Dispute about per-customer line transaction charges for Carrier Pre-Selection

06 July 2009

Dispute between: Cable & Wireless plc (C&W), THUS plc (THUS), Gamma Telecom Ltd (Gamma) and "Opal Telecom Ltd. (Opal)" (together the CPSOs) and British Telecommunications plc (BT)
Case opened: 15 October 2008
Determination issued: 13 February 2009
Case closed: 06 July 2009
Issue: The CPSOs have asked Ofcom to use its powers under sections 188 and 190 of the Communications Act 2003 (the Act) to resolve a dispute between them and BT about BTs CPS set-up charge.
Relevant instrument: Ofcom resolved elements (i) and (ii) of this dispute (see below) using its powers under Chapter 3 of Part 2 of the Act.

Update note 23 September 2009

On 4 September 2009, Cable & Wireless, The Carphone Warehouse and Gamma jointly filed an appeal with the Competition Appeal Tribunal (CAT) against Ofcom’s determination to resolve this dispute. Details of the appeal can be found on the CAT’s website at http://www.catribunal.org.uk/

End of update note

On 6 July 2009 Ofcom issued a further statement in relation to its determination of this dispute, concluding that its determination of 13 February 2009 should apply from that date, and as a result, BT is not required to make repayments to the other parties to the dispute in respect of this charge. Ofcom is not making any further determination as a result of this statement. Please see related items.

Update note 17 February 2009

On 13 February 2009 Ofcom issued a determination in relation to this dispute that BT is not entitled to recover through the CPS set-up charge the cost that it incurs in sending the notification of transfer letter and handling the resulting inbound customer calls; and that BT must reduce the CPS set-up charge by 78p to remove the recovery of these costs. This determination took effect from Monday 16 February 2009. Please see the related item.

Ofcom has also decided to consult on its revised proposal that BT should not be required to make any repayments in respect of this charge.

Ofcom will be consulting on this proposal until 5pm on 27 February 2009. Please send responses to:

Louise Marriage
Competition Group
Ofcom
Riverside House
2a Southwark Bridge Road
London
SE1 9HA

or by email to louise.marriage@ofcom.org.uk

Update note 6 January 2009

Ofcom issued a draft determination in relation to this dispute to the parties in dispute and a party which registered as an interested party on 30 December 2008. Please see the related item.

Ofcom will be consulting on its proposals until 5pm on 16 January 2009. Please send responses to:

Louise Marriage
Competition Group
Ofcom
Riverside House
2a Southwark Bridge Road
London
SE1 9HA

or by email to louise.marriage@ofcom.org.uk

End of update note

Update note 6 November 2008

Ofcom received a number of comments on the scope of this dispute.

Ofcom was asked to clarify that it will only consider C&Ws request for retrospection in the event that it determines BT should not be able to recover retail costs through the CPS set-up charge. We confirm that this is correct and have amended the wording of the scope accordingly.

Several of the parties expressed concern with Ofcoms statement that the level of the CPS set-up charge is not within the scope of this dispute, taking this to mean that Ofcom did not intend to assess the level of retail cost, if any, currently being recovered by BT.

Our view remains that the level of the CPS set-up charge is not within the scope of this dispute. The dispute is about whether or not BT can recover any of its retail costs through the CPS set-up charge. The parties have not discussed the other elements that go to make up the charge (various wholesale costs), and therefore the overall level of the charge is not currently in dispute. We also note in this context that BT is currently undertaking a review of some of its charges, including the CPS set-up charge.

However, in order to establish the facts of the dispute and to achieve effective resolution, we intend to analyse in more detail the current CPS set-up charge and to establish precisely what proportion of the charge relates to retail cost and how this is calculated. Therefore, and to this extent only, the level of the retail cost element is within the scope of this dispute. If we determine that BT is not entitled to recover its retail costs through the CPS set-up charge, our determination will therefore establish by how much the current charge would need to be reduced.

We have amended the scope of the dispute to clarify the above points. The revised scope of this dispute is therefore to determine:

1. whether it is appropriate for BT to recover through the CPS set-up charge the costs it incurs in sending the notification of transfer letter and handling the resulting inbound customer calls; and, if not,

2. the amount by which the CPS set-up charge should be reduced to remove the recovery of the costs BT incurs in sending the notification of transfer letter and handling the resulting inbound customer calls; and

3. the date from which Ofcoms determination of points (i) and (ii) above should apply.

Ofcom currently understands that the retail cost element is limited to the costs BT incurs in sending the notification of transfer letter and handling the resulting inbound customer calls. Should we establish that there are other retail costs reflected in the charge, these will be included in the scope.

End of update note

This dispute is about BTs charge for standalone CPS (Carrier Pre-Selection) set-up transactions (the CPS set-up charge) from 28 November 2003 to date.

The CPS set-up charge is a one-off wholesale charge paid by the CPSOs (Carrier Pre-Selection Operators) to BT when they start to provide calls on a customers line.

The CPS set-up charge is payable when customers transfer from BT Retail to another provider, and when they are transferring between non-BT providers.

The CPS set-up charge is currently set at a level that enables BT to recover some retail costs, namely the cost of sending the advice of transfer letter (the letter that tells customers they will be transferring to a new provider for some or all of their calls) and handling a proportion of the resulting inbound calls from customers (together the retail cost element). BT has told the CPSOs that the retail cost element represents 78p of the current CPS set-up charge of 2.47.

The CPSOs submit that it is not appropriate for BT to recover the retail cost element though the CPS set-up charge.

The CPSOs believe that it is appropriate for any new charges resulting from Ofcoms determination of this dispute to have effect from 28 November 2003.

Ofcom considers that this dispute meets the relevant statutory criteria and that it is appropriate for Ofcom to handle it according to section 186 of the Act. Ofcom has therefore accepted this dispute for resolution.

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 dispute:

The scope of the dispute is to determine:

1. whether it is appropriate for BT to recover through the CPS set-up charge the costs it incurs in sending the advice of transfer letter and handling the resulting inbound customer calls; and, if not,

2. the date from which any new charge that is agreed between the parties to reflect Ofcoms determination of point (i) above should apply.

The level of the CPS set-up charge is not within the scope of this dispute. In resolving this dispute, Ofcom will not specify the level of the CPS set-up charge. In the event that Ofcom determines that it is appropriate for BT to recover the retail cost element through the CPS set-up charge, the scope of the dispute does not include at what level the retail cost element should be set.

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 23 October 2008.

Stakeholders interested in the outcome of this dispute should notify Ofcom by 23 October 2008, describing the relevance of the outcome of this dispute to their business. Stakeholders with relevant information and evidence in respect of these disputes should submit this to Ofcom by 6 November 2008.

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: Louise Marriage ( e-mail:louise.marriage@ofcom.org.uk)
Case Reference: CW/00999/09/08