Dispute relating to BT’s charges for WES

27 February 2013

Dispute between: (i) Verizon UK Limited (“Verizon”) and (ii) British Telecommunications plc (“BT”).
Case opened: 15 March 2012
Case closed: 20 December 2012
Issue: Ofcom was asked to resolve this dispute concerning the level of BT’s charges for Wholesale Extension Services (“WES”) under section 185(1A) of the Communications Act 2003 (“the Act”).
Relevant instrument: Ofcom resolved this dispute using its powers under Chapter 3 of Part 2 of the Act.

Update note: 27 February 2013

Three appeals against Ofcom’s determinations to resolve this dispute and the related disputes between each of British Sky Broadcasting Limited, TalkTalk Telecom Group plc and Virgin Media Limited and BT (CW/01052/08/10) and between Cable & Wireless Worldwide plc group and BT (CW/01078/11/11) have been filed with the Competition Appeal Tribunal (“CAT”). Details of the appeals can be found on the CAT’s website at http://www.catribunal.org.uk/

End of update note

On 20 December 2012, Ofcom issued its final determinations of this dispute and of the related disputes between each of British Sky Broadcasting, TalkTalk Group plc and Virgin Media Limited (“the Parties”) and BT (CW/01052/08/10) and between Cable & Wireless Worldwide plc group (“CWW”) and BT (CW/01078/11/11) to the parties in dispute.
We have concluded that BT has overcharged Verizon, the Parties and CWW a total of £94,823,000 for certain wholesale Ethernet services and that BT is required to make repayments to Verizon, the Parties and CWW for the full amounts by which it has overcharged them.

We have published a non-confidential version of our final determinations (see related items).

Update note: 13 July 2012

On 19 – 21 June 2012, the Court of Appeal heard the appeal brought by BT against the Competition Appeal Tribunal’s judgment in British Telecommunications plc v Office of Communications (Partial Private Circuits) ([2011] CAT 5) (the “PPCs appeal”). In light of our provisional conclusions in relation to this dispute and the comments received from the parties to the dispute, as well as the nature of the arguments put to the Court of Appeal by the parties to the PPCs appeal, we believe that the Court of Appeal’s judgment is likely to be relevant to the issues raised in this dispute.

Accordingly, we consider that it is appropriate not to issue our final determination of this dispute until after the Court of Appeal hands down judgment and we have had an opportunity to consider the implications of the judgment for the matters in dispute in this case.

Ofcom will therefore not make a final determination of the dispute between Verizon and BT within four months of the day on which we decided that it was appropriate for us to handle the dispute, which was 15 March 2012. We consider that exceptional circumstances exist for the purposes of section 188(5) of the Communications Act 2003, for the reasons set out above.

We will continue to consider the matters in dispute as appropriate, so that we can resolve the dispute as soon as possible following the Court of Appeal’s judgment.

End of update note

Update note: 5 April 2012

On 4 April 2012, Ofcom issued its provisional conclusions concerning this dispute to BT and Verizon (please see related item).
The period for comments on the provisional conclusions will close at 5 pm on 23 April 2012.
Please send responses to:
Francesco Savino
Ofcom
Riverside House
2A Southwark Bridge Road
London
SE1 9HA

Or by e-mail to francesco.savino@ofcom.org.uk

End of update note

This dispute concerns the charges set by BT for WES/WEES provided to Verizon by BT between 1 April 2006 and 31 March 2011.  

Verizon alleges that the charges levied by BT between 1 April 2006 and 31 March 2011 were too high and were not cost orientated. Verizon claims that, as a result, it has overpaid BT for these services and that BT should reimburse the amounts overcharged.

WES/WEES are high speed point-to-point data circuits that use Ethernet transmission.

WES provide dedicated symmetric transmission at a range of bandwidths between a third party customer’s premises and a communications provider’s network node. WEES (Wholesale End to End Services or Wholesale End to end Extension Services) are an end user to end user version of WES.

Ofcom considers that on the face of the dispute submission, there appears to be a dispute between Verizon and BT that commercial negotiations have failed to resolve.

Ofcom considers that the dispute meets the relevant statutory criteria and it is appropriate for Ofcom to handle it according to section 186 of the Act, and accordingly, Ofcom has accepted the dispute 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:

After consideration of the submissions received from Verizon and BT, the scope of the dispute is to determine:
Whether, from 1 April 2006 to 31 March 2011:

  • BT overcharged Verizon for the following rental charges:
    • WES/WEES10  
    • WES/WEES100
    • WES/WEES1000  
  • by how much Verizon was overcharged for those services; and
  • whether, and by how much, BT should reimburse Verizon in relation to the overcharge.

Procedural matters:

In line with Ofcom’s Guidance on the resolution of disputes published in June 2011, Ofcom is not consulting on the scope of this dispute. Ofcom’s guidelines can be found at: Ofcom's Guidelines for the handling of regulatory disputes

Stakeholders interested in the outcome of this dispute should notify Ofcom by 30 March 2012, 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 30 March 2012.

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/01087/02/12