Out-Law News 1 min. read

Ofcom to consider impact of mobiles and VOIP on landline providers' market dominance as part of next review

The growing use of mobile phones, Voice over Internet Protocol (VOIP) and text-based and social media services to initiate calls may mean that the UK's dominant landline telephone providers no longer require the strictest form of regulation, Ofcom has suggested.

The UK's telecoms regulator is currently consulting the industry before it publishes proposals for change to the regulation of wholesale fixed call 'origination and termination' later this year and early next year. According to its 'call for inputs', which closes on 14 May, the regulator intends to consider whether these services now provide "competitive constraints" on BT and KCOM, the provider with 'significant market power' (SMP) in the Hull area.

As part of its programme of work for 2016/19, Ofcom intends to consider whether 'ex ante regulation' of wholesalers of fixed voice call origination services remains necessary; and, if so, whether current rules in place to ensure sufficient competition remain effective and proportionate. Depending on the evidence it receives during its review, it could impose additional obligations on BT and KCOM or loosen the regulatory requirements.

Wholesale fixed voice call origination is currently subject to 'ex ante regulation', which is the strongest possible form of market intervention by the regulator. EU law requires ex ante regulation in cases where there are substantial barriers to market entry; no visible trend towards competition developing; and the effect of competition law alone is unable to guarantee a competitive market.

According to Ofcom's call for inputs, 35% of UK consumers now use VoIP services such as Skype and Vonage, up from 22% in 2012. Mobile calls accounted for 59% of outgoing call minutes in 2013, a percentage which has increased every year since 2010 when mobile phone use overtook fixed line calls for the first time. However, the number of fixed lines installed in the UK has also increased, according to the report.

"We intend to examine these trends in more detail and the underlying reasons for these trends to understand what they indicate about competition in the wholesale call origination market," said Ofcom in its paper. "We also intend to consider the implications for residential and business end-users (and whether there are any differences between the two groups)."

Ofcom also intends to review the wholesale fixed call termination market to understand whether companies can compete effectively. However, it expects that this market will remain within the scope of ex ante regulation, as this is an EU-level presumption.

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