For announcement of referral see Oftel Press Notice
01/02
Cost of calls to Mobile phones
Terms of reference
Charges made by Orange and One 2 One for terminating calls
The Director General of Telecommunications (the "Director"), in exercise
of his powers under section 13 of the Telecommunications Act 1984 (the
"Act"), hereby refers to the Competition Commission (the "Commission")
for investigation and report, the following questions:
1. Whether any of the following matters operate, or may be expected to
operate, against the public interest:
(a) the charges, in the absence of a charge control mechanism on those
charges, made by Orange Personal Communications Services Limited ("Orange")
to operators of fixed or mobile public telecommunications systems for
calls to telephone handsets connected to Orange’s mobile public telecommunications
system;
(b) the charges, in the absence of a charge control mechanism on those
charges, made by Mercury Personal Communications Limited ("One 2 One")
to operators of fixed or mobile public telecommunications systems for
calls to telephone handsets connected to One 2 One’s mobile public
telecommunications system.
2. If so, whether the effects adverse to the public interest which the
above-mentioned matters have, or may be expected to have, could be remedied
or prevented by modifications of the conditions of the respective licences
granted under section 7 of the Act to Orange on 27th July 1995
and to One 2 One on 9th May 1995.
3. For the purpose of assisting the Commission in carrying out its investigation
on this reference:
(a) the Director hereby specifies, pursuant to section 13(3)(a) of the
Act, that in his opinion the adverse effect to the public interest that
the absence of a charge control mechanism on the above-mentioned charges
has, or may be expected to have, is the harm likely to be caused to consumers.
The Director has in his recent investigation found that Orange’s
and One 2 One’s current interconnection charges for termination of
calls on their respective mobile networks are excessive in relation to
cost, to the detriment of consumers (see note 1
below); and
(b) the Director further specifies, pursuant to section 13(3)(b) of the
Act, that in his opinion that effect adverse to the public interest could
be remedied or prevented by modifications of the conditions of the respective
licences granted to Orange and One 2 One by inserting in each of those
licences a condition substantially in the form of that set out in Annex
A attached to this reference.
4. For the purposes of this reference, a "call" shall have the same meaning
as in the condition set out in Annex A.
5. The report on this reference shall be made within a period of six
months beginning with the date of this reference.
7 January 2002
DAVID ALBERT EDMONDS
Director General of Telecommunications
Note:
1. The conclusions following that investigation are set out in Oftel's
Statement Review of the Charge Control on Calls to Mobiles, 26
September 2001, which is in Annex B attached to this Reference.
Annex A – Licence condition proposed by the Director
(Referred to in Paragraph 3(b) of the Terms of Reference)
The modifications to the Licences of Orange and One 2 One to introduce
a charge control would be by the insertion of a new Condition 70 as follows:
CONTROL OF INTERCONNECTION CHARGES
70.1 Except to the extent that the Director otherwise consents
under paragraph 70.5 below, the Licensee shall take all reasonable steps
to secure that, during any Relevant Year, the Average Interconnection
Charge does not exceed the Target Average Charge for any such Year.
70.2 For the purposes of this Condition, the Average Interconnection
Charge shall be:
(a) calculated as the average of the Interconnection Charges during the
Relevant Year in question, weighted according to the profile of the Licensee’s
call minutes by charging period in the Base Year. Where any Interconnection
Charges are in force during a part only of a Relevant Year (commencing
or ending at a date in the course of the Relevant Year), the weighting
shall be derived from the profile of call minutes by charging period in
the corresponding part of the Base Year; and
(b) determined according to the Licensee’s standard charges, and
no account shall be taken of any discounts offered by the Licensee, whether
in respect of any particular customer or any category of customers or
any category of Calls.
70.3 For the purposes of this Condition:
(a) the Target Average Charge shall be calculated as the Adjusted Base
Target Charge multiplied by the sum of 100% and the Controlling Percentage;
(b) the Adjusted Base Target Charge shall be calculated as the Base Target
Charge divided by the sum of 100% and the Adjustment Percentage; and
(c) the Base Target Charge shall be calculated as the average of the
Interconnection Charges during the Base Year, weighted according to the
profile of the Licensee’s call minutes by charging period in the
Base Year. Where any Interconnection Charges were in force during a part
only of a Base Year (commencing or ending at a date in the course of the
Base Year), the weighting shall be derived from the profile of call minutes
by charging period in that part of the Base Year.
70.4 Notwithstanding (and without prejudice to the generality
of) the obligation imposed on the Licensee by paragraph 70.1 above:
(a) if the Licensee has failed to secure that the Average Interconnection
Charge has not exceeded the Target Average Charge for any Relevant Year,
the Licensee shall make such adjustments to its Interconnection Charges
and by such day in the following Relevant Year as the Director may, after
consultation with the Licensee, consider to be appropriate for the purpose
of remedying that failure, and so direct the Licensee. Such adjustments
in the following Relevant Year shall not be relevant for the purpose of
establishing compliance with paragraph 70.1 above in that Relevant Year;
and
(b) if it appears to the Director that the Licensee is likely to fail
to secure that the Average Interconnection Charge for the last Relevant
Year, which begins on 1 April 2005 and ends on 31 March 2006, does not
exceed the Target Average Charge for that Year, the Licensee shall make
such adjustments to its Interconnection Charge and by such day in that
Year as the Director, after consultation with the Licensee, considers
appropriate for the purpose of avoiding that failure, and so directs the
Licensee.
70.5 Where the Average Interconnection Charge is less than the
Target Average Charge for any Relevant Year, the Licensee shall not make
such adjustments to its Interconnection Charges in the following Relevant
Year to recover the difference between the Average Interconnection Charge
and the Target Average Charge for the Relevant Year in question, unless
the Director has given his prior written consent to such adjustments.
Such adjustments in the following Relevant Year shall not be relevant
for the purpose of establishing compliance with paragraph 70.1 in that
Relevant Year.
70.6 Unless the context otherwise requires, in this Condition:
"Adjusted Base Target Charge" has the meaning given to it in paragraph
70.3(b) above;
"Adjustment Percentage" means, for the purposes of each Relevant
Year other than the first Relevant Year, the percentage by which the Average
Interconnection Charge in the Base Year was above or below (as the case
may be) the Target Average Charge in the Base Year. For the purposes of
the first Relevant Year (which, for the avoidance of doubt, means the
period of 12 months beginning on 1 April 2002 and ending on 31 March 2003),
the Adjustment Percentage shall be deemed to be zero.
For the avoidance of doubt, the Adjustment Percentage shall (except for
the purposes of the first above-mentioned Relevant Year) be:
(a) negative, if the Average Interconnection Charge in the Base Year
was below the Target Average Charge in the Base Year;
(b) zero, if the Average Interconnection Charge in the Base Year was
equal to the Target Average Charge in the Base Year; or
(c) positive, if the Average Interconnection Charge in the Base Year
was above the Target Average Charge in the Base Year.
"Average Interconnection Charge" has the meaning given to it in
paragraph 70.2 above;
"Base Target Charge" has the meaning given to it in paragraph
70.3(c) above;
"Base Year" means the year ending on 31 March immediately preceding
the Relevant Year in question. For the avoidance of doubt, in relation
to the first Relevant Year, the reference in this definition to the "year
ending on 31 March immediately preceding the Relevant Year in question"
means the period of 12 months beginning on 1 April 2001 and ending on
31 March 2002;
"Call" means a circuit switched conveyance of a speech teleservice
only (as defined in the relevant ETSI standards) originating in a telecommunication
system which is connected to any of the Applicable Systems of a fixed
or a mobile telecommunication system and intended to terminate on a GSM
mobile handset using the GSM air interface for the conveyance of that
speech call, which is connected to the system of the Licensee. For the
purposes of this definition:
(a) "the relevant ETSI standards" means the European Telecommunications
Standard (ETS) of ETS 300 905 (GSM 02.03 version 5.3.2), Third Edition,
January 1998, which has been produced by the Special Mobile Group (SMG)
of the European Telecommunications Standards Institute (ETSI); and
(b) "GSM" means the Global System for Mobile communications (GSM) as
defined in the relevant ETSI standards.
"Controlling Percentage" means, in relation to any Relevant Year,
the amount of the change in the Retail Prices Index in the period of 12
months ending on 31 December immediately before the beginning of that
Year, expressed as a percentage (rounded to two decimal places) of that
Index as at the beginning of that period, reduced by 12;
"Interconnection Charge" means the standard charge made by the
Licensee for the interconnection of a Call, and "interconnection" has
the same meaning as in the Interconnection Regulations;
"Relevant Year" means any of the four periods of 12 months beginning
on 1 April starting with 1 April 2002 and ending on 31 March 2006;
"Retail Price Index" means the index of retail prices compiled
by Her Majesty’s Government in respect of all items; and
"Target Average Charge" has the meaning given to it in paragraph
70.3(a) above.
Annex B
Oftel Statement Review of the Charge
Control on Calls to Mobiles, September 2001, referred to in footnote
1 of the Terms of Reference.
|
