Virgin Media 2009 Annual Report Download - page 25

and remedies proposed by Ofcom in the pay TV investigation are of direct relevance to its assessment
of Picnic. We submitted a response to the third consultation in September 2009 and expect Ofcom to
issue its final statement on the pay TV market in early 2010. If implemented in its proposed form, such
a remedy could reduce the wholesale prices we are charged for premium TV content and improve the
availability of BSkyB HD premium content, which would enable us to offer more competitive and
innovative consumer offerings.
Ofcom also initiated a review in 2006 of the terms under which operators of DTV platforms in the
U.K., such as us, allow access to their platforms for third-party television channels and content
providers. However, this review has not progressed beyond its initial stages and is not likely to do so
until Ofcom has concluded its investigation into pay TV. We are therefore unable to assess the likely
outcome of this review and resulting impact on our activities in this sector at this time.
Regulation of Telecommunications Services
In order to operate in the telecommunications sector, a provider must comply with general
conditions imposed by Ofcom. These general conditions cover a broad range of issues, including
interconnection standards, number portability, deployment of telephone numbers, access to emergency
services, and sales and marketing standards. Any breach of these general conditions could lead to the
imposition of fines by Ofcom and, ultimately, to the suspension or revocation of a company’s right to
provide electronic communications networks and services. Ofcom also undertakes periodic reviews of
the various economic markets within the telecommunications sector to establish whether any provider
has SMP warranting the imposition of remedies.
Fixed Line Telephony Services
As a fixed network operator we, like all other fixed network operators, including the incumbent,
BT, are deemed to have SMP in wholesale call termination on our own network, and are therefore
subject to SMP conditions in this market. However, these conditions do not have a significant impact
on our ability to compete in the wholesale market. Recent changes in market conditions at the retail
level led to a finding in September 2009 by Ofcom that BT no longer had SMP in retail telephony and
the consequent removal of all relevant SMP conditions. This removal of SMP conditions may result in
increased competition for us in the markets for retail fixed line telephony.
Mobile Telephony Services
As a MVNO, we are also subject to specific EU regulation relating to retail prices for roaming
services. In June 2007, European Commission Regulation 717/2007, or the Roaming Regulation,
introduced limits on certain wholesale and retails tariffs for international mobile voice roaming within
the EU and required greater levels of transparency of retail pricing information. As of July 2009,
certain amendments to the Roaming Regulation took effect, which expanded the scope to include SMS
tariffs and data roaming, further reduced the maximum roaming rates within the EU and required
operators to introduce measures aimed at preventing consumer bill shock relating to data roaming
charges. Measures to prevent bill shock must be in place by March 2010. The Roaming Regulation,
which will expire in 2012, is subject to review in 2011.
Mobile termination charges of MNOs are regulated by Ofcom under SMP conditions imposed in
respect of the mobile call termination market. One of these SMP conditions requires the MNOs to
comply with a price control which requires them to reduce their mobile termination charges over time.
Under our MVNO agreement with T-Mobile, these changes in mobile termination charges are passed
on to Virgin Mobile.
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