Charge controls for Wholesale Line Rental and related services

Summary

Summary

Introduction

1.1 In our statement on the Review of Fixed Narrowband Services Wholesale Markets (the Wholesale Review) ^(-1-), we determined that there is a single market for wholesale analogue exchange lines (outside the Hull area) ^(-2-) and that BT has significant market power (SMP) in that market. We also confirmed the continuing need for Wholesale Line Rental (WLR) as one of the key remedies addressing BTs SMP in that market. Furthermore, we explained our conclusion that, in the absence of regulation, Openreach has incentives to set prices for WLR higher than could be expected in a competitive market, and that a charge control is required to ensure that Communications Providers (CPs) are able to purchase WLR at the prices that would be expected in a competitive market ^(-3-).

1.2 This statement sets out our decisions on the charge controls and therefore must be read in conjunction with the Wholesale Review.

1.3 In this document we also set out for further consultation our proposals on the implementation plan for the introduction of the new Core WLR Rental Service and our proposed approach to the regulation of higher care service options for WLR.

1.4 WLR is a product Openreach ^(-4-) supplies to Communication Providers (CPs), 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). ^(-5-)

Background

1.5 The previous charge ceilings for WLR services were set in the 24 January 2006 statement, Wholesale Line Rental: Reviewing and setting charge ceilings for WLR services (the First WLR Statement). ^(-6-) Reflecting the separately defined markets for wholesale analogue exchange lines for residential and business customers in each of which BT was found to have SMP, Ofcom set two separate rental charge ceilings at that time.

Service	Current charge ceilings for annual rental
Residential WLR	100.68
Business WLR	110.00

 

1.6 These charge ceilings were fixed in nominal terms and have not changed since they were set in January 2006. Openreach has held the charges at the ceilings since they were set.

WLR Consultation

1.7 We published our consultation document Charge controls for Wholesale Line Rental and related services ^(-7-) (the WLR Consultation) on 3 July 2009. In the WLR Consultation we consulted on proposals for setting a new WLR charge control. We proposed moving from rental charge controls on both residential and business lines to a single control on a new core WLR rental service (based on a revised WLR Basic service) which will be available to residential and business customers.

1.8 In addition, the WLR Consultation sought stakeholder views on:

• the requirement for additional controls on options for higher care levels which can be purchased in combination with the Core Rental Service; and
  
• the proposed new charge ceilings for key installation and migration charges, that is the transfer of WLR lines between Communications Providers and the establishment of a new line.

1.9 We proposed that new controls would apply until March 2013, and we discussed the possible alternative of setting the control to end on March 2011 to ensure consistency of the LLU and WLR charge controls.

1.10 The WLR Consultation closed on 14 August. We received 10 responses, eight non-confidential ^(-8-) and two confidential. We have carefully considered each of the responses in making the decisions set out in this statement. We discuss the responses in detail in Sections 3 to 7.

Conclusions

1.11 In summary, we have decided that:

• The current controls on Residential and Business WLR will be replaced by a single control, for a Core WLR Rental service. The core WLR Rental Service will be available to all customers, residential and business, and will include a standard level of service and directory listings for residential and business numbers.
  
• The implementation of the core WLR service will be phased in order to allow Openreach appropriate time to ensure that they can make necessary changes to their systems to be able to provide products that fulfil the requirements of the core service.
  
• We will set new price controls for some related services, WLR line transfers and new connections.
  
• The control will apply for the period to March 2011.

1.12 The new charge controls are set out below:

	Current price	Oct 09 March 10	2010/11
New WLR Core Rental Service	100.68	100.68	RPI +3.8%
WLR transfer charge	2.00	3.00	RPI +3.8%
WLR new connection	88.00	67.00	RPI -16%

 

1.13 We are further consulting on three issues:

• The transition to the new WLR Core Rental service. We propose full introduction after the introduction of WLR3 functionality in Openreachs Release 1400, currently scheduled for July 2010.
• Operation of the WLR Premium charge ceiling 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 propose that Openreach may provide higher service levels at an additional charge. While such services will be subject to other SMP obligations imposed in the wholesale review (e.g. requirement not to unduly discriminate, requirement to publish a reference offer) we are proposing that they will not be subject to a basis of charges obligation.
  

Footnotes:

  1.-http://www.ofcom.org.uk/consult/condocs/wnmr_statement_consultation/

  2.- Rather than separate markets for business and residential wholesale analogue exchange lines defined by the Office of Telecommunications (Oftel) in 2003.

  3.-http://www.ofcom.org.uk/consult/condocs/wnmr_statement_consultation/ see Section 16.

  4.- Openreach is the access services division formed as a result of BT's Undertakings given to Ofcom in September 2005 in lieu of a reference to the Competition Commission under the Enterprise Act.

  5.- Review of Fixed Narrowband Retail Services Markets http://www.ofcom.org.uk/consult/condocs/retail_markets/statement/

  6.-http://www.ofcom.org.uk/consult/condocs/wlrcharge/statement/statement.pdf

  7.- Charge controls for WLR and related services, http://www.ofcom.org.uk/consult/condocs/wlrcc/

  8.- Responses can be found at http://www.ofcom.org.uk/consult/condocs/wlrcc/responses/