|
|
|
|
 |
|
|
|
|
|
|
|
 |
 |
 |
|
||||
|
A Review of the Trials Provision in BT's Licence - a Consultative Document |
|
||||||
 |
 |
 |
|
||||
 |
|
|
|
 |
|
||
|
|
|
|||||
|
Contents: This Consultative Document sets out how the trials provision in BT's licence operates in practice and how the present condition does not appear to be fully effective to control and monitor the adverse effects of trials on competition. It sets out proposals for a licence modification backed by the introduction of guidelines to give greater certainty. Oftel invites comments and evidence on the proposals and issues set out in this Consultative Document. Informal consultation on Oftel's proposals for amendment of the current trials regime starts with the publication of this document. Because of the need to get the future regime settled as soon as possible, the initial consultation period on the proposals will be until March 14 1996. There will then be a further period up to March 28 1996 during which comments are invited on any submission made to Oftel during the initial period. Written comments should be sent to: Mr G Gordon Oftel Room 213 50 Ludgate Hill LONDON EC4M 7JJ Written comments will be made publicly available in Oftel's Library, except where respondents indicate that their response or parts of it are confidential. Respondents are therefore asked to separate out any confidential material into a confidential annex which is clearly marked as such. In the interests of transparency, respondents are requested to avoid confidentiality markings wherever possible. on the Web pages or by using the e-mail address: press.office.oftel@gtnet.gov.uk Oftel intends to set up a link between this Consultative Document on Oftel's pages and any comments placed on respondents' own Internet pages. Please contact Catherine Guiver at Oftel on 0171 634 8756 to organise this. Condidential responses should not be sent via the Internet. 1.1 Consumers have benefitted from great technological and commercial progress in telecommunications since the liberalisation of the UK telecommunications market. Many new products and services, facilitated by modern equipment, have been introduced. The pace of innovation is increasing as new Public Telecommunication Operators ("PTOs") seek to compete not just on price but on the range of their services. 1.2 Under its licence BT is obliged to provide basic telecommunications services to all customers wherever their geographic location. As an exception to this universal service obligation, BT is allowed to trial new services in a limited area or to a limited class of customers, before they are required to be made available nationally. Such trials must be for the purpose of evaluating the technical feasibility or commercial prospects of a service. Mercury has a similar condition in its licence as do the licences of PTOs, but some conditions only come into force when the operator has achieved a significant share of a relevant market. 1.3 Since the ending of the BT/Mercury duopoly in 1991 Oftel has received an increasing number of representations from BT's competitors about the possible anti-competitive effects of such trials by BT. It has been asserted, in particular, that some trials have been a disguised form of undue discrimination or preference by way of offering favoured customers, or certain geographical areas, special services or discounts with a view to dissuading ustomers of competitors to BT from changing operator. As the market has developed, Oftel needs to answer such assertions effectively. The precise scope of the current licence provisions has been the subject of some uncertainty. There is a need to clarify and rationalise the conditions under which trials will be compatible with other terms of BT's licence. 1.4 Oftel has accordingly reviewed the operation of the condition relating to trials currently contained in the licences of BT and Mercury. 1.5 The review period ran from October 1994 to April 1995. During that six month period eight trials were notified to Oftel by BT on a confidential basis. Seven of those trials involved technical innovations and one a commercial discount package. Out of those eight trials four have subsequently become full services. BT notified us that it wished to extend one of the remaining four trials beyond the original six month period for further evaluation. 1.6 An additional eighteen trials which had been previously notified to Oftel were still running during at least part of that same six month period. Of these, some trialled services (such as Caller Line Identification ("CLI") and Callminder) were subsequently offered as a full service after evaluation; other trialled services were withdrawn before the projected trial period was complete. 1.7 The review also covered the six trials notified to us by Mercury during the same period. These raised similar issues and have been taken into account in preparing this document. 1.8 BT has adopted an informal procedure whereby it notifies Oftel of trials in advance. However, the period of advance notification has ranged from the day before the trial was launched to several weeks in advance and the information provided has often been insufficient. 1.9 This Consultative Document puts forward proposals in the light of this review. In summary, Oftel proposes that:- (i) trials should still be permitted (as at present) for the purpose of evaluating either the technical feasibility of, or the commercial prospects for, a service; (ii) trials should be permitted only for a service materially different from existing or previous services (this may include a substantially different tariff structure); (iii) there should be a requirement for notification to Oftel 28 days in advance; (iv) sufficient information must be provided to Oftel at that time to enable the Director General to make an assessment of whether a trial represents undue discrimination or preference, having regard to such factors as;
1.10 Although all PTO licences have trial provisions, in practice specific concerns have been raised only about trials conducted by BT. This no doubt reflects BT's dominant market position. This Document accordingly focuses on BT and its licence, but discusses at the end the implications for other licences. 2.1 Manufacturers and service providers generally trial new products or services in order to establish their technical soundness or commercial prospects. Telecommunications operators are no different in this respect. BT is, however, in a distinctive situation. Whereas normally a business is free to choose to offer a product only in a limited area, or to a limited number of customers, BT is subject to a universal service obligation (under Condition 1 of its licence). That obligation operates in tandem with the prohibition in Condition 17 of its licence on BT showing undue preference or discrimination. 2.2 BT is permitted to undertake trials, notwithstanding those Conditions, by Condition 53.7 of its licence: "Nothing in these Conditions shall prevent the Licensee from withdrawing from, or declining to provide to, any person any telecommunications service which the Licensee has notified the Director that it is providing in a limited area, or to a limited class of customers, for the purpose of evaluating the technical feasibility of, or the commercial prospects for, that service." 2.3 This provision provides a modification to (but not an exception from) the universal service obligation under the licence for telecommunications services where a service is trialed in order to evaluate the technical feasibility or the commercial prospects for a service. 2.4 Questions have arisen about how Condition 53.7 interacts with other Conditions and about how Oftel should enforce it. Oftel accordingly proposes to replace Condition 53.7 with a new Condition which, whilst having broadly the same legal effect, will provide greater certainty and a procedure for Oftel to monitor trials. In practice, the acceptability of a trial will continue to be considered primarily by reference to the prohibition in Condition 17 of undue preference or undue discrimination. In that context, Oftel proposes to complement the Condition with guidelines as to factors which the Director General will have in mind in addressing whether a trial may involve any undue preference or discrimination which would give him reason to object to a trial proceeding. Draft guidelines are contained in Annex B of this Consultative Document. 3.1 This section considers the key issues that in Oftel's view need to be addressed in a regime for trials. (i) Criteria 3.2 Oftel has reviewed whether the two criteria of "technical feasibility" and "commercial prospects" remain appropriate to justify an evaluation by way of a trial. "Technical feasibility" 3.3 Oftel accepts that operators need to be able to test that the technology offered to customers works effectively. Often this can be achieved without trialling, for example through laboratory testing. Sometimes, testing new services or equipment in actual operation before they are available generally to the market,will be necessary to give a sufficient degree of advance confidence. It is unlkely to be feasible in such cases to test new services or equipment on all, or even a significant proportion, of BT customers. Testing with a limited group can help to identify and iron out technical problems related to the introduction of the technology itself, or of the associated revised processes and support systems, before a service is made widely available. In this way, operators, and indeed consumers, can have reasonable confidence that a new technology works reliably and efficiently before they commit themselves to it. Oftel does not wish to inhibit technical innovation and considers that a facility to permit trials for the purposes of technical feasibility should remain. "Commercial prospects" 3.4 Frequently, but not invariably, the other current criterion for launching a trial, namely evaluation of the commercial prospects for a service, has been associated with developments in technology as well. Where a service involves technical novelty the evaluation of the commercial prospects of such a service may be undertaken (a) alongside the technical evaluation in the same trial, (b) subsequent to a technical trial, or (c) following laboratory-based or other tests which have established technical feasibility without a customer-based trial. Case (a) does not raise any problems. In cases (b) and (c), where the commercial prospects of a new service are evaluated separately from technical viability, the purpose of the trial is to enable the commercial risks inherent in a full national launch to be reduced even where the new service is considered to be technically feasible. To the extent that this encourages innovation, this too can, in Oftel's view, provide long term benefits to the consumer. 3.5 Calling Line Identification ("CLI") is an example of an innovative service which was trialled by BT before launch. One purpose of the trial was to ensure that the existing network technology would support CLI on a national basis - the technical evaluation. The trial was also used to establish whether there would be sufficient take-up for this new service to make it commercially worthwhile investing in it. The trial accordingly covered both categories of evaluation simultaneously. Without the trial BT would not necessarily have been able to launch the service for the benefit of its customers. (The launching of CLI raised a separate issue, the fact that two methods of delivering CLI, resulting in two incompatible customer interfaces, were adopted by different operators. Approaches to avoiding such a conflict are discussed in the Oftel Consultative Document 'The Customer Interface to Public Networks.' Paragraph (i) of the Guidelines is designed to enable us to receive the information necessary to avoid this sort of problem.) 3.6 In the case of interactive 'on-demand' services, BT has so far proposed two trials. It undertook a technical evaluation trial to determine the practicality of providing such services over its network using both existing copper and new direct fibre connections to trial customer premises. This stage involved BT employees only. It subsequently proposed a second trial, to evaluate both the in-service technical characteristics of the services and their commercial prospects. (ii) New Services 3.7 Concerns have been expressed to Oftel about BT using price alteration to existing services with limited period national special offers in an anti-competitive way. Trials to evaluate new tariffs or other commercial terms for a service which is already available to the generality of BT's customers, and which is of established technical feasibility, should only be permitted where there is a substantial change to the existing tariff structure which makes it necessary to test the commercial prospects of the new tariff. Oftel will deal with these on a case by case basis, but will be particularly concerned where the tariff change is being used as an opportunity to provide valued customers, or areas of strong competition, with service on unduly preferential terms. 3.8 Option 2000 provides an example of what, in Oftel's view, should not be permitted as a commercial trial. BT originally wished to trial this discount scheme before launching it. Oftel took the view that not only did it involve only the mere repackaging of the tariff for existing PSTN services, but that, as it offered discounts to large users, it could have an anti-competitive impact. The package did not involve any element of novelty that, in Oftel's view, required evaluation through a trial with a limited number of customers or in a limited area. After discussion with Oftel, BT agreed not to trial it. 3.9 Similarly, technical tests of existing services do not normally require customer trials eg. private circuits to new international destinations do not generally need to be trialled as the connection at the distant end could be tested without customers. Provision on a trials basis could be used as a means of offering free service to a single customer. This has been the subject of many discussions with BT. Oftel remains to be convinced that these satisfy the criteria to qualify as a trials service. 3.10 To ensure that there is a clear distinction between a trial and an existing service, Oftel proposes to require that permitted trials should be materially different from an existing or previous service. (iii) Duration 3.11 Some difficulties have arisen over the duration of trials. Some trials have lasted longer than Oftel was advised would be the case. There has been uncertainty on what a reasonable duration of a trial is. Oftel has received complaints that trials are lasting so long that certain customers are in effect receiving a privileged service. Some constraint on the duration of trials is accordingly necessary to avoid their becoming in practice a bespoke technical provision or special discount scheme for valued customers or in a targeted area, with a potential for serious anti-competitive impact. 3.12 Oftel therefore proposes that the revised Condition should permit only trials which last for "a short period". Oftel considers, in the light of experience of trials notified, that a trial should not normally need to last longer than six months for an adequate evaluation to be made. In the event of a trial proposed for more than (or to be extended beyond) six months, the Director General would need to be persuaded that no undue discrimination or preference would arise. He would presume so unless he received persuasive arguments to the contrary - an example might be where BT could make a case that there was an unexpected technical problem which delayed the start of the trial. (iv) Customer Selection 3.13 Trials will necessarily involve the selection of a particular customer, or a number of participants, or an area, chosen for the purposes of the evaluation. However, trials can have a potentially anti-competitive effect if they involve the targeting of specific areas of competitive threat, or the offering to existing customers a special service as, effectively, a "loyalty bonus" and a disincentive to change operator. There have been instances in which BT has been perceived to target trials on areas where there was developing competition from cable companies, or on a class of customers, such as large users or specific valued customers, which competitors were also targeting. 3.14 Oftel recognises that a trial must involve selected participants and geographical areas. Particularly as competition spreads, it would be unrealistic to aim to insulate trials from all potential for anti competitive effect. However, the Director General will take into account the competitive implications of a proposed trial in deciding whether or not to object to a trial on the ground that it represents undue discrimination or preference under Condition 17. (v) Interconnection 3.15 The absence of interconnection for other licensed operators to a certain type of trialled service has resulted in a number of complaints. These are trials which can be accessed by a large number of telephone users. They normally require the opening of a new national number group (eg. 0990, a premium rate service, or 0774, a messaging service), or involve the wide dissemination of a number (eg. Callsign). One example was a trial which involved the advertising of a particular telephone number in order to allow any member of the public access to, for example, a messaging service or a new premium rate number. Complainants represented to Oftel that customers of other operators who dialled the trial numbers and could not get through, because their networks did not provide the functionality being trialled, would have formed a negative view of the operator, with a possible anti-competitive impact. 3.16 The existing licences do not require interconnection of trial services in these circumstances. Oftel considers that there is a strong case that they should, where a request is made by another operator. The Director General will have regard to the position on interconnection in such cases in considering whether or not a trial represents undue discrimination or preference. 3.17 Some trials are of services which, if introduced, would benefit from being in general use across all networks (eg CLI). Ideally these cases should be identified early so that decisions can be taken as to how interconnection and interoperability are to be accomplished in a full service context in good time prior to service introduction. The general issue of whether a new service should be required to be interconnectable with other PTOs' equivalent services is accordingly the subject of current consultation among PTOs within the Interconnect Policy Forum. (vi) Charging 3.18 Some trials have offered the equivalent to established services at less than published rates or have charged for a service at what is clearly below cost. This has been justified by BT on the grounds that it is necessary to attract participants to a trial which may cost those participants time and resources. BT has also argued that some trials are run to establish what tariff the market will bear. This is a difficult area which will require careful analysis inaccordance with the guidelines. 3.19 BT concludes contracts with those who take trial services which make it clear that the tariff of the service as eventually launched may differ from that for the trial. However, others who access a trial will not be subject to a contract. For instance in the Personal Numbering Trial, a large number of those who are charged for access to the trial are not parties to a trial contract. In these circumstances a misleading impression could be given that the charge made as part of the trial will be the commercial tariff on introduction of the full service. This could have an anti-competitive effect if it were to dissuade customers, on false premises, from changing operator. (vii) Publication of Charges 3.20 At present, BT publishes details only of trials of services which can potentially be accessed by anyone, eg premium rate services. These are cases where it is necessary for the purposes of an effective trial to disseminate widely the charges and other terms and conditions relating to that trial. Oftel has reviewed the question of publication under the publication Condition of BT's licence (Condition 16) which gives the Director General the right to consent to non-publication of tariffs. 3.21 Concern has been expressed to Oftel that publishing the prospect of new services and tariffs is likely of itself to encourage potential customers of other operators to stay with BT. There is also the question of whether publicity might deter BT from legitimate innovation because competitors would be given too clear or early an indication of BT innovations. If so, this could deny the consumer the benefits of new services. 3.22 However, publication has the advantage of making trial activity transparent so that interested parties can identify a potential competition issue for themselves and thereby provide a check on anti-competitive conduct. Any publication should make clear that a trialled service is available only for a limited period and that tariffs may well alter if the service is launched (see (vi) above). 3.23 On balance, Oftel considers that in a multi-operator market it is important for derogations from the normal licence obligations to be available only on a transparent basis. It is therefore envisaged that Condition 16 of BT's Licence should continue to apply in the normal way to trialled services and that consent to non-publication would be the exception rather than the rule. This means tariffs for trialled services would be published when BT put forward a convincing argument why the Director should exercise the discretion which he has under Condition 16 of BT's licence to waive the requirement that the tariff be published. (viii) Notification in Advance 3.24 Oftel needs adequate notice if it is to evaluate trials in advance of their commencement. Whilst BT sometimes gives more than 28 days notice, half of the trials considered in Oftel's review were notified no earlier than the day before they began, even though it is apparent that a good deal of planning and preparation had already been done well before then. This leaves insufficient time to assess the trial, even were adequate information to be provided. Oftel accordingly proposes a notification period of 28 days, in line with tariff notifications under Condition 16 of BT's licence. (ix) Information to be Supplied 3.25 Oftel regularly finds the information received from BT is inadequate to allow it to make a full assessment of trials,in particular to decide whether or not a proposed trial may represent undue discrimination or preference, having regard to the matters discussed above. 3.26 The information needs to cover such matters as details of the trial, its purpose, participants, location, duration and arrangements for interconnection. It needs to be provided with the notification of the trial so that Oftel can make an adequately informed decision on whether or not to object to the trial or aspects of it. 3.27 Oftel accordingly proposes to require adequate information to be provided to it on trials, that a trial may not commence until the information has been provided, and that the Director should be able to stop a trial if information comes to light which should have been provided in advance. (x) Objection to a Trial 3.28 The proposed new Condition contains explicit provision for the Director General to object to a trial within the period of 28 days following its notification to him. It is envisaged that, in considering whether or not to object, the Director General will have regard in particular to whether the proposed trial seems likely to constitute undue preference or discrimination. The Director General will also have particular regard to the likely effect of a trial on competition to BT. 4.1 The present licence condition does not provide the machinery to examine trials on a case-by-case basis. Oftel therefore proposes to replace Condition 53.7 in BT's licence by a new licence condition. A draft is in Annex A. 4.2 Oftel considers that it will be helpful to complement the new licence condition with brief guidelines which will give a degree of predictability and clarity to the Director's approach to notified trials. A draft of such guidelines is at Annex B. Oftel would propose to keep these guidelines under review and to consult on any changes to them. 5.1 Although this document focuses on BT, Oftel has considered whether any new provisions should be applied to other operators through amendments to the licences under which most operate. (i) Mercury 5.2 For the present the trials provision in Mercury's licence mirrors BT's. However, Oftel is currently consulting on proposals to reduce the licence obligations on Mercury in order to reflect its market position. Oftel will review the position on Condition 50.7 Mercury's licence in the light of any broader decisions taken on Mercury's licence following this consultation as well as the conclusions of this consultation where relevant. (ii) Others 5.3 Other PTO licences contain a provision equivalent to Condition 53.7 of BT's licence. However, with the exception of the cable PTOs, which are in effect obliged to provide cable television services where their networks have been installed, the obligation to provide any form of universal service remains contingent upon the Director being of the opinion that the operator is well-established in the relevant market (usually defined as having 25% of that market.) The trial condition is, therefore, of lesser importance for such operators until that threshold is reached. In the case of cable PTOs, there have been few notifications of trials under ther comparable provision in their licences. Because of their current market position such notifications as there have been have not raised the same type of issues as those raised by BT trials. 5.4 Oftel has considered whether to modify these Licences in line with our proposals in this document. To do so would have the superficial benefit of uniformity. However, in Oftel's view, given that there have been no complaints about other operators' trialed services and given the limited market power of these operators at present, it would seem that the modification of other licences is not necessary, at least at present. This will however be kept under review in the light of market developments or as opportunities arise to make changes. ANNEX A: DRAFT REVISED CONDITION [53.7] CONDITION (53.7 TRIALS) [53.7] The Licensee's obligations under this Licence, in particular under Conditions 16 and 17, shall not prevent the Licensee from providing or from offering to provide for a short period any telecommunication service only in a limited area, or to a limited class of customers, for the purpose of evaluating the technical feasibility of, or the commercial prospects for, that service, provided that the Licensee fulfils each of these conditions:- (a) the Licensee has given at least 28 days written notice to the Director before the trial service is to come into effect; (b) the Licensee has within seven days supplied all information reasonably requested by the Director, to enable him to assess whether it is appropriate, having regard in particular to the requirements of Condition 17, that the service be introduced on a trial basis; (c) the trial service is materially different from an existing or previous service; and (d) the Director has raised no objections to the introduction of such trials service within the period of 28 days; (e) the Licensee complies both before the announcement of the trial and throughout the period of it with any direction made by the Director to ensure compliance by the Licensee with its other obligations under the Licence; The Director may direct the withdrawal of a trial on immediate notice if he later learns of facts of which he was not aware when the Licensee notified the trial to him, or if the licence fails to comply with a direction made under (e). For the avoidance of doubt Condition 16 applies to trials. ANNEX B: GUIDELINES FOR NEW CONDITION 53.7 OF BT'S LICENCE B.1. In considering whether to object to a trial the Director General will have regard in particular to whether by virtue of the trial BT may
In deciding whether this is the case, the Director General will take into account the following matters:- (a) Duration The proposed duration of the trial. A duration of more than six months will require special justification. (b) Interconnection whether, where a trial is such that customers of other operators are likely to seek to obtain the benefit of the same service, facilities for interconnection are to be made available (eg. where the opening of a national number group is required or where the number is widely disseminated and the participants require the customers of other operators to have access); (c) Charges to participants whether it is to be made clear to trial participants in writing and in advance of the trial that there will be a charge for the trial service and that charges for the service if later introduced as a full service may be different; (d) Whether the trial service is materially different from an existing or previous service
(e) Competition
(f) Customer platforms
B.2 Information For the purposes of B.1 above, the information supplied to the Director General shall include details at least of the following:- a. The customers expected to participate in the trial and why they have been selected; b. the location of the trial sites and why they have been chosen; c. the duration of the trial; d. previous trials of a similar service; e. reasons for the trial, specifying whether it is for the purpose of evaluating technical feasibility or commercial prospects; f. the arrangements envisaged for interconnection (where this is appropriate) of other operators during the trial; g. a full description of the trial service; h. the information that is being provided to customers; i. the interfaces to be used in the trial; where BT is using new or altered interfaces, details of notifications made (ie SINs), expected or proposed to be made, should be supplied. j. the charges being made(to include any charges for the rental of equipment during the course of the trial, the right to purchase of "used" equipment at the end of the trial, as well as charges for the service being trialed) k. any equipment being lent to customers; l. details of how the progress of the trial will be monitored and the criteria by which the success of the trial will be evaluated.
|
|
||||||
|
|
||||||
 |
 |
|
|||||
 |
|
||||||
