Telecommunications
Oftel
NOTICE UNDER SECTION 15(3) OF THE TELECOMMUNICATIONS ACT 1984
PROPOSED MODIFICATIONS TO THE LICENCES OF VODAFONE, O2 , T-MOBILE AND ORANGE
1. The Director General of Telecommunications (the “Director”), in accordance with
section 15(3) of the Telecommunications Act 1984 (the “Act”), hereby gives notice
that, following his consideration of the report of the Competition Commission (the
“Commission”) of 31 December 2002 on two terms of reference made by him on 7 January
2002 under section 13 of the Act with respect to the charges made for terminating
calls from fixed and mobile networks (the “References”), he proposes to make modifications
to the licences granted by the Secretary of State for Trade and Industry under section
7 of the Act to Vodafone Limited (“Vodafone”) on 9 December 1993, Telecom Securicor
Cellular Radio Limited (“O2”) on 22 March 1994, Mercury Personal Communications Limited
(“T-Mobile”) on 9 May 1995, and Orange Personal Communications Limited (“Orange”)
on 27 July 1995, collectively referred to hereinafter as the “MNOs”.
2. The effect of the modifications which the Director proposes to make is to reduce
the charges that the MNOs make to operators of fixed or mobile public telecommunictions
systems for certain calls terminating on their respective networks (“GSM Termination
Charges”) by 15 per cent in real terms by 24 July 2003 at the latest. Another effect
of the modifications is that the MNOs must, by 2 May 2003, offer to amend their interconnection
agreements so that their GSM Termination Charges accord with any reductions necessary
to comply with their obligations achieving the above-mentioned effect. The proposed
modifications take the form of inserting two new conditions to each of the MNOs’ licences
mentioned above, namely Condition 70A (Control of Interconnection Charges (Fixed to
Mobile)), and Condition 70B (Control of Connection Charges (Mobile to Mobile)), in
the case of the licences of T-Mobile and Orange, and Condition 70B (Control of Interconnection
Charges (Fixed to Mobile)) and Condition 70C (Control of Interconnection Charges (Mobile
to Mobile)), in the case of the licences of Vodafone and O2)).
3. The reason for the proposed modifications is that it appears to the Director that
they are requisite for the purpose of remedying or preventing the adverse effects
specified in the report to the extent that it is possible to do so before 25 July
2003 in that the level of GSM Termination Charges would be reduced towards that of
the fair charge (see further about this in paragraph 4 below) identified by the Commission.
In reaching that view, the Director has also had regard to the findings by the Commision
and their formal recommedations on licence modifications.
4. The Commission concluded in their report to the Director that the GSM Termination
Charges of the MNOs currently operate against the public interest and that, in the
absence of any charge control on them, such Charges may be expected to operate against
the public interest. In particular, the Commission found that the amount by which
those Charges would, in the absence of a charge control on them, exceed the fair charge
would be contrary to the interests of consumers in the UK in respect of the prices
charged for telecommunication services. The Commission made these findings because,
in the absence of such control, they believe that the GSM Termination Charges would
be set above levels that reflect a reasonable estimate of their costs (that is to
say, their long-run incremental costs, including allowances for relevant network and
non-network fixed and common costs, plus an allowance for externalities) and the Commission
term the level of such Charges that reflects such costs “the fair charge”.
5. The Director is required by section 15(3) of the Act to consider any representations
or objections which are duly made and not withdrawn. Representations or objections
may be made to: Selena Bevis, Oftel, 50 Ludgate Hill, London EC4M 7JJ (telephone:
020 7634 8844, e-mail: selena.bevis@oftel.gov.uk) by not later than 28 March 2003.
6. All confidential information should be clearly marked as such and separated out
into a confidential annex. All representations and objections received by Oftel, with
the exception of material market confidential, will be made available for inspection
in Oftel’s Research and Intelligence Unit and may be published.
7. Copies of the full text of the proposed modifications can be obtained from Oftel’s
Research and Intelligence Unit at the above address (telephone: 020 7634 8761, e-mail
infocent@oftel.gov.uk). The Commission’s report is available from the Stationery Office
or Oftel’s website at www.oftel.gov.uk.