Disputes between T-Mobile and BT, O2 and BT, Hutchison 3G and BT and BT and each of Hutchison 3G, Orange Personal Communications Services and Vodafone relating to call termination rates

19 July 2007

Disputes between: (i) T-Mobile (UK) Limited (‘T-Mobile’) and British Telecommunications plc (‘BT’) (ii) O2 (UK) Limited (‘O2’) and BT (iii) Hutchison 3G Limited (‘H3G’) and BT and (iv) BT and each of H3G, Orange Personal Communications Services Ltd (‘Orange’) and Vodafone Ltd (‘Vodafone’).
Case opened: 9 February 2007
Case closed: 7 July 2007
Issue: T-Mobile asked Ofcom to resolve a dispute under Section 185 of the Communications Act 2003 (‘the Act’) between T-Mobile and BT concerning BT’s rejection of T-Mobile’s proposed call termination rates. O2 asked Ofcom to resolve a dispute under Section 185 of the Act between O2 and BT concerning BT’s rejection of O2’s proposed call termination rates. H3G asked Ofcom to resolve a dispute under Section 185 of the Act between H3G and BT concerning BT’s rejection of H3G’s proposed call termination rates. BT asked Ofcom to resolve disputes under Section 185 of the Act between BT and each of H3G, Orange and Vodafone concerning H3G, Orange and Vodafone’s rejection of BT’s proposed call termination rates.
Relevant instrument: Ofcom resolved these disputes using its powers under Chapter 3 of Part 2 of the Communications Act 2003.

Update note – 19 July 2007

Ofcom has today published updated versions of the determinations issued on 7 July 2007 to include the previously redacted rates that BT is required to pay T-Mobile, O2 and Hutchison 3G. Ofcom has also corrected a mis-statement of fact and a typographical error.

Please click on link below.

End of update note

On 7 July 2007 Ofcom issued determinations under Sections 188 and 190 of the Communications Act 2003 resolving these disputes.

Please see link below

Update note – 7 June 2007

Following receipt of responses to the draft determinations issued on 10 May 2007 in relation to these disputes it has become apparent that certain data previously supplied to Ofcom, and relied on by Ofcom in these draft determinations, is incorrect. That party has now supplied new data to Ofcom which Ofcom is considering.

In the light of this, Ofcom is of the view that exceptional circumstances have arisen since the acceptance of these disputes for resolution and that the requirement to resolve these disputes in four months, in accordance with section 188(5) of the Act, will not therefore apply in this case. Ofcom currently intends to issue determinations in respect of these disputes by 6 July.

Ofcom also notes that Orange has appealed Ofcom’s decision to open an investigation to the Competition Appeal Tribunal. Ofcom had previously indicated to the Competition Appeal Tribunal that given that there are six related but distinct disputes between various parties being considered concurrently, and having regard to the nature of those disputes and the broader issues that they raise, Ofcom could not exclude the possibility that exceptional circumstances might have required a modest extension of the period provided in section188(5) of the Act. In the event, Ofcom has extended its timetable exceptionally as a result of the difficulties arising in obtaining accurate information from one of the parties on a timely basis.

End of update note

Update note – 14 May 2007  

Ofcom issued draft determinations in relation to these disputes to the parties in dispute on 10 May 2007. Please see the related item.

Ofcom will be consulting on its proposals until 5pm on 24 May 2007. Please send responses to:

Robert MacDougall
Competition Group
Ofcom
Riverside House
2a Southwark Bridge Road
London
SE1 9HA

or by email to robert.macdougall@ofcom.org.uk

End of update note

Update note: 18 April 2007

H3G has provided evidence of having an additional dispute with BT on this matter and this dispute has now been included within the scope of this investigation. The scope has been expanded to make clear that Ofcom will also consider whether it is appropriate to require that BT make any repayments to H3G. This Competition Bulletin entry has been amended to reflect these developments.

End of update note

Update note: 26 February 2007

Following Ofcom’s consultation on the proposed scope of these disputes, this Competition Bulletin has been amended to reflect the following substantive changes:

1) O2 has provided evidence that it too is in dispute with BT on this matter and has therefore been added as a party to the disputes; and
2) The scope has been expanded to make clear that Ofcom will also consider whether it is appropriate to require that BT make any repayments to T-Mobile and O2.

End of update note

Text published when case was opened

These disputes concern the prices that BT pays T-Mobile, O2, H3G, Orange and Vodafone for terminating voice calls on their respective networks.

BT currently pays T-Mobile and O2 termination rates that reflect the unit costs of terminating calls on each of T-Mobile and O2’s second generation (‘2G’) networks. T-Mobile and O2 have each proposed two sets of higher call termination rates to BT, which, according to T-Mobile and O2, reflect the fact that an increasing proportion of calls are being terminated on their third generation (‘3G’) networks, which they state exhibit different unit costs to their 2G networks. These rates, which are known as ‘blended’ call termination rates, have been rejected by BT. T-Mobile and O2 have each referred the resulting disputes to Ofcom for resolution.

Vodafone and Orange currently charge BT blended call termination rates, which were introduced in September 2004 and August 2006 respectively. BT does not consider that it should pay these higher blended call termination rates and has now proposed lower call termination rates to Orange and Vodafone. These lower call termination rates have been rejected by Orange and Vodafone, and BT has referred the resulting disputes to Ofcom for resolution.

H3G solely operates a 3G network. BT has proposed lower call termination rates to H3G, which have been rejected by H3G on the basis that, amongst other things, they do not reflect the efficiently incurred costs of terminating calls on its network. BT has referred the resulting dispute to Ofcom for resolution.

Ofcom recognises that on the face of the referrals, there appear to be disputes between the parties that commercial negotiations have failed to resolve.

The rates charged by T-Mobile, Orange and Vodafone for terminating calls on their respective 2G networks are each subject to charge controls, which are due to expire on 31 March 2007. Ofcom has recently consulted on a proposal to set a charge control that will control the rates charged by T-Mobile, Orange , Vodafone and H3G for terminating calls on both their 2G and 3G networks (see related items).

In accordance with the end-to-end connectivity obligation imposed on BT on 13 September 2006 (see related items) BT is required to purchase wholesale narrowband call termination services on reasonable terms and conditions (including charges)

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 disputes:

The scope of the disputes is to assess the charges either proposed to BT or paid by BT for call termination in relation to each of the respective mobile operators during the periods covered by the respective disputes. Specifically, Ofcom will consider whether:

  • Prior to 13 September 2006, there is any reason why BT should not have been charged on the basis of the disputed call termination charges; and
  • With effect from 13 September 2006, the disputed call termination charges either proposed to BT or paid by BT were not reasonable terms and conditions as set out in the end-to-end connectivity obligation.

If Ofcom establishes that the answer to either of these questions is ‘yes’, Ofcom will consider whether it is appropriate to determine call termination charges in this case, and if so, will determine what these charges should be. Ofcom will also consider whether it is appropriate to require that H3G, Orange and Vodafone make any repayments to BT in respect of the disputed call termination charges and also whether it is appropriate to require that BT make any repayments to T-Mobile,O2 and H3G in respect of the disputed call termination charges.

Procedural matters :

Guidance on the resolution of disputes 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.

All representations on the scope of the disputes should be submitted to Ofcom by 19 February 2007.

Stakeholders interested in the outcome of these disputes should notify Ofcom by 19 February 2007, describing the relevance of the outcome of the disputes to their business. Stakeholders with relevant information and evidence in respect of this disputes should submit this to Ofcom by 5 March 2007.

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

Case Leader: Robert MacDougall ( e-mail: robert.macdougall@ofcom.org.uk)
Case Reference: CW/00942/12/06