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The Competition Appeal Tribunal has issued a ruling declaring that Ofcom erred in its Business Connectivity Market Review (BCMR), and quashing the market definition decisions upon which Ofcom’s “dark fibre” remedy was based.
In its BCMR Statement, which was published in April 2016, Ofcom defined various markets for the provision of “business connectivity” services, used by companies to carry data between locations. Ofcom defined a single product market for contemporary interface symmetric broadband origination (“CISBO”) services of all bandwidths; and four separate relevant geographic markets: the Central London Area; the London Periphery; Hull; and the Rest of the UK. Ofcom also made determinations concerning the extent of BT’s core network. Ofcom found that BT had significant market power (“SMP”) for CISBO services outside Central London and Hull, and proposed a package of remedies including a so-called passive remedy allowing Communications Providers to lease only the fibre element of the leased lines from BT, allowing them to attach equipment of their own choosing at either end to “light” the fibre. This remedy was referred to as Dark Fibre Access (“DFA”) and was to be implemented in October 2017.
BT appealed on the grounds that Ofcom had erred in its Product Market Definition, in that Ofcom had failed to identify a separate product market for Very High Bandwidth (“VHB”) services of 1 Gbit/s and above, in which BT does not have SMP. BT also argued that Ofcom had erred in its approach to the Geographic Market Definition, and in its determination of the boundary between the (competitive) core segments of BT’s network and other terminating segments. BT further argued that the dark fibre remedy was disproportionate, including because it would undermine infrastructure based competition for VHB services from providers such as Virgin Media and CityFibre.
A hearing took place in April-May 2017 over sixteen hearing days, in which the Tribunal heard BT’s arguments in relation to market definition and the competitive core. Yesterday, the CAT issued a ruling on those issues. The CAT has unanimously decided that Ofcom erred in defining a single product market, in concluding that the UK outside London (and Hull) comprises a single geographical market, and in its determination of the boundary between core and terminating parts of BT’s network. Those decisions will be quashed and remitted to Ofcom for reconsideration. The CAT is still preparing its reasoned judgment for its conclusions, which will be handed down in due course.
The imposition of the DFA remedy was contingent on the correctness of Ofcom’s market definition analysis. A further hearing of the remedies issues raised by BT had been scheduled for September 2017, to allow those issues to be considered, if appropriate, before the implementation date of the DFA remedy. Given that Ofcom’s market definition will now need to be reconsidered, the hearing has been vacated.
Daniel Beard QC, Robert Palmer, Ligia Osepciu and David Gregory represented BT.
Josh Holmes QC represented Ofcom.
Philip Woolfe represented a group of communications providers including TalkTalk, Vodafone, Colt and Hutchison 3G.
The ruling has already been reported by the Financial Times and the Daily Telegraph.