Vodafone / O2 / Orange / T-Mobile

No. 27/05/2004

Suspected margin squeeze by Vodafone, O2, Orange and T-Mobile

The Office of Communications (Ofcom) has concluded that Vodafone, O2, Orange and T-Mobile (the mobile operators) have not infringed Section 18 (the Chapter II prohibition) of the Competition Act 1998 (the Act) or Article 82 of the EC Treaty in relation to their pricing of certain fixed-to-mobile calls to business customers.

Ofcom's decision follows an own-initiative investigation, which was opened in response to representations made by three fixed operators that the mobile operators were pricing the delivery of certain fixed-to-mobile calls to business customers at levels that constituted a margin squeeze vis-à-vis the wholesale charges that fixed operators pay for mobile call termination.

Ofcom's investigation covered two types of fixed-to-mobile call: Closed User Group (CUG) calls and Business On-Net calls. 

In respect of CUG calls, Ofcom has concluded that the relevant upstream market is the market for the provision of call termination for CUG calls across all the mobile operators' networks covering the whole of the United Kingdom.  Ofcom has concluded that none of the mobile operators is dominant in this market.  Accordingly, Ofcom has concluded that none of the mobile operators has infringed the Chapter II prohibition or Article 82 of the EC Treaty in respect of CUG calls.   

In respect of Business On-Net calls, Ofcom's view is that the relevant upstream market is the market for the provision of call termination for Business On-Net calls on each respective mobile operator's network covering the whole of the United Kingdom.  Ofcom considers that each of the mobile operators is dominant in the relevant market(s).  Ofcom recognises that there is a possible alternative upstream market for the provision of call termination for Business On-Net calls across all the mobile operators' networks covering the whole of the United Kingdom, in which none of the mobile operators would be dominant. 

Ofcom does not need to reach a conclusion on which of the two market definitions for Business On-Net calls is appropriate.  This is because Ofcom does not consider that the mobile operators' conduct amounts to an abuse, irrespective of the market definition that is adopted.  Accordingly, Ofcom has concluded that the mobile operators have not infringed the Chapter II prohibition or Article 82 of the EC Treaty in respect of Business On-Net calls.

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