Dispute between O2 and each of Vodafone and H3G about wholesale mobile voice call termination charges in October 2010

06 October 2011

Dispute between: Telefnica O2 UK Limited (O2) and each of Vodafone Ltd (Vodafone) and H3G UK Ltd (H3G)
Case opened: 16 May 2011
Case closed: 14 September 2011
Issue: O2 asked Ofcom to resolve a dispute under section 185 of the Communications Act 2003 (the Act) between O2 and each of Vodafone and H3G concerning the wholesale mobile voice call termination charges payable by O2 in October 2010 to each of Vodafone and H3G for calls that originated on O2s network and terminated on Vodafone and H3Gs respective networks.
Relevant instrument: Ofcom resolved this dispute using its powers under Chapter 3 of Part 2 of the Act.

On 14 September 2011, Ofcom issued a final determination under sections 188 and 190 of the Act resolving this dispute. A non-confidential version of the determination is available under related items.

Update note 5 August 2011

On 4 August 2011, Ofcom issued a draft determination to the parties in relation to this dispute (please see related item). Ofcom will be consulting on its proposals until 5 pm on 19 August 2011.
Please submit responses by this date to:

Paul Dean
Ofcom
Riverside House
2A Southwark Bridge Road
London SE1 9HA
Or by e-mail to paul.dean@ofcom.org.uk

End of update note

This dispute concerns the charges for wholesale mobile voice call termination charged by each of Vodafone and H3G to O2 in respect of calls originating on O2s network and terminating on the networks of Vodafone and H3G in October 2010. Each of Vodafone and H3G amended their respective price lists, effective from 1 October 2010, by providing notice to O2 in writing on 26 August 2010. Each of them amended their price lists again, effective from 1 November 2010, by providing notice to O2 in writing on 29 September 2010. These are the October 2010 charges.

Vodafone and H3G (among other Communications Providers) are subject to a charge control in respect of their interconnection charges (-1-). This charge control sets limits on the average interconnection charges that Communications Providers may charge during the course of the year.

O2 considers that the October 2010 charges were example of flip flopping. O2 describes flip flopping as the practice of changing wholesale voice call termination charges on a monthly basis, and dramatically increasing the weekend charges in certain of those months.

O2 has proposed that Ofcom should declare that it was not fair and reasonable for each of Vodafone and H3G to levy the October 2010 charges and require repayment of the difference between (i) the October 2010 charges and (ii) either the rates which applied in September 2010 or the target average interconnection charges set by the charge control.

On the face of the referral it appears that there is a dispute between O2 and each of Vodafone and H3G that commercial negotiations have failed to resolve and that meets the relevant statutory criteria. It is appropriate for Ofcom to handle the dispute according to section 186 of the Act and Ofcom has therefore accepted it for resolution.

In resolving disputes Ofcom must act in accordance with the six Community requirements that give effect to Article 8 of the Framework Directive. In summary, those requirements are:

  • to promote competition in communications markets;
  • to secure that Ofcom contributes to development of the European internal market;
  • to promote the interests of all European Union citizens;
  • to act in a manner which, so far as practicable, is technology-neutral;
  • to encourage, to the extent Ofcom considers it appropriate, the provision of network access and service interoperability; and
  • to encourage such compliance with certain international standards as is necessary for facilitating service interoperability and securing freedom of choice for the customers of communications providers.

Scope of the dispute:

The scope of the dispute is to determine:

  • whether it was fair and reasonable in light of the prevailing regulatory regime for Vodafone and H3G to levy the charges which applied to the purchase of wholesale voice call termination services by O2 during the period October 2010; and
  • if not, what charges would it have been fair and reasonable for Vodafone and H3G  to have levied on O2 for the purchase of wholesale voice call termination services during the period October 2010?

Procedural matters:

Guidance on the resolution of disputes can be found in Ofcom's Guidelines for the handling of competition complaints, and complaints and disputes about breaches of conditions imposed under the EU Directives.

All representations on the scope of the dispute should be submitted to Ofcom by 5 pm on 25 May 2011.

Stakeholders interested in the outcome of this dispute should notify Ofcom by 5 pm on 25 May 2011, describing the relevance of the outcome of this dispute to their business. Stakeholders with relevant information and evidence in respect of this dispute should submit this to Ofcom by 5 pm on 10 June 2011.

Stakeholders who wish Ofcom to join them as parties to the dispute must provide evidence, as set out in Ofcom's Guidelines, that they are in dispute.

Case Leader: Paul Dean (e-mail: paul.dean@ofcom.org.uk)
Case Reference: CW/01071/04/11

Footnotes:

1.-http://stakeholders.ofcom.org.uk/binaries/consultations/mobile_call_term/statement/statement.pdf