Ofcom issues statement on wholesale voice market review

31 Mar 2021

British telecoms regulator Ofcom has published a statement setting out how it plans to regulate the wholesale markets that underpin fixed and mobile calls for the period between April 2021 and March 2026.

In a press release regarding the matter the watchdog said that, to continue to protect customers from high prices it had decided to cap termination rates for calls made and received, based on the cost of connecting a call. With Ofcom confirming that the cap for mobile call termination is being reduced ‘to reflect the lower costs faced by mobile operators’, it has said the mobile termination rate (MTR) cap will fall to GBP0.00379 (USD0.005) per minute in the first year of the market review period (the year to 31 March 2022), down from the existing figure of GBP0.00468 per minute. Looking further ahead, as per Ofcom’s ‘2021 mobile call termination [MCT] model’ it has said it expects the MTR over the charge control period to be as follows: GBP0.00371 from 1 April 2022; GBP0.00379 from 1 April 2023; GBP0.00387 from 1 April 2024; and GBP0.00393 from 1 April 2025. Additionally, Ofcom has said it will also continue applying this MTR cap for calls to ‘070’ numbers, which are used for personal or ‘follow-me’ services. For fixed voice termination, however, Ofcom has confirmed that it will maintain the current cap of GBP0.00292 per minute ‘in real terms’.

Separately, Ofcom has confirmed it plans to deregulate the wholesale market for landline call origination. Although the regulator noted that some phone companies still use fixed line incumbent BT’s wholesale ‘Wholesale Call Origination’ (‘WCO’) service to enable people to make outbound calls over their landline, it said that as these providers move to more modern methods of supplying landlines, they will no longer need to purchase this service from BT. As such, Ofcom expects the transition to more modern methods to take place by the end of 2025, adding that BT has offered voluntary commitments to maintain its WCO service in line with current regulation during that transition period.

Nonetheless, the regulator has revealed plans to regulate IP interconnection such that BT will be required to interconnect on ‘fair, reasonable and non-discriminatory terms, including prices’. Further, Ofcom will also require BT to publish a timetable for the migration from traditional interconnection to IP interconnection. To encourage this shift, BT has been ordered to offer interconnection with its IP network for termination of calls on BT’s network at the regulated termination rate from April 2025. According to Ofcom, such a requirement will ‘provide certainty to telecoms providers that by April 2025, they will be able to access the regulated termination rate for calls to numbers allocated to via IP interconnection, including for those numbers that may still be held on BT’s traditional network’. As a consequence, from April 2025 BT will no longer be able to charge for certain additional services for IP interconnection, on top of the regulated termination rate.

Of note though, in terms of the next steps Ofcom did note that EU legislation provides two routes under which UK providers can secure low termination rates for calls to the EU providers. According to the regulator, the first can be satisfied by individual UK telecoms providers, where the second would require the UK Government to make an application to the EU. Ofcom has said that should the UK Government decide on the second route, it would support it ‘as necessary’, though said that this may involve having to revisit some of its decisions, specifically the regulation of the termination rates for 070 numbers at the mobile termination rate.

All of Ofcom’s decisions come into force on 1 April 2021, except its changes to the caps for fixed, mobile and ‘070’ termination charges, which will take effect from 1 June 2021; this delay is reportedly to allow providers time to notify new termination rates where necessary to comply with the new rules. In addition, BT will be given six months to implement the transparency requirements for IP interconnection to publish (1) a reference offer setting our fair and reasonable terms for IP interconnection, and (2) information on the quality of service of its provision of interconnect circuits.

United Kingdom, BT Group (incl. Openreach), Ofcom