Conditions FA6 and FB6

BT's response to Ofcom's consultation - Local loop unbundling: setting the fully unbundled rental charge ceiling and minor amendments to SMP conditions FA6 and FB6

Issued 10 October, 2005

EXECUTIVE SUMMARY

Ofcom is proposing to set a price ceiling for 2005/6 of £81.85 per annum for the fully unbundled rental charge. To calculate this ceiling, Ofcom has used cost information provided by BT to which it has made some adjustments whilst disallowing some cost elements.  Ofcom proposes to maintain this ceiling until the wholesale local access market is next reviewed unless current circumstances materially change. Ofcom is also proposing amendments to SMP conditions FA6 and FB6 requiring BT and Kingston respectively to notify technical information.

BT understands the principle of setting a charge ceiling to provide BT's wholesale customers with certainty as well as providing transparency as to Ofcom's approach to costing LLU.  BT is pleased that the fully unbundled rental charge introduced on 1 August 2005 is within the price ceiling for 2005/6 of £81.85 pa.   BT will also shortly be announcing a revision to its fully unbundled new provide connection charge to remove drop wire costs.

For the reasons given to a number of questions, BT considers that some of the assumptions behind the rental price ceiling may turn out to be inaccurate, and that a higher ceiling may be justified.  However, BT is committed to maintaining its current charge for some time, consistent with its goal of supporting alternative network investment in the UK.  The precise assumptions used to derive the 2005/6 ceiling should not be determinative of BT's fully unbundled rental charge. 

BT does suggest, however, that Ofcom should give further consideration to its approach and assumptions for 2006/7 and beyond.  Ofcom's methodology to determine the charge is based on forecast 2005/6 costs for this service but Ofcom is proposing a ceiling which, assuming that the relevant market review is completed by December 2007, could apply until late 2007/8.  To date, little attention has been given to these further years. 

In these circumstances, BT believes either that:

• assumptions should be reviewed next year so that 2006/7 charges can be based on 2005/6 data (in the same way that 2005/6 charges are based on 2004/5 data); or

• Ofcom should give consideration to the factors which would be relevant were a price cap to be set for this service to run until 31 March 2008. 

BT agrees that it is inappropriate to set conditions that introduce artificial delays to the publication of technical changes where adequate alternative processes are already in place, in this case industry agreement through NICC.  BT agrees with Ofcom's proposal to modify SMP conditions FA6 and FB6.

Download full response as PDF document

Comments should be addressed by e-mail to Francine Ravetllat at francine.ravetllat@bt.com