Posted on: 22nd January 2026, by Magrathea
Summary
With the Openreach WLR shutdown now just one year away, much attention is rightly focused on customer migrations, but less visible — and equally significant — changes are happening at carrier level.
The transition from TDM to IP interconnection is not simply a technology upgrade; it represents a fundamental shift in how voice networks are interconnected, regulated and costed. Drawing on our own long-running migration experience, this article explores how historic regulatory frameworks, evolving Ofcom policy and BT’s transition strategy have shaped the UK wholesale voice market. We also highlight current anomalies where early adopters of efficient IP interconnection can find themselves commercially penalised.
As the industry approaches the final stages of the PSTN era, resolving these issues is essential to ensure a fair, competitive and sustainable all-IP future.
Introduction
There has been a flurry of articles, social media posts and advertisements this month – quite rightly – reminding us that the Openreach Wholesale Line Rental (WLR) shutdown deadline is just one year away. This means anyone still relying on a “traditional” copper phone line or an ISDN service provided by BT or Openreach must migrate this year.
You will also see this described as “the PSTN switch off”. Of course, BT does not constitute the entirety of the Public Switched Telephone Network; however, given the scale of BT’s UK network and the fact other major providers have broadly aligned themselves with its timeline, we will use the term PSTN loosely throughout this article for simplicity.
WLR shutdown progress
With so many resources now available explaining what the WLR shutdown means for residential and business users, we will not repeat that here. Instead readers who are interested can catch up with our update article on that here, and the government’s official guidance here.
Recent figures shared by Openreach tell us that consumer migrations are well underway. However, with more than three million WLR customers still to migrate, there is clearly significant work remaining before January 2027, and those remaining cases are likely to be the most complex too. New commitments and initiatives focussed on protecting vulnerable users and critical national infrastructure are therefore welcome, even if they have arrived relatively late in the process.
Creating a new interconnect standard
Amid the heavy focus on end-user services, it is easy to overlook the substantial changes taking place within the core network. These changes not only have technical implications, but also regulatory and security consequences as the UK transitions to an all-IP environment.
We felt it might be useful to explore these carrier-level changes, how they have evolved over time, and how Magrathea has responded to them (including our previous reflections on the retirement of the TDM article here).
This is not simply a technology upgrade. It represents a fundamental shift in how voice is designed, interconnected, regulated, and costed – a process that has been unfolding for many years.
For decades, the PSTN was built on Time Division Multiplexing (TDM). Industry standards, interoperability testing and, critically, regulation were all designed around this technology. Ofcom imposed additional obligations on BT, as the largest network operator, to ensure fair treatment of other providers and a consistent interconnect framework. While this created a relatively high barrier to entry, the rules were clear.
BT’s Standard Interconnect Agreement, developed with industry input, established a broadly level playing field for networks interconnecting with it.
While networks remained TDM-based, interconnection was complex and costly, making BT a common transit provider. That dynamic shifted when transit pricing ceased to be regulated and increased sharply, creating incentives for networks to establish direct interconnects with one another.
As an IP-native business, Magrathea historically operated a blend of TDM and IP interconnects, progressively migrating most relationships to IP over the past decade. Interconnection with BT, however, represented a significantly larger and more complex project. One we are glad to have started many years ago.
BT’s TDM network consisted of a hierarchy of exchanges, from small local sites through to larger parent exchanges. Traffic would enter the local exchange, traverse BT’s network, and handover at a point chosen by the interconnect partner. The number of network “hops” involved directly influenced call costs or revenues, depending on call type.
This creates strong incentives to interconnect at as many points as possible, not only for resilience but also for commercial reasons. The difference between one hop and multiple hops was substantial, close to a nine-fold difference.
Magrathea therefore chose to interconnect widely across the UK, maximising revenue for non-geographic calls whilst keeping call charges low. Unsurprisingly, maintaining such an extensive interconnect estate was costly.
As physical infrastructure aged, BT increasingly encouraged migration to IP, something many providers, including ourselves, were already pursuing. However, BT initially introduced IP Exchange as a service positioned closer to a retail product than a regulated carrier-grade interconnect solution.
In 2019, we formally raised concerns with Ofcom that there appeared to be a push to move providers away from a regulated, carrier-grade environment towards an unregulated IP solution that was, at the time, neither fully scalable nor resilient.
Compounding this, BT classified IP Exchange as an additional transit layer, increasing costs for interconnect partners. While regulated rates remained available via TDM, this simply encouraged continued investment in an increasingly inefficient platform.
By this stage, interconnecting at every local exchange to retain regulated rates was impractical. The alternative was to pay high, unregulated transit charges. Yet, as late as 2017, Ofcom maintained that TDM remained an “efficient” technology choice.
We highlighted these issues in our response to the 2017 Narrowband Market Review, reiterating concerns first raised in 2013. If TDM was to remain the default choice of technology, the number of interconnect points required in order to obtain regulated rates needed to be reduced.
By the 2019 “Future of Interconnect” review, Ofcom began to acknowledge the emerging problems. We were able to demonstrate that no viable wholesale IP interconnect option existed with BT and that this posed a threat to competition in the UK voice market.
Our position was that IP-based networks should be recognised as “efficient” with providers choosing to remain on TDM bearing their own media conversion costs. At the same time, in the absence of a regulated IP alternative, we argued for continued regulation of interconnect rates to provide stability during the transition period. Ofcom agreed.
The 2020 Wholesale Voice Markets Review marked further progress. For the first time, BT would be required to share a roadmap to provide regulated rates (fixed termination rates, or FTR) to all interconnect partners irrespective of physical interconnect points, with a commitment to publish a Reference Interconnect Offer for their IP solutions.
This acknowledgment that IP Exchange would become BT’s carrier IP interconnect solution and that it should be governed by a standard industry agreement, mirroring the TDM framework and enabling charge controls and reciprocity.
Historically, interconnect costs were shared between parties. Under IP Exchange, such arrangement was initially absent, with one party bearing full link costs. We believe this alone was enough to cause many large networks to hang on to their TDM estate for as long as possible.
It’s not a done deal yet
If you’ve read this far it will be clear that this journey has been neither simple nor linear. Migrating a national network from one technology to another inevitably involves complexity and long-term planning. For us, early preparation meant the process was manageable.
Anticipating challenges with BT migrations, we negotiated an early wholesale agreement and migrated our TDM estate gradually, range by range. This allowed interoperability to improve iteratively while commercial arrangements evolved in parallel. Whilst not without difficulty, we now consider ourselves in a strong position, with further refinement expected through the forthcoming updated Standard IP Interconnect Agreement (SIPIA).
However, not all networks are at the same stage.
Whilst we don’t comment on how others are managing their technology or migrations; indeed, the benefit of our hybrid platforms is that it is not a significant concern for us – our speciality is taking traffic in all its shapes and forms and making it work – but the commercial consequences are becoming obvious.
Despite having migrated to an efficient all-IP model, we sometimes need to exchange traffic via BT where direct interconnection is not an option. In such cases, where the other party has not yet migrated to IP, we now incur additional costs for TDM to IP conversion required at a transit level – effectively paying more as a result of having migrated ahead of others.
Having been fully encouraged to migrate early, for excellent reasons (the crumbling TDM infrastructure and the declining levels of experienced staff to support it) this outcome rankles. Fortunately, this affects a very small proportion of our traffic, but the principle is problematic, compliance with an industry supported migration should not result in higher costs.
Ofcom itself recognised this risk in its most recent market review, stating that providers choosing alternative technical standards are likely to bear the additional costs involved.
We continue to push back on BT to insist that they remove this additional toll for all-IP networks to receive calls from legacy TDM networks, in particular with ported exports, which are often the main reason to use transit. Alongside this we will be engaging with Ofcom to ensure that they address this type of negative and preventable impact of migration.
As ever, our aim is not solely self-interest. Improvements in the wholesale and carrier layer ultimately benefit the entire communications supply chain – from service providers to end users – and through our CCUK membership we will be encouraging other networks to take action against similar charges.