Summary
Introduction
1.1 A new regulatory framework for electronic communications networks and services entered into force in the UK on 25 July 2003. The basis for the new framework is five new EU Communications Directives that are designed to create harmonised regulation across Europe. Four of these Directives have been implemented in the UK via the new Communications Act 2003 (the “Act”). The fifth has been implemented by Regulations that came into force on 11 December 2003.
1.2 The Act provides for functions, powers and duties to be carried out by Ofcom (the Office of Communications), which include, inter alia, functions, powers and duties flowing from the four EC Communications Directives referred to above.
1.3 The new Directives require National Regulatory Authorities (“NRAs”), such as Ofcom, to carry out reviews of competition in communications markets to ensure that regulation remains proportionate in the light of changing market conditions.
1.4 In this document, Ofcom undertakes a review of the market for Number Translation Services (NTS) call termination in the UK.
1.5 Ofcom has been prompted to undertake this review of NTS call termination at this time for two reasons:
- Firstly, Ofcom is currently re-examining the regulatory regime for NTS (a consultation will be published separately). As part of this re-examination, Ofcom considers several policy options that would involve to varying degrees the removal of regulatory support for revenue sharing on NTS number ranges. Given this change, the competitive and regulatory model for some or all NTS call types might, in future, arguably be expected to more closely follow the existing model for geographic calls. In this context, it is appropriate to consider whether any of the competition issues surrounding geographic call termination also apply in the case of some or all NTS numbers, both before and after the adoption of any new regulatory model.
- Secondly, and more importantly, the need for this review derives from the fact that, since 1 st May 2004, NTS markets have been characterised by a new feature, namely differential termination charges based on the identity of the Originating Communications Provider (OCP), i.e. BT charging other OCPs more than it charges itself. These charges were introduced by BT under Network Charge Change Notice 500 (NCCN 500). Previously, such differential charging was not observed, meaning that, in all cases where BT was involved as either an originating, transit, or terminating Communications Provider, the amount paid for NTS call termination by BT to the Terminating Communications Provider (TCP) had been effectively determined by the retail price for that class of call on the BT network and the interconnection arrangements put in place by Oftel as remedies to BT’s Significant Market Power (SMP) in wholesale NTS call origination. Under NCCN 500, this is still the case for calls that are originated on BT’s network, but not for calls that originate on a non-BT network and which terminate on the BT network.
Identification of markets
1.6 The products and services under consideration in this market review are the NTS call termination services provided between OCPs (or a transit communications provider) and TCPs. Ofcom proposes to identify the following economic wholesale market in accordance with competition law principles, for the purpose of ensuring that regulatory obligations are appropriate, proportionate and objectively justifiable: - NTS call termination in the UK.
1.7 The reasoning behind this market definition is explained in Section 3.
Assessment of market power
1.8 Having analysed the operation of these markets, and taken the utmost account of the Commission’s Guidelines on market analysis and the assessment of significant market power (SMP) (“SMP Guidelines"), Ofcom proposes that BT has significant market power in the market identified above. The details of Ofcom’s approach to the assessment of market power, together with its analysis in relation to the market for NTS call termination, are contained in Section 4.
Regulatory remedies
1.9 Based on the evidence presently available to it, Ofcom proposes to impose two SMP service conditions – an obligation to provide Network Access and an obligation not to discriminate. The detail of the proposed regulatory remedies, and the approach taken by Ofcom when setting those remedies, are contained in Section 5.
Final steps
1.10 Consultation on the proposals set out in this market review closes on 7 January 2005. Ofcom intends to publish a second consultation in the first quarter of 2005.
The full document is available via the link at the top right of this page.
