Narrowband Market Review

  • Start: 01 December 2016
  • Status: Open
  • End: 28 February 2017

Consultation on the proposed markets, market power determinations and remedies for wholesale call termination, wholesale call origination and wholesale narrowband access markets.

About this document

The Narrowband Market Review 2017 covers five wholesale markets that underpin the delivery of retail fixed voice telephone services in the UK. The outcomes from this review are designed to promote competition and further the interests of residential and business customers.

We are reviewing three access markets: wholesale fixed analogue exchange lines (the standard fixed lines used by residential and business customers) and two markets that enable the delivery of digital telephone services to businesses to support applications such as call centre operations. The two digital exchange line markets are ISDN30 and ISDN2. In addition, we are reviewing wholesale call origination – a complementary service to the provision of analogue and digital exchange lines, which enables end customers to make calls over those lines.

This review also includes wholesale call termination, a connection service provided by a fixed telecoms provider when their customer receives a call. If customers call a UK geographic number (a number starting 01 or 02), their provider pays the terminating provider a wholesale charge, called a fixed termination rate.

This consultation considers the level of competition in each of these five wholesale markets. Where competition is not working effectively, we propose regulation that should apply for the period 1 October 2017 to 30 September 2020.

We will take all responses to this consultation into account before reaching our final conclusions, which we plan to publish in a statement in September 2017.

Narrowband Market Review PDF, 4.4 MB

Narrowband market review: Annexes PDF, 1.7 MB

12 January 2017

Purpose of this document

This document sets out clarifications to the consultation document on the Narrowband Market Review published on 1 December 2016 (the “Consultation”), which can be found at: https://www.ofcom.org.uk/__data/assets/pdf_file/0016/95011/Narrowband-Market-Review.pdf

This note supplements the Consultation, and the Consultation should be read accordingly.

Clarifications

Following publication of the Consultation, BT raised  concerns with us about the value we had calculated for its current average wholesale call termination (WCT) charge. The charge published in the Consultation was  0.029ppm and was used in our estimation of the financial impact of our proposals, our arguments around the use of a glide path, and the relevant draft condition (draft Condition 5C). BT stated that, by its own calculations, this should instead be 0.035ppm.  

We have investigated this issue further with BT and have determined that the discrepancy is caused by differences in the volume mix (the  relative volumes of day, evening and weekend calls) assumed in the calculations. Using the most recent available data regarding the volume mix, we agree with BT that its average charge during the lacuna period is 0.035ppm in 2015/16 prices. [1] The Consultation should therefore be read with this value replacing the published value of 0.029ppm.

This issue affects three distinct parts of the Consultation:

  • In paragraphs 1.45 and A8.100 of the Consultation we calculated the overall reduction in industry revenues as a result of the proposed charge control as £7.7m over three years across all communications providers (CPs), or around 8p per year per line on average. Using a current average charge of 0.035ppm in this analysis results in a reduction of revenues of £14.5m over the review period, or around 14p per year per line on average.
  • In paragraphs 15.13-15.15 of the Consultation, we presented our assessment of whether a glide path or a one-off adjustment would be more appropriate to set the WCT charge control. This assessment referenced a current average charge of 0.029ppm as the starting point when we considered the glide path option. While starting from a charge of 0.035ppm would result in a  larger difference between the two options, we still consider that the difference is small in absolute terms and is insufficient to alter our proposal that a reduction to LRIC in the first year of the control is appropriate.  
  • In draft condition 5C.1 of Schedule 1 within Annex 6 of the Consultation, we proposed to require that BT’s revenue-weighted average charge for WCT should not exceed 0.029ppm during the period from 1 October 2017 to 30 November 2017. This should be read as not exceeding 0.035ppm.

[1]This is based on the average charge in the 2015/16 charge control year (in accordance with BT’s voluntary pricing commitment, see https://www.ofcom.org.uk/phones-telecoms-and-internet/information-for-industry/telecoms-competition-regulation/narrowband-broadband-fixed) and volumes in the 2015/16 financial year.


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