The Future of Interconnect

Posted on: 8th April 2021, by Magrathea

Wholesale Voice Markets Review, the future of interconnect

Magrathea have been campaigning for some time now to have Ofcom review regulation applied to IP Interconnect, or more specifically to ignore the technology and apply regulation where it’s needed to maintain the current competitive environment.

We were able to have our say in the latest Wholesale Voice Markets Review consultation, for which we finally have a statement from Ofcom now.  We are delighted that many of our concerns have been addressed.  This is also the first time the review period has been five years (it was previously three) so all of the changes will be with us until at least 2026.

Interconnect regulations

Magrathea have felt for some time now that BT were able to use their dominant position to gain customers for their IP Exchange product, which in turn distorted the wholesale voice market.  We have previously voiced concerns that BT could ‘cherry pick’ who they did a deal with to the extent that competition was severely limited and access to a key network such as theirs would become restricted or overly expensive to the detriment of many service users.

We are thrilled to see that Ofcom shared most of our concerns and have attempted to address them with this statement.  They have not gone as far as price controls for IP regulations, something we would have preferred, but instead they have said that IP Interconnect must be provided on ‘fair and reasonable’ and ‘non-discriminatory’ terms.  BT now have until 1st October 2021 to publish their reference offer in line with Ofcom guidance.

Ofcom have also introduced a transparency obligation on BT to make sure they share their migration timetable, which is to be published by June 2022, and a prohibition on additional charges, which will influence what BT can charge for their ports and circuits.

Another area we had pushed for is the reduction in points of interconnect that networks needed to reach to get the best termination rates on BT’s ranges.  Currently you have to interconnect at over 600 local exchanges or pay expensive transit fees and we argued that we should not have to suffer for this inefficient network setup.  However, Ofcom did not agree that BT should be required to make a change on their TDM network, but instead have stipulated that BT must offer the fixed termination rate on IP interconnect from 1st April 2025 even if BT haven’t yet migrated off of TDM.

Whilst it’s disappointing Ofcom didn’t go a step further on this point, we are very pleased to see that they agree any attempt by BT to significantly expand on the number of points of interconnect needed to get FTR on all ranges in an all-IP environment would likely not be considered ‘fair and reasonable’ so we would hope that BT will continue their existing strategy of a small number of POCs all offering FTR.

Interconnect Standards

Ofcom have decided not to mandate any particular set of standards but will issue guidance that states the NICC standards will help us comply with our network access obligations, this should incentivise the take up.  Any network wishing to use different standards will be expected to bear the costs of interoperability.

Calls originating outside the UK

Another notable change to our existing regulations is that we now have some flexibility to set termination rates based on where the call originates.  Termination rates must be capped at the Ofcom set FTR or MTR unless the International counterpart’s termination rate is higher, in which case we can charge up to that amount.

The idea is that this will help keep termination rates low as each country will know high rates will be reciprocated.

In conclusion, despite a few areas where Ofcom have dismissed our concerns, we feel this review has been mostly positive and having certainty around the regulatory and pricing obligations for all of us through what is a going to be a tumultuous period can only be of benefit.

Here at Magrathea we started out specialising in interoperability between signalling protocols and a variety of networking standards so we are confident that with our technology and specialist support team we are in a position to guide our clients through this transition period and beyond.