This dispute relates to the proposed charges payable by British Telecommunications plc (BT) for the termination of fixed geographic calls on Colt Technology Services (Colt) network.
Until 30 September 2009, Colts termination rate was set in accordance with a formula contained in an industry-wide agreement, which is commonly referred to as the Reciprocity Agreement.
This formula set Colts termination rate as a blend of BTs Single Tandem (ST) and Local Exchange (LE) termination rates, as published in BTs Carrier Price List.1 The exact blend was based on the proportions of Colts outbound traffic that were delivered to BTs tandem and local switches, respectively.
Following the expiry of this agreement on 30 September 2009, and in the absence of industry consensus on a replacement arrangement, BT has continued to do business with other communications providers (CPs) (including Colt) according to the terms of the expired agreement. In the remainder of this document, we refer to this as the expired Reciprocity Agreement.
On 14 December 2009 Colt issued an Operator Charge Change Notice2 (OCCN) to BT. This proposed a new fixed geographic termination rate for calls originating on, or transiting across, BTs network and terminating on Colts network, which would take effect from 1 March 2010. Colts proposed rate was based on the expired Reciprocity Agreement formula, and was a blend of BTs ST and LE termination rates. However, Colts proposal adapted the formula to take into account, in the calculation of the blend of ST and LE rates, traffic originated by Colt for termination on BTs network but sent via a third party transit provider.3 Colts proposed methodology for including this third party transit traffic in the calculation would result in an increase in its termination rate of about [ " ]%. This would increase Colts termination receipts by about [ " ]4 per year.
On 18 December 2009 BT formally rejected Colts OCCN of 14 December 2009. Following some further negotiations between the parties, on 10 August 2010 we received a submission from Colt requesting that Ofcom handle, consider and determine, as a dispute under section 185 of the Communications Act 2003 (the Act) whether the rate proposed by Colt would be fair and reasonable in accordance with the requirements of Significant Market Power (SMP) Condition BC1.5
In accordance with section 186(4) of the Act, on 2 September 2010 we decided that it was appropriate for us to handle this dispute, informed the parties to the dispute of our decision and published a Competition and Consumer Enforcement Bulletin entry setting out the scope of the dispute.
Footnotes
1. Colts proposed termination rate from 1 March 2010 was: [ " ] pence per minute (ppm) daytime; [ " ] ppm evening; [ " ] ppm weekend. Colts current rate was agreed with BT under the expired Reciprocity Agreement: 0.2455 ppm daytime; 0.1124 ppm evening; 0.0885 ppm weekend.
2. A Network Operator OCCN a notice issued by an operator proposing a change to its charges.
3. Under the expired Reciprocity Agreement, this traffic would not have been taken into account in calculating the blend of ST and LE rates for Colts termination rate.
4. The figure is based on Ofcom calculations using data provided by Colt in response to our section 191 notice (see paragraph 3.55). Colts dispute submission of 10 August 2010 reported the revenue impact at circa [ " ] p.a.
5. CPs subject to SMP Condition BC1 are required to provide network access in this case, fixed geographic call termination on terms, conditions and charges that are fair and reasonable.