This document invites stakeholder comments on our revised proposed list of telecoms providers that have significant market power (SMP) in wholesale call termination (WCT) and our proposal to include an additional service in our proposed wholesale ISDN30 charge control.

List of wholesale call termination providers and ISDN30 charge control clarification

We are consulting on revised price notification requirements for all telecoms providers that offer WCT and, in addition, clarifying how our proposals for the regulation of BT’s interconnection circuits may apply to interconnection using next generation voice networks (which rely on internet protocol (IP) technology).

View the further consultation on the Narrowband Market Review.

Ofcom has published its 2017 wholesale local access (WLA) market review consultation (WLA Consultation) setting out our provisional assessment of the WLA market, our proposed finding that BT continues to have Significant Market Power (SMP) and our proposed remedies including price control remedies and quality of service standards. The closing date for comments on the WLA market review is 9 June 2017.

Price regulation of virtual unbundled local access: impact on narrowband market review

As discussed at paragraphs 8.53-8.59 of the WLA Consultation, we propose that where Wholesale Line Rental (WLR) is used to provide the necessary copper bearer to support BT’s ‘40/10’ (40 Mbit/s download, 10 Mbit/s upload) Virtual Unbundled Local Access (VULA) service, we would expect that the WLR service would be charged to reflect the costs of providing a copper bearer.

This would mean that for BT to be able to use the pricing flexibility that we have proposed in the 1 December 2016 Narrowband Market Review Consultation (NMR Consultation) for Wholesale Fixed Analogue Exchange Lines (WFAEL), it would need to provide the ability for telecoms providers to use the 40/10 VULA service without needing to also purchase WLR in its present form (or MPF).

We consider that telecoms providers should be able to purchase VULA on a standalone basis, without being required to also purchase other services such as voice telephony over the BT network. Therefore, BT will be able to benefit from pricing flexibility on WLR in the WFAEL market when it offers an effective alternative copper support product to WLR in its present form. BT is already developing such a product, known as single order GEA (SOGEA).

Ofcom asks stakeholders to submit any additional comments on our proposals for the WFAEL market in the light of our WLA proposals by 21 April 2017.

Consultation on our proposed quality of service remedies

Ofcom has published a consultation setting out our proposals for quality of service remedies for WLR, MPF and GEA.

In the case of WLR, this consultation also develops the proposals set out in Section 9 of the NMR Consultation.

In paragraphs 8.73-8.78 we set out proposals for WLR which partially amend proposals set out in the NMR Consultation. Specifically, we propose to update our Reference Offer requirements and we are now proposing not to re-impose the 2008 SLG Directions.

We also make some clarifications to Draft Condition 6 in relation to the Reference Office requirements for ISDN services (see p284-289), to address omissions in the NMR Consultation.

The Draft Legal Instruments Proposals for SMP services conditions set out in Annex 6 to the Narrowband Market Review consultation published on 1 December 2016 (the “Consultation”) included an omission in error.

This note supplements the Consultation by setting out the omitted text, and the Consultation (specifically Annex 6) should be read accordingly.

1. Annex to draft Condition 5D: The following Annex to draft Condition 5D listing the services subject to the interconnect circuits charge control in that draft Condition 5D was omitted from the Consultation:

Annex to Condition 5D – Services subject to the interconnect circuits charge control^[1]

• i) External wholesale standard Customer-Sited Interconnect connections;
• ii) External wholesale standard Customer-Sited Interconnect rentals – fixed;
• iii) External wholesale standard Customer-Sited Interconnect rentals - per km;
• iv) External wholesale interconnection extension circuits connections;
• V) External wholesale interconnection extension circuits rentals – fixed;
• vi) External wholesale interconnection extension circuits rentals - per km;
• vii) External wholesale intra-building circuits connections;
• viii) External wholesale intra-building circuits rentals;
• ix) External wholesale in-span interconnection links rentals;
• x) External nominated in-span interconnection links - per km; and
• xi) External wholesale rearrangements.
  

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1 Account only for the interconnect circuits connected at the DLEs.

Ofcom will shortly publish a consultation on our review of the market for standalone landline telephone services.

We recognise that stakeholders may wish to consider the interactions between our wholesale and retail proposals – particularly in relation to wholesale fixed analogue exchange lines (WFAEL) and wholesale call origination (WCO) – before they finalise their responses to our December wholesale Narrowband Market Review consultation. We are therefore extending the final deadline for submissions to 29 March 2017.

Where possible, we ask stakeholders to provide their responses to our proposals by the original closing date of 28 February 2017, particularly where they relate to the wholesale call termination, ISDN30 and ISDN2 markets.

This document sets out clarifications to the consultation document on the Narrowband Market Review published on 1 December 2016 (the “Consultation”).

This note supplements the Consultation, and the Consultation should be read accordingly.

Clarifications

Following publication of the Consultation, BT raised  concerns with us about the value we had calculated for its current average wholesale call termination (WCT) charge. The charge published in the Consultation was  0.029ppm and was used in our estimation of the financial impact of our proposals, our arguments around the use of a glide path, and the relevant draft condition (draft Condition 5C). BT stated that, by its own calculations, this should instead be 0.035ppm.

We have investigated this issue further with BT and have determined that the discrepancy is caused by differences in the volume mix (the  relative volumes of day, evening and weekend calls) assumed in the calculations. Using the most recent available data regarding the volume mix, we agree with BT that its average charge during the lacuna period is 0.035ppm in 2015/16 prices. ^[1] The Consultation should therefore be read with this value replacing the published value of 0.029ppm.

This issue affects three distinct parts of the Consultation:

• In paragraphs 1.45 and A8.100 of the Consultation we calculated the overall reduction in industry revenues as a result of the proposed charge control as £7.7m over three years across all communications providers (CPs), or around 8p per year per line on average. Using a current average charge of 0.035ppm in this analysis results in a reduction of revenues of £14.5m over the review period, or around 14p per year per line on average.
• In paragraphs 15.13-15.15 of the Consultation, we presented our assessment of whether a glide path or a one-off adjustment would be more appropriate to set the WCT charge control. This assessment referenced a current average charge of 0.029ppm as the starting point when we considered the glide path option. While starting from a charge of 0.035ppm would result in a  larger difference between the two options, we still consider that the difference is small in absolute terms and is insufficient to alter our proposal that a reduction to LRIC in the first year of the control is appropriate.
• In draft condition 5C.1 of Schedule 1 within Annex 6 of the Consultation, we proposed to require that BT’s revenue-weighted average charge for WCT should not exceed 0.029ppm during the period from 1 October 2017 to 30 November 2017. This should be read as not exceeding 0.035ppm.

[1]This is based on the average charge in the 2015/16 charge control year (in accordance with BT’s voluntary pricing commitment, see https://www-pp.ofcom.org.uk/topic-and-subtopics/phones-and-broadband/telecoms-infrastructure/information-for-industry/narrowband-broadband-fixed/) and volumes in the 2015/16 financial year.

Technical report (PDF, 272.0 KB)

Slide pack  (PDF, 1.3 MB)

Questionnaire (ZIP file)

PDF data tables (ZIP file)

Excel data tables (ZIP file)

XML raw data (ZIP file)

These models should be run in Excel 2010 or a later version. In order to run the model, we suggest saving the ZIP file onto your computer, unzipping the three files into a folder and opening them individually in Microsoft Excel. Please also enable macros and allow links between the files to update.

Cost model (ZIP file)