Dispute referred by Energis against BT about retrospective application of reduced WLR ISDN2 charge (Updated)

10 November 2004

Complainant : Energis
Complaint against: BT
Case opened: 10 November 2004
Case closed: 9 March 2005
Relevant instrument: Ofcom resolved this dispute under Chapter 3 of Part 2 of the Communications Act 2003. In resoving this dispute, Ofcom referred to the Notification, and Schedule 1 thereto, pursuant to sections 48(1) and 79 of the Communications Act 2003, as set out in Annex A to Oftel's market review document entitled "Review of the fixed narrowband wholesale exchange line, call origination, conveyance and transit markets, identification and analysis of markets, determination of market power and the setting of SMP conditions - Final Explanatory Statement and Notification" (the "Market Review").

On 9 March 2005 Ofcom issued a Determination under Sections 188 and 190 of the Communications Act 2003 resolving this dispute.

Please see related items.

Case Leader : Kath Dinsdale (e-mail: Katherine.Dinsdale@ofcom.org.uk)
Case Reference: CW/00797/10/04

Text published when the case was opened

Complainant: Energis

Complaint against: BT

Case opened: 10 November 2004

Relevant instrument: Ofcom intends to resolve the dispute under Chapter 3 of Part 2 of the Communications Act 2003. In resoving this dispute, Ofcom will refer to the Notification, and Schedule 1 thereto, pursuant to sections 48(1) and 79 of the Communications Act 2003, as set out in Annex A to Oftel's market review document entitled "Review of the fixed narrowband wholesale exchange line, call origination, conveyance and transit markets, identification and analysis of markets, determination of market power and the setting of SMP conditions - Final Explanatory Statement and Notification" (the "Market Review").

Update note – 2 February 2005

Ofcom published its proposals to resolve this dispute on 2 February 2005 . Please see the related item.

Ofcom will be consulting on its proposals until 5pm on 15 February 2005. Please send responses to:

Katherine Dinsdale
Competition and Markets
Ofcom
Riverside House
2a Southwark Bridge Road
London
SE1 9HA

or by email to Katherine.Dinsdale@ofcom.org.uk

End of update note

Issue:
Energis has submitted a dispute relating to BT's charges for the provision of Wholesale Business ISDN2 Line Rental between the period 28 November 2003 to 1 October 2004. Energis considers that BT's charges for Wholesale Business ISDN2 Line Rental charges were not cost-oriented between 28 November 2003 and 1 October 2004, and requests that BT be required to charge £55 for Wholesale Business ISDN2 Line Rental during that period.

Background:
On 28 November 2003, the Director General of Telecommunications (the "Director") published his findings in the Market Review. The Director concluded that BT has Significant Market Power ("SMP") in inter alia the wholesale business ISDN2 exchange line services market.

As a result of this SMP finding, the Director imposed certain SMP services conditions upon BT including a requirement that its charges for the provision of Wholesale Business ISDN2 Line Rental shall be based on the forward looking long-run incremental costs of providing such services.

On 19 December 2003, Oftel commenced an own-initiative investigation into BT's Wholesale Business ISDN2 Line Rental charge.

On 17 June 2004, BT announced that it was reducing its Wholesale Business ISDN2 Line Rental charge from £71.88 per quarter to £55.00 per quarter with effect from 1 October 2004. As a result, Ofcom closed its investigation into this matter (see footnote 1).

On 9 September 2004 and 20 September 2004, Energis wrote to BT claiming reimbursement for the alleged overcharge made by BT to Energis for Wholesale Business ISDN2 Line Rental between 28 November 2003 and 1 October 2004. BT responded to Energis on both occasions stating that it did not accept Energis' claim for reimbursement.

In referring this dispute, Energis stated that BT has an obligation to charge no more than £55 per quarter for Wholesale Business ISDN2 Line Rental. Energis also stated that the issue of whether the charge should be below £55 goes beyond the scope of the dispute. BT has stated that its charge for WLR Business ISDN2 Line Rental has at all times been in compliance with its SMP obligations. Therefore the parties agree that the issue of whether the charge should be below £55 is not in dispute.

Scope:
Ofcom recognises that on the facts of the matter referred to its attention, there appears to be a genuine dispute between the parties that commercial negotiation has failed to resolve and where there is an imbalance of market power between the two parties. Therefore Ofcom intends to make a direction, subject to consultation, concerning the steps that the parties should take to bring resolution to this issue.

Given that the parties are not in dispute on whether the current charge of £55 is based on the forward looking long-run incremental costs of providing Wholesale Business ISDN2 Line Rental, the scope of this dispute is to determine:

  • whether the charge of £71.88 that was in force between 28 November 2003 and 1 October 2004 is based on the forward looking long-run incremental costs of providing Wholesale Business ISDN2 Line Rental; and if not
  • whether BT should be required to remedy any over-recovery.

Procedural matters:
Guidance on the resolution of the dispute 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. Please see related items.

All representations on the scope of the dispute should be submitted to Ofcom by 17 November 2004.

Stakeholders interested in the outcome of this investigation should notify Ofcom by 17 November 2004, describing the relevance of the outcome of the dispute to their business.

Stakeholders with relevant information and evidence in respect of this dispute should submit this to Ofcom by 1 December 2004.

Case Leader: Kath Dinsdale (e-mail: Katherine.Dinsdale@ofcom.org.uk)
Case Reference: CW/00797/10/04

1. See Competition Bulletin entry