Review of retail and wholesale ISDN30 markets - Statement on the markets, market power determinations and remedies

Statement published 20 August 2010

Summary

Introduction

1.1 This statement sets out the conclusions of our review of the retail and wholesale ISDN30 markets following on from the consultation published on 4 May 2010 ( Review of retail and wholesale ISDN30 markets referred to hereafter as the May 2010 consultation ). The May 2010 consultation proposed that retail ISDN30 services were in a discrete product market and that wholesale ISDN30 services were also in a discrete product market.

1.2 We further proposed that, in these discrete markets, BT did not have significant market power (SMP) in the retail market in the UK excluding the Hull area whereas KCOM had SMP in the retail market in the Hull area.

1.3 At the wholesale level, we proposed that Openreach had SMP in the wholesale market in the UK excluding the Hull area and KCOM had SMP in the wholesale market in the Hull area. We proposed regulatory remedies which we considered were necessary to address the competition concerns that we had found.

1.4 This statement now concludes the market review. We discuss respondents views throughout this statement and we have considered all submissions carefully in reaching our conclusions.

Conclusions

Forward look

We conclude that the appropriate forward look period is four years. We adopt our analysis as set out in paragraphs 3.3 to 3.8 of the May 2010 consultation, where we recognised that IP services are likely to gain momentum in the future and may eventually be an effective substitute for ISDN30. Whilst we do not believe, however, that this is likely to happen in the time period of this review we will nonetheless continue to monitor market conditions. In the event that substitute services emerge, it may be necessary to review the market for ISDN30 services earlier than currently anticipated.

Market definition

We have concluded that ISDN30 services are in a distinct product market at both the retail and wholesale levels. We have concluded that there are two geographic markets at both the retail and wholesale level and these are the UK excluding the Hull area and the Hull area.

SMP

Retail level

1.7 We have concluded that no one has SMP in the retail market for the supply of ISDN30 services in the UK excluding the Hull area.

1.8 We have concluded that KCOM has SMP in the retail market for the supply of ISDN30 services in the Hull area.

Wholesale level

We have concluded that Openreach has SMP in the market for the supply of wholesale ISDN30 services in the UK excluding the Hull area. KCOM has SMP in the equivalent market in the Hull area.

Remedies

Retail level

1.10 We are imposing two SMP conditions on KCOM which maintain the existing obligations requiring them to:

• not discriminate unduly in the provision of retail ISDN30 services; and
• publish retail ISDN30 prices.

Wholesale level

1.11 We are imposing the following requirements on both Openreach and KCOM. These are a continuation of the remedies that apply currently:

• a requirement to provide network access on reasonable terms and conditions;
• a requirement not to discriminate unduly in the provision of ISDN30;
• a requirement to publish a Reference Offer;
• a requirement to notify charges, terms and conditions; and
• a requirement to notify technical information.

1.12 For Openreach only, we are also imposing the following remedies which apply currently:

• a requirement to publish quality of service information;
• a requirement to provide new network access on reasonable request;
• a requirement to provide wholesale line rental (WLR) ISDN30; and
• a requirement to account separately.

1.13 We have also concluded that new price control and cost accounting remedies should be imposed on Openreach to address the competition concern that wholesale charges for ISDN30 appear to be above the competitive level. The precise form and type of remedy will be determined in a subsequent review which will examine the efficient level of cost of wholesale ISDN30 provision as well as reviewing the options for a price control remedy, taking account of relevant points raised by stakeholders in their responses to the May 2010 consultation. This position reflects the concern expressed about charge controls by a number of stakeholders in their responses to the May 2010 consultation.

1.14 We will carry out the review of the costs of wholesale ISDN30 services alongside the review of the costs of local loop unbundling (LLU) and analogue WLR. We would intend that, subject to consultation, any price controls that we consider are needed for wholesale ISDN30 services would take effect at the same time as any proposed controls for relevant LLU and WLR services. These are scheduled to take effect from 1 April 2011. In the interim, we have placed a cap on wholesale ISDN30 charges at their present level.

1.15 We are also imposing a new direction on Openreach requiring them to produce Key Performance Indicators (KPIs) for ISDN30. This formalises the reporting position and aligns it with requirements in other WLR markets.

Footnotes:

  1.-http://stakeholders.ofcom.org.uk/binaries/consultations/isdn30/summary/isbn30.pdf

  2.- Openreach is the access division of BT established by Undertakings in 2005. Whilst the proposed SMP services conditions in this document apply to British Telecommunications plc, Openreach is the division of BT which provides the wholesale ISDN30 services which we are proposing to regulate. Therefore, throughout this document, we refer to Openreach as the supplier of wholesale ISDN30 services. For retail markets, we refer to BT.

The full document is available below