This Explanatory Document sets out Oftel’s proposals for the introduction
of carrier pre-selection (CPS) in the UK. These proposals are produced
in compliance with Article 12(7) of the Interconnection Directive (ICD)
(97/33/EC) as amended and they have been prepared in discussion with the
DTI. Attached at Annex A is the Functional Specification
which defines the proposed services to be offered and describes how CPS
will be handled between operators. This document is not intended to cover
cost recovery or charging issues: Oftel is currently consulting on charging
principles and will issue a Statement separately.
The Requirements of the Interconnection Directive
Operators to whom the obligation applies
Services covered by the CPS obligation
Operators eligible for pre-selection
Limitations on the availability of the CPS service
Timescales for implementing CPS
Annex A – Functional Specification Issue 1
Annex B – Charging for CPS – cost recovery principles
Annex C – Proposed Amendment to the Interconnection Directive – the Numbering Directive
Written comments should be submitted to:
Sally Trebble
Consultation on Carrier Pre-selection
Oftel
50 Ludgate Hill
London EC4M 7JJ.
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OPTION 2 – one pre-selection for all national calls; or
OPTION 3 – an all calls pre-selection, covering international, national, local, mobile, specially tariffed services, personal numbers, and paging, but excluding emergency calls, operator services, directory enquiries and other network specific short codes;
National regulatory authorities shall require at least organisations operating public telecommunications networks as set out in Part 1 of Annex I and notified by national regulatory authorities as organisations having significant market power, to enable their subscribers, including those using ISDN to access the switched services of any interconnected provider of publicly available telecommunications services. For this purpose, facilities shall be in place by 1.1.2000 at the latest or, in those countries which have been granted an additional transition period, as soon as possible thereafter, but no later than two years after any later date agreed for full liberalisation of voice telephony services, which allow the subscriber to choose these services by means of pre-selection with a facility to override any pre-selected choice on a call by call basis by dialling a short pre-fix.
National regulatory authorities shall ensure that pricing for interconnection
related to the provision of this facility is cost-orientated and that direct
charges to consumers, if any, do not act as a disincentive for use of this
facility.
3 Mobile networks are not specifically covered by the CPS obligation
in the ICD and Oftel does not propose to impose CPS obligations in addition
to what is required by the Directive. Oftel is, however, intending to conduct
a separate consultation on indirect access from mobile networks with SMP,
as a result of a dispute which has been referred to it.
5 The CPS service envisaged by the Directive is not limited to any specific type of call. The European Commission’s consultation exercise which led to the Commission’s formal proposal for legislation addressed only the long distance and international markets. However, the Directive negotiated and adopted by the Council and Parliament is not defined in this way. In particular, the Directive does not exclude local calls or calls to mobile phones and there is thus a reasonable expectation that these types of call should, in addition to long distance and international calls, be available using CPS. The Commission have indicated that they take this view.
6 Oftel considered whether to require the 4 main call types – international, national, local and mobile – each to be subject to individual pre-selects. It concluded that treating international and national calls as separate options would increase customer choice because operators licensed only to offer international facilities would be able to offer CPS services. If these options were bracketed together, international facilities licensees would be prevented from offering CPS services because the IF licence does not permit the provision of national calls. It is clear, however, that the margins available from local and mobile calls are narrower than for national and international calls and it is therefore probably unlikely that any operator would want to enter markets based on individual pre-selects for these call types. Customers would in all likelihood be deprived of any local or mobile call pre-selection service should these be required to be offered independently. In any event, the extra complexity of individual pre-selects would add to the costs and timescales of introducing the service, with few counterbalancing benefits. Separate pre-selects for local and mobile calls were not therefore considered desirable. Having concluded that local and mobile calls should be bracketed with other call types, and taking account of the view expressed by some operators that they were also keen to be able to offer NTS services, it seems to Oftel that an 'all calls' service would provide customers with a wider choice of operator for all types of call and that such a market will be attractive to operators wishing to offer CPS services.
7 In view of the fact that CPS is an EU harmonising measure, Oftel took into account the CPS services being proposed in other Member States. Most Member States are at present considering what form CPS should take, in consultation with interested parties. Whilst national and international calls are consistently included, a variety of options are proposed for other call types with no clear trend emerging. Further, most Member States are proposing the availability of between 1 and 3 pre-selects – 2 is most common.
8 In accordance with the provisions of the Directive, and taking into account the views expressed by interested parties and the measures being put forward in other Member States, Oftel proposes that the CPS service offered by BT and Kingston, should give those customers who wish to use pre-selection a choice between the following options:
Option 1 – International calls only
This option enables customers to pre-select a carrier other than BT – or Kingston as the case may be – for all their international calls only
Option 2 – National calls only
This option enables customers to pre-select a carrier other than BT or Kingston for all their national calls only.
Options 1 and 2 may be combined so that the customer has pre-selects for both national and international calls. The pre-selected operator may of course be the same or different for each call type.
Calls for which the customer does not pre-select an operator ie everything but international and/or national calls would continue to be routed by the originating direct access operator. Thus BT or Kingston would continue to route local, mobile and specially tariffed calls etc. In addition to this, customers would be able to suspend, or 'override' their preselections for individual calls on a call by call basis by dialling a pre-fix of extra digits, having made arrangements to do so with alternative operators (including BT or Kingston).
Option 3 – All calls
This option enables a customer to pre-select an operator other than BT or Kingston to carry all of their calls. As long as the customer remained with BT or Kingston, these operators would continue to provide the line to the customer’s premises and would bill for line rental. But the only calls which BT or Kingston would route and deliver would be calls using Type A short codes (eg 100, 999, 112) or Type C (operator specific) short codes such as 150. All of the customer’s international, national, local, mobile, specially tariffed (eg freephone, local rate, national rate and premium rate), personal numbers and paging calls would be routed to the pre-selected operator.
9 Customers who wish to continue to take all of their call services
from BT or Kingston will not need to do anything. The provision of their
calls will be unaffected by the introduction of the CPS service. Likewise,
existing call by call carrier selection (indirect access) services will
continue to be available from BT and Kingston.
11 BT and Kingston switches will be initially provisioned with sufficient
capacity to host up to 100 pre-selected operators at any one time. This
capacity will be increased at a later stage to be able to host over 200
CPS operators. Capacity will be allocated on a first come first served
basis. At present, just over 80 indirect access codes have been allocated
by Oftel’s Numbering Unit. It is therefore anticipated that the capacity
now being developed will be sufficient to meet demand in most geographical
areas for the foreseeable future.
Lack of capacity on the host switch
13 Where there is insufficient capacity to accommodate an operator wanting to offer CPS in a geographical area served by a particular switch, BT and Kingston will make provision for increasing the available capacity. BT and Kingston will be generally permitted a reasonable period to achieve this with their software suppliers. In the short term, this may result in a temporary delay in providing the service required. BT and Kingston will be expected to use their best endeavours in such circumstances to provide the service as quickly as is reasonably possible and to explore temporary alternatives where these are available.
Traffic forecasting and Network Integrity
14 Demand for carrier pre-selection, particularly for local calls, is likely to change demand patterns on the networks of originating operators. Traffic previously handled in BT’s network solely at local switch level will now pass to the transit layer of main switches as it is handed over to CPS operators. Both BT and Kingston will need to install new infrastructure to ensure that sufficient capacity is available to meet growing demand. Failure to accommodate changes in traffic patterns could lead to serious network overload of BT’s core network. To ensure that such an event does not happen, BT and Kingston will to a large extent be reliant on traffic forecasts provided by operators wishing to offer CPS services. It will be incumbent on CPS operators to provide reliable forecasts. BT will not generally be considered to be acting unreasonably should it restrict traffic volumes of CPS traffic to forecast levels if network integrity might be compromised. Consistent over-forecasting leading to over-investment which cannot be recovered because demand never reaches suggested levels could justify BT in restricting capacity to its own forecasts.
15 A few BT customers (about 100,000) in rural areas of Wales and Scotland are served by UXD5 exchanges. These exchanges are not able to support CPS and at the present time it does not look possible that they can be modified to support it. Providing a CPS service to these customers will need to be discussed with BT and the Commission.
BT’s Low User Scheme
16 Customers who receive a discount on line rental under BT’s low user
scheme will not have access to CPS services, in the same way, and for the
same reasons that they are at present unable to use call by call indirect
access services.
Deferment of the obligations under Article...12(7) may be requested where the Member States concerned can prove that they would impose an excessive burden on certain organisations or classes of organisation.
The Member State shall inform the Commission of the reasons for requesting a deferment, the date by which the requirements can be met, and the measures envisaged in order to meet this deadline. The Commission shall consider the request taking into account the particular situation in that Member State and the need to ensure a coherent regulatory environment at a Community level, and shall inform the Member State whether it deems that the particular situation in that Member State justifies a deferment and if so, until which date such deferment is justified.
19 Oftel is seeking assurances from BT, Kingston and their suppliers, that everything that can be done is being done to ensure that implementation of CPS is effected as swiftly as possible. The timeline for availability of the service is crucially dependent on 2 processes:
21 Oftel will be monitoring development of all relevant software and processes during this programme. Oftel expects BT to introduce the CPS service as soon as possible after September 2000 when switch roll-out is completed and to achieve this a phased introduction of the Options set out earlier is proposed. In the first stage, Options 1 and 2 (national and international calls) would be available before the end of 2000. Option 3 (all calls) which requires more complex programming, should be available during 2001. Kingston would be expected to meet the same timescales if possible.
22 It must be emphasized that the Commission’s agreement to the suggested approach will have to be sought. It will be necessary for the UK to apply for a deferral under Article 20(2) as amended. Oftel’s view is that, whilst everything that reasonably can be done should be done to achieve timely implementation of CPS, the realities of network planning and upgrading switch software would seem to make a delay unavoidable.
Inter-operator processes
23 Independent of defining the CPS service and BT and Kingston’s responsibility for rolling out network functionality, processes will need to be developed by all operators with an interest in CPS for the preparation, delivery and maintenance of the CPS service to customers. An Industry Process Group has been set up to design and introduce the necessary systems. The Group’s work will cover electronic order handling processes with standard protocols, operational support systems to support order handling, and industry documentation, including an agreed Process Manual and a Code of Practice for consumer protection. The Code of Practice will, in particular, have to cover anti-slamming measures. Slamming is the process by which a customer’s pre-selections are changed without the customer’s full knowledge or consent. Slamming has been a considerable problem in the US. It is not a practice in which reputable operators engage but nevertheless safeguards need to be put in place. Consumer representatives will be involved in the work of the Process Group to ensure that the consumer protection measures introduced in the UK have their support.
24 Oftel urges the Process Group to recognise the amount of work likely
to be necessary to put in place adequate inter-operator processes. Without
sufficient commitment of resources and a real willingness to develop sustainable
processes, the CPS service could be available before operators are in a
position to roll out services in an effective way to their customers.
Functional specification for Carrier Pre-Selection
Issue 1
Definition
1 Carrier Pre-Selection (CPS) is the facility offered to customers which allows them to opt for certain defined classes of call to be carried by an operator selected in advance (and having a contract with the customer), without having to dial a routing prefix or follow any other different procedure to invoke such routing. CPS can be overidden by dialling an indirect access code of another operator (again where there is a contract between the customer and the operator).
Scope
2 Carrier Pre-Selection will be provided by the following originating operators:
3 CPS facilities will be provided to any operator (referred to as the CPS Operator) which qualifies under Schedule 2 of the Interconnect Regulations and has established Points of Interconnection with the originating operator and been allocated a CPS prefix code and/or a Type B single stage indirect access code by Oftel.
4 Originating operators will provide CPS facilities to all customers, on request of CPS operator, on direct exchange lines, including ISDN and Centrex lines. CPS will not be provided on public or managed payphone lines or lines on Low User Schemes.
(Explanatory note) Carrier Pre-Selection (CPS) and Virtual Private Networks (VPNs)
It is not necessary for individual Centrex lines to have separate CPS options. Centrex subscribers should be able to alter the CPS options for their group of lines, however. VPN on-net and VPN off-net calls do not need CPS capability, but it is expected that BT and Kingston will provide VPN subscribers with the capability of directing specific types of off-net traffic to CPS operators (e.g. all international traffic) to a given carrier without the need for an access code to be dialled.
5 Originating Operators shall support up to 100 CPS Operators on any switch. Where demand appears likely to exceed this limit, steps will be taken to develop further capacity.
Customer Options
6 Customers opting to use CPS may take up both or either of the following options:
a. International calls
b. National calls
or they may make a single pre-selection for the following
c. all calls, to include international, national, local, mobile, specially tariffed (eg freephone, local rate, national rate), premium rate, personal and paging
CPS will not apply to calls using Type A short codes (eg 100, 999, 112) or Type C (operator specific) short codes
(Explanatory note) Customer Options
Customers will be able to pre-select an operator for all international calls and/or an operator for all national calls (this may of course be the same operator). Alternatively, customers may make a single pre-select for all their calls. This will include everything except Type A and C short codes, such as operator services and emergency calls.
7 Where no option is made, relevant calls will be routed according to the decision of the originating operator.
8 Local calls shall be interpreted as calls to those geographic destinations which are charged at local call rate by the originating operator.
Routing
9 Where a customer has elected to have calls routed by CPS, the following will apply:
a. Calls to ranges subject to CPS (see paragraph 6) will be routed according to the customer’s selected CPS Operator to an agreed Point of Interconnection.
b. Calls to ranges excluded from paragraph 6 will not be affected
10 Where a call is routed by CPS, the originating operator will prefix the customer’s dialled digits with the ‘CPS access code’ before passing the call across the Point of Interconnection. The CPS access code ensures routing through the originating operator’s network to the Point of Interconnection. Where a pre-selected call is dialled using the local dialling format, the originating operator will insert the leading zero and area code between the CPS access code and the dialled number .
11 CPS facilities shall not apply to operator controlled calls, including transfer charge calls. Operator and other special services of CPS Operators will be accessed using the appropriate indirect access code.
12 A CPS access code will be a 4 digit non-diallable prefix.
(Explanatory note) Numbering
An operator’s CPS 8XXX non-diallable prefix will not necessarily be the same as its 1XXX diallable indirect access code. Only one access code will be allocated to each CPS operator. CPS prefix codes will be allocated to organisations which follow the procedures for number allocations set out in the Numbering Conventions.
Override
13 Calls made to Type B Indirect Access Codes will override CPS options and route to the operator identified by that code, without alteration to the digit string dialled by the customer
Billing
14 Responsibility for billing the calling customer on CPS and Indirect Access calls rests with the CPS Operator. Where no pre-selection or other form of selection has been made by the calling customer, the originating operator will bill for those calls.
CPS Services (4)
15 CPS calls will be provided as a standard interconnect service to qualifying CPS Operators.
(Explanatory note) Costs
Allocation of the costs incurred by operators referred to in paragraphs 2 and 3 of the Functional Specification remains to be decided.
Oftel July 1998
Charging for Carrier Pre-Selection
Introduction
In considering the issues surrounding the appropriate structure of charging for carrier pre-selection (CPS), Oftel has used the framework of the 6 principles for charging and cost recovery that it has developed and applied in a number of different contexts. The principles are cost causation, cost minimisation, distribution of benefits, effective competition, reciprocity, and practicability. Oftel used these principles to develop its policy on charging for the different types of number portability, and the MMC also adopted them to form an analytical framework in its report on geographic portability. Oftel has also used the principles in its consideration of other issues, such as reciprocal charges for call termination, charging for directory information, and universal service funding.
Types of cost
BT will incur three main types of cost in providing CPS:
In the next section each of the six principles is applied in isolation to the question of charging. Following a brief comparison with the structure of charging for number portability, the final section draws together the implications of the preceding discussion, weighs up the relative importance of the policy implications of each principle and attempts to reach conclusions. An illustration of the level of charges is at Annex A.
Applying the six principles
(1) Cost causation: Costs should be recovered from those whose actions cause the costs to be incurred at the margin.
Discussion
There is a distinction regarding the application of this principle between on the one hand system set-up costs and on the other hand per operator and per line set-up costs. Per operator and per line set-up costs are caused at the margin by the decision of respectively an individual operator and an individual customer to take-up CPS. But system set-up costs are not caused at the margin by the choice of CPS by any one customer or OLO. They arise from the decision that the capability to implement CPS should be put in place.
Policy implication
The cost causation principle implies that per operator set-up costs should be charged to each OLO requiring CPS and per line set-up costs should be charged to CPS operators for each of their CPS customers. It also suggests that CPS OLOs as a group should pay for system set-up costs, since it is the demand of this group for CPS that causes the costs to arise.
(2) Distribution of benefits: Costs should be recovered from the beneficiaries, especially where there are externalities.*
Discussion
The most direct beneficiaries of CPS are the customers who choose to take it up. However, there could be other beneficiaries, if it is suggested that the introduction of CPS stimulates increased competition between operators and so indirectly benefits even those customers who do not take up CPS. But, in the particular circumstances of the UK where there is already local loop competition, number portability and easy access, is the addition of CPS likely to increase competition to a material extent? Also, one would need to take into account the possible negative effect of pre-selection on the degree of local loop competition. These issues are discussed further below in the context of the principle of effective competition.
Policy implication
If the net effect of CPS on competition were thought to be strongly positive, the distribution of benefits principle would suggest that some of the costs should be recovered from BT’s customers and not solely from the customers who decide to take up CPS. If the net effect were thought to be small or negative, this would not follow.
* An externality arises where a decision is taken that affects others (either positively or negatively), but the individual making the decision has no incentive to take account of these indirect effects. There are two aspects to the principle of distribution of benefits: first, the existence of externalities, which relates to allocative efficiency; and second, fairness (eg equity may suggest that those that benefit should pay).
(3) Effective competition: The mechanism for cost recovery should not undermine or weaken the pressures for effective competition.
Discussion
The pressures for effective competition would be weakened if CPS operators were overcharged for CPS, or if they were required to bear an excessive burden of the costs. However, this begs the question of what the right benchmark is, ie what burden of costs would be competitively neutral? Table 1 below identifies two different interpretations of competitive neutrality and considers the effect on competition along two dimensions, between BT and indirect access OLOs and between direct and indirect access operators. The first column considers how the status quo relative competitiveness of BT, indirect and direct access operators is affected by the introduction of CPS. The second column considers how the recovery of CPS costs would affect the competitive positions of these different types of operator.
Table 1: Competitive
neutrality
| Before and after introduction of CPS | How costs of CPS borne | |
| BT versus indirect access OLOs | In this interpretation competitive neutrality is the balance of costs that maintains the current competitive position (ie where there is easy access but without CPS). This type of competitive neutrality may not be relevant because the intention lying behind the introduction of CPS is to improve the competitive position of indirect access OLOs. In any case if the costs of CPS are not large, the competitive position of OLOs using CPS could be improved even if they were to bear all the costs of CPS (because of the advantages to these OLOs of CPS over easy access). | In this interpretation the burden of cost recovery should not affect the ability of operators to compete for customers. Competitive neutrality between BT and indirect access OLOs would be achieved if all the costs – system, per operator and per line set-up – were spread over all 'relevant' call origination minutes. These would be paid by OLOs on CPS calls or on indirect access calls, and by BT Retail where the call were billed to the customer by BT. This would be competitively neutral because BT and CPS OLOs would face the same costs arising from CPS when competing for a customer. Hence the more efficient operator would be able to offer the lower prices. |
| Direct versus indirect access | The introduction of CPS may worsen the relative competitive position of direct access operators by making it more likely that a customer will choose to stay with BT and (say) opt for a CPS operator than switch to a direct access competitor. The fewer the costs faced by CPS OLOs, the larger this effect is likely to be. So, recognising the interaction between direct and indirect access competition, the more that CPS costs are charged to those OLOs using CPS eg as a surcharge on CPS minutes the less the existing balance between direct and indirect access competition is affected. | This type of competitive neutrality is not applicable to this dimension of competition, since CPS is not mandated on other direct access providers (apart from Kingston). |
Policy implication
One interpretation of competitive neutrality (top right quadrant of Table 1) between BT and indirect access OLOs would imply the recovery of all costs – system, per operator and per line set-up – from both BT and CPS OLOs as a surcharge on relevant call origination minutes. But the effect on the competitive position of direct access operators may suggest that more of the costs should be recovered from CPS OLOs, eg by a surcharge on CPS minutes (bottom left quadrant of Table 1).
(4) Cost minimisation: The mechanism for cost recovery should ensure that there are strong incentives to minimise costs.
Discussion
Charges to other operators that are strictly cost-based would not provide BT with incentives for cost minimisation. Therefore, charges might need to be divorced from strict cost measurement, eg through the use of indexation or price caps, or applying efficiency adjustments to measured costs. Another way to provide incentives for efficiency would be for BT to bear some or all of its own costs. Since OLOs will have an influence on the technical specification to be implemented incentives on them to avoid inefficiently expensive solutions are also important. Such incentives would be absent if BT were to bear all the costs.
Policy implication
Incentives for cost minimisation should be built into the charging mechanism, but the cost minimisation principle does not specify who should pay for what.
(5) Reciprocity: Where services are provided reciprocally, charges should also be reciprocal.
Discussion
CPS is not a service provided on a reciprocal basis (unlike number portability), ie it is to be provided by BT to indirect access operators but not vice versa.
Policy implication
The principle of reciprocity is not relevant to CPS.
(6) Practicability: The mechanism for cost recovery needs to be practicable and relatively easy to implement.
Discussion
It would be easier to require BT to bear its own costs than to charge other operators, because it would avoid having to measure costs. But this is a weak argument, since Oftel has made numerous interconnection and number portability determinations (and will continue to do the latter). Charging out system set-up costs might raise some practical issues, since a one-off cost might need to be spread over an uncertain and growing volume of CPS calls (or customers). Forecasts and retrospective adjustments might be needed (and use of estimated economic depreciation might be appropriate to profile depreciation in line with volumes). These difficulties would be reduced if system set-up costs were recovered over (say) call origination minutes, which would include the minutes of BT as well as indirect access OLOs and so would be more predictable and unlikely to change as rapidly over time.
Policy implication
Charges for system set-up costs may raise some questions of practicability, depending on the nature of the charges, but they do not present insuperable difficulties.
Comparison with the case of number portability
In applying the principles to charging for CPS, it is useful to compare and contrast with the case of number portability. The conclusions on geographic portability (which served as a model for other types of portability) were:
The key principles underlying the conclusion on system set-up costs were:
Per line set-up
The key principles underlying the conclusion on per line set-up costs were:
Per operator set-up
To the extent that per operator set-up costs existed under number portability (eg activities similar to data management amendments), they were classified as part of system set-up costs. But that approach may not be appropriate in the case of CPS. The data management activities under number portability were more limited than is likely under CPS, which involves a much larger potential ‘pool’ of operators to be allocated an undialled prefix and is likely to involve a faster turnover of operators joining and leaving the ‘pool’. Therefore, the treatment of per operator set-up costs separately from system set-up costs appears justified for CPS.
Conclusions
Per line and per operator set-up costs
There is a sound case under cost causation for recovering the per line set-up costs from CPS operators, so long as the costs are not exaggerated, which would contravene effective competition, and if incentives for cost minimisation are retained. BT would itself face per line set-up charges if a customer that had initially pre-selected an OLO as the CPS operator chose subsequently to take such calls from BT. Sufficient incentives for cost minimisation could be achieved through the use of efficiency adjustments or indexation.
There is a case for distinguishing per operator from system set-up costs (unlike number portability) and, following the cost causation principle, for the per operator set-up costs to be charged to CPS operators. Again, efficiency adjustments or indexation may be required.
System set-up costs
The appropriate treatment of system set-up costs is less clear. Cost minimisation and practicability might be interpreted as suggesting that BT alone should bear these costs, but these arguments are weak, especially since CPS is not a reciprocal service. There may be other possibilities, but the two main options are shown in Table 2 below:
Table
2: Charging options for system set-up costs
| Option | Favoured by |
| Surcharge on all relevant call origination minutes (system set-up costs to be borne by both BT and OLOs with CPS or indirect access) | Competitive neutrality, interpretation A
Distribution of benefits, interpretation A Cost minimisation Practicability |
| Surcharge on CPS call origination minutes (ie BT to recover all system set-up costs from CPS operators) | Cost causation
Competitive neutrality, interpretation B Distribution of benefits, interpretation B |
The choice between the options depends crucially upon the view taken of the distribution of benefits and competitive neutrality (as discussed in Table 1). Spreading systems set-up costs over all relevant call origination minutes would be broadly consistent with one interpretation of competitive neutrality, namely considering only how the split of costs affects the competition between BT and indirect access OLOs (‘interpretation A’ in Table 2; top right quadrant in Table 1). Under this interpretation, benefits would accrue through increased indirect access competition even to those of BT’s customers that do not use CPS.
Note: It would not perfectly implement this interpretation of competitive neutrality, because CPS OLOs would pay the per operator and per line set-up costs, which BT would generally not pay (except the per line set-up charge if it were to recover a customer that had previously switched to a CPS OLO).
But taking into account the possible adverse effects on direct access competition would lead to a different interpretation (labelled ‘interpretation B’ in Table 2; bottom left quadrant in Table 1). In such circumstances, the benefits to customers not using CPS might not be significant (or they could even be negative) and competitive neutrality between direct access and indirect access competitors might point towards CPS costs being recovered only from CPS OLOs.
The implications of these two options for the level of charges to recover system set-up costs is illustrated in Appendix A.
At this stage Oftel has not yet taken a view about which of these
two charging options for system set-up costs is more appropriate. Comments
are invited on the pros and cons of these two options and on Oftel’s initial
conclusions that per operator and per line set-up costs be recovered from
CPS operators.
Oftel May 1998
Illustrative charges for recovery of system set-up costs
The figures in this Annex should not be taken as a forecast of the level of charges. Instead the intention is to illustrate the relative levels of pence per minute charges under different options.
The following simplifying assumptions have been made:
Illustrative charges for system set-up costs of £30m
| pence per minute | 2000/01 | 2004/05 | Equalised ppm | Approx % of ST |
| Surcharge on all call origination minutes | 0.006 | 0.003 |
|
|
| Surcharge on CPS minutes | 0.125 | 0.041 |
|
|
Illustrative charges for system set-up costs of £45m
| pence per minute | 2000/01 | 2004/05 | Equalised ppm | Approx % of ST |
| Surcharge on all call origination minutes | 0.008 | 0.004 |
|
|
| Surcharge on CPS minutes | 0.187 | 0.061 |
|
|
The decline in the ppm charge over time is due to the growth in the volume of call origination and CPS minutes and the use of straight line depreciation. Economic depreciation would tend to equalise the pence per minute charge across years, because some depreciation would be deferred to later years when volumes would be larger (though there would be effects in the opposite direction, such as declining asset prices leading to holding losses). The penultimate column of the tables gives an indication of this – it is not derived from a full-blown economic depreciation profile, but shows the equalised pence per minute charge that yields the same discounted revenue as obtained in the base case.
For comparison, the final column of the tables shows the charge as a
percentage of the charge for a single tandem segment used for call origination,
which is likely to be around 0.40 ppm or below by 2000/01 (the current
charge including emergency intermediate services and product management,
policy and planning is 0.453 ppm).
EUROPEAN PARLIAMENT AND COUNCIL DRAFT DIRECTIVE
Having regard to the Treaty establishing the European Community and in particular Article 100a thereof,
Having regard to the proposal from the Commission (1),
Having regard to the Opinion of the Economic and Social Committee (2),
Acting in accordance with the procedure laid down in Article 189b of the Treaty (3),
Whereas the Commission organized a broad public consultation on the basis of a Green Paper on a Numbering policy for telecommunications services in Europe,
Whereas this consultation underlined the importance of equal quantitative and qualitative access to numbering resources for all market players and the crucial significance of adequate numbering mechanisms, in particular for number portability and carrier selection, as key facilitators of consumer choice and effective competition in a liberalized telecommunications environment;
Whereas the Council adopted a Resolution (4) on 22 September 1997 inviting the Commission to submit proposals to the European Parliament and to the Council regarding the accelerated introduction of number portability and regarding the introduction of carrier pre-selection;
Whereas on 17 July 1997 the European Parliament adopted a Resolution (5) calling on the Commission to submit a proposal for an amendment to an already existing directive with a view to introducing carrier pre-selection and number portability;
Whereas, in the interests of the consumer and taking into account specific national market situations, national regulatory authorities may extend the obligation to provide carrier pre-selection with call-by-call override to organizations operating public telecommunications networks without significant market power, where this does not impose a disproportionate burden on such organizations or create a barrier to entry in the market for new operators;
Whereas Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in Telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (ONP) (6) should therefore be amended accordingly,
HAVE ADOPTED THIS DIRECTIVE:
Article 1
Directive 97/33/EC is hereby amended as follows:
1) the following definitions shall be added to Article 2(1):
(h) “subscriber” means any natural or legal person who is party to a contract with the provider of publicly available telecommunications services for the supply of such services;
(i) “geographic number” means a number from the national numbering plan where part of its digit structure contains geographic significance used for routing calls to the physical location of the network termination point of the subscriber to whom the number has been assigned;”;
2) the first subparagraph of Article 12(5) shall be replaced by the following:
“5. National regulatory authorities shall encourage the earliest possible introduction of operator number portability whereby subscribers who so request can retain their number(s) on the fixed public telephone network and the Integrated Services Digital Network (ISDN) independent of the organization providing service, in the case of geographic numbers at a specific location and in the case of other than geographic numbers at any location, and shall ensure that this facility is available by 1 January 2000 at the latest or, in those countries which have been granted an additional transition period, as soon as possible after, but no later than two years after any later date agreed for full liberalization of voice telephony services.”;
3) the following paragraph shall be added to Article 12:
“7. National regulatory authorities shall require at least organizations operating public telecommunications networks as set out in Part 1 of Annex I and notified by national regulatory authorities as organizations having significant market power, to enable their subscribers, including those using ISDN, to access the switched services of any interconnected provider of publicly available telecommunications services. For this purpose facilities shall be in place by 1 January 2000 at the latest or, in those countries which have been granted an additional transition period, as soon as possible thereafter, but no later than two years after any later date agreed for full liberalization of voice telephony services, which allow the subscriber to choose these services by means of pre-selection with a facility to override any pre-selected choice on a call-by-call basis by dialling a short prefix.
National Regulatory authorities shall ensure that pricing for interconnection related to the provision of this facility is cost orientated and that direct charges to consumers, if any, do not act as a disincentive for the use of this facility.”
4) the first sentence of Article 20(2) shall be replaced by the following:
“2. Deferment of the obligations under Article 12(5) and (7) may be requested where the Member States concerned can prove that they would impose an excessive burden on certain organizations or classes of organization.”
Article 2
1. Member States shall take the measures necessary to comply with this Directive before 31 December 1998. They shall forthwith inform the Commission thereof.
When Member States adopt these measures they shall contain a reference to this Directive or shall be accompanied by such reference on the occasion of their official publication. The methods of making such reference shall be laid down by the Member States.
2. Member States shall communicate to the Commission the text of the main provisions of domestic law which they adopt in the field governed by this Directive.
Article 3
This Directive shall enter into force on the day of its publication in the Official Journal of the European Communities.
Article 4
This Directive is addressed to the Member States.
Done at Brussels
For the European Parliament For the Council
The President The President
1. OJ C 330, 1.11.1997, p. 19, and amended proposal of 20.11.1997 (not yet published in the Official Journal).
2. Opinion delivered on 10 December 1997 (not yet published in the Official Journal).
3. Opinion of the European Parliament of 20 November 1997 (not yet published in the Official Journal), Council Common Position of ...(OJ C ...) (not yet published in the Official Journal) and Decision of the European Parliament of ... ((OJ C ...) (not yet published in the Official Journal)).
5. OJ C 286, 22. 9.1997, p. 232.
6. OJ L 199, 26.7.1997, p. 32.
Annex II (of the ICD) – Annex II operators are those who have rights and obligations to interconnect with each other under Article 4(1) of the Interconnection Directive for the purpose of providing publicly available telecommunications services.
Carrier pre-selection (CPS) – the facility offered to customers which allows them to opt for certain defined classes of call to be carried by an operator selected in advance (and having a contract with the customer), without having to dial a routing prefix or follow any other different procedure to invoke such routing.
Cost-orientated pricing – where all elements of the price charged can be related to costs. The UK authorities use a measure of costs known as LRIC (long-run incremental costs), which comprises only those costs directly caused by the provision of the service in question.
Digital – The coded representation of a waveform by, for example, binary digits in the form of pulses of light, as opposed to analogue which is the direct representation of a waveform.
Direct access – the situation where a customer is directly connected to a telecommunications operator by a wire, fibre-optic or radio link to connect that customer to a public telecommunications network
Easy Access – a facility allowing a BT customer to select an alternative operator using a short access code, usually 3 or 4 digits in length. Outgoing calls use BT’s lines and network to the first point of interconnection, and are then switched to the chosen operator.
Geographic portability – the ability of customers to transfer their numbers between operators on fixed telecommunications networks when they switch their operator
Indirect access – a situation where a customer contracts to buy a telecommunication service from an operator to which the customer is not directly connected and where the second operator pays the first operator for the use of that connection.
Integrated Services Digital Network (ISDN) – A network providing end-to-end digital connection, supporting a wider range of services than available across the PSTN.
Interconnection – The connection of separate telecommunications networks.
Interconnection Directive (ICD) – an EU Directive implemented in the UK in December 1997, setting rules for, amongst other things, who has rights and obligations to interconnect and the terms on which it should take place
International facilities licence (IFL) – A licence granted under the Telecommunications Act 1984 authorising the connection of a UK telecommunication system to a telecommunication system outside the UK and the provision of telecommunication services over the system to countries outside the UK.
Interoperability – The ability of different distribution networks and/or apparatus to work together to provide a seamless service for users.
Local loop – the final link in the telecommunications network, from the local exchange to the customer
Local rate – the rate for calls within the local call area, the area being defined by the telecommunications operator serving the customer
Low user scheme – the scheme whereby a customer with a low call bills gets a discount on line rental
MMC – Monopolies and Mergers Commission
National rate – the rate for calls within the national call area, the area being defined by the telecommunications operator serving the customer
National Regulatory Authority – regulatory bodies recognised by EU law in each EU Member State; in the UK, this is Oftel
Numbering Conventions – a set of rules and principles published by Oftel relating to the management of the National Numbering Scheme, which is a scheme for allocating and re-allocating telephone numbers
Numbering Directive – an EU Directive in the course of adoption which creates the EU CPS obligation. Once adopted, the Numbering Directive’s provisions will be included as amendments to the Interconnection Directive
Number portability – the ability of customers to keep their number when they change operators
OLO – Other Licensed Operators (i.e., not BT)
Over-ride – the ability of the CPS customer to choose alternative operators to their pre-selected operator(s) on a call-by-call basis
Per operator set-up costs – the costs of enabling CPS for any individual operator, including an activity similar to a data management amendment and the setting up of commercial arrangements for the electronic transfer of customer orders.
Per customer line set-up costs – the costs of implementing CPS for a particular customer line
Premium rate – services including recorded information and live conversation run by independent service providers. All calls to these companies are called at a higher rate than ordinary calls to cover the company’s costs in providing the content of the call and the operator’s costs for the special network facilities needed.
Public Switched Telephone Network (PSTN) – The telecommunications networks of the major operators, on which calls can be made to all customers of the PSTN.
Publicly available telecommunications services – Whether a service is “publicly available” is likely to be a question of fact and judgement which will depend on all the circumstances. As a minimum it is likely that a telecommunication service will be publicly available if it is “on offer” to anyone who is prepared to pay for it, probably with standard terms and conditions. Sometimes this criterion may not be sufficient. Public accessibility of the network over which the service is provided may also need to be taken into account.
Reference Interconnection Offer – the terms and conditions for interconnection offered by operators with SMP status for the purpose of the Interconnection Directive
Slamming – the process by which a customer’s pre-selections are changed without the customer’s full knowledge or consent
System set-up costs – the costs of developing and implementing on switches the software needed for the capability to provide CPS, and the cost of modifying support systems.
Telecommunications Advisory Committees – independent regional advisory bodies set up by Oftel
Universal service – a provision in some Telecommunications Act
licences requiring the licensee to provide certain services to all specified
persons. For example, BT is currently required to provide basic voice telephony
and certain other established telecommunications services to anyone who
may reasonably request them.
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