Oftel has for some time been considering opening up the market for directory enquiry services, which are presently dependent upon electronic databases held by BT. The purpose of this would be to create a situation in which competition can emerge to promote improved quality, efficiency and economy in the provision of these services. In response to representations from BT's competitors, and businesses outside the telecommunications industry who are interested in playing a part in this market, Oftel has developed a set of far-reaching proposals for change, which are explained in this document. The proposals extend beyond familiar directory enquiry services provided over the telephone to deal with other products and services which may be provided using the same information - in particular, electronic products such as CD ROM.
A deciding factor in implementing change will be the interests of consumers. We would therefore welcome comments from consumers and consumer groups, as well as from telecommunications operators and potential new service providers. It is particularly important that the privacy of the customers of BT and its competitors should be preserved and that information about them should not be misused.
The document highlights a number of areas where comment would be welcome. In this opening note I would just draw attention to the central features of our proposals. We suggest that:-
DON CRUICKSHANK
Oftel invites comments on the proposals set out in this Consultative Document.
Representations should be sent to:
Alex Blowers
Oftel
50 Ludgate Hill
LONDON EC4M 7JJ
All Representations will be made publicly available in Oftel's library. Those responding are requested to separate out any confidential material into a confidential annex which is clearly marked as such. Representations are to be received by 20 December 1995.
Thereafter a second stage "period for review" will take place. This period is intended to allow parties to make comments on the first stage Representations. Any second stage Representations are to be received (at the same address) by 17 January 1996.
Comments (provided they are relatively short) can be sent to Oftel by filling in the form 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 Mary-Ann Auckland at Oftel on 0171 634 8751 to organise this.
Any confidential material should be sent to Oftel by ordinary mail, not via Internet.
1.1 Oftel's objectives in relation to the directory services and products which are provided using the directory information of Public Telecommunications Operators ("PTOs") are:
(a) to improve the quality of such services and products for the benefit of consumers; and
(b) to promote efficiency and economy in the provision of such services and products.
1.2 Oftel takes the view that the introduction of a competitive market is the most direct and efficient way to improve the quality of directory services and products for the benefit of consumers and to get greater efficiency and economy on the part of service providers and product suppliers. Oftel has received a number of complaints about the quality of such services and products under the existing regime.
1.3 Oftel also sees directory services and products in a wider context, as ancillary services and products provided by PTOs to their customers. The manner in which such services and products are provided has an impact on competition in the market for broader telecommunication services. BT's competitors have complained that the way in which it operates its directory databases, which include information about their customers, puts them at a disadvantage in this broader market. Oftel intends to promote competition between persons providing broad packages of telecommunication services by ensuring that they are all able to provide directory services and products on fair terms, either in their own right or by purchasing them at the wholesale level from BT or a new competing database manager.
1.4 Oftel has to ensure that any steps taken to promote competition will, in the context of the relevant legislation and regulation, be effective to enable new managers of directory databases to provide a range of products and services without being faced with unduly onerous regulatory requirements. The apparent reluctance of PTOs other than BT to provide directory services and products may stem from the fact that it is uneconomic for them to do so in their own right. Equally, PTOs may not themselves possess the expertise necessary to provide such services and products. Oftel therefore intends to extend access to the directory information of PTOs to other companies, who will be licensed to provide directory services.
1.5 In taking steps to promote competition, however, Oftel has to address the danger that PTO customers will lose confidence in the protection afforded by the directory regime to the privacy of the information held about them by PTOs. Oftel's research suggests that public confidence in the use to which directory information is put is fragile. In deregulating, Oftel would not wish to take any measure likely to weaken that confidence to such an extent that there was for that reason a significant increase in the number of customers choosing the ex-directory option (at present some 27% of BT lines are ex-directory; and BT estimates that between 20% and 25% of its customers do not have an in-directory line). A high proportion of ex-directory customers would reduce the value of the directory services and products to the prejudice of consumers at large. Oftel understands that in some parts of the US, where there is greater freedom of access to directory information, this has resulted in a very high proportion of subscribers withdrawing from public directories.
1.6 Oftel has to balance a desire to promote competition against the danger of eroding public confidence. Oftel accordingly considers that a gradual and cautious approach is necessary, giving consumers time to become accustomed to the idea that the information they provide to their PTO is likely to be disclosed to a non-PTO and appear in a range of different directory products and services; and reassurance that adequate measures will be in place to ensure that their information is not misused. Access to information will only be extended to new database managers if Oftel is confident that a regime is in place which is sufficient to ensure at least the current level of protection of the privacy of PTO customer information.
1.7 Oftel's proposals are described in detail in Chapters Two, Four, Five and Six of this Document. They can briefly be summarized as follows:
(a) All PTOs should be obliged to provide their customer directory information to at least one database manager.
(b) Database managers may be current PTOs or other companies, but will be licensed under the Telecommunications Act to provide directory services.
(c) PTOs and database managers will be obliged by the terms of their Telecommunications Act licences to abide by a Code of Practice governing the use and disclosure of PTO customer information.
1.8 While Oftel is engaging in this consultation exercise, the Monopolies and Mergers Commission is pursuing an investigation into the market for advertising in classified directories, with a particular focus on Yellow Pages. The Commission is expected to conclude its investigation and report to the Secretary of State by the end of 1995. Whilst regulation of competition in advertising or in classified printed directories does not fall directly within the scope of the Director General's powers, the Commission's findings are likely to be relevant to Oftel's considerations.
2.1 PTOs, like other providers of services to the public at large, hold a significant amount of information about their customers. Some of this information, such as bill payment records, may be highly sensitive. Other information may be less sensitive, but can still be used for purposes which would be objectionable to the person concerned. This is particularly true of the information which is used to provide directory enquiry ("DQ") services and other directory services and products (such as printed telephone directories).
2.2 The databases which PTOs use to administer their relationships with their customers and, in the case of BT, provide directory services and products, contain a wide variety of information. In making proposals regarding directory services and products, Oftel is only dealing with a restricted category of PTO customer information: names, addresses and telephone numbers, and certain ancillary information - for example, the fact that a particular PTO customer is a business rather than a residential customer (or vice versa) and the fact that a particular number is mobile rather than fixed.
2.3 This Document is concerned with the use of this customer directory information and the quality of services and products which are provided to PTO customers and consumers at large using the information. A balance must be struck between, on the one hand, the desire to ensure that high quality directory services and products are provided, to the benefit of PTO customers and consumers generally; and, on the other hand, the need to ensure that information relating to individual PTO customers is not misused. Oftel's proposals aim to strike the right balance.
2.4 Most PTO customer directory information is presently gathered together (with some other information) in BT's "OSIS" (Operator Services Information System) database. BT also operates a range of sub-databases which are used to provide different services and products. The "DAS" (Directory Assistance System) database, for example, contains the information used to provide BT's DQ service.
2.5 Oftel is also concerned to ensure that there is no misuse of other PTO customer information, such as billing records. Use of this information, collected in the context of the PTO/customer relationship, is restricted by the provisions of the Data Protection Act 1984, administered by the Data Protection Registrar. The PTO licences granted under the Telecommunications Act 1984 do not attempt to regulate the use of such information. The Director General does not now propose to introduce new regulation to govern the use of this information. He is, however, concerned that any changes made to the directory information regime should not have "knock-on" effects on the use of this information.
2.6 The focus of Oftel's activity in this area to date has been on conventional DQ services. These services fall within the definition of "directory information services" in the Telecommunications Act. They consist in providing directory information through a telephone network (such as BT's network) in order to facilitate the use of that network. Because directory information services have a special status in the Telecommunications Act, as "telecommunication services", they fall directly within the scope of the Director General's area of statutory responsibility. DQ services include the familiar BT directory enquiry service, and also more sophisticated products such as BT's on-line Phone Base service.
2.7 Such services, however, form part of a wider market for directory services and products, which also includes classified and unclassified printed directories and electronic directories, such as BT's Phone Disc, on CD ROM or other media. Electronic media are likely to form an increasingly significant part of the market for directory products. Oftel proposes to take steps to enable, but at the same time restrict, the use of PTO customer directory information for products and services of this kind. Oftel considers this to be necessary for the following reasons:-
(a) A database operator seeking to establish a viable commercial concern in the provision of DQ services, or making its database available to enable PTOs to provide such services, may well wish (and may possibly need) also to provide other related services and products. Oftel believes it to be necessary to ensure that any licensing regime developed for the provision of DQ services also permits the provision of such other services and products. Developments in data protection legislation (discussed in Chapter Five), suggest that specific action should be taken by the Director General (in relation to modifications to existing licences) and the Secretary of State (in relation to new licences) for this purpose.
(b) The risk that PTO customers will lose confidence in the safeguards within the DQ regime which respect and protect the privacy of their information is particularly acute if products and services other than DQ services are not effectively regulated. For example, research conducted on behalf of Oftel suggests that PTO customers would be concerned if there was a serious possibility that "reverse directory" products or services would be provided, allowing a subscriber to identify and locate a PTO customer from his or her telephone number. Oftel believes that it is necessary to build safeguards into the regime governing the use of PTO customer information which address such concerns.
2.7 Thus Oftel must ensure that database operators are permitted to use information to provide services and products other than conventional DQ; whilst ensuring that their use of information to provide such services and products is effectively regulated.
3.1 BT's OSIS database derives from the information it has been holding ever since British Telecommunications, the statutory company (and predecessor to BT), was privatised in 1984. Before 1984 British Telecommunications faced no competition as a provider of telecommunication services, including DQ services.
3.2 As the market in the provision of telecommunication services has opened to competition, so the PTOs have sought to provide their own DQ services in competition with BT or to find other companies prepared to do so on their behalf.
3.3 As is discussed in more detail in Chapter Five, the PTO licences include conditions designed to ensure that all PTO customers receive a DQ service which includes information about virtually all PTO customers on all networks. These conditions provide for the exchange of customer directory information between PTOs. Any PTO is entitled to provide a DQ service in its own right.
3.4 BT has in practice continued to maintain the only databases containing directory information relating to virtually all PTO customers. BT charges the other PTOs for inputting their directory information into its databases.
3.5 Mercury originally set up its own DQ service using the information contained in BT's databases and has now sub-contracted this service to a third party service provider. Few other PTOs provide their own directory information services or products, the exceptions being Vodafone, Kingston (in Hull), Manx Telecom and the Channel Islands companies. PTOs generally, therefore, rely on BT's DQ service, provided to them at a wholesale rate, which they must then provide on request to their customers in order to meet their licence obligations. BT also provides them with copies of its branded printed directories, which they pass on to their customers.
3.6 PTOs have expressed considerable concern to Oftel, both in response to Oftel's earlier review of the use of directory information carried out in 1993/4 and in response to informal consultation over amendments to Condition 3 of BT's Licence, regarding the use by BT of its customer directory information databases. Prior to Oftel's review of directory information:
(a) In the absence of obligations in its licence, BT would not permit other PTOs to create their own printed directories; and it still does not permit them to create other directory products.
(b) PTOs complained that BT accorded the inputting of their customer directory information unequal treatment compared to the inputting of its own information, in that (for example) they felt that their information tended either never to appear on the BT database or to appear late. They also complained that the procedures used by BT to input their information were archaic. BT suggested the introduction of a Code of Practice in order to address these complaints (see paragraph 3.10(a), below).
(c) PTOs were concerned that BT's prices for assimilating PTO customer information and providing wholesale DQ services and unclassified printed directories to other PTOs did not reflect BT's underlying costs. PTOs wanted to see transparency of charges and considered that cost-based charges should apply equally to all those who accessed BT's databases, including those parts of BT which made use of the customer directory information.
3.7 Independent research conducted on behalf of Oftel suggests that PTO customers' concerns focus less on the quality of DQ services than on uses and disclosures of their information. PTO customers appear in particular to be concerned that the ex-directory option and the de facto prohibition of "reverse directories", which would allow PTO customers to be identified from their telephone numbers, should be preserved. More generally, they are concerned that Oftel should not take steps which would lead to increases in unsolicited direct marketing.
3.8 Oftel has at various times received representations from non-PTOs who are keen to provide directory services and products. They have expressed concern that the present regime places them at a competitive disadvantage because of the difficulty of obtaining access to and the right to use PTO (and particularly BT) information. They have argued that Oftel should broaden the scope of its review to consider the possibility of requiring BT to make its customer directory information available to companies which are not currently PTOs.
3.9 During 1993/4 Oftel carried out a review of the provision of DQ services. The review sought to establish how best to ensure that PTOs could meet their customers' needs for these services and to gauge views on issues such as the geographical coverage of printed directories; frequency of updates; and the release of PTO customer directory information to non-PTOs to enable them to publish directories or to offer services in competition with BT and the other PTOs. A key question in conducting the review was how Oftel could ensure that PTO customers continued to have access to a complete DQ service and that PTOs were able to compete to provide services on equitable terms.
3.10 As a result of the review, Oftel concluded that:
(a) A Code of Practice on the compilation and use of directory information should (as suggested by BT) be introduced and BT should be obliged to comply with it.
(b) Oftel should examine BT's charges for inputting and accessing directory information and for supplying wholesale DQ services and unclassified printed directories to PTOs.
(c) BT data should be downloaded to enable other PTOs to produce their own printed directories.
(d) An unbranded "core" unclassified printed directory should be made available to all PTOs, to enable them to package the directory as they wished.
(e) Arrangements for the bulk supply of BT's own branded unclassified printed directories to other PTOs should continue.
(f) PTOs should continue to be free to decide whether to make a separate charge for printed directories or to include the charge in their general telephone service charges (line rental or call charges).
(g) PTOs should not for the time being be obliged to provide customer directory information to non-PTOs to enable them to provide directory services and products.
3.11 These proposals have in part been implemented:
(a) The Code of Practice has been agreed with BT following consultation with other PTOs and BT has agreed to operate in accordance with its terms; as yet this agreement is not embodied in BT's licence and breach of the Code therefore carries no legal sanctions.
(b) Oftel has carried out an investigation of BT's charges for assimilating PTO directory information and for supplying wholesale DQ services and unclassified printed directories to PTOs. This investigation has resulted in a new regime providing for these charges to be transparent and to reflect underlying cost, which has been implemented by modifications to BT's licence under the accounting separation provisions implemented in March 1995 (see paragraphs 5.4 and 5.5, below).
(c) Oftel has obtained BT's agreement that other PTOs should be able to download information from the BT databases in order to allow them to produce their own unclassified printed directories. So far as Oftel is aware, however, no PTO has yet taken advantage of this opportunity.
(d) BT has put in place arrangements under which a PTO can either purchase unbranded unclassified printed directories or ask BT to wrap such directories with its own cover on its behalf. So far as Oftel is aware, however, no PTO has yet taken advantage of this opportunity.
(e) BT is continuing to supply the BT unclassified printed directories to other PTOs in bulk, and at lower prices.
(f) Modifications to BT's licence to require BT to abide by the Code of Practice; permit other PTOs to produce their own unclassified printed directories; and make available unbranded printed directories to other PTOs (or brand them on behalf of other PTOs) were drafted but were not issued for formal consultation following representations received in informal consultation from several PTOs that the proposed changes did not go far enough.
3.12 An invitation was also issued to any PTO which would like to set up a separate directory information database to put proposals to the Director General. Expressions of interest were received by Oftel from non-PTOs; and these expressions of interest were supported by some PTOs. Some PTOs suggested that they might be prepared to set up databases in their own right, but only if Oftel was not prepared to consider extending the regime to other companies. These representations convinced the Director General that further consideration of the issue was needed.
3.13 Oftel now wants to explore a wider approach to database liberalisation, taking particular account of the interests of PTO customers and consumers at large in the use to which information is put. The aims of the earlier directory information review, that all PTO customers should have access to a complete DQ service and that PTOs should be able to compete to provide directory services and products on equitable terms, will remain an important part of this further review. The following chapters discuss how such wider database liberalisation might be achieved.
3.14 Oftel's proposals are unlikely to lead to the introduction of competition in the market for the provision of directory services and products before late 1996, at the earliest. A Telecommunications Act licence or licences for new database managers will need to be granted by the Secretary of State and modifications to the existing PTO licences will need to be put in place. This will involve statutory consultation with the PTOs; and reaching agreement with the PTOs regarding the licence modifications. If agreement cannot be reached with any of the PTOs and Oftel nevertheless decides to go ahead with the implementation of the proposals it will be necessary to refer the matter to the Monopolies and Mergers Commission, which would add a further six to twelve months to the timetable. Once the regulatory framework has been put in place, of course, it will be necessary for any new competitor to BT to establish its business.
3.15 Oftel is concerned that the interests of PTOs and their customers should be protected. Pending the finalisation of Oftel's proposals and their implementation, Oftel is monitoring BT's compliance with the existing Code of Practice; and Oftel will investigate any complaints received that BT is not complying. If it becomes clear that it will not be possible to implement Oftel's proposals reasonably quickly, Oftel will consider the introduction of interim modifications to BT's licence, requiring BT to abide by the Code of Practice; to permit other PTOs to produce their own unclassified printed directories; and to make unbranded printed directories available to other PTOs (or brand them on behalf of other PTOs).
4.1 Oftel is determined to give a high priority to the privacy of PTO customer information, both in the interests of the customers themselves and in order to avoid a migration to ex-directory, leading to a deterioration in the value of directory services and products to the detriment of consumers of such services and products generally.
4.2 Oftel considers that the following principles should be enshrined in regulation for the protection of the privacy of PTO customer information:
(a) The directory information to be disclosed between PTOs and any new database operators should be limited to name, address, telephone number, nature of number (fixed or mobile) and customer category (business or residential). No other PTO customer information should be disclosed to new database managers.
(b) PTO customers should retain the option to be ex-directory and the use and disclosure of information about ex-directory customers should be strictly controlled. A blanket prohibition on the disclosure of information to database managers about ex-directory customers would give rise to two problems, however. First, a database manager would not be able to identify an ex-directory number as being ex-directory unless it knew the customer's name and at least a partial address. This would put new database managers at a competitive disadvantage since the BT DQ service does tell an enquirer if a number sought is ex-directory. It may also cause concern to ex-directory customers themselves, since it might leave enquirers with the impression that they did not have a telephone at all or had been cut off. Second, it is essential that BT and Mercury at least should have a complete database of all customers of all networks, including ex-directory customers, so that they can continue to provide an effective emergency operator service. PTOs must retain the right to provide information about ex-directory customers to the company (if any) handling emergency operator services on their behalf. Oftel's preliminary conclusion, then, is that information about ex-directory customers should be passed on but clearly marked as ex-directory, and should not be used other than to identify customers as ex-directory and to provide assistance to the emergency authorities.
(c) PTO customers should also retain the existing option to have what is known as a "DQR" listing, under which their numbers are available through DQ but do not appear in printed (or electronic) directory products.
(d) PTO customers should additionally be able to opt to appear only in unclassified directories; and database managers should be prohibited from making unsolicited sales calls to customers who have taken up this option. This would be of particular benefit to those business customers who do not wish to appear in classified directories but at present have no option. Oftel has not yet reached a final decision as to whether PTO customers should be entitled to pick and choose between directories or whether the choice should be between all classified directories or none. The "all or none" approach should help to promote competition on level terms between BT and any new competitor, at least in the short term: if customers were entitled to choose between classified directories, inertia would favour BT's Yellow Pages. The matter is by no means clearcut, however. Allowing greater freedom of choice might act as an incentive to provide better classified directories and is on the face of it of benefit to PTO customers in itself. Oftel's preliminary view is that, on balance, it is necessary to promote competition, at least in the short term, by not allowing PTO customers to choose between classified directories.
(e) Directory service and product providers should be expressly prohibited from providing "reverse directory" services and products, designed to enable a customer to be identified from his or her telephone number. Although the Code of Practice prohibits reverse directories, and BT's directory products (including its DQ service) are designed to ensure that addresses cannot be ascertained from telephone numbers, there is at present no legal prohibition against such directories being compiled. It should be borne in mind, however, that general data protection legislation allows (and will continue to allow) businesses to compile reverse directories of their own contacts for their own purposes (for example, to allow an in-coming caller to be identified from his or her telephone number using calling line identification), subject to various constraints. The new regime would allow database managers to do the same, subject to the same constraints. PTOs, for example, would be permitted to use reverse directories in dealing with customer enquiries and complaints.
(f) Directory service and product providers should be prohibited from disclosing PTO customer directory information other than in the course of providing directory services and products (either directly or through a reseller), to enable an appropriately licensed person to provide such services and products or to assist the law enforcement agencies. PTOs, of course, would still be entitled to use such information to conduct their own PTO/customer relationship; and database managers generally would be entitled to contract with third party service providers to run their databases for them, provided the database manager remained responsible for the use of the data contained in the database by the service provider.
(g) Directory service and product providers should be obliged to ensure that their customers make use of the service or product only as end-users or straightforward resellers. Otherwise, it would be possible for a commercial enterprise to take, for example, an on-line directory service from a licensed database operator and use it to provide a similar service, not individually licensed and therefore unregulated other than by general copyright and data protection law. It will, of course, be necessary carefully to define what is meant by "end use" and straightforward "resale".
(h) PTO customers should retain the right to prevent (by blocking caller line identification) other people from obtaining their telephone numbers.
4.3 While there is no suggestion that the ex-directory option should cease, Oftel does not propose to give PTO customers a right to opt to have their information appear only in BT (or other operator) directories. BT (and other PTOs) will, therefore, be entitled and obliged to disclose PTO customer information to new database managers without first consulting or obtaining the consent of their customers. Oftel believes that this approach is necessary if genuine competition is to be introduced. A new database manager will not be able effectively to compete with BT unless it has access to information which is as complete as the information available to BT. Oftel believes that the principles set out above, provided that they are backed up by effective regulation, will be sufficient to ensure that PTO customers are not prejudiced by the adoption of this approach. In particular, ex-directory information will not appear in any directories and its use will be governed by a Code of Practice.
5.1 This Chapter discusses some features of the legislative and regulatory framework within which BT provides directory services and products. It seeks to explain why it is that non-PTOs are not, for the most part, in a position to provide directory services and products. It also discusses features of the UK's current data protection law and the recently adopted EU Data Protection Directive which make it necessary for the Director General to take specific action to ensure that database managers are able to exchange information and provide high quality services and products without unduly onerous regulation.
5.2 Each PTO must under the conditions of its Telecommunications Act licence provide a DQ service to its customers by means of a switched voice telephony system. To ensure that all PTOs provide as comprehensive a service as possible, each PTO must provide all interconnecting PTOs with directory information about its own customers; and each PTO must include in its DQ service directory information about the customers of other PTOs, to the extent that it has such information.
5.3 The various PTO licences regulate the terms on which directory information is exchanged and DQ services are provided on a wholesale basis. Condition 3.2(c) of BT's licence (and equivalent conditions in other PTO licences) provide that directory information must be provided "on reasonable terms (which may include recovery of fully allocated costs and a reasonable return on capital employed)". In practice, as mentioned in Chapter Three, BT charges other PTOs for inputting their information into its databases.
5.4 The level of these charges, and BT's charges for the provision by BT to other PTOs of wholesale DQ services, are regulated under Condition 13 of BT's licence as "Standard Services" provided by BT to the other PTOs.
5.5 Condition 13 provides for the Director General to determine the terms and conditions on which Standard Services are provided if BT and the other PTOs cannot agree them. Conditions 13 and 16B set out in detail the procedures and basis on which the terms and conditions on which Standard Services are provided are determined.
5.6 Condition 3.2(c) requires BT to provide other PTOs with access to its database, but only if certain conditions are fulfilled. It therefore allows BT to impose restrictions on the uses to which other PTOs can put its directory information. BT can restrict use of its information to the provision of DQ services and call routing. In practice, as has already been discussed in Chapter Three, BT is now willing to permit use of its information for the preparation of printed directories, although its licence does not require it to do so. It has not to date been willing to allow other PTOs to use its information to provide electronic directory products.
5.7 In addition to its obligations in relation to other PTOs, BT must provide such directories as it "publishes and makes available generally" to its customers to anybody in the UK who asks for them. Oftel does not believe that this obligation is apt to force BT to provide all of its directory information to anyone who asks for it, in whatever form.
5.8 Subject to BT's claim to own copyright in its databases, and data protection considerations, there is no legal reason why a non-PTO should not provide directory products and services. In practice, however, since BT has some 94% of direct customer connections, non-PTOs cannot provide satisfactory DQ services or other directory services and products unless they can reach an agreement with BT for the provision of BT directory information. Under the conditions of BT's licence, only PTOs can require BT to provide them with such information, except in the form of published directories. While BT continues to provide DQ and related services and products there is a perception that it is not in BT's narrow commercial interest to reach agreements with non-PTOs to make BT directory information available except on terms which are favourable to BT.
5.9 Non-PTOs can require BT to provide them with copies of its published directory products, but have no direct right of access to BT's directory information databases. Furthermore, even to the extent that non-PTOs are able to obtain copies of parts or all of BT's electronic databases, for example by scanning printed directories, they may be prohibited from doing so because BT claims rights as the owner of copyright in the compilation of data in its databases and may refuse to authorise copying or use.
5.10 BT claims copyright in its directory information databases. UK law is unusual in giving copyright protection to compilations of information on the basis of the work necessary to assemble the information contained in them. Most other European jurisdictions require a degree of creative endeavour before copyright protection is available. The position throughout Europe is likely shortly to be harmonized, however, pursuant to a European Council Directive on the legal protection of databases. Oftel understands that this Directive is likely to be adopted by the end of 1995.
5.11 The Directive, when implemented, will not affect the copyright protection of existing databases. It will, however, change the situation with regard to new databases, although its practical effect, by providing non-copyright protection against acts of extraction from a database in which heavy investment has been made, may well be very similar.
5.12 General UK copyright law does not provide for compulsory licensing of rights in databases. It was proposed that the Directive should include provision for compulsory licensing in certain limited circumstances, but it has now been agreed that these provisions should not be included.
5.13 Although there may be arguments to suggest that an entity such as BT could be compelled under EU competition law to license rights in its database to others, the position is by no means clear and it is in any case recognized that, where national law can give effect to the desired outcome, it should do so and action should not be taken at the EU level. Licences granted under the Telecommunications Act provide an opportunity in national law for the Director General and the Secretary of State to ensure that there is fair competition in the market for the provision of directory services and products.
5.14 BT's licence already contains conditions providing for compulsory licensing in certain circumstances. These conditions (Conditions 3 and 39) are not sufficient, however, to enable the Director General to require BT to license non-PTOs to use BT's information to provide a wide range of directory services and products. Condition 3 requires BT to provide information only to other PTOs; and the relevant part of Condition 39 relates only to the use of information to provide services over the BT network.
5.15 The freedom of PTOs and non-PTOs to provide DQ and other related services and products is restricted by the requirements of the Data Protection Act 1984. This legislative framework is likely to need to be amended to give effect to the requirements of the recently adopted EU Data Protection Directive.
5.16 The Data Protection Act regulates the holding of "personal data" - that is, information relating to living individuals ("data subjects") and held in electronic form. The Data Protection Registrar, however, takes the view that BT's published directory information is exempt from all of the substantive provisions of the Act while it remains in the hands of BT. Section 34(1) exempts data which consists "of information which [the person holding it] is required by or under any enactment to make available to the public". Whilst Condition 3.1(b) of BT's licence does not impose an absolute obligation on BT to make information available to the public, it does, as discussed at paragraph 5.7, above, require BT to supply to anybody who asks for them copies of any directories that it does publish and make available to its customers generally. Since BT in practice publishes and makes available directory information to its customers generally, it is in effect "required by or under" its licence (an enactment) to make such information available to the public and therefore appears to be able to take advantage of the Section 34(1) exemption.
5.17 Since all PTO licences contain conditions equivalent to Condition 3.1(b), it appears that the Data Protection Act may not apply to directory information which the PTOs publish, whilst it remains in the hands of the PTOs.
5.18 Section 34(1) does not apply to information which BT (or another PTO) is not obliged to publish. It does not, therefore, apply to information about ex-directory customers. The Data Protection Act applies in full to that information.
5.19 If BT were to be required to pass the contents of its directory information databases to non-PTOs, those non-PTOs would not be exempted from the provisions of the Act, and would therefore be required to obtain and process data "fairly". In respect of customer information obtained from BT for the provision of directory services and products, the Data Protection Registrar's view is that the requirement to process personal data fairly might restrict non-PTOs from using the information to provide services and products other than those likely to have been anticipated by the relevant PTO customers.
5.20 Oftel's view is that this situation is unsatisfactory in two respects. First, the Data Protection Act appears not to apply to the use by the PTOs of PTO directory information, but there are no alternative safeguards in place to protect the privacy of that information. There is a need for clear regulation in this area. Second, the application of the Data Protection Act to the same information in the hands on non-PTOs is likely to act as a barrier to competition from those non-PTOs in the market for the provision of directory services and products.
5.21 Oftel has discussed these matters with the Office of the Data Protection Registrar. The Registrar considers that a sensible approach would be for Oftel and the DTI to introduce Telecommunications Act regulation to protect the privacy of PTO customer information by restricting the uses to which it can be put and the extent to which it can be disclosed. This would fill the gap apparently left by the Section 34(1) exemption and also provide greater certainty for PTOs and non-PTOs alike regarding the ways in which the information may (or may not) be used and disclosed.
5.22 On 24 July 1995, the EU adopted a Directive on Data Protection. This establishes a common set of data protection rules which will apply throughout all EU Member States. It goes beyond the UK's existing data protection regime in a number of respects (not least in that it applies to certain manually held records as well as to computerised data). Member States have three years from the date of adoption of the Directive in which to introduce national law giving effect to its provisions. Processing operations which are already under way when the implementing legislation takes effect have to be brought into conformity with it within three years of the date of implementation. Clearly, Oftel would wish to establish a directory information regime which is compatible with the requirements of the Directive.
5.23 As far as any new directory information regime is concerned, the most significant feature of the Directive is that it does not contain a provision allowing Member States to provide a general exemption for the processing of personal data which are required to be published pursuant to an enactment. Processing of personal data by BT or another PTO is caught by the Directive in the same way as processing by a non-PTO. It will, therefore, be necessary to ensure that appropriate arrangements are in place to allow an effective directory information regime to be operated within the requirements of the Directive.
5.24 There are two provisions of the Directive which are particularly relevant to this. First, the Directive sets out (in article 7) a number of conditions, of which at least one must be met before personal data may be processed ("processing" has a much broader definition than in the Data Protection Act: it includes every operation performed on personal data, from collection, through storage, to destruction). One of these is that "processing is necessary for compliance with a legal obligation to which the [person carrying on the processing] is subject".
5.25 Second, article 11 of the Directive requires a person who obtains personal data otherwise than from the data subject (for example, a new database manager which obtains customer information from BT) to inform the data subject (PTO customer) that it has obtained the data, and to provide him or her with various other information. This requirement would be likely to have a very severe effect on the commercial viability of any independent directory information business. However, the Directive provides an exemption from this requirement where the recording or disclosure of the personal data is expressly laid down by law. To take advantage of this exemption, Member States must provide appropriate safeguards.
5.26 Without prejudice to the precise arrangements to be introduced in UK legislation to give effect to the Directive, Chapter Six sets out Oftel's proposals for a directory information regime having regard to these provisions. The proposals are intended to protect the interests of PTO customers and to ensure that there is no substantial migration to ex-directory, while allowing new database managers to obtain and use directory information without the need to comply with unduly burdensome legal requirements.
6.1 Oftel proposes that a new regime should be established, under present legislation, under which the Secretary of State would grant new Telecommunications Act licences authorising the licensee to run a database for purposes connected with directory information services and products. The grant of such a licence, or the modification of an existing PTO licence to include equivalent provisions, would trigger modified conditions in the PTO licences regarding the disclosure of directory information (see paragraph 6.8, below). Oftel would expect BT's licence to be modified to include provisions dealing with its status as a licensed database manager at the outset. Other PTOs would be entitled to apply to the Director General for appropriate modifications to be made to their licences. The regime would treat all PTOs with the relevant licence amendment and all licensed database managers equally.
6.2 It would be possible, instead of taking this approach, simply to amend the existing PTO licences to require PTOs to provide directory information to any non-PTO on request, on terms to be determined by the Director General in the absence of agreement. The non-PTO could then run its electronic database and provide DQ services under the existing Telecommunication Services Licence (a class licence under the Telecommunications Act). The reasons why Oftel does not consider this to be a helpful way forward can be summarized as follows:
(a) The EU Data Protection Directive would be likely to require new database managers to notify and seek permission from the PTO customers from whom the directory information had originally been obtained, which could be a difficult and costly process. Our approach provides adequate protection of the privacy of PTO customer directory information without requiring database managers to go through this process.
(b) Conversely, the Director General would have no direct power to regulate the use to which directory information was put by the new database managers. This would threaten customer confidence in the protection of the privacy of information, particularly before the implementation of the Data Protection Directive. Even after implementation, however, Oftel and the Office of the Data Protection Registrar agree that it would be more appropriate (and would give PTO customers greater confidence) if Oftel regulated information use in this area.
6.3 It has been suggested to Oftel that the use of PTO customer information could be regulated through a system of copyright licences between database managers, who would not all need to be separately licensed under the Telecommunications Act. Instead, Oftel would require PTOs to make any disclosure of directory information subject to compliance by the recipient with a set of principles governing the use of the information, and to the agreement of the recipient to impose similar conditions if it made any further disclosure of the information. This approach, it is suggested, would have three principal advantages: it would not require the grant of new licences under the Telecommunications Act; it would relieve Oftel of the burden of enforcing restrictions on the use of directory information, instead placing the burden on the PTOs and database managers themselves; and it would allow such enforcement to take place through actions for breach of contract and infringement of copyright, achieving swifter results (in some circumstances) and making available tougher remedies.
6.4 Oftel has considered this approach carefully but does not propose to adopt it. There are two reasons for this. First, the interests of consumers would be protected only to the extent that they coincided with the interests of a commercial party with the right to enforce a copyright licence against a person alleged to be misusing customer information. This coincidence of interests might often occur, since PTOs and database managers would wish to protect the integrity of their databases and their own reputations, but Oftel is not prepared to rely upon it in all circumstances. Second, it does not address the problem mentioned at paragraph 6.2(a), above, and Oftel would prefer to allow new database managers to obtain and use information without the need to consult PTO customers, thus putting them on an equal footing with BT and the other PTOs. Oftel's proposals do, however, share some of the advantages of the "copyright licence" approach, in that it will be open to PTOs and database managers to bring actions for infringement of copyright or breach of contract in response to misuses of directory information by persons to whom they have disclosed information (see paragraphs 6.9 and 6.10, below). In many cases, then, it should be possible for complaints of misuse to be resolved by the industry without reference to Oftel.
6.5 The Secretary of State would be willing to consider applications for licences to run telecommunication systems in order to provide DQ services using PTO customer information, but will not do so until this consultation is complete. Of course, Oftel and the Secretary of State can only establish a framework to encourage competition in the provision of directory services and products. Whilst Oftel has received strong expressions of interest from potential database managers, there is no guarantee that a competitive market will in fact emerge.
6.6 A summary of the types of provision which Oftel considers should be included in the conditions of licences to new database managers, and which could be included in modifications to existing PTO licences, is set out in the Annex to this Document. Given the wide-ranging nature of the proposals in this Document, Oftel is not at this stage consulting informally on specific licence modifications. Oftel wishes first to have the benefit of reactions to this Document. This Chapter goes on to discuss the proposed arrangements and their rationale.
6.7 The licensing of new database managers, including existing PTOs, would result in a two tier system of operators and managers. In one tier would be PTOs, still obliged to provide DQ services to their customers. In the other tier would be database managers, some of whom may be existing PTOs. They would be licensed to provide directory services and products to the PTOs (as wholesalers) and to consumers at large. The different categories of entity in the two tiers would be subject to different, but complementary, licence obligations. PTOs which were licensed as database managers would be subject to both sets of obligations.
6.8 Oftel proposes that the condition requiring each PTO to provide its directory information to all other PTOs with which its network connects should be replaced by a more flexible condition, allowing the PTO to choose to provide its information to any licensed database manager. This would allow BT, for example, to opt to provide its directory information to itself (because it would be licensed as a database manager). Any PTO which was also a licensed database manager, however, would also have an obligation to exchange information with other such managers (see paragraph 6.10, below).
6.9 The new licence conditions requiring each PTO to provide directory information to a licensed database manager would include an obligation to grant a licence of the PTO's intellectual property rights, to the extent they exist, in the compilation of its information on terms which are broader than those currently set out in the PTO licences. It would no longer be open to PTOs to restrict the use of their information to the provision of directory information services and call routing. They would be required, however, to make provision of directory information and the intellectual property licence subject to compliance with a new Code of Practice (see paragraph 6.12, below). Restrictions would, in addition, be imposed through the Telecommunications Act licence of the database manager, which would also require the manager to abide by the new Code of Practice.
6.10 In order to ensure that each directory information database was as complete as possible, the licensed database managers would be required to exchange all PTO customer information. This, again, would require modification to the existing PTO licence of any PTO which wished to operate a database. The requirement would be imposed on new licensed database managers in the conditions of the new licence or licences to be granted by the Secretary of State. The Director General would have a power to determine the terms on which information was exchanged between the database managers (including BT) if they could not reach agreement. Oftel's provisional view is that no charge should be made for the information itself, but that each manager should be entitled to recover its incremental costs efficiently incurred in making information available. Again, the contract governing the exchange of information would require each database manager to abide by the Code of Practice.
6.11 At present, Oftel would advise the Secretary of State that each licensed database manager's licence should contain a condition requiring it, if it uses PTO customer information to provide directory services or create directory products, to provide those services or products to any person in the United Kingdom on request (although it will not be required actively to market its services or products throughout the United Kingdom). This requirement would be subject to agreement of satisfactory terms (including price) relating to the provision of the services/products. The inclusion of this condition is proposed for two reasons:
(a) Oftel considers that, in return for receiving a licence to use valuable PTO customer information, each licensed database manager should accept an obligation to make its services and products widely available, with a view to promoting competition in the provision of DQ services.
(b) Oftel wishes effectively to regulate the use of PTO customer information. In order to do so, however, Oftel must first ensure that the licensed database managers will not be prevented from or seriously inhibited in providing directory services and products by general data protection legislation, particularly after the implementation of the Data Protection Directive. This can be achieved by ensuring that any data processing necessary to provide the various services and products is "necessary for compliance with a legal obligation" and that any necessary recording and disclosure of personal data is "expressly laid down by law".
6.12 In recognition of the requirements of the Data Protection Directive, Oftel further proposes that the licence of each PTO and each new licensed database manager should contain a condition requiring the PTO or manager to comply with a new Code of Practice governing the use of PTO customer information. The inclusion of this condition is proposed for two reasons:
(a) To protect the privacy of PTO customer information and provide PTO customers with sufficient reassurance regarding the manner in which their information will be used to ensure that there will be no significant migration to ex-directory.
(b) To meet the UK's obligation under the Data Protection Directive to "provide adequate safeguards" where recording or disclosure of personal data is exempted from the requirement to notify data subjects because it is expressly laid down by law.
6.13 Although the basic objectives of the new Code will be specified in the new licence conditions, detailed provisions in the Code will allow the Director General greater flexibility to take account of future changes in technology or commercial practices. Oftel's proposal is that the Code should be subject to modification by the Director General from time to time, following consultation with PTOs and licensed database managers. Since each licence would include a condition placing an absolute obligation on the PTO or manager to comply with the Code of Practice, the Code's provisions would be intended to be as effective as if they were set out in the licences.
6.14 The new licences and licence modifications and the Code of Practice would enshrine in regulation the principles set out in Chapter Four. Many of the provisions of the Code, however, would not apply to PTOs unless they chose to be licensed as database managers.
6.15 Since PTOs may become dependent upon a new licensed database manager to enable them to provide DQ services to their customers, as required by their licences, and a new licensed database manager could very quickly build up a substantial share of the market for the provision of directory services and products, it is a matter for consideration whether any new licence should include provisions dealing with anti-competitive behaviour on the part of the licensed database manager.
6.16 Oftel has also considered the possibility of including conditions which deal with the quality of directory services and products to be provided. Oftel has reached the preliminary conclusion, however, that, provided adequate safeguards are introduced to prevent the misuse of information by the new database managers, competitive pressures should be relied upon to ensure that high quality services and products are provided. It will, after all, be necessary for any new database manager to compete with the existing services and products provided by BT.
6.17 It has been suggested to Oftel that there may be some technical difficulties in implementing Oftel's proposals, particularly where a single person is a customer of more than one PTO and has strong preferences regarding the consistent arrangement of his or her entries in directory products. Oftel does not expect any such technical difficulties to be fundamental, and expects them to be addressed in the process of agreeing (or, failing agreement, determining) the terms of the contracts under which PTOs and licensed database managers exchange PTO customer information.
Oftel would welcome comments on any aspect of its proposals. In particular, however, comments on the following matters would be most welcome:
A.1 A provision requiring the PTO to provide any of its customers, on request, with directory information services. This is already included in the PTO licences (for example, at Condition 3.1(a) of BT's licence) and would not require modification.
A.2 A provision requiring the PTO to provide any person in the UK, on written request, with such directories as the operator publishes and makes available to its customers generally in order to facilitate use of its network. This condition is already included in the PTO licences (for example, at Condition 3.1(b) of BT's licence) and would not require modification.
A.3 A provision requiring the PTO to include in its directory information services information about the customers of other PTOs with whose networks its network connects, to the extent that such information is made available to it. This condition is essentially already in place. A minor modification would be necessary to Condition 3.2(a) of BT's licence and the equivalent conditions in other PTO licences.
A.4 A provision requiring the PTO to provide directory information about its customers to at least one licensed database manager. This requirement would not apply if (and for so long as) the PTO was itself a licensed database manager. It would not, therefore, apply to BT from the outset (but BT would be subject to the requirement at paragraph 7, below).
A.5 Provisions concerning the terms on which the PTO provides information to licensed database managers. It would prohibit the PTO from imposing conditions on the use of its information by the manager or managers (other than compliance with the new Code of Practice) and provide for the charge (if any) for providing the information to be determined by the Director General if not agreed between the parties.
A.6 A provision requiring the operator/manager to comply with a Code of Practice regarding the use of PTO customer information. The Code would be subject to amendment by the Director General following consultation. There would be a reasonable opportunity to comment on any proposed amendment and the Director General would be required to state his reasons for making the amendment.
A.7 A provision requiring the manager to provide all PTO customer information which it has obtained by virtue of its status as a licensed database manager to any other licensed database manager in electronic form on request.
A.8 Provisions concerning the terms on which the manager provides PTO customer information to other licensed database managers, including a requirement to put procedures in place to ensure that all PTO customer information is promptly passed on to any other licensed database manager which has requested information in relation to the customers of a given PTO. The manager would also be prohibited from imposing conditions on the use of its information by the other manager or managers (other than compliance with the new Code of Practice). Provisions for the determination of the charge (if any) for providing the information by the Director General if not agreed between the parties would also be included.
A.9 A provision requiring the manager, on the written request of any person in the UK and subject to agreement of terms (including price), to supply to that person any directory service or product that the manager makes available to any person.