Summary
1.1 This dispute concerns the termination rate payable by T-Mobile (UK) Ltd (T-Mobile) to Mapesbury Communications Ltd (MCom) for calls originated on T-Mobiles network and terminated on MComs network. These payments are known as mobile termination rates (MTR).
1.2 On 10 October 2008, we received a joint submission outlining a dispute between T-Mobile and MCom about the MTR charged to T-Mobile for the termination of calls on the MCom network. The joint submission requested that Ofcom handle, consider and determine the MTR payable by T-Mobile for the termination of calls on the MCom network.
1.3 MCom is currently building areas of contiguous GSM mobile phone coverage with a view to providing a mobile service in certain urban areas of the UK which have a high proportion of ethnic community residents. T-Mobiles main business activities include public mobile communications network operation and the provision of mobile network communications to the public.
1.4 MCom and T-Mobile do not interconnect directly. Each party has entered into a Standard Interconnection Agreement with BT under which BT provides transit services between the operators. In this respect, where a call originates on T-Mobiles network and is terminated on MComs network, BT purchases termination from MCom and charges T-Mobile an amount equal to the MCom MTR plus an additional transit charge. The current MTR for the termination of calls on MComs network agreed between MCom and BT is equal to 7.24 pence per minute (ppm).
1.5 Our powers and duties to resolve certain disputes are set out at sections 185-191 of the Communications Act 2003 (the 2003 Act). In accordance with Section 186(4) of the Act, on 21 November 2008 we decided that it was appropriate to resolve this dispute, informed the parties to the dispute of our decision and published a Competition Bulletin entry setting out the scope of the dispute.
1.6 In resolving this dispute, we have considered our general statutory duties and Community obligations under section 3 and 4 of the 2003 Act. In the context of this dispute, we have had particular regard to our primary duty under section 3(1)(b) of the 2003 Act to further the interests of consumers in relevant markets, where appropriate, by promoting competition.
1.7 We considered the six principles of pricing and cost recovery established by Ofcom as an appropriate basis for the framework to set a MTR which is reasonable as between the parties and satisfies our general statutory duties and Community obligations. We decided that it was appropriate to directly link MComs MTR to a regulated rate. We considered which rate would be appropriate in this matter and decided, in the interests of cost minimisation, that it should be the lowest.
1.8 In summary, based on the submissions of the parties and the evidence gathered in this dispute, for the reasons set out in the draft determination and explanatory statement (referred to in this document as the Consultation), our provisional conclusion was that:
- i) As from [the date of the final determination], the MTR charged by MCom for the termination of calls originated on the T-Mobile network and terminated on the MCom network may not exceed 4.4ppm (2006/07 prices), converted into nominal terms. This being the same as the (lowest) regulated MTR specified in the Competition Commission (CC) determination for 2009/10; and
- ii) In order to ensure the appropriate rate is applied as between MCom and T-Mobile in the absence of direct interconnection, as from [the date of the final determination], MCom shall make a payment to T-Mobile of an amount equal to the termination charge it receives from a transit operator less [4.4ppm (2006/07 prices), converted into nominal terms] for each minute of calls originated on the T-Mobile network and terminated on the MCom network.
1.9 On 13 February 2009, Ofcom issued to each of the parties in dispute and to 9 parties that asked to be considered as an interested party a non-confidential version of the Consultation and published the Consultation on its website. Ofcom asked for comments from all stakeholders by close of business on 27 February 2009.
1.10 Ofcom carefully considered stakeholders responses and conducted some further analysis. For the reasons given in section 6, our conclusion remains as set out in the Consultation. the MTR charged by MCom for the termination of calls originated on T-Mobiles network and terminated on MComs may not exceed the target average charge (TAC) for Vodafone and O2, as this will be determined following the implementation of the CCs Determination. Until the implementation of the CCs Determination, MComs MTR for calls originated on T-Mobiles network and terminated on MComs network may not exceed 4.71ppm, which is currently our best estimate of the TAC for Vodafone and O2 for 2009/2010, as specified in the Competition Commission (CC) determination, converted into nominal terms.
1.11 The background to this dispute is set out in section 2. The history of this dispute is set out in section 3. Section 4 sets out the statutory obligations and principles which apply in resolving the dispute. The analysis and reasoning underpinning our proposals for resolving the dispute in the Consultation are set out in section 5. We address stakeholders comments to the Consultation and set out our responses in section 6. Ofcom's determination, which takes effect on 20 March 2009, is set out at section 7.