 Contents
Summary
Draft
Determination
Chapter
one – Explanatory memorandum
Chapter
two – Consultation
Annex
A – Condition 70A of Vodafone’s Licence
Summary
S1. This document
contains a draft determination relating to the rollover of the control
of interconnection charges under Condition 70A of the licence of Vodafone
Limited (‘Vodafone’).
S2 The effect of
the determination is that the provisions in Conditions 70A.2 and 70A.3
of the Licence shall have effect.
Draft
Determination
DRAFT DETERMINATION
RELATING TO THE ROLLOVER OF THE CONTROL OF INTERCONNECTION CHARGES UNDER
CONDITION 70A OF THE LICENCE OF VODAFONE LIMITED (‘VODAFONE’)
WHEREAS:
(A) the Secretary
of State for Trade and Industry (the ‘Secretary of State’) granted to
Vodafone on 9th December 1993 a licence (the ‘Licence’) under
section 7 of the Telecommunications Act 1984 (the ‘Act’) for the running
of the telecommunications systems specified in Annex A to the Licence;
(B) Part K of Schedule
1 to the Licence contains a condition, Condition 70, which imposes a
control on Vodafone’s interconnection charges. The period of that control
is due to expire on 31 March 2002;
(C) on 5 September
2001 the Director General of Telecommunications (the ‘Director’), in
exercise of the powers conferred on him by section 12 of the Act, modified
the conditions in Part K of Schedule 1 to the Licence by inserting Condition
70A, which is annexed to this determination;
(D) Condition 70A
enables the Director to make a determination that any or all of the
provisions in Conditions 70A.2 and 70A.3 shall take effect, in order
to extend the period of control provided for in Condition 70 to 31 March
2003;
(E) the Director
may make the determination referred to in paragraph D above if the conditions
in Condition 70A.1 (a) to (c) are satisfied by 31 January 2002. Those
conditions have been satisfied before 31 January 2002 in
that:
(i) the
Director gave notice on 12 October 2001 in accordance with the requirements
of sections 12(2) and (3) of the Act that he proposed to replace Condition
70 in the Licence and considered representations or objections made
following that proposal;
(ii) Vodafone objected to the proposed modification in whole under section
12(4B) of the Act on 12 November 2001; and
(iii) On 7
January 2002 the Director made a reference to the Competition Commission
under Section 13 of the Act in relation to the proposed replacement
of Condition 70 in the Licence;
(F) in making this
determination, the Director has taken into account representations and
observations received as part of the consultation process, and the matters
described in the Explanatory Memorandum attached; and
NOW, THEREFORE,
THE DIRECTOR GENERAL, PURSUANT TO CONDITION 70A OF THE LICENCE, HEREBY
DETERMINES THAT:
the provisions in
Conditions 70A.2 and 70A.3 of the Licence shall have effect.
DAVID ALBERT
EDMONDS
DIRECTOR GENERAL
OF TELECOMMUNICATIONS
…. FEBRUARY 2002
Chapter
one – Explanatory memorandum
1.1 Part K of Schedule
1 to Vodafone’s Licence contains a condition, Condition 70, which imposes
a control on Vodafone’s interconnection charges. That control on the
charges Vodafone makes to other operators for terminating calls on its
network was set at a level of RPI-9%. The control is due to expire on
31 March 2002. In order to give himself the power to extend that control,
on 5 September 2001, the Director, in exercise of his powers under section
12 of the Act, modified Vodafone’s licence by inserting Condition 70A
in Part K of Schedule 1 to the licence. No representations or objections
had been made in respect of the proposed Condition 70A. A copy of Condition
70A is annexed to this document.
1.2 The effect of
that modification was to give power to the Director, if the conditions
in Condition 70A.1 (a) to (c) were satisfied by 31 January 2002, to
determine that any or all of the provisions in Condition 70A.2 and 70A.3
should take effect. Conditions 70A.2 and 70A.3 provide for the insertion
of wording into Condition 70.1 of Vodafone’s Licence which would extend
the period of control provided for in that Condition until 31 March
2003. The conditions in Condition 70A.1 (a) to (c) have now been satisfied,
in advance of 31 January 2002, in that:
(i) the Director
gave notice on 12 October 2001 that he proposed to replace Condition
70 in the Licence and considered representations or objections made
following that proposal;
(ii) Vodafone objected
to the proposed modification under section 12 (4B) of the Act on 12
November 2001; and
(iii) on 7 January
2002 the Director made a reference to the Competition Commission under
Section 13 of the Act in relation to the proposed replacement of Condition
70 in the Licence.
1.3 The Director
proposed to replace Condition 70 in Vodafone’s licence (and the licence
of BT Cellnet Limited - see note 1 below) following
a review of competition in the market for mobile call termination (Oftel’s
Statement Review of the Charge Control on
Calls to Mobiles, September 2001). As a result of that review,
the Director concluded that competitive pressures do not currently exert
sufficient constraints on the termination charges of any of the four
mobile operators (ie Vodafone, BT Cellnet, Orange and One2One), nor
are they likely to do so in the near future. The proposed new Condition
70 provided for a new period of control on the charges Vodafone makes
to other operators for terminating calls on their networks at a level
of RPI – 12%. Vodafone objected to the proposed new Condition 70 on
12 November 2001. The Director was therefore precluded from replacing
Condition 70, as the requirements of section 12(4B) of the Act were
not fulfilled.
1.4 On 7 January
2002 the Director therefore made a reference to the Competition Commission
under Section 13 of the Act on the question whether Vodafone’s termination
charges for voice calls, in the absence of a charge control, operate
against the public interest and if so, whether those effects adverse
to the public interest may be remedied by means of a licence modification.
The Director has proposed that those effects may be remedied by a licence
modification, a replacement to Condition 70, annexed to the reference,
which is similar to the replacement Condition 70 proposed by the Director
on 12 October 2001. The Competition Commission has a period of up to
six months, which may be extended to up to a year, to investigate and
report on the questions contained in that reference. Once the Competition
Commission has reported on those questions in accordance with section
14 of the Act, and assuming the Competition Commission concludes that
the matters specified in the reference operate against the public interest
and that those effects can be remedied by a modification to Vodafone’s
licence, in particular the replacement Condition 70 proposed by the
Director, then the Director has the power under section 15 to make a
modification to Vodafone’s licence for the purpose of remedying the
adverse effects identified in the Competition Commission’s report.
1.5 As the current
control contained in Condition 70 of Vodafone’s licence will expire
on 31 March 2002, in all probability before the Competition Commission
has completed its investigation referred to in paragraph four above,
and the conditions in Condition 70A.1 have now been fulfilled, in advance
of the specified deadline of 31 January 2002, the Director now has the
power and proposes to make a determination that the provisions of Condition
70A.2 and 70A.3 shall have effect.
1.6 The Director
now proposes to make the determination so that the existing controls
on Vodafone’s termination charges will be maintained, in order to protect
consumers, pending the outcome of the Competition Commission investigation.
A similar determination is being proposed simultaneously in respect
of BT Cellnet Limited.
Note:
1. The
Director also proposed a new charge control in the licences of the operators
Orange and One2One, who had not previously had charge control conditions
in their licences.
Chapter
two – Consultation
2.1 The draft determination
relating to control of Vodafone’s Interconnection Charges under Condition
70A of Vodafone’s licence is being made available in this document to
Vodafone, and published on Oftel’s website, together with the Director’s
reasons, so that Vodafone and any interested parties may have a reasonable
opportunity to make representations. Having considered any such representations,
the Director will, if appropriate, make the determination and will notify
Vodafone and interested parties of that determination and his reasons
for making it. Any comments or representations to the proposed determination
should be made to:
Selena Bevis
Oftel
50 Ludgate
Hill
London
EC4M 7JJ
tel: 020 7634 8844
e-mail:
selena.bevis@oftel.gov.uk
no later than 7
February 2002. Any confidential information should be clearly marked
as such and separated out into a confidential annex. All representations
received by Oftel, with the exception of material marked confidential,
will be published on Oftel’s website and made available for inspection
in Oftel's Research and Information Unit.
2.2 Oftel does not
plan on this occasion to allow a further period during which observations
may be made on the representations made by others. Nevertheless, in
the interests of transparency, all non-confidential representations
will be published.
2.3 Representations
will be accessible via a link created on the title page of the electronic
text of this document. This can be found in the Publications section
of Oftel’s website. Paper copies of representations will also be made
publicly available in Oftel’s Research and Information Unit. Appointments
to view written comments in this way, which must be made in advance,
may be arranged by phoning: 020 7634 8761 (fax: 020 7634 8946).
Annex
A – Condition 70A of Vodafone’s Licence
CONDITION
70A
ROLLOVER
OF CONTROL OF INTERCONNECTION CHARGES
70A.1 If
by 31 January 2002:
(a)
the Director, having given notice and considered representations or
objections in accordance with the requirements of Section 12(2) and
(3) of the Act, has submitted to the Licensee proposals for Condition
70 of this Licence to be replaced or modified; and
(b)
the Licensee has objected to those proposals in whole or in part under
Section 12(4B) of the Act; and
(c)
the Director has made a reference to the Competition Commission under
Section 13 of the Act in relation to any part of the proposals (including
the whole) to which the Licensee has objected as referred to in paragraph
(b) above, but in relation to no other matter,
the Director may
determine that, in order to extend the period of control provided for
in that Condition, any or all of the provisions in Conditions 70A.2
and 70A.3 below shall take effect.
70A.2 In Condition
70.1 of this Licence, the following text of a new paragraph (d) shall
be inserted after paragraph (c):
"(d) during
the Year 2002-2003, the amount in pence per minute that is the product
of the amount calculated in accordance with 70.1(c) above multiplied
by the sum of 100% and the Controlling Percentage (deducting that Percentage
if it is negative)."
70A.3 In Condition
70.4 of this Licence, the following text of a new paragraph (c) shall
be inserted after paragraph (b):
"(c) If
it appears to the Director that the Licensee is likely to fail to secure
that the Average Interconnection Charge for the Year 2002-2003 does
not exceed the level specified in 70.1(d) above, the Licensee shall
make such adjustments to the Interconnection Charge in that Year as
the Director, after consultation with the Licensee, considers appropriate
for the purpose of avoiding that failure, and so directs the Licensee."
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