Ofcom Changes

Differences to proposals set out in the September 2005 Consultation

The measures described above are broadly similar to the proposals set out in the September 2005 Consultation. The main differences concern:

• the duration of the interim period for 0870 calls;
• price ceilings for 0870 calls during the interim period; and
• price ceilings for 0845 calls over the next two years.

The nature of these changes and the reasons for making them are as follows.

The duration of the interim period for 0870

In the September 2005 Consultation, Ofcom proposed to restore the geographic link for 0870 calls and remove 0870 calls from the scope of the NTS Condition after a 12-month interim period. Following the consultation, Ofcom now proposes that the interim period should be for 18 months from the date of publication of the Statement on the Numbering Review.

Ofcom is aware that a number of respondents, especially consumers, will be opposed to this extension of the interim period. In Ofcom's view, however, it is justified for the following reasons:

• A significant number of SPs are likely to want to move from an 0870 number to a number on a different range, in order to be able to continue revenue sharing. The capacity of some of the alternative ranges, however, may be at or close to exhaustion, by the time the changes come into effect. Ofcom will therefore need to open up new revenue sharing ranges to accommodate the likely demand for numbers from those wishing to move away from 0870. This issue is being considered as part of the Numbering Review, which is due to be completed in July 2006. It will be difficult for those wishing to move away from the 0870 range to do very much planning until they know which ranges will be available for them to move to, and the new number ranges are available for allocation. In Ofcom’s view, therefore, it is appropriate for the interim period to begin from the date on which the Numbering Review Statement is published.
• Information provided by a number of SPs indicated the lead-time for the production of marketing material such as catalogues and brochures can in some cases be 12-18 months. In order to avoid any unnecessary migration costs, Ofcom considers it reasonable to allow SPs 18 months to plan for the likely end of revenue sharing on the 0870 range.
• A number of CPs, resellers and SPs also emphasised that a large number of commercial agreements will need to be renegotiated in the light of the changes proposed for 0870. Ofcom accepts that this is the case, and considers that a longer interim period will be useful in providing more time for this process to be satisfactorily completed.

Price ceilings for 0870 calls during the interim period

In the September 2005 Consultation, it was proposed that during the interim period the designation of 0870 numbers in the Plan would be amended so that the current prices from BT lines would be decoupled from the standard rates for geographic calls and replaced with designations that reflect the current prices. This would in effect have placed a ceiling on 0870 prices from BT lines, ensuring that they did not go up in nominal terms during the interim period. BT also offered to provide a voluntary undertaking to the effect that it would not reduce the rates paid to TCPs for 0870 call termination during the interim period.

Ofcom no longer proposes to apply these measures, for the following reasons:

• We do not believe that it is necessary to impose price ceilings in the manner proposed, because BT’s standard rates for geographic calls have been on a downward trend for many years, and are subject to competitive pressures in the retail market, which are likely to ensure that this trend continues. Decoupling the 0870 designations from the standard geographic rates could have reduced the competitive pressure on 0870 call prices and resulted in 0870 charges being higher than would otherwise have been the case. This would not have been in the interests of consumers.
• Industry respondents indicated that they attached little value to BT's undertaking, primarily because of its voluntary nature. The proposed approach therefore promised to provide little perceived benefit in terms of greater revenue certainty for TCPs.

Price ceilings for 0845 during the two-year review period

The measures proposed for 0845 were similar to those described above in relation to 0870. The only difference was that, in its draft undertaking, BT indicated that it would review the factors used in calculating the termination rates for 0845 calls half way through the two-year review period.

Ofcom no longer proposes to apply the proposed measures, for the reasons given above in relation to 0870 calls.