Dispute referred by Level 3 about BT’s historic PPC charges

16 July 2014

Dispute between: Level 3 Communications UK Limited (“Level 3”) and British Telecommunications plc (“BT”) concerning BT’s charges for partial private circuits.
Case opened: 17 January 2014
Case closed: 16 May 2014
Issue: Ofcom was asked to resolve this dispute under section 185 of the Communications Act 2003 (“the Act”) concerning whether BT overcharged Level 3 by failing to ensure that the charges paid to BT by Level 3 for certain partial private circuits (“PPCs”) services were compliant with SMP Condition G3.1.
Relevant instrument: Ofcom resolved this dispute using its powers under Chapter 3 of Part 2 of the Act.

Update note – 16 July 2014

Ofcom has identified an error in the calculation of the repayment due to Level 3 by BT. We have therefore corrected that error and provided the Parties with a revised Final Determination reflecting the correction. We have updated the published version of the Final Determination accordingly. Changes have been made to paragraphs 6.32, 6.35, 6.36 and 6.38 and to Table 6.5.

End of update note

On 16 May, Ofcom issued its final determination resolving this dispute. A non-confidential version of the determination, published on 19 May 2014, is available under related items.

Update note – 25 March 2014

On 25 March, Ofcom published its provisional conclusions regarding this dispute (please see related item).
The period for comments on the consultation will close at 5 pm on 8 April 2014.

Please send responses to:

Costas Pittas
Riverside House
2A Southwark Bridge Road

Or by e-mail to costas.pittas@ofcom.org.uk

End of update note

This dispute concerns allegations by Level 3 that BT overcharged it by failing to ensure that the following charges for PPCs were cost orientated in the periods specified:

  • Charges for 2Mbit/s local end services between 1 October 2009 and 30 September 2010; and
  • Point of Handover additional charges between 1 April 2010 and 30 September 2011.

PPCs are interconnection products that are purchased by communications providers and combined with their own networks to provide leased lines to business customers.

Ofcom recognises that on the face of the referral, there appears to be a dispute between the parties that commercial negotiations have failed to resolve. In resolving disputes, Ofcom must act in a manner which is consistent with both Ofcom’s general duties under section 3 of the Act, and pursuant to section 4(1)(c) of the Act, the six Community requirements set out in section 4 of the Act which give effect, amongst other things, 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.

Ofcom considers that there is a dispute between the parties within the meaning of section 185(1A) of the Act. 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.

Scope of the dispute:

After consideration of the submissions received from Level 3 and BT, the scope of the dispute is to determine:

1) Whether BT overcharged Level 3 by failing to ensure that the following charges paid to BT by Level 3 were compliant with SMP Condition G3.1 in the periods identified:

  • Charges for 2Mbit/s Local End services between 1 October 2009 and 30 September 2010; and
  • Point of Handover additional charges between 1 April 2010 and 30 September 2011.

SMP Condition G3.1 requires that BT secure and be able to demonstrate to the satisfaction of Ofcom, that each and every charge offered, payable or proposed for Network Access covered by Condition G1 is reasonably derived from the costs of provision based on a forward looking long run incremental cost approach and allowing an appropriate mark up for the recovery of common costs including an appropriate return on capital employed.

2) If BT overcharged Level 3 for either of the charges described in 1a) and 1b), whether and how much BT should pay Level 3 by way of adjustment.

Procedural matters:

In line with Ofcom’s Guidelines 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 13 February 2014, 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 13 February 2014.

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

Case Leader: Costas Pittas (e-mail: costas.pittas@ofcom.org.uk)
Case Reference: CW/01118/12/13