Section 72: Report on sharing mechanism

188.     This section provides that where regulations that provide for the sharing of the financial burden of providing universal services are in place under section 71, OFCOM must prepare and publish an annual report. However, OFCOM are not obliged to publish any confidential material.

*material is confidential if it falls within subsections (7) or (8), i.e. if it relates specifically to the affairs of a particular body, or the private affairs of an individual, in each case where publication could seriously prejudice that body's or person's interests.

Section 73: Permitted subject matter of access-related conditions

189.     This section governs OFCOM's power to set access-related conditions. OFCOM may set access-related conditions only in relation to one or more of the matters listed in subsections (2) to (5).

190.     Subsection (2) allows OFCOM to set access-related conditions for the purpose of ensuring a level of network access and interoperability which will secure efficiency, sustainable competition and the greatest possible benefit to end-users. These access-related conditions include, but are not limited to, the specific type of access-related conditions set out in section 74. This provision, together with section 74, implements Article 5(1) of and Part II of Annex I to the Access Directive and Article 2(p) of the Framework Directive.

191.     Subsection (3) allows OFCOM to set access-related conditions to secure the sharing of apparatus and the division of the costs incurred by those to whom the electronic communications code applies, in cases where there is no viable alternative. This implements Article 12(2) of the Framework Directive.

192.     Subsection (4) allows OFCOM to set access-related conditions of a technical or operational nature to ensure the proper operation of an electronic communications network in compliance with any SMP services conditions falling within section 87(3). Section 87(3) allows OFCOM to set SMP conditions requiring the dominant provider to give entitlements in relation to network access, use of relevant networks and availability of relevant facilities. This provision, together with section 75(1), implements Article 5(2) of the Access Directive.

193.     Finally, subsection (5) provides that OFCOM may set access-related conditions in respect of conditional access systems in accordance with section 75(2). This provision, together with sections 75(2) and 76, implements Article 6 of, and Part I of Annex I to, the Access Directive and Article 2(f) of the Framework Directive.

*conditional access system is defined in section 75 (see below).

Section 74: Specific types of access-related conditions

194.     Section 73(2) allows OFCOM to set access-related conditions for the purpose of ensuring a level of network access and interoperability which will promote efficiency and sustainable competition and the greatest possible benefit end-users. Section 74 provides that such conditions include those designed to ensure end-to-end connectivity. It also provides that conditions can be set for securing that the use of Application Programme Interfaces (APIs) and Electronic Programme Guides (EPGs) is provided on a fair, reasonable and non-discriminatory basis.

*end-to-end connectivity is defined in subsection (3) as the ability for two parties to communicate with each other whether they are using the same or different public electronic communications services.

*the meaning of application programme interface is given in subsection (3) as a facility for allowing software to use facilities in other software in order to allow someone to access a programme service or become the ultimate user of any network or service by means of which any programme service is broadcast or otherwise transmitted.

*electronic programme guide is defined in subsection (3) as any facility by means of which a person may ascertain what programmes are included in a service, and may access that service.

Section 75: Conditional access systems and access to digital services

195.     Subsection (1) provides that OFCOM must ensure, when setting an access-related condition of a technical or operational nature for providers with significant market power (SMP), that they take account of all relevant international standards (which are defined in section 151).

196.     Subsection (2) provides that OFCOM are under a duty to ensure that access-related conditions are applied to every person who provides a conditional access system in relation to a protected programme service, and that such conditions comply with Part I of Annex I of the Access Directive.

*conditional access system is defined in subsection (3) as any arrangements by means of which access to a programme service requires either subscription or authorisation.

*protected programme service is defined in subsection (3) as a service which is encrypted such that the programmes on it can only be viewed or listened to in an intelligible form by the use of a conditional access system.

Section 76: Modification and revocation of conditions imposed under s.75

197.     This section provides that OFCOM may not modify or revoke any access-related conditions that they have set falling within section 75(2) unless they have carried out a market analysis from which they have concluded that the provider of conditional access systems to whom the condition applies does not have SMP. They must ensure that the proposed modification or revocation will not adversely affect the accessibility to persons of must-carry services or the prospects for effective competition.

Section 77: Imposition of privileged supplier conditions

198.     Where a public electronic communications provider enjoys special or exclusive rights in relation to the provision of services in other sectors (other than the provision of associated facilities), OFCOM must set such privileged supplier conditions as they think fit (unless that provider has an annual turnover in relation to all of his communications activities of less than €50 million, in which case OFCOM are not obliged to impose a condition, but may do so if they wish). Such conditions can require such providers to keep separate accounts (all of which should be audited and published), or to have structural separation between different activities. This implements Article 13 of the Framework Directive.

*special or exclusive rights has the same meaning as in Article 86 of the Treaty establishing the European Community. Although the Treaty does not itself define them, guidance is given in Article 2(1)(f) and (g) of the Commission Transparency Directive OJ [1980] L 195/35. These rights are often, but need not be, given to public undertakings. Exclusive rights are largely self-explanatory but should be analysed in a functional rather than formalistic manner. Case law indicates that special rights are rights granted by a Member State to a limited number of undertakings where this limits - otherwise than according to objective, proportionate and non-discriminatory criteria - the number of undertakings authorised to provide a service in a particular area.

Section 78: Circumstances required for the setting of SMP conditions

199.     Sections 78 to 93 concern OFCOM's powers and duties to identify markets, determine whether persons have significant market power (SMP) on those markets, and to impose SMP conditions on persons whom they have determined as having SMP.

200.     Section 78 sets out when a person shall be taken to have SMP in relation to a particular market. A person will only be taken to have significant market power where he is, alone or with others, in a position of dominance in a market. A position of dominance must be construed in accordance with any applicable provisions of Article 14 of the Framework Directive, which (at its paragraph 2) defines dominance as 'a position of economic strength affording the person the power to behave to an appreciable extent independently of competitors, customers and ultimately consumers'. A determination of joint dominance must take into account, in particular, the criteria for joint dominance set out in Annex II to the Framework Directive. This implements Article 14 of and Annex II to the Framework Directive.

Section 79: Market power determinations

201.     Subsection (1) provides that before making a determination that a person has SMP, OFCOM must first identify the markets in which they consider it will be appropriate to carry out a market analysis and then carry out that analysis. When identifying appropriate services markets and when making SMP determinations in relation to a services market, OFCOM are obliged to take due account of all relevant European Commission guidelines and recommendations - the first such recommendation was published by the European Commission on 11 February 2003: the recommendation can be viewed on the European Commission website (http://europa.eu.int/information_society/topics/telecoms/regulatory/maindocs/documents/recomen.pdf). The way in which a market is to be identified or a market determination made is by the publication of a notification under subsection (4). This section implements Articles 15 and 16 of the Framework Directive. The Electronic Communications (Market Analyses) Regulations 2003 (S.I. 2003/330) empower Oftel to carry out market analyses and to make proposals for market power determinations and the setting of conditions in advance of the passing of the Act. Paragraph 10 of Schedule 18 to the Act provides that proposals confirmed under those Regulations have effect under this section and other relevant sections after the provisions of the Act have been commenced.

Section 80: Proposals for identifying markets and for market determination proposals

202.     Before identifying a market for the purposes of making a market power determination or making a market power determination, OFCOM must publish a notification of what they are proposing to do. A notification under this section must state that OFCOM are proposing to identify that market or to make a market power determination, set out the effect of the proposal, give their reasons for making the proposal and specify the period (not less than one month from the date of the publication of the notification) within which representations about the proposal may be made to OFCOM.

203.     Subject to sections 82 and 83, subsection (6) provides that OFCOM may give effect, with or without notifications, to a proposal notified in accordance with this section, provided they have considered every representation about the proposal made within the period specified by them and they have regard to every international obligation of the United Kingdom (if any) notified to them by the Secretary of State.

204.     This section implements Articles 6, 7 and 16(1) of the Framework Directive.

Section 81: Delivery of copies of notifications under ss. 79 and 80

205.     OFCOM must send a copy of every notification published under section 79(4) or 80 to the Secretary of State. OFCOM must also send to the European Commission: (i) a copy of every notification published under section 79(4) with respect to a market power determination in relation to an SMP services market; and (ii) a copy of every notification published under section 80 which relates to a proposal to identify a services market or to make a market power determination in relation to such a market; and which in OFCOM's opinion would affect trade between member States. A copy of a notification falling within (ii) must also be sent to the regulatory authorities of every other member State.

206.     In all other cases when it appears to them appropriate to do so, OFCOM must send a copy of a notification published under section 80 which relates to a proposal to identify a services market or to make a market power determination in relation to such market to the European Commission and such of the regulatory authorities of the other member States as OFCOM think fit.

207.     The various requirements in this section to send matters to the European Commission implement Article 16(2) of the Access Directive, Article 36(2) of the Universal Service Directive and Article 7(3) and (5) of the Framework Directive.

Section 82: European Commission's powers in respect of proposals

208.     During the period given for representations under a notification under section 80 relating to an SMP services condition, the European Commission may inform OFCOM that they believe that the proposed market identified in the notice or OFCOM's proposed market determination may not be compatible with the single European market, or with any Community obligations. In such a case, OFCOM may not give effect to their proposal for a further two months. OFCOM must withdraw their proposal if in accordance with the procedure in Article 7(4) of the Framework Directive the Commission, within that two-month period, decides that the proposal must be withdrawn. This implements Article 7(4) of the Framework Directive.

Section 83: Special rules for transnational markets

209.     When the European Commission identifies a transnational services market that includes the United Kingdom, OFCOM are required to make arrangements with all other relevant regulatory authorities to deal with the following issues:

• the identification of the market;

• assessing whether a person has SMP in the relevant transnational services market(s);

• the setting of appropriate SMP services conditions as well as the modification or revocation of such conditions; and

• the procedures to be followed to secure that OFCOM and other regulatory authorities comply with their agreed arrangements.

210.     This implements Articles 2(b), 15(4) and 16(5) of the Framework Directive.

Section 84: Review of services market identifications and determinations

211.     Where OFCOM have identified and analysed a services market for the purposes of making a market power determination, OFCOM must, at such intervals as they consider appropriate, carry out further analyses of the identified market for the purposes of reviewing the determinations made on the basis of the earlier analysis and deciding whether to modify any SMP condition set on the basis of that earlier analysis (subsection (2)). Where OFCOM determine that a person to whom any SMP conditions are applied no longer has SMP, they must revoke every SMP services condition applied to that person by reference to the market power determination made on the basis of the earlier analysis.

212.     Subsection (3) requires OFCOM to carry out further analysis of a services market as soon as reasonably practicable after the European Commission makes any recommendation that affects the matters that were (or could have been) taken into account in the earlier market analysis.

213.     Before carrying out further analysis for the purposes of subsection (2), OFCOM may review any of their decisions identifying the appropriate markets that they considered in their earlier analysis. Where OFCOM conclude that the appropriate markets have changed, OFCOM must identify the markets they now consider to be appropriate and those markets must be the identified markets for the purposes of further analysis.

214.     Sections 79 to 83 apply in relation to the identification of a services market for the purposes of reviewing a market power determination and in relation to the review of such a determination.

215.     This section implements Article 16(1) and (3) of the Framework Directive, Article 7(3) of the Access Directive and Articles 16(3) and 18(2) of the Universal Service Directive

Section 85: Review of apparatus market identifications and determinations

216.     Where OFCOM have identified and analysed an apparatus market for the purposes of making a market power determination, OFCOM must, at such intervals as they consider appropriate, carry out further analyses of the identified market for the purposes of reviewing the determinations made on the basis of the earlier analysis and deciding whether to modify any SMP condition set on the basis of that earlier analysis (subsection (2)). Where OFCOM determine that a person to whom any SMP conditions are applied no longer has SMP, they must revoke every SMP apparatus condition applied to that person by reference to the market power determination made on the basis of the earlier analysis.

217.     Before carrying out that further analysis OFCOM may review any of their decisions identifying the appropriate markets that they considered in their earlier analysis. Where OFCOM conclude that the appropriate markets have changed, OFCOM must identify the markets they now consider to be appropriate and those markets must be the identified markets for the purposes of further analysis.

218.     Sections 79, 80 and 81(1) apply in relation to the identification of an apparatus market for the purposes of reviewing a market power determination and in relation to the review of such a determination.

Section 86: Cases where review required

219.     This section prohibits OFCOM from setting an SMP services condition by a notification (other than by a notification which also makes the market power determination by reference to which the condition is set) unless (i) the condition is set by reference to a market power determination which has been reviewed under section 84; or (ii) the condition is set by reference to a market power determination made in relation to a market in which OFCOM are satisfied there has been no material change since the determination was made.

* A change is material for the purposes of this section if it is material to the setting of the condition in question or the modification or revocation in question.

220.     OFCOM must not modify or revoke SMP services conditions applying to a person except where: (i) for the purpose of determining whether to make the modification or revocation, they have carried out further analysis under section 84 of the market in question and reviewed the market power determination for the time being in force in that person's case; or (ii) they are satisfied that there has not been a material change in the market identified or otherwise used for the purposes of the market power determination by reference to which the condition was set or last modified.

221.     OFCOM must not modify SMP apparatus conditions applying to a person except where, for the purpose of determining whether to make the modification or revocation, they have carried out a further analysis under section 85 of the market in question; and reviewed the market power determination for the time being in force in that person's case.

Section 87: Conditions about network access etc.

222.     Sections 87 to 92 make provision about the subject matter of SMP services conditions. Where OFCOM have identified a provider of a public electronic communications network or a person who makes available associated facilities in connection with such a network as having SMP in a services market, they may impose such SMP conditions authorised by this section, as they consider appropriate. These may include conditions requiring the provider to confer entitlements on other providers regarding the provision of network access, the use of that network, and the availability of facilities. Such conditions may include provision for securing fairness and reasonableness in the process and should be set having taken into account the matters set out in subsection (4). These include the feasibility of providing network access; the need to ensure effective long-term competition in the markets; the investment made by the person initially providing or making available the network or facility in respect of which an entitlement to network access is proposed; the technical and economic viability of installing and using facilities that would make the proposed network access unnecessary; intellectual property rights; and the availability of services throughout the European Union.

223.     Subsection (6) provides that SMP service conditions may require a person with SMP to publish such information as OFCOM may direct for the purpose of securing transparency in relation to network access. They may require such a person not to discriminate in relation to any matter connected with network access. They may require such a person to publish the terms and conditions on which the provider will enter an access contract and to modify those terms and conditions.

*an access contract is defined in subsection (12) as any contract for the provision, by a dominant provider, of network access, or of associated facilities made available in relation to a public electronic communications network.

224.     Subsection (7) provides that OFCOM may set SMP services conditions obliging a dominant provider to maintain separate accounts for such different matters relating to network access or the availability of associated facilities as OFCOM may direct.

225.     Subsection (9) provides that OFCOM may set SMP services conditions requiring a person with SMP to comply with price-controls, rules on cost-recovery and cost accounting systems in relation to matters connected with network access or the availability of associated facilities. OFCOM may also, by setting such conditions, direct the provider to adjust its prices.

226.     This section, together with sections 88 and 89, implement Articles 8 to 13 of the Access Directive, Article 6(2) of the Authorisation Directive and Article 16(4) of the Framework Directive.

Section 88: Conditions about network access pricing etc.

227.     OFCOM may not set conditions under section 87(9) unless it appears to them from a market analysis that the provider in question might charge excessive prices or engage in other anti-competitive pricing behaviour. The condition must also be perceived by OFCOM as being efficient and pro-competitive, and as resulting in the maximum benefit to end-users. In setting an SMP services condition falling within section 87(9), OFCOM must take into account the extent of the investment that the person to whom the condition is to apply would need to make if the condition were to be applied.

Section 89: Conditions about network access in exceptional cases

228.     In exceptional circumstances, OFCOM may decide that SMP services conditions additional to those set out in sections 87 and 88 (SMP services conditions about network access) need to be imposed on a provider. Such additional SMP services conditions must be submitted by OFCOM to the European Commission for approval and OFCOM can only apply them once they are approved.

Section 90: Conditions about carrier selection and pre-selection

229.     Where the relevant market is one relating to services for the provision of public fixed line telephone networks, OFCOM may set conditions obliging providers with SMP to make a relevant connection facility available to any person to whom they provide a public electronic communications service, or to make interconnection facilities available to a person providing an electronic communications service. OFCOM must also set pricing conditions to ensure that charges imposed by the provider with SMP do not constitute a barrier to use of the facility. Conditions set by OFCOM under this section may impose obligations relating to the manner in which a relevant connection facility is to be made available or in which the facilities for interconnection that are to be made available to a person providing an electronic communications service. This section implements Article 19 of the Universal Service Directive Article 6(2) of the Authorisation Directive and Article 16(4) of the Framework Directive.

*relevant connection facility is defined in subsection (6) as a facility which allows the end-user to select which carrier to use. This may be specified on every occasion of use (carrier selection), or by designating a carrier in advance (carrier pre-selection).

Section 91: Conditions about regulation of services etc. for end-users

230.     This section deals with the situation where the relevant services market is one for the end-users of public electronic communications services, and where access-related conditions, and SMP conditions set under sections 87 to 90, are not sufficient to allow OFCOM to perform their duty under section 4. In such a case, OFCOM may set conditions obliging the provider to comply with such regulatory controls as OFCOM consider appropriate.

231.     If such regulatory controls are imposed on tariffs, or on other matters to which costs are relevant, the provider may be obliged to use such cost accounting systems as OFCOM direct, to have those systems annually audited and to publish an annual statement as to its compliance with those obligations. OFCOM must provide the European Commission with whatever information they require about conditions authorised by this section. This section implements Article 17 of the Universal Service Directive, Article 6(2) of the Authorisation Directive and Article 16(4) of the Framework Directive.

Section 92: Conditions about leased lines

232.     Where the relevant services market relates to the provision of such leased lines as are identified by the European Commission in the List of Standards published in the Official Journal of the European Communities, OFCOM may set and apply SMP services conditions obliging the provider to apply, so far as required by Annex VII of the Universal Service Directive, the principles of non-discrimination, cost orientation and transparency to dealings regarding leased lines. This section implements Article 18 of, and Annex VII to, the Universal Service Directive, Article 6(2) of the Authorisation Directive and Article 16(4) of the Framework Directive.

*a leased line is defined in subsection (4) as an electronic communications service consisting in the reservation of a fixed amount of transmission capacity between fixed points on the same or different electronic communications networks.

Section 93: Conditions about apparatus supply

233.     Where OFCOM determine that a supplier of electronic communications apparatus has SMP in an apparatus market, OFCOM may set conditions requiring the supplier to maintain accounting separation between such activities and other matters and also may set price controls in relation to the hiring of telephones which are hardwired to an electronic communications network. The SMP apparatus conditions may only apply to apparatus in respect of which the supplier has been found to have significant market power.

* A telephone is hardwired to an electronic communications network if the telephone has to be physically attached to apparatus in the network by means of a tool before it can be used (subsection (5)).

*Apparatus in relation to SMP apparatus conditions is defined in section 151(1), as apparatus designed or adapted for a use which consists of or includes the sending or receiving of communications or other signals (within the meaning of section 32) that are transmitted by means of an electronic communications network.