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“FleXtel statement at the NTS Focus Group of the 9 August 2007 (to be included in the meeting notes)
FleXtel generally supports Ofcom’s broad policy objective to protect consumers from
rapacious pricing. To ensure proper competition, price transparency is paramount
and so retail prices must be accurately labelled, this also protects consumers from
pricing scams. In normal markets, the retailer sets its retail tariff, taking into account
a negotiated wholesale tariff.
Ofcom’s intervention removes 0870 from the NTS Call Origination Condition, which
controls the wholesale price, based on BT’s retail price. It follows that TCPs should
now be able to set their own wholesale rates and have, as Ofcom promised,
“revenue certainty restored”. Therefore it is surely unreasonable for Ofcom to
impose a common termination rate based, once again, on BT’s retail price. The
question is therefore, should BT continue to control wholesale rates, if Ofcom have
promised “BT would purchase call termination from TCPs”?
It is now recognised that, if Ofcom finds in favour of BT’s offered rate, of about one
third of penny per minute, then TCPs will be forced to charge the called party up to
five pence per minute to receive 0870 calls. We can find no evidence that Ofcom
have taken this cost into account in its impact assessment. Furthermore, when
consulting on this intervention, Ofcom failed to highlight this extra cost burden to
stakeholders. Indeed, the consultation was silent on the issue in the “press release”,
the “high level summary” and in the “plain-English summary”. Only on page 67 of the
215-page detailed document was there a hint that such costs were “possible”.
As a result of the current state of affairs, a number of organisations have called on
Ofcom to delay implementation. These include the Cabinet Office, the FCS and the
CMA . Indeed, of all the NTS Focus Group members, it seems that only a minority
(including BT and Ofcom) wish to proceed .
When appraising the recent request from BT for a dispute, Ofcom may wish to
consider the Competition Act issues surrounding price fixing and cartels. The EU
Commission may be interested to discover why Ofcom is being asked by BT to force
wholesale prices below its suppliers costs, particularly as BT and Ofcom both
appear to favour proposals contrary to the opinion and expertise of many other
stakeholders.
Finally, if Ofcom continues with its proposals, without underpinning them with proper
impact assessment and consultation, with respect to the costs to receive 0870 calls,
then Ofcom’s actions could be construed as negligent. Some stakeholders may feel
justified in seeking compensation, if this were the case.”
End of Flextel statement.
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