This Statement sets out Ofcom's conclusions in relation to a request by BT for an exemption from a requirement in the Undertakings to provide high bandwidth (i.e. bandwidths above 1Gbit/s) Ethernet access services and optical spectrum access services in the geographic markets in which BT does not have significant market power (SMP). As set out below, this affects an area known as the West, East and Central London Area (WECLA).
On 22 September 2005 British Telecommunications plc (BT) offered, and Ofcom accepted, a set of undertakings pursuant to section 154 of the Enterprise Act 2002 (the "Undertakings"). The Undertakings include mechanisms to allow BT and Ofcom to agree exemptions from the Undertakings.
BT originally made an exemption request in May 2011 that was different in scope to its final request. We consulted on the original exemption request on 31 May 2011 proposing to grant a temporary exemption to Openreach. We did not perform a detailed market assessment but relied on information contained within the Business Connectivity Market Review (BCMR) conducted in 2007/8. Given that there were a number of stakeholders that opposed our proposal to grant the exemption in advance of the next BCMR and that we had recently commenced this work, we decided to postpone making a decision on the exemption until the results of the new BCMR (the BCMR 2012/13) were available.
On 18 July 2012, BT submitted a revised exemption request (set out at Annex 1) for current and potential high bandwidth fibre based services that is geographically limited to the markets in which BT does not have SMP, as would be ultimately defined in the BCMR 2012/13.
On 25 July 2012, we published a further consultation on BT's revised exemption request and received six responses from stakeholders.
We have now completed the BCMR 2012/13 and published a Statement (the BCMR 2012/13 Statement) on our findings and decisions on 28 March 2012. The BCMR 2012/13 Statement includes a detailed assessment of the competitive conditions in the supply of the services relevant to this exemption.
In the BCMR 2012/13 Statement we set out our finding that BT has significant market power (SMP) in the provision of these high bandwidth services in the UK excluding a geographic area defined as the WECLA and also excluding the Hull area. We define this market in the BCMR 2012/13 as the "wholesale market for Multiple Interface Symmetric Broadband Origination (MISBO) in the UK excluding the Hull Area and the WECLA".
Having considered the findings of the analysis undertaken by the BCMR 2012/13 that the market for relevant services within the WECLA is competitive with a choice of suppliers and that no CP has been found with SMP, our conclusion is that this exemption is unlikely to have a significant impact on the ability of other CPs to compete in this market or on end-users.
In addition, our conclusion is that the exemption is unlikely to have an adverse impact on the overall operation of the Undertakings. However, the Equality of Access Board (EAB) will have an additional monitoring role to give added assurance that this exemption does not undermine the delivery of services on an EOI basis outside the WECLA.
Having taken account of all representations made during the consultation, we have concluded that it is appropriate to grant BT's exemption request.
We remain of the view that the absence of a finding of SMP does not mean that we should automatically relieve BT of its obligations under the Undertakings. The granting of an exemption requires careful consideration of the matters on a case-by-case basis and particularly whether the exemption will have an impact on the overall operation of the Undertakings.
The legal text of the exemption is set out at Annex 2.