the Hull Area.

1.14 Full details of the remedies imposed are contained in Sections 5, 6 and 10.

Broadly speaking, the remedies are unchanged from those set out in the previous consultations, except for the following:

• from the May consultation, BT and Kingston are now able to make a reasonable charge for sending out paper copies of their reference offer;
• from the August consultation, BT and Kingston do not have to publish details of traffic and network management in their reference offer;
• from the August consultation, the specific example of undue discrimination in Conditions FA2.2 and FB2.2 has been removed; and
• from the August consultation, the requirement to give Ofcom ten days prior notice of any amendment to a reference offer, the requirement to notify charges and terms and conditions and the requirement to notify technical information will not apply where such amendments or new Network Access is directed or determined by Ofcom.

Local loop unbundling

Aims of regulation

1.15 The provision of LLU services is aimed at stimulating competition in the provision of broadband services, in the absence of network build, and at enhancing competition in areas with only limited local access competition. Ofcom believes that over the next five years, the successful encouragement of greater competition based on infrastructure investment and combined with continued innovation in access technologies, could enable UK households to benefit from affordable and accessible broadband connections delivering video-quality bandwidth.

1.16 In the document entitled Strategic Review of Telecommunications Phase 2, 18 November 2004, Ofcom has set out its proposed regulatory approach in respect of broadband. It also sets out Ofcom’s proposed key regulatory principles, one of which is to promote competition at the deepest levels of infrastructure where it will be effective and sustainable, which in areas of higher customer densities will mean competition based on LLU. Ofcom believes that current generation broadband is an important bridge to next generation broadband services and therefore competition in current generation broadband is an Ofcom priority.

1.17 The regulation imposed by this review and the work of the Adjudicator is intended to provide a positive environment for LLU to succeed in the UK. However, Ofcom recognises that further steps may be necessary to ensure that LLU is ultimately successful.

Specific LLU regulation

1.18 Further to the general regulatory remedies imposed on BT in the wholesale local access market and in respect of co-location, Ofcom has imposed a requirement on BT to provide the following LLU services:

• metallic path facilities / fully unbundled local loops;
• shared metallic path facilities / shared access;
• sub-loop unbundling;
• internal tie cables;
• external tie cables;
• site access;
• co-location;
• co-mingling; and
• ancillary services as may be reasonably necessary for the use of the services
above.

1.19 In addition, Ofcom has imposed charge ceilings for a number of LLU services. Table 1.1 sets out the charge ceilings for fully unbundled and shared access connection and rental charges.

Table 1.1

Local Loop Unbundling Service	Type of Charge	(£)
Shared MPF	rental per annum	15.60
Shared MPF	connection	34.86
MPF Transfer	connection	34.86
MPF New Provide	connection	168.38

1.20 The charge ceilings have been adjusted from those consulted on in the August consultation to reflect more recent cost data and minor changes to Ofcom’s approach. Full details of Ofcom’s LLU remedies, including its approach to determining charge ceilings and the charge ceilings themselves, are contained in Sections 7, 8 and 9.

Discontinuation of existing regulation

1.21 As Ofcom has decided to impose remedies on BT in the wholesale local access market, Condition 83 of BT’s licence issued under section 7 of the Telecommunications Act 1984 has been discontinued from 16 December 2004. Full details of the discontinuation of Condition 83 are contained in Section 11. The obligations imposed on BT and Kingston pursuant to Regulation 2887/2000/EC have also ceased to apply to BT and Kingston from the same date.

The text of the full document is available in PDF format via the link on this page.

• Review of Wholesale Local Access Market [pdf]

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