Summary

On 30 March 2021, Ofcom published the outcome of its review of the wholesale voice markets 2021-2026

In summary Ofcom decided to:

  • deregulate fixed call origination (mobile call origination is already deregulated)
  • continue to cap the charges for both fixed and mobile domestic voice termination:
  • allow UK operators to set international call termination charges on a reciprocal basis where these are higher than the domestic caps (although if higher reciprocal charges are set this will likely provide an opportunity and incentive for bypass arrangements)
  • regulate IP interconnection: BT will be obliged to provide IP interconnection on fair, reasonable and non-discriminatory terms (including prices) and by 2025 offer IP interconnection with voice termination at the capped rate offered for calls routed via traditional interconnection
  • continue to cap charges for calls to 070 numbers equivalent to the mobile termination rate
  • remove the charge control, but not the obligation to set charges at cost, from the ported mobile number donor conveyance charge
  • incentivise use of common technical standards for IP interconnection.

Ofcom’s Wholesale Voice Markets Review 2021-2026

As with the wholesale fixed telecoms market review (which set the regulatory framework for UK fibre regulation and investment), although this review effectively sets the framework for voice regulation in the UK, it (despite Brexit) still followed the format of EU market reviews, which make the document unnecessarily long and inaccessible.

It consists of a series of parallel market reviews. Each market review first defines the relevant economic market for an ex-ante regulatory review, then assesses if any market participants have market power, then considers what remedies (if any) are appropriate. 

Markets reviewed and defined

Ofcom defined the following markets:

  • in respect of each fixed communications provider, the wholesale voice call termination services market for termination of voice calls to UK geographic numbers in the area served by that provider
  • in respect of each mobile communications provider, the wholesale voice call termination services market for termination of voice calls to UK mobile numbers in the area served by that provider
  • in respect of each holder of a 070 number range, the wholesale voice call termination services market for termination of voice calls to those 070 numbers in the area served by that provider

Ofcom explicitly declined to identify wholesale call origination as a market.

Ofcom did not define a market for ported mobile number donor conveyance charge, although in contrast to their decision on wholesale call origination, this was somewhat circular (and perhaps questionable) in that Ofcom started from the proposition that no future charge control was necessary, and so no market needed to defined.

Findings of Significant Market Power

Ofcom found that each provider of call termination (i.e. fixed call termination, mobile call termination and 070 call termination) had significant market power. 

Remedies imposed

On every operator providing voice termination services

Ofcom required each operator providing fixed, mobile and/or 070 voice termination services to:

  • provide network access
  • be subject to a charge cap (separate for fixed, mobile and 070) for termination of domestic calls
  • charge for termination of international call no more than: (i) the domestic cap, or (ii) the reciprocal rate charged for call termination in the originating country

On BT

Whilst Ofcom’s findings of every operator having market power in its voice termination market logically flow from the market review structure and process adopted, Ofcom also considered the overall market position of operators and has imposed asymmetric regulation – less on the smaller operators and more on the largest operator BT. Following Ofcom’s decisive shift back to encouraging network competition and investment in the broadband market review, the current regulatory environment is increasingly starting to feel like a rerun of Oftel’s greatest regulatory hits from the 1990s (Full disclosure: the author worked at Oftel in the 1990).

Ofcom required BT to:

  • not unduly discriminate
  • publish a reference offer (i.e. standard contract and prices, available to all)
  • maintain accounting separation between various divisions and publish regulatory accounts
  • be subject to a charge control on traditional (time division multiplex) interconnection circuits
  • in respect of (newer) IP interconnection:
    • ensure its charges are fair and reasonable
    • notify its charges
    • provide transparency over quality of service
    • not levy specified additional charges from 1 April 2025
    • provide transparency over IP interconnection migration