6 December 05: UK Competition Appeal Tribunal rejects Ofcom finding that Hutchison 3G has significant market power in voice call termination
The UK’s Competition Appeal Tribunal has found that the telecom’s regulator Ofcom erred in its finding that Hutchison 3G UK Ltd (H3G) has significant market power in voice call termination on its mobile network. Ofcom's decision was set out in its June 2004 statement "Wholesale Mobile Voice Call Termination." In appealing the decision, H3G argued that Ofcom had failed to recognize the degree of countervailing bargaining power exercised by BT and other purchasers of wholesale call termination services from H3G, and had presented no evidence that H3G would be able to charge excessive prices. Ofcom claimed that BT’s obligation to interconnect with other networks (its “end to end connectivity” obligation), eliminated any countervailing buyer power that it might otherwise have had, leaving H3G free to set its termination rates at whatever level it chose.
The Tribunal disagreed with Ofcom on this crucial matter. It found that Ofcom had failed to carry out a full assessment of the extent to which BT had countervailing buyer power, and in particular that ‘it is over-simplistic and wrong to say that the end-to-end connectivity obligation determines the question of countervailing bargaining power.’ The Tribunal also found that a fuller investigation of BT’s position as a monopsonist purchaser of termination services from H3G, including the possibility of joint dominance, needed to be undertaken.
Market Analysis was retained by H3G to provide expert economic evidence in its appeals on this issue in both the UK and Ireland. The detailed economic arguments presented in the two cases can be found in the paper by Ken Binmore and David Harbord, "Bargaining Over Fixed-to-Mobile Termination Rates: Countervailing Buyer Power as a Constraint on Monopoly Power” on the Topical Articles section of our website. For the Tribunal’s decision see http://www.catribunal.org.uk.