Narrowband Market Review

Start: 28 September 2012 Status: Closed End: 09 November 2012

1.1 This document invites you to comment on the general approach we intend to take if it is necessary to set a new network charge control (NCC) when the current network charge control expires on 30 September 2013.

1.2 Fixed (wireline) voice telephone services are provided in the UK by a variety of different companies (retail communications providers) who either use their own network, or pay another provider (a wholesale communications provider) to supply end customers. As the UK's communications regulator, Ofcom's primary duty is to further the interests of consumers. One way that we fulfil this duty is to review certain retail and wholesale markets for voice telephony (as required under the EU regulatory framework for electronic communications) and, in that review, to set rules that may be necessary if the markets are not effectively competitive.

1.3 We began our review of fixed narrowband markets by publishing a call for inputs (CFI) in May 2012. The deadline for responses was 28 June 2012. In that document we indicated that, whilst in previous fixed narrowband market reviews we have considered the markets for telephone lines (access) and telephone calls (conveyance) together, in this review we intend to only consider the markets for calls. The wholesale markets regulated in this area comprise:

  • Wholesale fixed call origination;
  • Wholesale fixed geographic call termination;
  • Single transit; and
  • Interconnect circuits and the administrative costs of managing interconnection (i.e. BT's "Product Management, Policy and Planning" (PPP) charges).

1.4 In each of these markets, our previous market review concluded that the market was not effectively competitive, and that BT had significant market power (SMP) in those markets. As a result, BT is required to offer a number of services:

1.4.1 Wholesale call origination, this is a service provided by one communications provider (the wholesaler) to another, to enable the latter to offer telephone calls to a customer connected on the wholesalers' network (e.g. to use BT's network in the UK excluding Hull);

1.4.2 Wholesale fixed call termination, which is the service provided by one CP (the terminating CP) to connect a call made by a customer of another CP (the originating CP);

1.4.3 Single transit which allows originating and terminating CPs which are not directly interconnected to each other to switch calls through BT's network (in the UK excluding Hull); and

1.4.4 Interconnect circuits which allow the physical interconnection of other networks to BT's.

1.5 Since 1997, we have regulated BT's charges for these services through the NCC. The current NCC was set by Ofcom in September 2009 and, as noted above, expires on 30 September 2013.

1.6 This consultation deals with some questions relating to the nature and design of a possible future NCC. It does not set out any proposed regulatory rules. We are continuing to analyse the relevant markets and we expect to publish our proposals in January 2013 which may include the imposition of charge controls as a means of addressing competitive concerns where we have identified that a provider holds SMP in any relevant market.

Proposals in this document

1.7 If an NCC is considered appropriate for the period from 1 October 2013 to 30 September 2016, we anticipate using a cost model as the basis for such controls. For the reasons set out in this document, we are proposing to adopt a different approach to cost modelling to that undertaken in previous market reviews.

1.8 We are now consulting on our proposed approach to the cost modelling exercise. Specifically:

  1. We intend to model the costs of a next generation network (NGN) rather than a network that uses time division multiplexing (TDM) technology;
  2. We set out the proposed design of the model NGN; and
  3. We set out our proposals regarding the design of the cost model and how to implement a LRIC calculation for call termination.

1.9 We are also publishing a spreadsheet model, reflecting the proposals above. We are making the model available now in order to give stakeholders a chance to comment on our approach and make any specific points about the model before we publish any specific charge control proposals. This model is able to generate unit costs for network services. We have provided this capability at this time so that interested stakeholders are able to see the impact of changing model assumptions. However, the outputs from this current model do not form the basis of any charge control proposals.

Next steps

1.10 The closing date for responses to this consultation is 9 November 2012.

1.11 We anticipate publishing a consultation setting out our full proposals in relation to the Narrowband Market Review in January 2013. The January 2013 consultation document will set out proposed relevant markets, our proposed determinations as to SMP and, if relevant, any proposed remedies.

1.12 If we propose a charge control in January 2013, we will publish a further version of the NCC cost model at that time.

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