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Summary

The regulatory framework and market reviews

1.1 The regulatory framework for electronic communications networks and services entered into force in the United Kingdom (“UK”) on 25 July 2003. The basis for the framework is five European Union (“EU”) Communications Directives that are designed to create harmonised regulation across Europe.

1.2 The 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.

1.3 The Office of Communications (“Ofcom”), the UK NRA, published its Review of wholesale international services markets on 9 March 2006 (the “March 2006 Consultation”)^(-1-). This national consultation invited comments from UK stakeholders, over a 10 week period, on proposals for market identification, assessment of competition in the relevant markets and market power determinations.

1.4 At the same time, and pursuant to the European Commission’s (the “Commission’s”) Recommendation of 23 July 2003 on notifications, time limits and consultations provided for in Article 7 of the Framework Directive^(-2-), Ofcom sent the Commission a summary notification form of its draft proposals. This, together with the March 2006 Consultation document, invited representations from the Commission and other NRAs^(-3-) in parallel with the national consultation.

1.5 Ofcom received three responses to its national consultation. Non-confidential comments have been published on Ofcom’s website^(-4-). A summary of the responses is at Annex 1.

1.6 Ofcom received confirmation from the Commission, in a letter dated 17 May 2006, that it had examined the notification and has no comments. Moreover, and pursuant to Article 7(5) of the Framework Directive, the Commission confirmed that “…Ofcom may adopt the resulting draft measure and, where it does so, shall communicate it to the Commission”. No responses were received from other NRAs.

Summary of final decision

1.7 Having considered all responses to the March 2006 Consultation, Ofcom’s final decision is summarised below.

Identification of markets

1.8 The markets in this review relate to wholesale international services which are services sold and purchased by communications providers rather than end users. These services involve the conveyance of traffic to network termination points that are outside the UK. Ofcom has identified 235 economic markets on a route-by-route basis consistent with both the Commission’s market analysis guidelines^(-5-) (the “Commission’s Guidelines”) and that taken previously by the former regulatory authority, the Office of Telecommunications (“Oftel”), in its statement called Wholesale international services markets (the “November 2003 Statement”) dated 18 November 2003.^(-6-)

1.9 The routes referred to above represent unique “country-pairs”, for which international traffic is carried where the UK is at the beginning of the route and the destination country is the other, e.g. UK to France, UK to United States etc. For these purposes a destination country may include cities or territories, which are not as such countries, or which are satellite services, but which have their own wholesale international services markets. A complete list of all 235 markets is at Schedule 1 of the notification of revocation at Annex 2.

Assessment of market power

1.10 Ofcom has determined, in accordance with the Commission’s Guidelines, that there are no persons with significant market power (“SMP”) in any of the 235 wholesale international services markets.

Revocation of SMP conditions

1.11 Section 84(4) of the Communications Act 2003 (the “Act”) provides that where on, or in consequence of, a further analysis Ofcom determines that a person to whom SMP conditions apply is no longer a person with SMP in that market, they must revoke every SMP services condition applied to that person by reference to the market power determination made on the basis of an earlier analysis.

1.12 Ofcom has therefore decided to revoke conditions KA1, KA2, KA3 and KA4 previously imposed on British Telecommunications plc (“BT”) and set out in Schedule 3 of the Director General of Telecommunications’ (the “Director’s”) notification pursuant to Section 48(1) and Section 79 of the Act of 18 November 2003. Ofcom has also decided to modify the SMP services conditions on BT relating to regulatory accounting in respect of various markets notified to BT on 22 July 2004 such that the wholesale international conveyance markets numbered 11 in Part 1 of Schedule 1 to that notification to which the conditions apply shall be revoked.

1.13 Ofcom has also decided to revoke conditions KB1, KB2, KB3 and KB4 previously imposed on Cable & Wireless plc (“C&W) and set out in Schedule 4 of the above mentioned Director’s notification of 18 November 2003.

1.14 The formal notification of revocation which Ofcom now gives effect to is at Annex 2.

Footnotes:

1.- Ofcom’s review of wholesale international services markets dated 9 March 2006 is at http://www.ofcom.org.uk/consult/condocs/wsidd/

2.-Commission Recommendation of 23 July 2003 on notifications, time limits and consultations provided for in Article 7 of Directive 2002/21/EC of the European Parliament and of the Council on a common regulatory framework for electronic communications networks and services is at http://europa.eu.int/information_society/topics/telecoms/news/documents/recommendation_art7/Rec%20EN.PDF

3.-Ofcom’s notifications are published on the Commission’s website at http://forum.europa.eu.int/Public/irc/infso/ecctf/library?l=/uk/registeredsnotifications/uk20060354&vm=detailed&sb=Title

4.-Responses to Ofcom’s review of wholesale international services markets are published at http://www.ofcom.org.uk/consult/condocs/wsidd/responses/

5.-Commission guidelines on market analysis and the assessment of significant market power under the Community regulatory framework for electronic communications networks and services (2002/C165/03) is at http://europa.eu/eur-lex/pri/en/oj/dat/2002/c_165/c_16520020711en00060031.pdf

6.-Oftel’s final explanatory statement and notification on wholesale international services markets dated 18 November 2003 is at http://www.ofcom.org.uk/static/archive/oftel/publications/eu_directives/2003/wis1103.pdf

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