Virgin Media 2007 Annual Report Download - page 26

Under one of the earlier reviews, all fixed operators, including ourselves, have been found to
possess SMP in relation to the termination of calls on their own networks. This has resulted in the
imposition of a requirement on all fixed operators to provide access to their networks on fair and
reasonable terms for terminating calls, with additional requirements being imposed on BT and Kingston
Communications. We have not been found to possess SMP in any of the other voice, data or internet
markets in which we operate.
All U.K. mobile network operators (MNOs) have been found to possess SMP in relation to the
termination of calls on their own networks. Accordingly, in June 2004, Ofcom imposed Specific
Conditions on each of the MNOs in respect of their 2G networks requiring, among other things, a
reduction in the average charges for termination of voice calls on their networks levied on fixed line
operators or other MNOs. These price controls were renewed in March 2007 and require further
average price reductions to be achieved by all MNOs (including 3) in respect of voice call termination
on their 2G and 3G networks over the period from the end of March 2007 to the end of March 2011.
As Virgin Mobile is not an MNO such proposals do not apply directly to us. However, under the terms
of the network supply agreement we have with our network provider, T-Mobile, they will continue to
operate to decrease the inbound interconnect revenue we receive from T-Mobile in respect of calls
made to our customers. Ofcom is currently reviewing the wholesale SMS termination market. Ofcom
believes the review will take 12 to 18 months.
The Strategic Review of Telecommunications
Following the passing of the Communications Act 2003, Ofcom announced that one of its first
tasks would be to carry out a strategic review of telecommunications in the U.K. (TSR).
The TSR commenced in April 2004 with the observation from Ofcom that, despite almost twenty
years of telecommunications liberalization in the U.K., BT remained dominant in almost all
telecommunications markets. Ofcom felt, therefore, that it should seek to increase competitive intensity
by improving third party access to the BT network.
Having reached this conclusion, Ofcom has developed a concept known as ‘‘equivalence’’. Broadly,
this concept has been defined as enabling BT’s competitors to gain access to BT’s network
infrastructure on exactly the same (i.e. equivalent) terms as BT itself enjoys.
At the conclusion of the TSR, BT offered and Ofcom accepted a number of undertakings to put
the concept of equivalence into practice in its dealings with competitors. This has been achieved
primarily through the creation of a new division within BT called ‘‘Openreach’’ which manages and
sells network services to competitors and the rest of BT on the same terms and conditions (including
prices) and in accordance with the same processes.
The efficacy of these undertakings was formally reviewed by Ofcom during 2007. Ofcom stated that
BT had made very significant progress in implementing the undertakings and had committed
considerable resources to meeting its obligations, including the creation of Openreach as an
independent business unit in January 2006. Ofcom stated that these changes had benefited competition
and end consumers. In addition, Ofcom now wants to ensure that Openreach has clear incentives to
improve its performance levels to deliver better products and service to its own retail business and to
other communications providers and their customers. We expect this matter to be addressed further
during 2008.
Universal Service
The concept of universal service is designed to ensure that basic fixed line telecommunications
services are available at an affordable price to all citizens across the EU. The scope of universal service
obligations is defined by the Universal Service Directive (see above under ‘‘Regulation in the European
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