This consultation started on 15th April 2009 and ends on 22nd April 2009.

1.1 This dispute concerns the termination rate payable by T-Mobile (UK) Ltd (T-Mobile) to Cable & Wireless (C&W) for calls originated on T-Mobile's network and terminated on C&W's network in respect of C&W customers using its fixed to mobile convergence (FMC) service.

The Draft Determination and Consultation

1.2 On 20 March 2009, we issued a draft determination proposing to resolve the dispute by determining that the mobile termination rate (MTR) charged by C&W for the termination of calls to their customers using the FMC service originated on T-Mobile's network may not exceed the target average charge (the TAC) applied to Vodafone and O2, this being the lowest regulated MTR, pursuant to the price control determination of the Competition Commission in the context of the appeal against Ofcom's 2007 MCT statement .

1.3 Ofcom invited stakeholders to comment on the draft determination by 30 March 2009.

1.4 We received three responses to this draft determination. The response from C&W raised an issue which, as explained below, may have some merit. Since the response would lead to a change to the proposed means of resolution, we consider that is appropriate to conduct an additional consultation in order to allow stakeholders to consider fully the outcome of the dispute. This consultation is supplementary to the draft determination and is limited in scope only to the matters raised by C&W in their response. Ofcom will not consider further comments on the draft determination itself and all matters raised in response to the draft determination will be addressed in the final determination. C&W's response to the draft determination on time of day charges

1.5 C&W's response to the draft determination queried how compliance with the determination would be judged, in particular whether the determination would allow C&W to vary its charges by time of day (Daytime, Evening, Weekend) whilst still being consistent with a weighted average charge of no more than 4.71ppm (the rate proposed in the draft determination). C&W also expressed concern that, should they not be allowed to vary their charge according to time of day, the restrictions placed on them would be more stringent than those imposed on the incumbent mobile network operators' (MNOs) under the charge control against which we have proposed to benchmark C&W's MTR.

1.6 Therefore, C&W indicated that they would find it undesirable to be forced to charge a single termination rate across all time periods and would favour an approach under which Ofcom determined separate day, evening and weekend rates. In its response to the draft determination, C&W proposed a set of termination rates based on a revised proposed average weighted charge, the time of day traffic profile of C&W customer's outgoing calls to mobiles and C&W's preferred pricing structure (i.e. the ratio of the time of day charges to each other expressed as the ratio of charges to the Day time charge: Day 1, Evening 0.75, Weekend 0.67)).

1.7 In further discussions, C&W indicated that, given the limited information available on the time of day profile of C&W's FMC service, they consider a determination that allowed for differential charges, but without flexibility to vary those charges subsequently (except by agreement), would acceptably address their concerns. Ofcom's decision to re-consult stakeholders

1.8 In order to resolve this dispute, we consider that it may be appropriate to allow C&W to vary charges by time of day in order to ensure that it is not subject to greater restrictions on its pricing freedom than those applied to the regulated MNOs. This issue was not addressed in the draft determination and we have therefore decided to issue a further consultation in order to allow stakeholders the opportunity to comment on our proposals for resolution of the dispute.

1.9 The scope of this consultation is to determine the appropriate method of implementation of the average termination charge payable by T-Mobile to C&W for calls originated on T-Mobile's network and terminated on C&W's network in respect of C&W's FMC service. In particular, we are consulting on whether, and how, a time of day weighting might be appropriate for the MTR payable by T-Mobile in respect of C&W's FMC service. This consultation does not address the question of the appropriate average MTR to be applied as between T-Mobile and C&W which was the subject of our previous consultation on the draft determination. Ofcom will not take into account further comments on the draft determination.

The reasons why it may be appropriate to provide C&W with greater flexibility

1.10 It is common practice for telecoms operators' wholesale and retail tariffs to vary by time of day according to a 'tariff gradient'. Tariff gradients are employed to increase the efficiency with which network capacity is used. In general charges are highest during the daytime peak, when demand to use the network is at its highest, and lowest in off-peak periods in the evening and at weekends when demand is relatively low. This ensures that the costs of network capacity are recovered primarily from peak users whose demand causes the capacity to be installed, and also allows operators to send prices signals that promote the usage of that capacity in off-peak times, when it might otherwise be spare, and consequently can be used at very low (marginal) cost. To the extent that these more accurate price signals would affect caller behaviour, they could allow an operator to provide the same level of call termination minutes more efficiently i.e. if some of the calls that would have been received at peak times are received at lower cost times of the day, the operator would be able to supply the same number of call minutes on a lower capacity (cheaper) network.

1.11 The incumbent MNOs, whilst subject to a charge control which sets a headline TAC, are able to vary their charges by time of day, provided that the weighted average charge reflects the headline TAC. This allows them flexibility and the efficiency benefits associated with tariff gradients as described above.

1.12 Considering C&W's response to the draft determination, we therefore consider it appropriate to explore options which would allow C&W to vary its charges by time of day in order to allow it similar flexibility in determining its own charging structures. This is particularly relevant in this case where we proposed in the draft determination to determine a MTR for C&W's FMC service which is benchmarked against the regulated TAC for Vodafone and O2.

Options for implementation

1.13 If we were to resolve the dispute by allowing C&W the flexibility to vary its charges by time of day, whilst maintaining an average termination charge across time periods, we might need to determine the appropriate traffic weights or 'time of day splits' between day, evening and weekend for incoming calls of C&W's FMC service in order to assess how C&W might be permitted operate a time of day pricing policy.

1.14 Under the charge controls in place following Ofcom's market review of the Mobile Call Termination market , the MNOs are required to use the proportions of termination minutes in the previous year received during the day, evening and weekend charging periods as the weights to compute the weighted average interconnection charge (AIC). This AIC must comply with the TAC for the current year.

1.15 As C&W's FMC service has yet to be launched on a commercial basis, no traffic information is available for the preceding year and it is therefore not possible to set the weights upon which C&W's time of day variations are based in the same manner as the calculation of the AIC for the MNOs. Accordingly, in determining this dispute in a manner which gives C&W the flexibility to vary charges by time of day or by setting maximum charges by time of day we need to estimate C&W's day, evening, weekend call splits for its FMC service.

The full document is available below

The following documents relating to this consultation are available: Dispute between Cable & Wireless and T-Mobile about mobile termination rates Dispute between Cable & Wireless and T-Mobile about mobile termination rates How to Respond

http://www.tellthemwhatyouthink.org/consultation/con-2182-further-resolve-dispute-termination-rates