Competition Commission to consider BT appeal over Ofcom price controls

BT has challenged price controls proposed by Ofcom on two types of charge the company's 'Openreach' division can levy on competitors to use its copper network. Under the 2003 Communications Act, decisions by the regulator relating to price controls must be referred to the CC for determination from the Competition Appeal Tribunal (CAT).

The charges, which were announced by the regulator in March 2012, are expected to cover the period 2012-14. The CC has until 29 March 2013 to come to a decision on the pricing issues.

Openreach was established as part of a deal struck between the UK's dominant fixed line telecoms company and the regulator in 2005. It manages BT's 'local loop' copper access network so that other BT businesses and competing communications providers can access the network on an open and equal basis. As part of the arrangement Ofcom sets the prices Openreach is able to charge for its wholesale services, ensuring that they are made available to other providers on an "equivalent basis" to that offered to BT.

The price controls at issue concern two types of access: Local Loop Unbundling (LLU), which allows communications providers to install their equipment in BT's local telephone exchanges to provide broadband and telephone services to their customers, and Wholesale Line Rental (WLR), which is used by communications providers to offer telephone services to consumers using lines rented from BT. LLU can be supplied alongside or in combination with WLR.

The new price caps proposed by Ofcom in March saw the price of a fully unbundled line into a property fall from £91.50 per year to £87.41 per year, while the price for a shared line dropped from £14.70 per year to £11.92. Fully unbundled lines are those taken over by a communications provider for broadband and telephone services, while on a shared line a provider will use a proportion of the line to supply broadband only. The cost of WLR for telephone services using BT lines was cut from £103.68 per year to £98.81 per year.

The number of 'unbundled' lines in the UK has increased from 123,000 in September 2005 to over eight million, according to the latest figures from Ofcom. There are also over 6.2 million WLR connections in the UK.

In its appeal to the CAT, BT alleged that the calculations relied on by Ofcom in reaching the new figures contained "material errors", both in the allocation of costs and income associated with each type of service and in the valuation of relevant assets.

Sky and TalkTalk have also challenged Ofcom's decision in a separate appeal to the CAT, which the CC said it expected to lead to a "similar reference". The parties in both cases have been granted permission to intervene in each other's appeals, while Everything Everywhere is intervening in both appeals.

Ofcom began a consultation last month on plans to place new price caps linked to inflation on both the 'traditional interface' technology and new Ethernet high-speed services BT can lease to other companies on a wholesale basis. The new proposals will, the regulator said, "align the prices of these BT products with their cost" by 2015.