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Disputes between BT and each of Sky, TalkTalk and Virgin Media about BT charges for Ethernet services

CW/01052/08/10

Disputes between: British Telecommunications plc (BT) and each of  British Sky Broadcasting Limited ("Sky"), TalkTalk Telecom Group plc ("TalkTalk") and Virgin Media Limited ("Virgin") (together the "Parties")
Case opened: 13 September 2010
Case closed: 20 December 2012
Issue: The Parties asked Ofcom to use its powers under Section 190 of the Communications Act 2003 (the "Act") to resolve the disputes between the Parties and BT concerning the level of BT's historic charges for backhaul extension services ("BES") and wholesale extension services ("WES").
Relevant instrument: Ofcom resolved these disputes using its powers under Chapter 3 of Part 2 of the Act.

Update note: 13 March 2013

Sky and TalkTalk each requested that Ofcom exercise its discretion under section 190(6) of the Act to require BT to pay the costs they incurred in connection with these disputes. We have decided that the circumstances of these disputes and BT’s conduct are on balance not such that we should exercise our discretion to require BT to pay either Sky’s or TalkTalk’s costs in this case.

We have published our letters communicating our decisions to Sky and TalkTalk (see related items).

End of update note

Update note: 27 February 2013

Three appeals against Ofcom’s determinations to resolve these disputes and the related disputes between Cable & Wireless Worldwide plc group and BT (CW/01078/11/11) and between Verizon UK Limited and BT (CW/01087/02/12) have been filed with the Competition Appeal Tribunal (“CAT”). Details of the appeals can be found on the CAT’s website at http://www.catribunal.org.uk/

End of update note

On 20 December 2012, Ofcom issued its final determinations of these disputes and of the related disputes between Cable & Wireless Worldwide plc group (“CWW”) and BT (CW/01078/11/11) and between Verizon UK Limited and BT (CW/01087/02/12) to the parties in dispute.

We have concluded that BT has overcharged the Parties, CWW and Verizon a total of £94,823,000 for certain wholesale Ethernet services and that BT is required to make repayments to the Parties, CWW and Verizon for the full amounts by which it has overcharged them.

We have published a non-confidential version of our final determinations (see related items).

Update note: 13 July 2012

On 19-21 June 2012, the Court of Appeal heard the appeal brought by BT against the Competition Appeal Tribunal's judgment in British Telecommunications plc v Office of Communications (Partial Private Circuits) ([2011] CAT 5) (the "PPCs appeal"). In light of our proposals contained in our draft determinations in relation to these disputes and the comments received from the parties to the disputes, as well as the nature of the arguments put to the Court of Appeal by the parties to the PPCs appeal, we believe that the Court of Appeal's judgment is likely to be relevant to the issues raised in these disputes.

Accordingly, we consider that it is appropriate not to issue our final determination of these disputes until after the Court of Appeal hands down judgment and we have had an opportunity to consider the implications of the judgment for the matters in dispute in this case.

We will continue to consider the matters in dispute as appropriate, so that we can resolve the disputes as soon as possible following the Court of Appeals judgment.

End of update note

Update note: 28 March 2012

On 26 March, Ofcom decided to extend the time to provide responses to its draft determinations until 5 pm on 20 April 2012.

End of update note

Update note: 9 February 2012

On 8 February 2012, Ofcom issued draft determinations to the Parties in these disputes (please see related item).

The period for comments on the draft determinations will close at 5 pm on 5 April 2012. Please send responses to:

Paul Dean
Ofcom
Riverside House
2A Southwark Bridge Road
London SE1 9HA

Or by e-mail to paul.dean@ofcom.org.uk

End of update note

Update Note: 26 November 2010

On 15 November 2010, BT filed an appeal with the Competition Appeal Tribunal (CAT) against a series of decisions made by Ofcom in connection with these disputes. Details of the appeal can be found on the CATs website at http://www.catribunal.org.uk/files/1172_BT_Summary_251110.pdf

End of Update note

Update note: 5 October 2010

Ofcom has received a number of representations whether exceptional circumstances exist in this case, due to the apparent overlap with a number of the issues raised in the imminent Partial Private Circuits ("PPC") case in the Competition Appeal Tribunal (case 1146/3/3/09). Ofcom considers that there is a significant overlap between the issues, and that the judgment in the PPC case is likely to have a bearing on the issues to be considered here. Ofcom therefore considers that exceptional circumstances exist and that as a result it may not be possible to resolve the disputes within four months. Ofcom nonetheless intends to progress consideration of these disputes as far as possible in the meantime, in order to enable us to resolve these disputes as soon as possible.

End of update note

These disputes concern allegations by the Parties that BT's charges for particular BES and WES products were historically too high, as they were not "cost oriented".  Sky and TalkTalk claim that BT's charges for certain BES products were not cost oriented during a period between 24 June 2004 and 31 July 2009 (the "Relevant Period"), whereas Virgin claims that BT's charges for certain BES and WES products were not cost oriented during a period between 1 April 2006 and 31 March 2009. The Parties claim that, as a result, they have significantly overpaid BT for these products and that BT should reimburse them the amounts overcharged.

BES and WES are high speed point-to-point data circuits that use Ethernet transmission. BES provides a secure data link between the communication provider's network and its equipment within the relevant unbundled BT local exchange. WES provides dedicated symmetric transmission at a range of bandwidths between a 3rd party customer premise and a communication provider's network node. Ofcom considers that on the face of the dispute submissions, there appear to be disputes between each of the Parties and BT that commercial negotiations have failed to resolve.

Ofcom considers that the disputes meet the relevant statutory criteria and that it is appropriate for Ofcom to handle them according to section 186 of the Act and, accordingly, Ofcom has accepted the disputes for resolution.

In resolving disputes Ofcom must act in accordance with the six Community requirements that give effect to Article 8 of the Framework Directive. In summary, those requirements are:

  • to promote competition in communications markets;
  • to secure that Ofcom contributes to development of the European internal market;
  • to promote the interests of all European Union citizens;
  • to act in a manner which, so far as practicable, is technology-neutral;
  • to encourage, to the extent Ofcom considers it appropriate, the provision of network access and service interoperability; and
  • to encourage such compliance with certain international standards as is necessary for facilitating service interoperability and securing freedom of choice for the customers of communications providers.

Scope of the disputes:

The scope of the disputes is to determine whether, during the Relevant Period:

i. BT has overcharged the Parties for the BES and/or WES products concerned and, if so;
ii. by how much the Parties were overcharged during the Relevant Period; and
iii. whether and by how much BT should reimburse the Parties in relation to the overcharge.

Procedural matters:

Guidance on the resolution of disputes can be found in Ofcom's Guidelines for the handling of competition complaints, and complaints and disputes about breaches of conditions imposed under the EU Directives.

We are currently seeking the Parties' views on whether the issues raised in the imminent Partial Private Circuits case in the Competition Appeal Tribunal (case 1146/3/3/09), and their apparent overlap with a number of the issues raised in these disputes, give rise to exceptional circumstances in these disputes.

All representations on the scope of the disputes, or the possibility that exceptional circumstances exist, should be submitted to Ofcom by 20 September 2010.

Stakeholders interested in the outcome of these disputes should notify Ofcom by 20 September 2010, describing the relevance of the outcome of these disputes to their business. Stakeholders with relevant information and evidence in respect of these disputes should submit this to Ofcom by 4 October 2010.

Stakeholders who wish Ofcom to join them as parties to the disputes must provide evidence, as set out in Ofcom's Guidelines, that they are in dispute.

Case Leader: Paul Dean (e-mail: paul.dean@ofcom.org.uk)
Case Reference: CW/01052/08/10

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