LLCC PPC Points of Handover pricing review - Revisions to proposed modifications of SMP Conditions

  • Start: 22 June 2011
  • Status: Statement published
  • End: 20 July 2011

This statement sets out our final decision on the modification of the charge control on BT in relation to its Point of Handover pricing, following our consultation published on 26 January 2011 ("the January Consultation") and a second consultation published on 22 June 2011 ("the June Consultation").

These consultations reconsidered a number of issues remitted back to Ofcom by the Competition Appeal Tribunal ("CAT") following the disposal of the Leased Lines Charge Control appeal ("the LLCC Appeal") on 20 September 2010. The remitted issues relate specifically to the cost recovery approach for Points of Handover ("POHs") used to deliver Partial Private Circuits ("PPCs").

A POH is a high capacity link provided by BT, which connects a Communications Provider's ("CP") network with that of BT and comprises the physical infrastructure (duct and fibre) as well as electronics at both or one end of the link. It is therefore an important component which enables infrastructure based competition.

In our January Consultation we made a number of proposals relating to the cost-recovery approach and the cost estimates for the additional POH charges. In particular:

  • we proposed the additional POH charges should be brought into line with Long Run Incremental Costs ("LRIC") and we proposed to set the charges based on LRIC estimates derived from our own bottom-up model;
  • based on our bottom-up model we estimated that the additional POH costs were between 3.5m and 4.1m on a LRIC basis, with a central estimate of 3.8m;
  • we proposed that Type I POH charges should be reduced immediately to LRIC while increases in Type II charges should be phased; and
  • we also proposed to waive the notification period to allow BT to make the price changes without requiring 28 days notice.

The responses to the January Consultation raised a number of issues about our overall approach and also about the specific assumptions used in our bottom-up model. We considered that a number of those comments affected our cost estimates and therefore we published a second consultation in June which set out what changes we were proposing to make to our modelling assumptions and cost estimates in our bottom-up model. In particular:

  • we estimated that the additional POH costs were in the range of 2.7m to 3.4m on the proposed LRIC basis;
  • we proposed that the increases in charges for Type II POHs were such that they should be introduced in a single change and not phased (as proposed in the January Consultation); and
  • we proposed that the new additional POH charge control would apply from 1 October 2011 until 30 September 2012.

We received four responses to the June Consultation and we have considered these comments carefully, as well as the comments received in response to the January Consultation, in reaching our conclusions on the appropriate cost recovery approach and additional charges for POHs.

We notified our proposed decision and draft statement to the European Commission, The Body of European Regulators for Electronic Communications (BEREC) and the national regulatory authorities ("NRAs") in other Member States for EU consultation under section 48B of the Act on 19 August 2011. We did not receive any comments from these bodies and therefore we are confirming our final decision in this statement.


Main documents

Supporting documents

model.xls
(MS Excel Document, 229.5 KB)
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Responses

Responder name Type
BT.pdf (PDF File, 53.9 KB) Individual
Cable_Wireless_Worldwide.pdf (PDF File, 67.0 KB) Individual
Verizon_Business.pdf (PDF File, 30.8 KB) Individual