Charge controls for Wholesale Line Rental – implementation and cost orientation

Statement published 23|02|10

Summary

Introduction

1.1 In our Statement of 26 October 2009 , we set out our decisions on the charge controls to be applied to Wholesale Line Rental ("WLR") analogue service and related charges.

1.2 WLR is a product Openreach supplies to Communication Providers allowing them to rent access lines on wholesale terms, and resell the lines to customers. This product gives consumers the opportunity to choose alternative suppliers who can provide them with access and, in almost all cases, calls services. WLR has been and remains a central service supporting effective competition in fixed narrowband services at the retail level (as demonstrated by our recent finding that BT no longer held SMP in the provision of retail analogue access services).

1.3 In the Statement in October, we decided that:

• the previous controls on separate Residential and Business WLR were to be replaced by a single control, for a Core WLR Rental service. The Core WLR Rental Service would be available to all customers, residential and business, and will include a standard level of service and directory listings for residential and business numbers; and
• the implementation of the Core WLR service should be phased in order to allow Openreach the appropriate time to make the necessary changes to their systems to be able to provide products that fulfil the requirements of the Core service.

1.4 We also set new price controls for some related services, i.e. WLR line transfers and new connections. The control ends on 31 March 2011.

1.5 However, as part of that Statement, we sought additional stakeholder views on three other issues related to WLR charge controls. They were:

• The precise timing of the transition to the new WLR Core Rental service. We proposed full introduction after the introduction of WLR3 functionality in Openreach's Release 1400, currently scheduled for July 2010.
• A continued cap on 110 on the WLR Premium charge for the period of the transition.
• The removal of the basis of charges (cost orientation) obligation on specific higher care services linked to WLR. We proposed that Openreach may provide higher service levels at an additional charge. Such services will continue to be subject to other SMP obligations imposed in the Review of the wholesale fixed narrowband markets (the "Wholesale Narrowband Review") (e.g. requirement not to unduly discriminate, requirement to publish a reference offer). We considered removal of cost orientation was reasonable, as the revised charge control structure offered Communications Providers an accessible chain of substitution for these services which would ensure there was a constraint from the market on the charges for higher care services.

Responses to the further consultation

1.6 The consultation closed on 7 December 2009 and we received seven responses.

1.7 All respondents supported the implementation plan and the use of the temporary cap on WLR Premium, though two respondents suggested that the cap should be maintained until the end of the control period and one suggested it should be maintained indefinitely. Those advocating extension to the end of the period were particularly concerned about discrimination against those customers not yet able to migrate from WLR2 to WLR3.

1.8 There were a range of views on the advisability of removing cost orientation from the higher care level services, though no new arguments were put forward in addition to those raised with respect to this issue in the earlier consultation. In particular, there was considerable support for Ofcom monitoring Openreach's behaviour if cost orientation was removed.

1.9 Subsequent to the consultation, Openreach has offered a voluntary commitment to restrict any differential between the WLR Core Service and the WLR Premium charge to within the current difference (under 10) for the duration of the charge control. While we consider that such a commitment is not necessary for the removal of the basis of charge condition, we consider that it does offer Communications Providers additional re-assurance of price stability through the period of transition to the new services and controls.

Conclusions

1.10 In summary, having given careful consideration to all of the responses and taking into account the voluntary commitment from BT on WLR Premium charges, we have decided that it is appropriate to implement the proposals set out in October. That is:

• The full introduction of the WLR Core service will commence after the introduction of WLR3 functionality in Openreach's Release 1400, currently scheduled for July 2010 ("the implementation date").
• We will impose a cap of £110 on the WLR Premium charge for the period of the transition to the implementation date.
• We will remove the basis of charges (cost orientation) obligation on specific higher care services linked to WLR. Ofcom will continue to monitor BT's behaviour in this area in the context of future reviews.