Dispute referred by Gamma about BT’s historic charges for Interconnect Extension Circuits

23 May 2014

Dispute between: (i) Gamma Telecom Holdings Limited (“Gamma”) and (ii) British Telecommunications plc (“BT”) concerning BT's charges for Interconnect Extension Circuits (IECs).
Case opened: 27 January 2014.
Case closed: 23 May 2014
Issue: Ofcom was asked to resolve this dispute under section 185 of the Communications Act 2003 (“the Act”) concerning whether BT overcharged Gamma by failing to ensure that the charges paid to BT by Gamma for Interconnect Extension Circuits (“IECs”) were compliant with SMP Condition AAA3.
Relevant instrument: Ofcom resolved this dispute using its powers under Chapter 3 of Part 2 of the Act.

On 23 May 2014 Ofcom issued its final determination resolving this dispute. A non-confidential version of the determination 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:

Melanie Everitt
Ofcom
Riverside House
2A Southwark Bridge Road
London
SE1 9HA

Or by e-mail to melanie.everitt@ofcom.org.uk

End of update note

This dispute concerns an allegation by Gamma that BT overcharged it by failing to ensure that charges for IECs were cost orientated over the period 1 October 2009 to 30 September 2013.

IECs are circuits offered by BT to communications providers to extend interconnection to enable them to connect to equipment at a BT exchange that is different to the one to which they are physically connected.
IECs form part of a basket of Interconnect Circuits which are subject to regulation under the Network Charge Control regime.

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 Gamma and BT, the scope of the dispute is:

1) To determine whether BT overcharged Gamma by failing to ensure that charges for Interconnect Extension Circuits paid to BT by Gamma were compliant with SMP Condition AAA3 between 1 October 2009 and 30 September 2013.

SMP Condition AAA3- Basis of charges 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 AAA1(a) 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 Gamma for the charges, whether and how much BT should pay Gamma by way of adjustment.

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 17 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 17 February 2014.

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: Melanie Everitt (e-mail: Melanie.Everitt@ofcom.org.uk)
Case Reference: CW/01119/01/14