Most interconnection in UK telecoms is commercially negotiated between operators, and Ofcom does not prescribe the terms of an ordinary commercial interconnect. Two statutory powers sit behind the negotiation. Under the Communications Act 2003, section 45 gives Ofcom the power to set conditions, and section 73 limits what an access-related condition may cover, which includes network access and service interoperability. Where Ofcom has determined that a provider has significant market power in an identified services market, section 87 requires Ofcom to set SMP conditions on that provider; those may include price controls and rules about the recovery of costs and cost orientation under section 87(9), which Ofcom may set only where the tests in section 88 are met. Where one party is a dominant provider, the negotiation runs against conditions the parties cannot contract out of. Where neither is, the agreement is still technically demanding and turns on industry norms, numbering conventions and network design.

Why the interconnection framework matters now

Interconnection is changing. IP migration has replaced traditional circuit-switched interconnection with new technical and commercial arrangements. Where one party is a dominant provider, Ofcom’s periodic market reviews set conditions the commercial agreement must work with: the SMP conditions from the Telecoms Access Review 2026-31, published on 17 March 2026, took effect on 1 April 2026, and reviews of business connectivity, mobile and other markets run on their own cycles. In our experience most interconnection agreements are between non-SMP parties and are entirely commercial. Peering at internet exchange points carries a data protection overlay, and the largest exchanges carry a security one: an IXP operator holding 30 per cent or more of the UK market by interconnected autonomous systems is an operator of an essential service under Schedule 2 paragraph 10(4) of the Network and Information Systems Regulations 2018.

Where interconnection agreements fail

Four failures recur. The first is SMP pricing set without a cost orientation analysis. Section 87(9) does not itself oblige a dominant provider to price at cost: it authorises Ofcom to set an SMP condition imposing price controls and rules about the recovery of costs and cost orientation, and section 88 sets the tests Ofcom must meet before setting one. The obligation, and the meaning of cost orientation that applies to it, come from the condition Ofcom has actually set on that provider, so the condition is the document to read before the contract is drafted. Where a dominant provider prices outside its condition, Ofcom may enforce against the contravention and a counterparty may refer the pricing to Ofcom as a dispute. For non-SMP agreements, pricing is commercial, but the agreement still needs clear pricing review mechanisms and benchmarking provisions.

Second, service level and traffic handling provisions that cannot be measured. An interconnection agreement needs precise technical specifications: traffic parameters, measurement methodology, service levels and remediation processes. Generic service level language produces disputes as soon as traffic patterns change or quality degrades.

Third, peering agreements drafted without the data protection overlay. Where peering involves personal data, which is common in DDoS mitigation and traffic management, the peering operator may be a processor within the meaning of Article 4(8) of the UK GDPR, and Article 28(3) then requires a written contract containing the terms it lists.

Fourth, dispute resolution drafted without the regulatory context. Section 185 lets any party to a dispute about the provision of network access between communications providers refer it to Ofcom, whether or not either party has significant market power, and Ofcom’s power to determine the dispute is in section 190. The parties cannot contract that referral right away, although Ofcom decides under section 186 whether it is appropriate to handle a dispute and may weigh its own priorities and resources. The agreement should still set out industry escalation through technical working groups before formal proceedings.

Common issue	Better approach
SMP pricing terms that are not cost-oriented	Cost methodology with annual verification built in
Technical specifications lacking measurable service levels	Traffic handling parameters with defined measurement and remediation
No dispute escalation beyond commercial negotiation	Escalation drafted to leave the section 185 referral right intact
Data protection treated as separate from the agreement	UK GDPR Article 28 processor terms embedded in the contract
Termination without adequate migration provisions	Notice periods and transition obligations reflecting operational dependencies

A well-structured interconnection agreement

We start with the commercial position and, where one party is a dominant provider, with the SMP conditions Ofcom has set on it.

We classify the interconnection type (service interconnection, transit, or peering) and identify whether SMP obligations apply. For SMP interconnection, we develop a transparent cost orientation methodology including cost drivers, allocation methodology and return on capital, built into the agreement as an annex with annual verification. For non-SMP agreements, we draft commercial pricing terms with benchmarking and review mechanisms.

We specify traffic handling obligations with technical parameters, measurement methodology, target service levels and remediation processes. Where one party is a dominant provider, we draft escalation that leaves the section 185 referral right intact. For non-SMP agreements, we establish practical escalation: technical working group, commercial negotiation, then formal dispute resolution.

For peering agreements, we include UK GDPR processor contract terms where personal data is handled, security obligations and audit rights.

How Bratby Law helps

• Interconnection agreement drafting and negotiation: structuring and drafting interconnection agreements for voice, IP and transit services, including traffic handling specifications, measurement methodology, service levels, pricing mechanisms and remediation processes
• SMP cost orientation analysis: where one party is a dominant provider, building a transparent cost methodology that answers the cost orientation rules in the SMP condition Ofcom has set under section 87(9) Communications Act 2003, including cost drivers, allocation methodology and return on capital, built into the agreement as an annex with annual verification
• Peering agreements: drafting and negotiating internet exchange peering agreements with appropriate UK GDPR Article 28 processor terms, security obligations and audit rights where the peering operator handles personal data
• Regulatory dispute support: advising on referral of network access disputes to Ofcom under section 185 Communications Act 2003, which is open whether or not either party has significant market power, on Ofcom’s determination powers under section 190, and on practical escalation mechanisms short of a referral
• IP migration advice: advising operators transitioning from circuit-switched to IP interconnection on the commercial and regulatory implications, including new pricing models, technical standards and the impact on existing interconnection agreements
• New entrant interconnection strategy: advising new entrants on interconnection requirements, negotiation strategy with established operators, and the regulatory backstop available if commercial negotiations fail

Rob Bratby advises operators on interconnection, peering and access agreements across UK telecoms, bringing experience from a one-year secondment to Oftel and from General Counsel roles at telecoms operators.

Frequently asked questions

How has IP migration changed interconnection agreements?

IP migration has fundamentally changed the commercial and technical terms. Circuit-switched interconnection used per-minute pricing and capacity-based traffic commitments. IP interconnection typically uses capacity-based pricing with bandwidth commitments and traffic classes. The agreements need different service level specifications, different measurement methodology and different pricing review mechanisms. Operators transitioning from legacy to IP interconnection should renegotiate rather than amend existing agreements, because the commercial structure has changed.

If we are not an SMP operator, do we have to offer interconnection at cost orientation?

No. Section 87(9) does not apply to you. It authorises Ofcom to set price control and cost orientation conditions on a provider Ofcom has determined to have significant market power, and only where the tests in section 88 are met. A non-SMP operator negotiates commercial prices. Either party can still refer a dispute about the provision of network access to Ofcom under section 185, which is open whether or not anyone has significant market power.

Can we use a standard commercial contract template for interconnection?

For non-SMP agreements, a good industry template is a reasonable starting point. You should review it for adequate service level specifications with measurement methodology, pricing review mechanisms and appropriate dispute escalation. Where the counterparty is a dominant provider, the template must also work with the SMP conditions Ofcom has set on it, including any price control or cost orientation condition under section 87(9), and must leave the section 185 referral right intact.

What happens if we have a dispute about interconnection pricing?

Either party can refer the dispute to Ofcom under section 185, whether or not either has significant market power. Ofcom decides first, under section 186, whether it is appropriate to handle the dispute, and it may weigh its own priorities and resources. If it takes the dispute, section 188(5) requires a determination within four months of that decision, except in exceptional circumstances, and section 190 sets out what Ofcom may then do, including fixing the terms of the transaction and directing repayment of an overpayment. A transparent pricing methodology with periodic reviews reduces the risk of a dispute arising at all.

Are peering agreements at internet exchange points regulated?

Peering at IXPs is less regulated than voice interconnection but it is not unregulated. Where personal data is processed as part of peering, the UK GDPR applies and the controller and processor roles have to be worked out. An IXP operator holding 30 per cent or more of the UK market by interconnected autonomous systems is an operator of an essential service under Schedule 2 paragraph 10(4) of the Network and Information Systems Regulations 2018. Conduct by a dominant exchange can be examined under the Chapter II prohibition in section 18 of the Competition Act 1998, which Ofcom exercises concurrently with the Competition and Markets Authority under section 371 of the Communications Act 2003 for activities connected with communications matters. Treat peering agreements as formal agreements with processor terms and security obligations.

What notice period should we include for termination?

There is no statutory minimum, so this is a commercial question. Ninety days is the period we most often see, and it gives the receiving party time to notify customers and arrange alternative interconnection. Shorter periods create operational disruption. The agreement can include a break clause for early exit on payment of a specified fee.

Related transactions pages

See also our other transactions pages:

• Mergers and Acquisitions (M&A)
• Private equity
• SaaS and Cloud Services
• Subsea cables
• MVNOs and MVNEs
• Network sharing and co-location agreements
• Digital Infrastructure Projects
• Data Commercialisation and Licensing
• NSIA Clearances

Independent directory rankings

Our specialist expertise is recognised in major independent legal directories:

• Chambers & Partners: Rob Bratby is ranked as a Band 2 lawyer in the UK Guide 2026 in the “Telecommunications” category: Chambers
• The Legal 500: Rob Bratby is listed as a Leading Partner for Telecoms in London (TMT: IT and Telecoms). The Legal 500
• Lexology: Rob Bratby is recognised in the Lexology Index as a Global Elite Thought Leader for telecoms and media, and as a Thought Leader for data privacy and protection: Lexology

See our Core Communication case study for an example of how we advise on roaming and interconnection agreements.