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Wholesale mobile voice call termination markets – a proposal to modify the charge control conditions

Consultation published: 07|06|2005
Consultation closes: 30|08|2005

Explanatory statement and notification of proposals

Summary

This consultation document

1.1. On 1 June 2004 Ofcom published a statement Wholesale mobile voice call termination (the “June 2004 Statement”) in which Ofcom imposed conditions on Vodafone, O2, Orange and T-Mobile (the “2G MNOs”) which limited the charges which those mobile operators may levy for mobile voice call termination on 2G networks. Those controls will expire on 31 March 2006. This document is a consultation on a proposal to modify the period of those charge controls for one further year to 31 March 2007, retaining the current Target Average Charges which the 2G MNOs may not exceed. All other conditions imposed in the June 2004 Statement shall remain unchanged.

1.2 Ofcom is satisfied that there has been no material change in these markets. In these circumstances, Ofcom is proposing to use its powers under the Communications Act 2003 (the “Act”) to set Significant Market Power (“SMP”) services conditions to modify the charge controls, and is publishing its Notifications for consultation. The proposed Notifications are at Annex D.

Identification of markets

1.3 The services under consideration in this document are wholesale mobile voice call terminations on the mobile networks of each of the 2G MNOs in the UK. Ofcom continues to hold the view maintained in the June 2004 Statement that there are markets for wholesale voice call termination on each Mobile Network Operator’s (“MNOs”) network (or, where the MNO operates both 2G and 3G networks, across both networks). The reasoning which has led Ofcom to the conclusion that these market definitions remain unchanged is provided in section 3.

1.4 The June 2004 Statement also found that there were further markets for wholesale mobile voice call termination on the mobile networks of Hutchison 3G UK Ltd (“H3G”) and Inquam. However, as Ofcom is not proposing to modify any conditions or impose any new conditions on either H3G or Inquam, the present document does not address these other markets.

Assessment of market power

1.5 The June 2004 Statement found that each of the 2G MNOs had SMP in the wholesale market for mobile termination of voice calls on its network. (The June 2004 Statement also found that H3G and Inquam each had SMP in the wholesale market for mobile termination of voice calls on its network but, for the reason given in paragraph 1.4 above, Ofcom is not considering the existence or otherwise of SMP in those markets). As is explained in section 3, Ofcom continues to take the view that the SMP determinations imposed on each of the 2G MNOs in the June 2004 Statement remain appropriate.

Charge controls on mobile voice call termination on 2G networks

1.6 Ofcom has conducted an analysis of the costs of terminating calls on 2G networks and has updated the LRIC model used to determine the level of the charge control imposed in June 2004. The model has been updated to reflect changes to a number of factors including demand, equipment costs and cost of capital. Ofcom has also modelled a range of different assumptions in order to scope the likely impact of traffic migrations from 2G to 3G on the costs of voice call termination, as 3G phones start to become more widely used.

1.7 Ofcom proposes that during the Charging Period 1 April 2006 to 31 March 2007, the Target Average Charge, which MNOs shall not exceed, for Interconnection of a Mobile to Mobile call and for Interconnection of a Fixed to Mobile call on a 2G network, shall continue to be 5.63 ppm for Vodafone and O2 and 6.31 ppm for Orange and T-Mobile, subject to changes in time of day weights. The Average Interconnection Charges shall be calculated in accordance with conditions MC3 and MC4 of the conditions imposed on Vodafone and O2 and conditions MD3 and MD4 of the conditions imposed on Orange and T-Mobile in the June 2004 Statement as modified. In all cases these conditions will continue to be modified by the Consents granted by Ofcom on 1 September 2004 (see Wholesale Mobile Voice Call Termination charge controls – request for consent Explanatory Statement published by Ofcom on 1 September 2004).

Questions being asked in this consultation document

1.8 Ofcom is asking stakeholders to respond to the following questions

Question 1 Do you agree that there continue to be separate markets for wholesale voice call termination on each MNO’s network (or, where the MNO operates both 2G and 3G networks, across both networks) and that the geographic extent of each market matches the scope of each mobile termination provider’s network(s)?
Question 2. Do you agree that each of the 2G MNOs continues to have SMP?
Question 3. Do you agree that Ofcom should extend the existing charge control on 2G voice call termination by one year?
Question 4. Do you agree that the Target Average Charges should remain unchanged?

Next steps

1.9 When Ofcom has considered representations made within the period to 30 August 2005, including any made by the European Commission and other National Regulatory Authorities (“NRAs”), it may give effect to its proposals, with or without modifications. Ofcom will do this by publishing a further Notification accompanied by a final Explanatory Statement.

1.10 The June 2004 Statement envisaged that there would be another market review of the services covered by this review in 18-24 months and, therefore, the analysis in the June 2004 Statement looked forward over that time period. Ofcom is publishing, simultaneously with this document, a preliminary consultation on the future regulation of mobile voice call termination. Responses to that consultation exercise will inform Ofcom’s approach to a full market review which Ofcom expects to conclude before the new charge controls, which are being proposed in the present document, expire in 2007.

The full document can be found below

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