Mae'r cynnwys hwn ar gael yn Saesneg yn unig.

Dispute between Cable & Wireless and BT about BT’s charges for Ethernet services

21 Rhagfyr 2012

Dispute between: (i) Cable & Wireless Worldwide plc group (CWW) and (ii) British Telecommunications plc (BT) concerning BTs charges for Ethernet services
Case opened: 9 December 2011
Case closed: 20 December 2012
Issue: Ofcom was asked to resolve this dispute concerning the level of BTs charges for
Wholesale Extension Services (WES) and Backhaul Extension Services (BES) under section 185(1A) of the Communications Act 2003 (the Act)
Relevant instrument: Ofcom resolved this dispute using its powers under Chapter 3 of Part 2 of the Act

Update note: 27 February 2013

Three appeals against Ofcom’s determinations to resolve this dispute and the related disputes between each of British Sky Broadcasting Limited, TalkTalk Telecom Group plc and Virgin Media Limited and BT (CW/01052/08/10) and between Verizon UK Limited and BT (CW/01087/02/12) have been filed with the Competition Appeal Tribunal (“CAT”). Details of the appeals can be found on the CAT’s website at http://www.catribunal.org.uk/

End of update note

On 20 December 2012, Ofcom issued its final determinations of this dispute and of the related disputes between each of British Sky Broadcasting Limited, TalkTalk Telecom Group plc and Virgin Media Limited (“the Parties”) and BT (CW/01052/08/10) and between Verizon UK Limited and BT (CW/01087/02/12) to the parties in dispute.

We have concluded that BT has overcharged CWW, the Parties and Verizon a total of £94,823,000 for certain wholesale Ethernet services and that BT is required to make repayments to CWW, the Parties and Verizon for the full amounts by which it has overcharged them.

We have published a non-confidential version of our final determinations (see related items).

Update note: 13 July 2012

On 19 21 June 2012, the Court of Appeal heard the appeal brought by BT against the Competition Appeal Tribunal’s judgment in British Telecommunications plc v Office of Communications (Partial Private Circuits) ([2011] CAT 5) (the “PPCs appeal”). In light of our proposals contained in our provisional determination in relation to this dispute and the comments received from the parties to the dispute, as well as the nature of the arguments put to the Court of Appeal by the parties to the PPCs appeal, we believe that the Court of Appeal’s judgment is likely to be relevant to the issues raised in this dispute.

Accordingly, we consider that it is appropriate not to issue our final determination of this dispute until after the Court of Appeal hands down judgment and we have had an opportunity to consider the implications of the judgment for the matters in dispute in this case.

We will continue to consider the matters in dispute as appropriate, so that we can resolve the dispute as soon as possible following the Court of Appeal’s judgment.

End of update note

Update note: 5 April 2012

Since the publication of our Provisional Determination, we have received new information from BT in relation to development costs in 2010/11. We intend to take this information into account in making our final determination and we invite parties to comment on it. We remind parties that the closing date for responses on the Provisional Determination for this Dispute is 5 pm on 20 April.

In our Provisional Determination, we propose to make an adjustment for development costs in 2010/11 (see paragraph 5.75 of that document). BT has now provided us with information that indicates that the development cost adjustment should not have been made. In paragraphs 5.47-5.49 of our Provisional Conclusions concerning the Dispute between Verizon and BT relating to BT’s charges for WES (CW/01087/02/12), we provide details of the information we have received and, on the basis of this information, we provisionally conclude that no adjustment is required for development costs in 2010/11.

We intend to adopt a consistent approach in our final determinations of the dispute between Verizon and BT, and this dispute. We therefore set out here the impact of the new information on this dispute, in order that parties can consider and comment on it.

If we do not make an adjustment for development costs in this dispute:

  • BT’s revenue associated with WES1000 rental does not exceed DSAC in 2010/11. We would no longer find that BT has overcharged for WES1000 rental in 2010/11; and 
  • BT’s revenue exceeds DSAC for BES622, WES155 and WES622 rentals in 2010/11, but by a smaller amount than we proposed in our Provisional Determination.

The table below sets out the impact of this change on the data relating to each service in dispute in 2010/11.    



 Service

Provisional Determination*

Results without development cost adjustment

 

£m

per local end, £

£m

per local end, £

BES 100 rental

 

 

 

 

External revenue

6.4

£1,523

6.4

£1,523

External DSAC

6.6

£1,578

6.6

£1,578

Difference

(0.2)

(£55)

(0.2)

(£55)

BES 1000 rental

 

 

 

 

External revenue

17.6

£3,576

17.6

£3,576

External DSAC

23.9

£4,860

24.8

£5,040

Difference

(6.3)

(£1,284)

(7.2)

(£1,465)

BES 155 rental

 

 

 

 

External revenue

0.0

£4,700

0.0

£4,700

External DSAC

0.0

£1,578

0.0

£1,578

Difference

0.0

£3,122

0.0

£3,122

BES 622 rental

 

 

 

 

External revenue

0.0

£8,230

0.0

£8,230

External DSAC

0.0

£3,219

0.0

£3,309

Difference

0.0

£5,011

0.0

£4,921

WES 100 rental

 

 

 

 

External revenue

34.5

£2,141

34.5

£2,141

External DSAC

70.4

£4,366

74.1

£4,594

Difference

(35.9)

(£2,225)

(39.6)

(£2,453)

WES 1000 rental

 

 

 

 

External revenue

12.8

£5,500

12.8

£5,500

External DSAC

11.8

£5,098

12.8

£5,510

Difference

0.9

£401

(0.0)

(£10)

WES 155 rental

 

 

 

 

External revenue

1.4

£5,210

1.4

£5,210

External DSAC

1.2

£4,366

1.3

£4,594

Difference

0.2

£844

0.2

£616

WES 622 rental

 

 

 

 

External revenue

0.5

£8,500

0.5

£8,500

External DSAC

0.3

£4,732

0.3

£5,052

Difference

0.2

£3,768

0.2

£3,448

*These figures are taken from Tables 5.8, 5.9, 5.10 and 5.11

Separately, we have identified a transcription error in Table 6.7 of our Provisional Determination (which is unrelated to the new information we have received relating to the development costs adjustment, described above). The revenue as a percentage of FAC figure for WES1000 rental for 2010/11 currently states 166%.

This figure should be 264%. However, if we do not make the development cost adjustment, revenue as a percentage of FAC is reduced to 220%, as set out in Table 6.3 of our Provisional Conclusions in relation to the Dispute between Verizon and BT relating to BT’s charges for WES.

End of update

Update note: 28 March 2012

On 26 March, Ofcom decided to extend the time to provide responses to its provisional determination until 5 pm on 20 April 2012.

End of update note

Update note: 1 March 2012

Ofcom has today published an updated, non-confidential version of its provisional determination (please see related item). This version includes data on external revenue, external DSAC and overcharging for BES2500, BES10000 and WES10000 rental in table 5.11 and table 7.2 which were previously redacted in the version published on 23 February 2012.

End of update note

Update note: 23 February 2012

On 22 February 2012, Ofcom issued its provisional determination to BT and CWW (please see related item).
The period for comments on the provisional determination will close at 5 pm on 5 April 2012. Please send responses to:

Melanie Everitt
Ofcom
Riverside House
2A Southwark Bridge Road
London SE1 9HA
Or by e-mail to melanie.everitt@ofcom.org.uk

We consider that exceptional circumstances exist in this case. There are overlaps between this dispute and the Disputes between BT and each of Sky, TalkTalk and Virgin Media about BT charges for Ethernet services (CW/01052/08/10) in terms of many of the services which BT sold and the time period during which they were sold. Both disputes relate to the cost orientation of BTs charges for WES and BES services.

In order to give BT the opportunity to see Ofcom’s provisional determinations and reasoning in relation to both disputes we have aligned the deadline for comments which is 5 April 2012. A deadline of 5 April 2012 gives all stakeholders sufficient time to comment on both disputes. It will not therefore be possible to resolve this dispute within four months.

End of update note

This dispute concerns the charges set by Openreach (a BT Group business) for WES and BES services. CWW alleges that the charges levied by BT between 1 April 2006 and 31 March 2011 were too high and were not cost orientated. CWW claims that it has significantly overpaid BT for these services and that BT should reimburse the amounts overcharged.

BES and WES are high speed point-to-point data circuits that use Ethernet transmission. BES provides a secure data link between a communications provider's network and its equipment within the relevant unbundled BT local exchange. WES provides dedicated symmetric transmission at a range of bandwidths between a third party customer’s premises and a communications provider's network node. Ofcom considers that on the face of the dispute submission, there appears to be a dispute between CWW and BT that commercial negotiations have failed to resolve.

Ofcom considers that the dispute meets the relevant statutory criteria and it is appropriate for Ofcom to handle it according to section 186 of the Act, and accordingly, Ofcom has accepted the 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 whether, from 1 April 2006 to 31 March 2011:

  • BT overcharged CWW for BES and WES services; and if so
  • by how much CWW was overcharged for those services; and
  • whether, and by how much, BT should reimburse CWW in relation to the overcharge.

Procedural matters:

In line with Ofcom’s Guidelines for the handling of regulatory disputes published in June 2011, Ofcom is not consulting on the scope of this dispute. Ofcom’s guidelines can be found at: Ofcom's Guidelines for the handling of regulatory disputes

Stakeholders interested in the outcome of this dispute should notify Ofcom by 6 January 2012, describing the relevance of the outcome of this dispute to their business. Stakeholders with relevant information and evidence in respect of this dispute should submit this to Ofcom by 6 January 2012.

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

Case Leader: Paul Dean (e-mail: paul.dean@ofcom.org.uk)
Case Reference: CW/01078/11/11