Complaint from Gamma Telecom Limited against BT Wholesale about reduced rates for Wholesale Calls from 1 December 2004

20 June 2005

Complainant: Gamma Telecom Limited
Complaint against: BT Wholesale
Case opened: 14 December 2004
Case closed: 13 June 2005
Issue: Whether BT's changes to its wholesale call rates introduced on 1 December 2004 constitute anti-competitive behaviour
Relevant instrument: Chapter II of the Competition Act 1998 (abuse of a dominant position) and Article 82 of the EC Treaty

Update note – 20 June 2005

A non-confidential version of the decision has been prepared and is available at the link below.

End of update note

Ofcom has concluded that British Telecommunications Group plc (BT) has not infringed Section 18 (the Chapter II prohibition) of the Competition Act 1998 (the Act) or Article 82 of the EC Treaty (Article 82) in relation to revised pricing, effective from 1 December 2004, of BT's Wholesale Calls Product (BT's revised wholesale call tariff structure).

Ofcom's decision is made following an investigation which was opened because of a complaint from Gamma Telecom Limited (Gamma) that BT's revised wholesale call tariff structure represents an anti-competitive margin squeeze.

The decision sets out in detail Ofcom's finding that under a range of assumptions and scenarios, there is no margin squeeze in respect of BT's revised wholesale call tariff structure and, therefore, there are no grounds for action.

A non-confidential version of the decision is currently being prepared and will be published shortly.

Case Leader: Kath Dinsdale (e-mail: Katherine.Dinsdale@ofcom.org.uk)
Case Reference: CW/00802/11/04

Text published when the case was opened

Complaint from Gamma Telecom Limited against BT Wholesale about reduced rates for Wholesale Calls from 1 December 2004

Complainant: Gamma Telecom Limited ("Gamma")
Complaint against: BT Wholesale ("BT")
Case opened: 14 December 2004
Issue: Whether BT's changes to its wholesale call rates introduced on 1 December 2004 constitute anti-competitive behaviour.
Relevant instrument: Chapter II of the Competition Act 1998 (abuse of a dominant position) and Article 82 of the EC Treaty .

Update note – 22 April 2005

As part of its complaint Gamma requested that Ofcom grant interim measures under the Competition Act.

Ofcom has now reviewed the case for interim measures based on the evidence currently available to it and has decided not to grant interim measures at this time.

Ofcom's wider investigation remains open while it considers the issues in full in order to reach its final conclusions.

End of update note

Ofcom intends to investigate whether BT's revised wholesale calls tariff represents an anti-competitive margin squeeze and/or is structured in such a way as to foreclose competition in the markets for the provision of wholesale end-to-end voice calls to resellers.

On 8 October 2004 BT announced that it would be reducing the prices for wholesale local, national, fixed to mobile and fixed international direct dialing call products. Reduced prices would apply to both undiscounted rates and the discounted rates offered under the Wholesale Call Commitment Package ("BT's revised wholesale call tariff structure").

BT's announcement indicated that price reductions of up to 46.8% would be made under a tiered discount scheme.

Ofcom has received a complaint from Gamma alleging that BT's revised wholesale call tariff structure represents an anti-competitive margin squeeze and as such constitutes an abuse of BT's dominant position under UK and EC competition law.

Gamma has stated that it will be unable to compete effectively with BT in the provision of wholesale calls to Carrier Pre-Select Operator resellers as a result of the introduction of BT's revised wholesale call tariff structure and the regulated wholesale price that it must pay BT for call conveyance. Further, Gamma has also alleged that the effect of BT restructuring its wholesale call tariff structure will be to foreclose the market(s) for the provision of wholesale end-to-end voice calls to resellers.

As set out in section 25 of the Competition Act 1998, Ofcom may conduct an investigation if there are reasonable grounds for suspecting that the Chapter II prohibition has been infringed. In addition to the Chapter II prohibition, Ofcom also has the power to apply Article 82 of the EC Treaty in full.

In the light of Oftel's review of the fixed narrowband wholesale exchange line, call origination, conveyance and transit market dated 28 November 2003 review (http://www.ofcom.org.uk/legacy_regulators/oftel/narrowband_mkt_rvw/nwe/?a=87101), Ofcom has reasonable grounds to suspect that BT is dominant in the upstream market(s) for wholesale call origination, conveyance and call termination.

Gamma has requested that Ofcom applies interim measures and, inter alia, orders an immediate reversal of BT's price reduction. Ofcom intends to consider the merits of this request as a matter of priority during the investigation.

Case Leader: Kath Dinsdale ( e-mail:Katherine.Dinsdale@ofcom.org.uk)
Case Reference: CW/00802/11/04

The full document is available below