“Leased line charges to be reviewed by the CMA” – CityFibre and TalkTalk appeals to the CAT
First published by Admin on December 22, 2016 in the following categories: Latest
The Competition and Markets Authority has recently opened a case to investigate the prices that BT charges in providing lease line services to other telecom providers.
Two telecom providers – CityFibre and TalkTalk – have appealed to the Competition Appeal Tribunal (CAT) following an Ofcom decision in their three-year Business Connectivity Market Review (BCMR).
Ofcom’s conclusion
In the BCMR, Ofcom concluded that relevant markets which identify any provider with Significant Market Power (SMP) will be investigated and given restrictions. They also set out remedies to address competition problems which come about from having a SMP.
Every three years, a BCMR is conducted. The review imposes rules which may include price controls, where the competition in a market place is found to be ineffective. The aim of such a review is to ensure consumers/smaller businesses are protected to ensure there is free choice and effective competition.
Appeals
Under the Communications Act, if decisions by Ofcom are appealed to the CAT – which includes a price matter – the issue must be referred to the CMA. As mentioned above, both CityFibre and TalkTalk have brought the matter before the CMA in regards to price control in their appeals. The competition watchdog will have until 31 March 2017 to send its conclusions back to the CAT. The CAT will then be able to make its judgment, having considered the CMA’s findings.
This could play a crucial part in the telecom’s appeals.
The two telecom companies aren’t the only ones bringing an appeal. The Ofcom’s decision on non-price-control has pushed BT to make an appeal, which will be dealt with by the CAT.
The issue and appeals surrounding a price control decision is not of new phenomenon. As the Ofcom reviews markets for the provision of leased line services every three years, the issue has arisen before. Verizon and Vodafone submitted that a price control on Traditional Interface (TI) technologies needed to be readjusted. In their appeals, they argued that the TI price control imposed by Ofcom had been inappropriate. The Competition Commission came to the conclusion that the price control wasn’t inappropriate, therefore no changes needed to be made.
Waiting for CMA’s judgment
Now it’s for the CMA to decide whether the price controls were rightfully imposed. There’s a strong indication to suggest that they were imposed for the right reasons – to promote effective competition and to minimise the effects of an SMP. It’s crucial that the competition watchdogs here monitor and impose sanctions (where necessary). A lack of competition can increase prices, and the industry could become a monopoly. Whether the CMA will provide a favourable determination is yet to be seen.
Sources:
https://www.ofcom.org.uk/__data/assets/pdf_file/0015/72303/bcmr-final-statement-volume-one.pdf (Opens as PDF)
https://www.gov.uk/cma-cases/leased-lines-price-control-appeals-cityfibre-and-talktalk