Meeting Agenda List of Attendees
Oftel paper: Pricing of calls to the Internet
FAQ on Oftel's work on Internet access
Peter Walker (Oftel) welcomed everyone to the third Oftel Internet Forum (OIF) meeting and introduced himself as the Oftel's Director of Technology. The meeting was intended to be an interactive workshop to explore the issues relating to Internet access tariffs. He summarised the current profile of this subject within industry, Government and the media, and urged all present to contribute to the debate. The meeting was held under Chatham House rules, ie none of the comments on the presentations were to be attributed to individuals to ensure the debate was as open as possible.
Penny's presentation explained some of Oftel's current activities relating to Internet access tariffs. A full account of these activities can be found in the Oftel document entitled 'Pricing of calls to the Internet: possible initiatives to bring about more appropriate and flexible tariffs'.
Qu: Are there any plans to
decouple the retail uplift from the pence per minute charge ?
Ans: Oftel stated there are lots of options and are open to discussion on appropriate solutions.
Dave's presentation outlined BT's plans to roll-out its IP network nearer to the customer. This would be performed by installing modem racks in local exchanges. Currently Internet access charges are based around telephony pricing. By using less of the PSTN network to access the Internet (most calls would only travel through one BT exchange before reaching a modem bank) the telephony part of the total cost would be minimised.
Dave detailed a varient to an exisiting product (BTnet Dial IP 0800) which takes advantage of this new architecture. This product will be available from mid December 1999. It was emphasised that this was the first of many new tariffs based around this architecture and if it did not suit ISPs or OLOs then they should approach BT to discuss a more suitable alternative.
[ BT price notificiation for this product is here]
Qu: What is the timescale for installing modems in local exchanges?
Ans: Modems will be in use from December 1999, with 90 locations operational by September 2000.
Qu: The product includes a traffic profile (30/30/40 - day/eve/we). It bundles 8 hours/port but also includes an overflow price of 0.9999p per minute. Is this set by Oftel or BT ?
Ans: This is BT's own decision, based on its knowledge of typical usage. Oftel does not dictate the terms and conditions BT set for their products (so long as they comply with competition rules). Again BT stated that they were willing to talk to operators who felt this profile or cost were not appropriate
Qu: What does this product offer to ISPs ? It does not seem any cheaper than other BT IP products.
Ans: BT stated it was a good product with an attractive price for ISPs who do not wish to invest in infrastructure. The pricing should allow ISPs to offer an unmetered package to their customers.
Qu: ISPs are limited in what they can charge by the cost structure of the products they buy. BT's product is not itself unmetered - will BT be introducing a truely unmetered option ?
Ans: BT would be happy to discuss pricing based on flat rate pricing with OLOs or ISPs. This current product is usage based.
Qu: Does the product support ISDN and Home Highway customers ?
Ans: The modem banks do support ISDN. Bonding is being considered for the future, though there are some technical issues to be resolved when the two ISDN channels are not terminated on the same modem rack.
Qu: What are the contention ratios in the product ?
Ans: ISPs are free to set whatever contention ratio they wish for the modem ports (it is simply a matter of how may ports they buy compared to the number of customers they have). IP traffic flow and contention ratio is the same as the existing BTnet Dial IP products and can be found in the relevant SINs and SPINs.
Qu: This product could be seen as BT leveraging its strong position as a call originating network in to an area where it has a less strong position (IP transport). Does Oftel recognise this could be an issue ?
Ans: Oftel would be concerned if BT is bundling products in relation to which it is not dominant, with products in which it is dominant, where the result is anti-competitive. Oftel would look at the LRIC (see below) and retail analysis as part of a formal competition analysis. One issue Oftel would consider is where other operators would be able to interconnect with the BT product.
Qu: What BT interconnect products are available to Annex II operators ?
Ans: Annex II status gives operators the right to negotiate and the obligation to negotiate. BT are required to negotiate where there is reasonable demand for a product anyway. The status of the operators may affect which tool Oftel uses to address any interconnection disputes raised.
Qu: What are Oftel's powers to intervene when products are offered ?
Ans: Oftel's powers relate to the resolution of interconnect disputes. If an operator believes that a BT product is anti-competitive then they should make a formal complaint to Oftel. Oftel will then follow its standard competition analysis.
Qu: Does Oftel want more comprehensive powers to deal with disputes ?
Ans: Oftel believes it already has comprehensive tools for dealing with disputes, including powers under the Competition Act. Oftel does not limit the profitability of companies only their behaviour. If Oftel finds that prices are excessive however and/or have anti-competitive effects, Oftel can intervene.
Qu: Can Oftel set interim measures or set BT's prices ?
Ans: Oftel's role is to promote competition and prevent anti-competitive practices. Oftel shouldn't be setting prices as this is a commercial decision for companies to make. Oftel does have powers to set up own-initiative investigations, but does not have power to implement any remedy prior to conducting an investigation.
Qu: How long would it take for Oftel to resolve a dispute ?
Ans: Oftel is required to take steps to resolve all disputes within 6 months. Oftel will try to resolve disputes sooner, but this depends on the amount of information and evidence the complainent is able to offer both at the start and throughout the process. Generalised complaints are not very helpful. One key point is that Oftel needs cooperation with the industry as a whole to aid investigations. Complainants can help Oftel by providing figures for their own network use etc as appropriate to the complaint being made. Oftel also looks at the complete business case of a product. Nearly all products make a loss on the day of launch due to the level of costs incurred to set them up.
Qu: Has Oftel got a calculation for the Long Run Incremental Costs (LRIC) of Internet access ?
Ans: This kind of detail would only be required if Oftel were carrying out a dispute resolution. At that point Oftel would carry out detailed analysis which would include reviewing the LRIC of the product which is the subject of the complaint.
Qu: BT publish the prices of products that ISPs from BT. purchase. Isn't this unfair since consumers can then work out what products cost ISPs to buy. BT are not required to reveal the price of their inputs. ISPs don't like BT telling the media what ISPs should be charging (via press releases)
Ans: The BT press release was meant to give people an idea of the kind of tariffs that could be offered using the new product. ISPs are free to price the end user product in any way. Oftel stated that certain of BT's component costs are already broken down and in the public domain. ISPs should be able to work out BT's costs from these figures and their own knowledge of IP networks. Oftel again stated that if operators have a complaint about BT's prices they should make a formal complaint to Oftel with comprehensive supporting evidence.
Erol gave a presentation on why unmetered tariffs are essential for access to the Internet. His key points were: the 'mutuality of networks', application development, incentives for network investment, inefficiency of existing network design, the international perspective, social divide and the level of BT's profits. He stated the campaign for unmetered calls has received support from ISPs, Government, suppliers, and both large and small users.
Comments from the floor
BT should be driving the Internet forward, not just protecting its own revenue stream.
Unmetered calls should have been available 3 years ago, it's already too late. Now that it's a political issue it might finally get resolved.
John's presentation stated BT's support for the growth of the Internet in the UK across all customer types, from non-user to dabblers through to high data users. He pointed to some of the existing BT initiatives on Internet access and showed graphs which showed the UK isn't as bad as is often made out. He stated that BT were only part of a much bigger equation which included taxes, cost of PCs, and the prices charged by terminating operators. John ended by reminding the audience that the voice network was designed for voice calls and there are various things the industry should be doing to enable new tariffs.
Comment: The figures that BT presented as part of the OECD report and the NTS revenue sharing were disputed by the floor.
Qu: A BT chief executive recently stated that people should go to the library for their Internet access if they could not afford it. Was this an accepted view ?
Ans: This quote is taken out of context. The Cabinet Office report recommended opening up opportunities to allow lower and flat rate access for certain public institutions. It recognised that not all of the population will have Internet enabled PCs in their homes for various reasons, and some people will require other access methods in different places.
Qu: Will BT be offering an unmetered access product ? If so, when ?
Ans: BT are happy to discuss new products with operators
Qu: Are there any updates on the DSL roll-out ? Some people are suggesting BT will change the prices.
Ans: BT's position is as it was last March. BT notified Oftel of its intentions and the pricing has not changed since then.
Qu: Have Oftel designated any new numbering ranges for Internet access
Ans: 0844 has been allocated as any price point up to 5p/min. Terminating operators will be able to set what prices they like behind this number. 0844x could be designated as Internet specifically if required. This would allow ISPs the flexibility to price below local call rate if they wished.
Qu: Other non-BT originating operators lose out under the NTS arrangements
Ans: If Oftel set the price for all calls then it could be claimed to be price fixing. Instead Oftel believes in cost orientation and the revenue share available to orginating operators from the NTS formula should be sufficient to cover the cost of origination.
Simon stated that he believed Oftel's view has markedly changed within the last year with regards to unmetered Internet access. AOL have experience of unmetered tariffs and would offer such a tariff in the UK if BT offered a suitable product. The new BT product is priced and conditioned in such a way as to make it unusable and does not offer interconnect possibilities at the modem level.
Qu: What are BT's roll-out plans for their product
Ans: BT's roll out plans will allow 70% of UK customers to access the Internet with their traffic going through one exchange by September 2000.
Mark's presentation concentrated on the NTS formula and the new BT product. The NTS is priced on a per minute basis and Mark felt that the tariff gradients between weekend, evenings and weekend are out of step. Mark argued that the BT product was not suitable for ISPs and effectively ruled out the need for OLOs. He pointed out that consumers had not really benefited from the increase in Internet growth and that Internet access should reflect the costs it incurs.
Qu: Why have BT set the contention ratio for its product at 14:1 (based on 8hours usge/port/day) ?
Ans: The BT product was designed based on US experience where 14:1 contention ratio is usual.
Comment: The BT product places the risk on the ISP to get its figures right.
Qu: How do BT regulate the psychological effect of line rental prices versus call prices ?
Ans: BT are free to balance the price between the two elements as they wish so long as they recover costs.
Qu: Will BT be allowing interconnect at the IP side of the modems ?
Ans: BT use a proprietary tunnelling protocol between their modems and the point of IP interconnect (Home Gateway). NICC (Network Interoperability Consultative Committee) has been looking at IP interconnect. This could be an area for them to look at.
Qu: Can ISPs and OLOs interconnect at the DLEs at the telephony side the modems ?
Ans: Yes, BT already has such products. ISPs and OLOs need to approach BT to negotiate such a product.
Qu: End users want unmetered access and ISPs want unmetered access, but nothing has happened. Is this market failure and what are Oftel going to do about it ?
Ans: If ISPs or OLOs want unmetered products from BT they must approach them and ask for them. If negotiations break down then Oftel is willing to intervene. ISPs and OLOs need to put their money where their mouths are and approach BT.
Comment: It is still true that the majority of ecommerce activity is based in the US. This issue is more than just telecoms, its about the national economy.
Comment: The media has been too negative about the cost of Internet access in the UK. Things aren't all that bad and for low or casual users the UK is very well placed.
Ans: The OECD figures do not place the UK in a very good light. There are problems and we should recognise them.
The chairman thanked all present for their contributions to the discussion and encouraged people to get involved in the debate and continue the discussions. He closed by inviting ideas about topics for future Oftel Internet Forum meetings.
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