Review of the wholesale local access market

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Competitive models in GPON

Review of the wholesale local access market - Statement

Clarification of the cost orientation obligation in the WLA market, 07/12/10

Following discussion with BT, we consider it would be helpful to clarify the meaning of paragraphs 5.58 and 5.79 of the WLA statement. Paragraph 5.58 states:

"We said in the consultation document that were we to impose a basis of charges condition on BT, our view would be that the interpretation of the basis of charges obligation would be that BT's prices must, as a first order test, be between DLRIC and DSAC, BT would be required to adjust its prices to comply with the obligation if its current pricing was outside this range. As such, BT's prices would be constrained based on the costs it incurred. The same logic would apply to any such conditions on KCOM. "

Paragraph 5.79 then says:

"Following our review of stakeholders responses, we maintain the position set out in the consultation document. Therefore, on the basis of the analysis outlined above, we remain of the view that the conditions on the basis of charges are appropriate."

In relation to these two paragraphs commenting on the cost orientation obligation imposed in the WLA market, we would like to clarify that, as stated in paragraph 5.58, pricing between DSAC and DLRIC is a first order test for cost orientation, and is therefore not determinative. As a consequence, there is no automatic requirement for BT to bring prices inside the DLRIC-DSAC range. Whether or not BT would be required to do so in any particular case would also depend on the results of a second order evaluation of other relevant factors. This interpretation of cost orientation in the WLA market is in accordance with the guidance on cost orientation set out in Oftel's 2001 network charge control guidelines.

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