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Packing your trunk - price regulation and leased lines

An increasing source of work for people like me is the provision of expert reports and testimony quite often in another country or territory relating to the regulatory and legal aspects of telecommunications. I have recently been involved in providing expert witness services in another territory on the subject of leased lines. For some time now the regulation of Wholesale Leased Lines (“WLL”) and leased lines has thought to be a settled matter in the UK.

Some “disturbance” in the market now I think will call into question the market definition that is appropriate before regulating leased lines. The problem arises in the way in which regulation of leased lines has traditionally taken place. The regulated section of the leased line is the terminating trunk segment. In simple terms, that is the bit from the end user site to the first node or point of connection where it’s handed off to another system. If the signals, however, stay on the leased line after they pass through the first node of an operator who has also provided the terminating trunk segment then from the node onwards the trunk segment of the leased line is not regulated.

It would seem that it is possible that Openreach has cottoned onto this and upped its prices for the trunk segment to a degree such that other operators of WLL and leased line users have substantial price rises.

The definition of the regulated bit of leased lines comes from the recommendation of the EU Commission some very many years ago. Supposedly the section from the first node to wherever is competitive. There are a lot of people who disagree with that but Ofcom does not appear to one of them. It appears to be following the orthodox route without recognising whether or not in fact the market its examining is the correct one. It may seem that quite a few people sceptical of what Openreach seek to do in respect of increasing charges from the first node want to challenge the position.

It is, however, prima facie evidence of some degree of Significant Market Power that Openreach could increase to the level now expected that is charges.

Those affected may inevitably in the first instance complain to Ofcom who may then simply wring their hands and say they have been following the EU Commission guidelines as to market definition, they have regulated the bit that is and the rest of it ain’t. They could if it wished, undertake a market review using a different market definition that took into account the market power being exhibited by Openreach and anybody else if it is in a similar position.

But in respect of such matters the wheels will grind slow until Ofcom builds something into its program then drafts a consultation paper, considers the results and some months and years after when the process first starts issues some form of statement. The alternative is not one palatable from most companies perspective. That is, to take on the might of Openreach in Court or the Competition Appeal Tribunal to demonstrate the true market position for damages or other relief. But if numbers of people got together and shared that cost it might make more sense.

If what I have described above is a problem that is foxing you as you read this, I would invite you to give me a call on the number shown to discuss it further.

Ted Mercer

Partner

tmercer@maddoxlegal.co.uk

07802 432 416


#leasedlines #openreach #trunksegment #regulation #smp

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