Issued by the Director General of Telecommunications

September 2000

Contents

Chapter 1      Introduction

Chapter 2     Legal status of the Guidelines

Chapter3      General principles

Chapter 4     Application of Condition 83

Chapter 5     Service and Publication requirement (paras 2-5)

Chapter 6     Exceptions to the requirements (para 6)

Chapter 7     Conditions of supply (paras 8-15)

Chapter 8     Limitations (paragraph 15)

Chapter 9     Charging principles (paras 16-18)

Chapter 10   Dispute resolution (paras 19-23)

Chapter 11   Effective date and review (paras 27-29)

Chapter 12   Separate accounts (paras 30-32)

Chapter 13   Relationship of Condition 83 to other conditions in BT’s licence

Annex A       Responses to August Consultation

Chapter 1

Introduction

1.1 The purpose of Condition 83 is to give effect to requirements for BT to provide Metallic Path Facilities (MPFs), co-location and other associated services (commonly referred to as ‘Local Loop Unbundling’ or LLU) to network operators (Operators) as envisaged in Oftel’s November 1999 Statement Access to Bandwidth: Delivering Competition for the Information Age.

1.2 Oftel brought Condition 83 into force on 8 August^. 2000 (by the Determination under condition 83.27 of schedule 1 to the Public Telecommunications Licence granted to BT concerning the entry into force of the condition "Requirement to provide Access Network Facilities").

1.3 In addition, the European Commission has proposed a draft Regulation on LLU. This is subject to adoption by the Council and European Parliament which is expected by the end of 2000. If adopted, the provisions of the Regulation will be directly applicable in the UK.

1.4 The provisions in Condition 83 enable Operators to obtain space in BT exchange sites, lease BT local loops, and purchase other associated services from BT. By upgrading the lines using technologies such as Digital Subscriber Line (DSL) Operators will be able to deliver both voice telephony and services such as high-speed Internet access and video-on-demand directly to customers. This will promote competition in the provision of higher bandwidth services and lead to more choice, increased innovation, higher quality of service and lower prices for end customers. This competition and choice in higher bandwidth access via local access lines will bring benefits to consumers, institutions and businesses and is key to promoting the development of information society services.

1.5 While Local Loop Unbundling will have a far-reaching impact on the choice and services available to consumers and smaller businesses, the provisions of Condition 83 are primarily of interest to Operators, as it will be they who will be purchasing this new set of wholesale services from BT. Hence the remainder of this document is focussed on giving guidance to Operators and BT on the provisions of Condition 83 and the way in which the Director General of Telecommunications (the Director) is likely to apply the provisions where he has discretion.

1.6 These Guidelines have been amended taking into consideration the submissions Oftel received during the consultation. A summary of the responses is contained in Annex A.

Chapter 2

Legal status of the Guidelines

2.1 These guidelines do not form part of the licence, and they do not affect its legal scope. However, the Director would normally expect to follow them and to give his reasons if he departs from them. The Director cannot legally fetter his discretion in advance and therefore he retains the ability to depart from the guidelines where the circumstances warrant it. The guidelines are, therefore, not legally binding on the Director.

2.2 The guidelines will be subject to review and may be amended in the light of experience and to reflect any European Community legislation on Local Loop Unbundling.

Chapter 3

General principles

3.1 The following general principles are applicable to the way in which BT conducts its business in relation to services provided under Condition 83. These apply by virtue of BT’s dominant position in the local access network.

Prohibition on undue discrimination and undue preference

3.2 Condition 83 prohibits undue discrimination and undue preference (see paragraphs 24 – 26). This part of the condition is based on Condition 57 of BT’s licence. BT is, in essence, prohibited from showing undue preference to, or exercising undue discrimination against, any particular operator in relation to the provision of any matters to which Condition 83 relates. In practical terms this means that where services required under Condition 83 are the same as, or similar to, services required for its own products (eg for telephony provision or ADSL services) BT should provide them to other Operators on equivalent terms and conditions. Preference or discrimination will only be regarded by the Director as undue if it has a material effect on competition.

3.3 It is likely that the Director would, inter alia, determine the following types of behaviour to be in breach of Condition 83:

1. BT reserving for its own use higher quality metallic path circuits that are unavailable to others, or conditioning the connections to a higher level to enable its business to offer faster DSL services than are accessible to competitors.
2. A refusal to supply space in a co-location facility, when space is being made available for BT’s own DSL service provision.
3. A refusal to supply interested Operators with commercially relevant information on the availability and quality of Access Network Facilities, when that information is available to BT and it could reasonably be provided.
4. BT providing back-up services, such as repair or access to buildings, on terms less favourable to other Operators than to itself.
5. BT charging different rates to Operators for Local Loop Unbundling elements (eg the local loop itself or occupation of co-location space) than those which are charged to its own businesses.

Prohibition on abuse of a dominant position

3.4 As well as complying with the prohibition on undue discrimination or preference contained in Condition 83 and the other conditions contained in its licence, BT must comply with the Competition Act 1998. The Competition Act 1998 is based on Articles 81 and 82 of the EC Treaty and contains two prohibitions:

(i) prohibition of anti-competitive agreements:

3.5 This obligation to respect competition obligations has been stressed in the European Commission’s Communication on Unbundled Access to the Local Loop, which states that, under Competition rules, the dominant Operator has a duty to grant access to the local loop. In particular the Communication lays emphasis on the fact that:

1. "refusing to grant access to the local loop to competitors requesting access, is likely to imply various forms of abuses of dominant position"; and
2. other forms of abuse of dominant position may as well occur "where dominant operators do not formally refuse upon request partial or full unbundling of the local loop, but define a set of conditions of access which restrict competition".

3.6 Further information about the Competition Act 1998 and the types of agreements and conduct that are likely to be of concern can be found in the Competition Act guideline Application of the Competition Act in the Telecommunications Sector, which is available on Oftel’s website at www.oftel.gov.uk

Cost-oriented pricing

3.7 The Condition sets out the basic pricing principles that will have to be followed in the determination of the prices for the services to be provided in accordance to it. A more detailed discussion of the pricing principles, the rationale behind them and how the Director intends to apply them is set out in Oftel’s May 2000 Consultation document Access to Bandwidth: Indicative prices and pricing principles and August 2000 Statement Access to bandwidth: Conclusions on charging principles and further indicative pricing. The main requirements contained in the Condition are that the charges should be such that:

1. long run incremental costs are recovered where these costs have been reasonably and necessarily incurred;
2. a mark-up for common costs is included;
3. a reasonable return on the capital invested is allowed.

3.8 With regard to the determination of prices, a distinction has been drawn between standard and non-standard elements. The charges for the Access Network Facilities that are considered as standard elements will be determined every year by the Director; whereas the charges for the elements that may be regarded as non-standard will in the first instance be commercially negotiated between the parties and only determined by the Director in the event of a dispute.

Transparency

3.9 Terms, conditions and prices for products required under Condition 83 should be sufficiently transparent to enable the Director and other Operators to assure themselves of BT’s compliance with its obligations. This means that a ‘reference offer’ for the products giving clear product descriptions and standard terms must be put in the public domain. Where products are required to be cost-oriented, Operators should also be able to check that the charges are reasonably and transparently derived from costs, through the reported financial statements.

3.10 The procedure for publishing a ‘reference offer’ for services provided under Condition 83 will follow those set out in Condition 7. To achieve maximum transparency, Oftel would expect standard product and price lists (including those prices determined by the Director) to be drawn up where possible. Where charges may be bespoke, as is likely to be the case for certain elements of co-location, Oftel would expect BT to publish indicative product details and pricing principles. A reasonable level of transparency may still be achieved for bespoke products by, for example, allowing the requesting Operator access to relevant tender documents.

3.11 The accounting arrangements for services required under Condition 83 are designed to give similar clarity to that provided for interconnection products, where practicable. Products with standard pricing arrangements will be treated as ‘Standard Services’ for the purposes of Condition 78. Further information on the pricing arrangements is given below.

Chapter 4

Application of Condition 83

4.1 Condition 83 relates to the provision of MPFs, co-location and related services (based on option 2 in the November 1999 Statement) and the conditions surrounding the provision of these services. It is divided into 9 main sections:

4.2 The guidelines set out below are intended to give an indication of how the Director is likely to interpret the provisions of the Condition. The technical and operational information is based on current advice from the industry groups tasked with producing recommendations on the implementation of Local Loop Unbundling and may be amended should circumstances change or new issues emerge.

Chapter 5

Service and Publication requirement (paras 2-5)

The services to be provided

5.1 Paragraphs 2 and 3 of Condition 83 require the provision of a number of services. The primary services that the Director expects to be made available under this Condition are set out below and are represented in Figure 1.

1. Metallic Path Facility: Metallic twisted pair between end user Network terminating Equipment (NTE) and serving Main Distribution Frame (MDF).

1. External Tie Cable (BT): Metallic twisted pair between MDF and HDF in Operator’s premises. The section between the MDF and the BT cable chamber is formed of one or more Internal(2) tie cables.

5.2 Operators will have the option of using BT provided co-location facilities (required under paragraph 3) or their own distant facilities in making use of the services set out above. The possible arrangements are as follows:

1. Physical Co-location – The Operator can physically locate its equipment in a BT operational site containing a Main Distribution Frame (MDF site). For this arrangement the Operator will need an MPF and an internal(1) tie-cable, both to be supplied by BT. BT offers a standard form of accommodation, the Hostel product, which consists of a suitably fitted-out space in a common room with no physical separation between the equipment of the co-locating Operators. However, Operators may request to have their equipment separated from that of other Operators within that area with the kind of demarcation that they prefer (eg a solid wall, a lockable cabinet or a wire mesh). If an Operator has special needs, eg for cooling, it may request a bespoke arrangement.
2. Distant Co-location – The Operator can use its own premises. For this arrangement the Operator will need an MPF and:

1. an external tie-cable and an internal (2) tie-cable supplied by BT; or
2. a self-provided external tie-cable which will run from the Operator premises to an agreed footway box adjacent to the MDF site, from where BT will complete the installation by pulling the cable into the building for subsequent connection with the MPF.

5.3 Figure 1 shows the configurations that can be used to connect the end user to the HDF in either the Operator co-location space or own premises. In addition to this connection the Operator will also need to connect the end user to a core network (backhaul). For physical co-location if the Operator wished to provide its own backhaul it would be necessary for BT to provide a connection, normally fibre, between the co-location space and a defined hand over point outside of the curtilage of BTs building.

5.4 BT will also have to make available any ancillary services necessary for the use of the services listed above, such as operational support systems for ordering, maintenance and repair, and billing. These services will have to be of the same quality and provided under the same conditions as BT provides to its own business.

Provision of Access Network Facilities

5.5 At the initial set-up stage, provision of Access Network Facilities is likely to take place in four main steps:

1. provision of a reference offer containing general information, product descriptions, prices and terms and conditions to enable an Operator to make a decision as to where to purchase;
2. acceptance of the offer;
3. provision of co-location with internal (1) tie-cable, external tie-cable or internal (2) tie-cable; and
4. provision of Metallic Path Facilities.

Making an application for Access Network Facilities

5.6 Any application for an MPF, tie-cables, co-location, information or other associated services must be made in writing. The term ‘written’ is not intended to be limited to a physical medium, but may also refer to applications appropriately signed and made by electronic mail or electronically via a website or other interface, should these mechanisms be available and acceptable to both parties.

Information provision

5.7 There are three separate stages in the process at which information will need to be made available. Under the terms of Condition 83, BT is obliged to make publicly available certain information including the definitions of the products and services and the prices, terms and conditions under which they will be provided.

5.8 Further general information will be provided once an Operator has expressed an interest in purchasing any of the products or services, subject to any non-disclosure or other reasonable security and confidentiality conditions. This general information should be sufficient to enable Operators to make technical and commercial judgements on the same basis as BT, about where they will be able to provide services, including telephony and higher bandwidth services, to customers; although it should not include confidential commercial information on customers in BT’s possession. This information needs to be updated regularly to reflect changes in the availability of services and increased knowledge of network capabilities.

5.9 General information should include a general description of the network configuration and construction, including typical ranges of parameters like insertion loss and loop length/resistance. In addition, under paragraph 5 of Condition 83, BT should supply:

(a) a complete and accurate list of MDF sites and the areas they serve (by postcode);

(b) information on the suitability of MDF sites for physical co-location. In order to meet this obligation, BT, as a minimum, should supply:

1. a regularly updated list of co-location facilities in which space is readily available (especially where a shared room has been prepared and not all the space has been occupied or reserved);
2. a complete and regularly updated list of MDF sites in which co-location facilities cannot readily be made available.

(c) Any further information which would indicate potential problems for supplying MPFs and other essential related services. This might relate to circumstances in which:

      (i) MDFs are full and further MDF expansion cannot currently be achieved in the available space; and

      (ii) sites are or will be subject to upgrades to the access network and those upgrades will impact an Operator’s ability to 
      make use of MPFs within the standard contract term;

(d) Other information that the Director may decide is necessary for the Operators to make an informed technical and commercial decision about locations from which they can provide services and the kinds of services they will be able to offer to end-customers.

5.10 The Director’s view is that the list of MDF sites, in which co-location facilities cannot readily be made available, should only comprise sites where it is impracticable for BT to offer properly fitted space for competing Operators to install their equipment. The list may, therefore, include:

(a) Sites where ducting is not available for distant location.

(b) Sites in which space is not available. The Director will consider an MDF site as being capable of hosting co-location facilities if there is enough room in it to house three racks of equipment.

(c) Sites where BT has firm plans to dispose of the property within three years. However, the Director considers that it is reasonable that BT should accommodate a request in these circumstances, if an Operator is willing to accept co-location of its equipment for a limited period, terminating before the property is disposed of.

5.11 This list of MDF sites should also contain a clear indication of the reasons why co-location space is not available for each site listed, the period of time after which BT plans to dispose of the property, and of the MDF sites to which Operators would be re-routed.

5.12 Additionally, to meet non-discrimination obligations, BT should ensure that it supplies to Operators information at least at the same level of detail as is made available to its own divisions. This refers to information which is relevant and necessary to enable Operators to make an informed judgement, on the same basis as BT, about where and what kind of services may be provided to customers. Operators will have to ensure that, when handling this information, commercial confidentiality is respected. This could relate to relevant technical information which BT uses, or can be expected to use, within its normal course of business (ie all the information which is available, or could readily be made available, to BT divisions which employ copper loops or related facilities). This information could include:

        (i) data on the general quality of the lines in the various MDF sites if these are available, or could be easily be available, to
        BT, as these affect the technical and business decisions of the interested Operators;

        (ii) any result of line quality tests;

5.13 On making a specific request for co-location and/or an MPF, Operators should be provided with detailed information about the nature and quality of that product or service to enable them to determine the kind of services and reliability of service that can be provided. Details about the processes for the provision of information are set out in the O&M Handbook agreed by the OPF Focus group on Local Loop Unbundling.

Provision of co-location and external tie-cables

5.14 BT is under an obligation to provide co-location facilities at all sites housing an MDF, unless the Director determines it is not reasonably practicable to do so.

5.15 Oftel expects that the default arrangement for co-location will be a shared area within the MDF building of a standard specification which should be sufficient to meet the needs of Operators delivering DSL services to customers. BT is offering a standard form of accommodation, the Hostel product, which consists of a suitably fitted-out space in a common room with no physical separation between the equipment of the co-locating Operators. However, Operators may request to have their equipment separated from that of other Operators within that area with a physical partition, a cage or a wire mesh. If an Operator wishes for a greater degree of physical separation, it should be possible for it to request a bespoke arrangement within a separate room.

5.16 Determining the size of the room to meet demand for shared co-location will be an important consideration for BT, as building a room which is too large will result in additional unwarranted costs for Operators and one which is too small, could soon become full, necessitating additional building work, which again may result in additional costs for Operators.

5.17 As a general rule the Director expects BT to apply the same approach it adopts in developing accommodation for provision of its own services. This means that when planning and preparing co-location space it should cater for what it forecasts to be a reasonable level of demand in a cost efficient manner, avoiding underplanning or overplanning of the space. A failure to do so could create expense and raise barriers to entry for other Operators. Operators will normally provide BT with a forecast of their expected level of demand, which should aid BT in planning resources for co-location.

Security within BT’s buildings

5.18 BT is both entitled and obliged, under the terms of its licence, to make arrangements to ensure the security of its network. Where specific security arrangements are required as a direct result of Operators entering buildings for LLU purposes, the costs of the arrangements should be met by the Operators concerned. However, where BT wishes to put in place additional measures that cannot be justified as being necessary for security purposes, the costs of these arrangements should be met by BT. Oftel’s view is that the nature of the specific arrangements that can be considered appropriate to ensure a suitable level of security for BT’s network cannot be defined a priori and will depend on the circumstances. There may be cases in which the building of a wall between BT’s and the other Operators’ equipment will be required, cases in which a wire mesh may prove sufficient, or cases in which BT’s equipment can be secured in other ways.

Timescale for provision of physical co-location

5.19 The Director currently considers it reasonable for BT to inform the requesting Operators whether a co-location order has been accepted or rejected within two weeks of receiving a request.

5.20 If the order has been accepted by BT, the Director believes that it is reasonable to expect that BT should be able to provide standard co-location in a building which has not previously housed co-locating Operators within four months (including survey and building works), where these four months are calculated from the day of receipt of the order by BT from the requesting Operator. The Director expects that this period will be sufficient for the co-location space to be placed in a condition to allow the requesting Operator to install its equipment in it and begin operating it.

5.21 Nevertheless, the Director accepts that there may be external factors, such as the need to await planning permission, which may delay the process in certain circumstances, and that there may also be cases in which the construction and set up work will require more than four months (for example when asbestos needs to be removed). In these circumstances BT would be expected to give timely and reasonable justification for the delay to the Operator, together with an indication of the new date by which the facility will be provided.

5.22 The Director expects that once a shared co-location space has been set up for a first Operator, it will be realistic for BT to accommodate subsequent Operators in four weeks. Again, at the end of the four weeks the co-location space should be in such condition as to allow the requesting Operator to install its equipment in it and begin operating it. There may be exceptional circumstances in which setting up the space could require longer, in which case BT would be expected to supply a timely and reasonable justification for the delay to the Operator, together with an indication of the date by which the facility will be provided.

5.23 The timescales given above are based on the Director’s current understanding of the amount of time taken to provide similar facilities in commercial tele-housing centres and in other countries where co-location is available. These timescales will be subject to regular review in the light of experience.

5.24 In all cases, the Director expects BT to supply co-location to the quality, at the cost and to the timescales that an efficient Operator would meet in the same circumstances.

Allocation method

5.25 In most cases the Director expects that BT should be able to accommodate all the Operators seeking co-location at any MDF Site. However, where space is limited, there may be a need to determine an allocation method. Oftel expects to determine the allocation method following consultation. This method should allow for all requests for Access Network Facilities to be processed on fair and equitable terms, and should not unduly discriminate between Operators.

Use of space in co-location facilities

5.26 Co-location is a limited resource, thus use of co-location facilities should be limited to that which is necessary to enable Operators to provide services effectively in competition with BT and each other. Wasteful use of space may prevent other Operators from entering an exchange building, or prevent reasonable expansion by BT. A test of ‘necessity’ has thus been included within the licence condition as to what equipment should be permitted within the space.

5.27 While it is difficult to identify precisely (in circumstances where several functions may be performed within a single piece of equipment and where the boundaries between different types of equipment may become blurred) which specific equipment is and is not necessary for provision of services via an MPF, the Director will adopt the following criteria in determining any case brought to him for determination:

     (i) The co-location facility is only to be used for siting equipment that is reasonably required by an Operator in order to  
      compete effectively in the provision of telecommunications services (whether higher bandwidth, narrow-band data,
      telephony or other services) over the MPF.

     (ii) Where siting equipment away from the co-location facility is possible and does not significantly impede an Operator’s         ability to provide services competitively over the MPF, the equipment should normally be sited elsewhere if it would
      otherwise give rise to a need for an additional allocation of space. Conversely where siting equipment elsewhere would put
      Operators at a material disadvantage compared with BT’s operations, it should be permitted within the co-location space
      (unless there are valid objective reasons for refusing it).

5.28 The Director considers it reasonable that BT allow Operators to connect each other’s equipment inside the co-location space, where these connections are associated with the provision of telecommunications services through MPFs. For example, if an Operator wishes to focus on providing data services, it should be allowed to connect to another Operator for the purpose of offering voice services to its end-customers (ie line sharing). Operators may also wish to choose an alternative supplier to BT for backhaul, and should be able to make the connection within the co-location site, if to do so elsewhere would be considerably more inefficient or place the competitive backhaul provider at a disadvantage compared with BT.

Providing physical co-location outside the building housing the MDF

5.29 In most circumstances Oftel expects that co-location will be provided inside the building housing the MDF. However, where space inside the MDF building is limited, or there are benefits to be gained (eg better access) from using space outside the building, Oftel would consider it reasonable that BT should offer to do so. Such space could be made available in the site housing the MDF (such as adjacent buildings, car parks or warehouses) where provision would not unduly impact on BT’s business activities and where space could be suitably arranged to provide the necessary services. In general, where space is limited and BT could reasonably be expected to adapt facilities to meet its own needs, the same treatment should be given to other Operators.

Provision of external tie-cables for distant location

5.30 The Director expects that, from receipt of an order, it should take no longer than six weeks for external tie-cables to be provided, if additional ducting is not required and no more than three months if new or enhanced ducts are necessary. This timescale includes the time that may be required for the internal cabling in the Operator’s premises. However the Director accepts that there may be exceptional circumstances in which the provision could take longer, in which case BT would be expected to supply a timely and reasonable justification to the requesting Operator, together with an indication of the date by which the tie-cable will be provided.

Provision of MPFs

5.31 It is expected that, in general, BT will be able to meet the obligation to provide this service in all circumstances where there is a connection which:

1. is spare or has become available through cancellation of existing services by a customer;
2. extends (or could readily be made to extend) between the MDF and at least the relevant distribution point (DP) and where any connection between the DP and NTP could readily be provided;
3. is of the relevant quality or reasonably capable of being made so.

5.32 MPFs may be provided over existing lines or new lines (spare pairs), where a connection is or can be made available. The circumstances will usually dictate which is to be provided. If a customer is taking a service over an existing BT telephone line and wishes to retain that service, the MPF will need to be provided over a second line. If the customer, and when necessary its service provider, cancels all existing services delivered via his existing BT line (ie BT services, Calls and Access, etc), then Oftel would expect that the MPF will normally be provided over the existing line, except in circumstances where:

1. it is necessary to use a spare pair to provide a line meeting the relevant quality specification for an MPF;
2. the Operator requests that the service be delivered over a spare pair and is prepared to pay any applicable connection charge.

Timescales for supply of MPFs

5.33 The Director considers it reasonable that BT should be able to provide MPFs within three working days of an order, if no NTE is necessary, and within five working days, if a new NTE is needed (excluding the time required for the receipt of the anti-slamming card from the end-user). However, the Director accepts that there may be exceptional circumstances in which the process could take longer, in which case BT would be expected to supply a timely and reasonable justification to the requesting Operator, together with an indication of the date by which the MPF will be provided.

Chapter 6

Exceptions to the requirements (para 6)

Circumstances under which it may not be possible to provide co-location

6.1 Most circumstances where it is not possible for BT to provide co-location are likely to relate to the availability of suitable space at that exchange. For instance it may not be possible to provide co-location facilities:

1. Where all the space in an exchange building is accounted for in the provision of existing BT services or reasonable planned expansion. If the planned expansion is to meet projected demand for higher bandwidth services (through installation of DSL equipment), the Director would want to be assured that BT was not unduly favouring its own business at the expense of other Operators. If space is unavailable, because it contains equipment which is not utilised, the Director would expect BT to remove such equipment in order to free space for the provision of co-location. If space is being used for purposes other than the provision of telecommunications services (eg office space or meeting rooms), the Director may consider its conversion into co-location space to be appropriate if it would not unduly impact BT’s operations. The Director may also consider that redeployment of part of that space for provision of co-location facilities was justified if BT would itself react to increased demand for space at that location by reorganising non-operational facilities.
2. Where space is available, but cannot be used for co-location because it is not possible to provide or to arrange to provide necessary associated facilities such as ventilation and security arrangements.
3. Where there are significant safety concerns which need to be dealt with first.

6.2 BT has control over its property portfolio and it is ultimately a decision for BT as to how best to manage it in its commercial interest. Nevertheless, the Director would expect any business decision that BT takes about its properties, especially if it involves the disposal or redeployment of any of them, to take account of BT’s obligation to meet reasonable requests for co-location and not to unduly favour its own business.

Circumstances under which it may not be possible to provide MPFs

6.3 Oftel expects that MPFs will be available in most circumstances and in most areas at the determined price, although additional costs may be incurred in certain circumstances. However, there may be some cases in which it would be unreasonable (either temporarily or permanently) to require the provision of these services. These mainly relate to circumstances in which it is not technically practical to supply the service, or where to do so would require a disproportionate amount of resource. This could apply:

1. where copper is not available in a given area because the area is exclusively served by fibre;
2. where lines are not of the appropriate specification and could not readily be adapted (eg by removing pair gain equipment) to meet the specification. However, rules regarding undue preference apply – if BT considers a line suitable for being adapted to supply its own higher bandwidth services (eg ISDN, DSL) it should likewise be adapted and supplied to Operators as an MPF;
3. where there is a temporary inability to supply the line because provision would necessitate BT providing new poles, duct, D-side or E-side cables. However, Oftel would expect the service to be provided as soon as a spare pair can be made available;
4. where BT would not normally provide service to the premises for safety reasons;
5. where the request is not associated with a particular premises.

Limitations due to competition

6.4 An exception may also be made to the obligation to supply Access Network Facilities where the Director has determined through the review procedure (set out in paragraph 28 and 29 of the Condition) that there are sufficient competing alternatives available in a given market, or where the supply would adversely affect the development of competition in any market.

Chapter 7

Conditions of supply (paras 8-15)

7.1 This section of Condition 83 sets out the fundamental principles that the Director considers should be followed in permitting the use of MPFs, co-location and other services, to ensure that the security and integrity of BT’s network is maintained, and safeguard the right and ability of BT and other Operators to develop their networks and compete on reasonable terms. It also sets out requirements for BT to provide adequate notice of any changes that might affect Operators using MPFs.

Notice of cessation/change in circumstances

7.2 In any circumstance where BT proposes to cease a service due to an Operator’s failure to comply with one of the conditions set out in this Condition or in a contract, it should state its reasons for taking action to the affected Operator, give due notice and offer it the opportunity to rectify the offending behaviour. The Director expects that precise procedures for giving notice will be contained in the contract between BT and the Operator. The Director expects these provisions to be fair and equitable with a notice period that reasonably reflects and is proportionate to the circumstances.

7.3 There may be special cases in which immediate action is necessary to avoid disruption to other services (eg when spectral interference is caused). The Director expects all the Operators to follow the procedures agreed in the industry groups when dealing with these circumstances.

7.4 In addition BT must give appropriate notice of any changes, such as closure of an MDF Site, or upgrades to its local access lines, that are likely to affect existing or prospective users of these services. The notice should allow enough time for the affected Operators to take reasonable alternative arrangements and avoid any unnecessary disruption to their commercial activities.

7.5 If there is a dispute as to whether any action taken by BT is justified (eg action to cease service because of failure to comply with the Access Network Frequency Plan), the dispute may be referred to the Director.

Changes to BT’s Access Network

7.6 The obligation to provide MPFs should not prevent BT from making improvements to its local access network such as installing fibre to distribution points or to homes and businesses. BT might choose to do this in circumstances where the cost of the upkeep of its existing access network would make its replacement economically or operationally justified. Specific examples might include:

1. replacement of old cable where water penetration has degraded its performance;
2. replacement of cables where replacement, re-routing or duct renewals make this necessary;
3. where additional capacity is needed and available ducts are congested.

7.7 BT might also install fibre in response to customer demand for increased bandwidths.

7.8 If BT plans to improve its network (eg by extending fibre part-way to allow those which would previously not have been able to take DSL to do so, or to use high-speed technologies such as VDSL) it should give reasonable notice of the planned changes to Oftel and any affected Operators. The Director encourages such developments where they contribute to the modernisation of the access network and lead to improved services to customers. Such developments may, however, affect the ability of the Operators to provide competing services via MPFs. In general, BT should ensure that any changes to its access network do not have the effect of disrupting the commercial activities of BT’s competitors or unduly favouring the roll-out and operation of its own DSL services. This could mean that network upgrades involving rolling out fibre to street cabinets should be accompanied by new wholesale products (eg unbundled sub-loops or a new bit-stream product) that would give operators the continued opportunity to provide services to customers in competition with BT.

7.9 Oftel intends this year to publish guidelines as to what products it would consider reasonable in the circumstances set out above.

Compliance with the Access Network Frequency Plan

7.10 Oftel, on the basis of recommendations from the NICC DSL task group, has proposed an Access Network Frequency Plan which was published for consultation in June 2000 (Oftel’s consultation document Access to Bandwidth: Proposed Solution for the Access Network Frequency Plan for BT’s Metallic Access Network). This plan and its future final version should be referred to for a detailed description of the requirements that equipment must meet to be suitable for use on unbundled local loops.

7.11 In order to safeguard the integrity of local access lines and maintain the performance of higher bandwidth services, Operators must signify their acceptance of, and willingness to comply with, the Oftel approved Access Network Frequency Plan before they can be supplied with the MPF service. This might include, but is not limited to:

1. supplying a report from the manufacturer to show that the equipment (subject to correct installation) is compliant with this plan;
2. providing test results from the manufacturer to show that the equipment (subject to correct installation) is compliant with this plan; or
3. presenting reasonable evidence that other Operators are already employing the same equipment on unbundled loops.

7.12 However, while it would be reasonable for BT to expect evidence of this kind, the intention is that equipment should be declared compliant by the Operator and not subject to prior approval by BT.

7.13 Conformity with the Access Network Frequency Plan is essential for all, if the performance and reach of higher bandwidth services is to be maximised. Failure to comply is a serious matter. BT would be justified in taking action to cease supply of services where interference was caused. This ‘interference’ would normally be recognised by degradation in the performance of other systems and services carried in a common cable.

7.14 The obligation to conform to the Access Network Frequency Plan applies symmetrically to all Operators, including BT.

7.15 In addition, equipment should conform to other relevant standards, such as those governing product safety and EMC.

Chapter 8

Limitations (paragraph 15)

Code Powers (Telecommunications Act 1984)

8.1 Where BT provides co-location facilities in its premises to Operators, the ability of those Operators to place equipment within BT’s premises will be governed by Condition 83 and by the contractual agreements between BT and the Operators. Operators will not be able to claim additional rights over BT’s premises arising from any powers they may have under Schedule 2 to the Telecommunications Act 1984 (Code Powers).

8.2 The existing Code Powers of both BT and other licensed Operators are unaffected by Condition 83. Operators will be able to use their Code Powers outside BT’s premises in the usual way for backhaul and external tie-cables.

8.3 Condition 83 does not in any case impinge on BT’s right to continue running the Access Network Facilities as part of its Applicable Systems.

Chapter 9

Charging principles (paras 16-18)

Charges for MPF and internal tie-cables

9.1 As set out in the Oftel’s November 1999 Statement and reiterated in Oftel’s May 2000 consultation document Access to Bandwidth: Indicative Prices and Pricing Principles, the Director has decided to determine the charges for the Access Network Facilities that are considered as standard elements on the basis of Long Run Incremental Cost (LRIC) plus a mark-up for common costs. As the nature of the metallic path facility (MPF) and internal tie-cables is well-defined these may be regarded as standard elements, and are thus suitable for pre-determination by the Director.

9.2 The Director will regularly review prices. The first review will take place 12 months after the introduction of the services. Thereafter, the Director may either fix specific prices on an annual basis or choose to introduce an on-going control (eg an RPI-X form of price control). The determination of prices or the introduction of a price control will follow the standard consultation process.

Charges for co-location and non-standard elements

9.3 Unless called upon to resolve a dispute, the Director does not intend to pre-determine the charges for co-location set-up and rental, as these will in many cases be bespoke or ‘non-standard’ charges. Rather he would expect these charges to be commercially negotiated between the parties. However, the Director would expect that when setting these charges, BT will follow the general pricing principles stated in Condition 83 and in Oftel’s August 2000 Statement Access to bandwidth: Conclusions on charging principles and further indicative pricing. In the event of a dispute, the Director reserves the right to intervene and determine these charges (either the particular charges themselves or the way in which charges are structured).

Cost recovery

9.4 Oftel’s view is that the incremental costs of providing MPFs, co-location and associated facilities (such as heat, power and ventilation) should be recovered from Operators taking the service, where reasonably and necessarily incurred. In addition, Oftel has concluded that the reasonably and necessarily incurred costs of BT’s Operational Support Systems development and other costs which will specifically be incurred in the provision of services to other Operators should also be met by Operators taking the service. Allowing only ‘incremental’ costs means that the costs that will be attributable to the MPF, co-location and associated services should not include costs that BT incurs for its own products and services (whether systems development costs or otherwise).

9.5 Prices for Network Access Facilities should, in general, reflect the incremental costs that an efficient Operator would incur in providing the relevant services in the given circumstances. On this basis, for assets in place, the Director does not intend to adjust for minor inefficiencies, but would adjust for major inefficiencies, if studies showed that BT were significantly less efficient than a properly adjusted benchmarking group. Whereas, for assets and systems that are not yet in place, the Director would expect charges to be set on the basis of efficiently incurred costs. In cases where costs are constrained, eg by mechanisms put in place historically which cannot readily be changed, costs incurred should be those that an efficient Operator would incur if faced with those constraints.

Geographic de-averaging

9.6 Condition 83 allows BT the freedom to geographically de-average the price of MPFs. However, BT must be able to show that any variation in price is justified by variation in the underlying costs. The rationale for allowing BT to de-average prices is that the cost of the facilities might vary quite widely, and it is appropriate for such variations to be reflected in prices.

9.7 Geographic de-averaging could entail BT charging different prices for different areas of the country. For example, the price of a MPF might be lower in urban areas than in rural areas, because the average length of a circuit is shorter in urban areas than in rural areas. Density of end-users could also affect the level of costs.

Chapter 10

Dispute resolution (paras 19-23)

10.1 All disputes that are referred to the Director for determination under Condition 83 will be resolved in accordance with Oftel’s standard casework procedures. The length of time that it will take to resolve a dispute will depend on the circumstances of the case, but the Director will seek to resolve disputes as quickly as possible. The Director will give reasons for his decisions.

10.2 Before a dispute is referred to the Director, however, the parties should seek to resolve the dispute through commercial negotiations. The parties should adopt a pro-active approach to resolving the dispute and should co-operate with each other so far as possible. The Director’s current view is that if, for example, there is a dispute about whether co-location facilities could be made available at a particular site, upon reasonable notice being given, an independent expert should be allowed to survey the site before the dispute is referred to the Director. Additionally, the report of any such survey should be made available to other Operators requesting co-location facilities in the same site in order to avoid subsequent visits, unless circumstances have changed.

How to make an application

10.3 The following is a non-exhaustive list of the information that a party requesting a determination (the complainant) will be required to submit to the Director:

1. the names and addresses and contact details of the parties;
2. the facts relating to the dispute, including any supporting documentation or other documentation (cross-referenced to the facts of the dispute);
3. full details of the efforts made by the parties to resolve the dispute;
4. the legal obligation or obligations that the complainant believes the other party or parties to the dispute have breached, for example, Condition 83 or any other relevant licence condition or the Competition Act 1998;
5. evidence in support of the complainant’s allegations, for example, where an allegation of undue discrimination is being made the complainant should seek to provide evidence of a likely material impact on competition;
6. the determination that the party making the request is seeking.

Chapter 11

Effective date and review (paras 27-29)

Effective date

11.1 The Director determined that Condition 83 would come into effect in its entirety on 8 August^. 2000 (by the Determination under condition 83.27 of schedule 1 to the Public Telecommunications Licence granted to BT concerning the entry into force of the condition "Requirement to provide Access Network Facilities"). However, he appreciates that it is unlikely that all of the Access Network Facilities required under the Condition can already be made available to Operators, because certain products are dependent on provision of other products (eg provision of MPFs is not possible without provision of some form of co-location). BT started taking orders from Operators for co-location on 12 September 2000. Hence, as explained in paragraph 5.20, Oftel believes that Operators will be able to begin installing equipment within four months at the maximum, which means that the first connections to unbundled local loops will take place early in 2001. Once the products are offered the Director expects them to be provided according to the timescales set out in these guidelines.

11.2 Additionally the Director expects that BT will take all the necessary decisions and devote sufficient resources to ensure it can undertake all the processes and preparation it needs to be able to meet demand.

Review

11.3 As was stated in Oftel’s November 1999 Statement, the purpose of introducing these requirements is to promote competition in the provision of higher bandwidth and other innovative services. Once effective competition is established in the relevant markets there should no longer be a need for mandatory access to the BT local loop. In order to assess progress in this area the Director is committed to conducting a review, due to be completed by the fourth anniversary of the coming into effect of the Condition. If after the first review the obligation has not been removed, the Director will continue to review regularly the conditions of the market every two years, until he deems it appropriate to lift it. The Director intends to publish his conclusions (or reasons for not being able to publish conclusions at that stage) not later than two months following the review date.

11.4 This is consistent with Oftel’s strategy of regularly reviewing competition in certain key areas and adjusting the level of regulation in response to changes in circumstances. The first review will take place after a longer period of time than the following ones in order to create a stable environment for Operators to plan their investment.

11.5 The Director may conclude after a review that competition is effective, in which case he would give due notice of the removal of the Condition. Alternatively, if competition is not yet at that stage fully effective, but is developing well, the Director may consider it appropriate to lighten the obligations on BT. Action might include adjusting the price, removing the obligation in certain circumstances, or altering the conditions under which loops are to be provided.

11.6 Any such changes, or any termination of the obligation to supply will take full account of the impact on any Operators taking these services. Changes in the regulatory obligations would be subject to the usual process of consultation and would only be applied after a suitable notice period. Such alterations would not affect any contractual obligations already entered into by BT.

Chapter 12

Separate accounts (paras 30-32)

12.1 BT will be required to publish financial information on Access Network Facility services in the same way as it currently does for those interconnection services (defined as ‘Standard Services’) provided from BT's Network Business, except where the individual services are bespoke and the Director is satisfied that it is not practical for him to require this level of cost and revenue information. Treating products as Standard Services will enable industry to view detailed financial analysis of individual costs (including incremental costs) and revenues for these products. It will also support the Director in making determinations on specific charges or in assessing whether BT has breached competition rules for example discriminatory behaviour. It is likely that the MPF will be an activity undertaken from the Network Business.

Chapter 13

Relationship of Condition 83 to other conditions in BT’s licence

BT’s Universal Service Obligation (Condition 40)

13.1 An obligation (known as the Universal Service Obligation – USO) is currently placed on BT to ensure that a defined minimum set of services of specified quality are available to all, independent of their geographical location and at an affordable price. The USO includes the obligation to provide a connection to the fixed network able to support voice telephony and low speed data and fax transmission on reasonable request.

13.2 The Director is of the view that it would not be reasonable to apply this obligation where the customer is already receiving a voice service from another operator, either over an unbundled loop, over cable or where the customer has an existing BT line and is requesting a second. Assuming that providing a second line to a customer is likely to be profitable, BT may wish to supply a second voice line, but is not be obliged to do so. However, as the general competition provisions and the condition on undue discrimination and undue preference apply in these circumstances, the Director would expect BT to provide valid reasons for refusing to install a second line.

Annex A

Responses to August Consultation

Consultation background

A.1 In August 2000, Oftel published a consultation document which set out the Draft Guidelines on Condition 83 of BT’s Licence.

List of respondents

A.2 Oftel received five submissions from the following organisations and individuals (in alphabetical order):

• BT;
• Markus Karlsson;
• Novaxess;
• QS Communications;
• and one confidential submission.

A.3 Oftel has also benefited from informed discussions with a number of organisations.

Summary of responses received

A.4 On the whole Oftel’s proposals as set out in the consultation document have been well received, with the majority of respondents welcoming the content of the guidelines.

A.5 Key issues raised by respondents comprise:

• Provisioning intervals and target dates – The major concern for all respondents appeared to be the enforceability of the timescales for the provision of all Access Network Facilities. One respondent described the German experience and argued that LLU has not really taken off in Germany because of the lack of binding timescales for the delivery of co-location facilities and MPFs. Another respondent claimed that the timescales included in the Guidelines are too long. Moreover it claimed that the "exceptional circumstances" under which BT may not be able to respect the timescales are too vague and leaves room for BT to delay the provisioning process to its advantage.
• Lack of penalties for violation of these timescales – Many respondents asked for violations of provisioning intervals to be sanctioned through a system of automatic penalties. They claimed that the existing system based on complaints to be presented to Oftel for each individual delay is slow and burdensome and is prone to causing additional backlogs. Two respondents brought the states of New York and Texas as an example of an alternative system. In these states the regulators have developed a system to measure the incumbents’ performance against agreed provisioning benchmarks and a set of sanctions for any such failure.
• Information on unavailability of physical co-location space – Most respondents asked for the imposition of an obligation on BT to post information on unavailability of co-location space on its website and to regularly update it. Two of them also argued that BT should provide detailed information not only on unavailable, but also on available space in its MDF sites.
• Removal of equipment which is not utilised – A widespread concern was that BT may keep equipment which is not utilised to occupy space that may otherwise be used to co-locate competing Operators. Some respondents, therefore, requested that the Guidelines should include an obligation on BT to remove unused equipment, when it impedes the use of space in MDF sites for the provision of co-location.
• Unavailability of space for physical co-location – Oftel was asked to clarify who is responsible for deciding whether space inside an MDF building is really limited for the purpose of providing co-location facilities. Some respondents also argued that BT should be required to give Operators access to the MDF sites where they have been denied co-location in order to enable them to verify whether BT has failed to identify useful space. One of these respondents claimed that this is a rule in the US.
• Equipment that can be hosted in co-location space – Most respondents argued that BT should permit Operators to use co-location space to host any equipment used for interconnection and/or access to unbundled elements, even if it includes some switching or enhanced service functions. This requirement would facilitate the optimal use of the network resources and would drive down the costs incurred by the Operators. One respondent reported that in the US the FCC requires incumbents to allow in the co-location space all equipment "used and useful", as long as it is not solely used for switching and routing.
• Acceptability of equipment in co-location facilities – Some respondents argued that the burden to prove that the equipment in the co-location space causes interference with BT’s network should be upon BT. Two respondents reported that in the US the FCC ruled that any technology that complies with existing industry standards or has been approved by the FCC, any industry standard setting bodies or any state commission is presumed to be acceptable for deployment, and that, where the technology is new and has not yet been approved by a standard setting body, the Operator can petition the relevant state commission for permission to deploy it. These respondents claimed that an approach similar to one adopted in the US would eliminate a potential bottleneck for the deployment of new technologies.
• Electronic connection to BT’s OSS – Requests were advanced that BT should be forced to permit Operators to connect electronically to its OSS. Electronic bonding allows the automatic exchange of information between carriers’ OSS and permits it to carry out pre-ordering and ordering functions in a quick and efficient manner. The argument brought forward was that it has been in use in the US for over a year and it has brought significant cost savings to both incumbents and competitors.
• Exemptions on provision of co-location – Some respondents complained that the exemptions on provision of co-location are not detailed enough and that BT may use them as an opportunity to delay or avoid providing co-location to competitors. These respondents proposed a system under which BT drafts a list of sites it believes should be exempt and permits Oftel to determine whether there is a real cause for exclusion.

A.6 Main points made by BT in its response include:

• Competition Act – BT argued that no reference should be made to the Competition Act in a set of guidelines concerning a specific licence condition.
• Access to tender documents – BT does not consider that it is reasonable to allow requesting Operators access to tender documents for co-location building works. This objection was on the basis that such documents may contain commercially confidential information.
• Physical co-location – BT requested that the Guidelines include reference to the Hostel product – being the normal manner of providing physical co-location.
• Requirements to disclose commercial information – BT expressed concern about the extent of commercial information it is required to reveal. BT believes that this obligation should be limited to network technical information plus occasional and clearly specified operational data (eg co-location blacklist).
• List of co-location availability – BT proposed to update this list on the basis of the results of actual survey requested by Operators to keep costs down and avoid unproductive survey work.
• Building due for disposal – BT requested these sites to be marked only as "available space exhausted", without any indications of their being on the disposal list. It claimed that this information is commercially confidential and could affect BT’s negotiations with potential buyers. In addition, it argued that these buildings should be included in the blacklist if BT plans to dispose of them in the following three years, as the industry has requested a property licence of three years.
• Forecasting of co-location space requirements – BT protested that it should not bear the burden of forecasting the level of co-location demand. It claimed that Operators should submit forecasts and BT should only incorporate them into its relevant accommodation planning.
• Co-location timescales – BT claimed that the four-month interval for the provision of new co-location facilities may have significant implications for the agreed industry process. BT also complained that four weeks are not enough to accommodate an Operator in an existing co-location room and proposes an interval of eight weeks.
• Timescale for provision of external tie-cables – BT expressed concern about the discrepancy between the timescale agreed with the industry and the one contained in the Guidelines.
• Shared backhaul and shared access – BT argued that allowing Operators to connect between each other amounts to interconnection, which is not envisaged by Condition 83.
• Car parks – BT expressed concerns about the inclusion of external space among the areas in an MDF site that could be considered suitable for co-location. Car parks are often needed for operational reasons as well as for emergency purposes and cannot be redeployed to house co-location cabins.
• Site inspection – BT disagreed with the proposal to grant Operators the automatic right to access sites where it declares it cannot provide co-location space. BT argued that inspections should be carried out by an independent third party whose report could then be made available to other Operators requesting co-location in the same site to avoid repeated visits.
• RPI-X – BT argued that all references to price caps are incorrect, as Condition 83 states that prices are to be set by annual determination.

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