Chapter 2 Principles and procedures for trials
Introduction
1.1 Following the liberalisation of the UK telecommunications market, business and residential consumers have benefited from innovative services facilitated by developments in technology. The advances in new high speed digital networks and new applications from existing and developing communications and computer technology have resulted in significant improvements to quality network performance and the related customer service support systems. This pace of innovation has been accelerated by new Public Telecommunications Operators (PTOs) and Independent Service Providers (ISPs) seeking to compete on a range of services and tariff offerings.
1.2 Manufacturers and service providers generally trial new products and services in order to establish their technical soundness and commercial prospects. Telecommunications network operators do not differ in this respect. They too need to be able to test that new technologies and services offered to customers are viable and work effectively. Often this can be achieved through laboratory testing but, in many cases, testing in operational mode will be necessary to give a sufficient degree of confidence in advance of launch.
Why Guidelines for Trials?
1.3 Trials necessarily involve offering to a trial group, terms or products not available generally, and hence to some extent, outside certain licence obligations such as those governing discrimination. They may also offer the scope for gaining competitive advantage by, for example, signing up customers in advance of full commercial roll out of the service.
1.4 Since the ending of the BT and Mercury Communications duopoly, Oftel has received a number of representations from BT and Cable & Wireless Communications (CWC)s’ competitors about the possible anti-competitive effects of trials undertaken by BT and CWC (then Mercury Communications). For these reasons, Oftel has developed a methodology for satisfying itself that trials by certain PTOs do indeed fall within the criteria of testing the commercial and technical viability of a product; and that they do not confer unfair competitive advantage.
1.5 In 1996, Oftel published a consultative document on trials entitled A Review of the Trials Provision in BT’s Licence. The precise scope of the relevant licence provisions had until then been the subject of some uncertainty. There was a need to clarify the conditions under which trials by BT in particular, would be seen as compatible with its other licence obligations. For example, under its licence, BT is obliged to provide basic telecommunications services to all customers within the UK, irrespective of their geographical location (The Universal Service Obligation).
1.6 Following publication of the consultative document and discussion with the telecommunications industry, it was decided that operators with market power would be expected to pre-notify all trials at least one month in advance of commencement to the Director General, setting out details of the trial methodology and strategy in order that Oftel could determine whether there were compliance issues to be examined from both a commercial and technical perspective (refer to paragraph 1.11 below).
Licence obligations
1.7 In the case of BT, the operator is under an obligation to notify a trial service to Oftel where Condition 16 of its licence applies (Publication of Charges, Terms and Conditions to be Applied). Condition 17 (Prohibition on Undue Preference and Undue Discrimination) of its licence also covers trials. Oftel has reviewed the operation of the relevant part of the “Exceptions and Limitations Condition” (Condition 53.7 of BT’s licence) relating to trials and has agreed, subject to BT adopting and being in compliance with an agreed procedure, that a specific licence condition for trials would not be necessary. In the light of this, BT has agreed to implement agreed trial procedures in its product development and introduction process.
1.8 Likewise, Kingston Communications is also subject to an obligation to notify a trial service where Condition 15 of its licence applies (Publication of Charges, Terms and Conditions to be Applied). Condition 16 of its licence (Prohibition on Undue Preference and Undue Discrimination) will also apply to trials.
1.9 Other fixed link PTOs are covered by the same rules in the market where they are determined to be Well Established (ie effectively where they have market power). Currently, the only operator determined to be Well Established is CWC, and only in respect of certain international markets. They are therefore required to publish their prices and not to discriminate unduly with respect to trials in these international markets (or trials where such international services are bundled together with other services).
1.10 In the mobile telephony market, the PTOs have obligations to publish prices and not to unduly discriminate with respect to wholesale services. (Vodafone and Cellnet also have these obligations with respect to retail services, but as they do not supply such services directly, these obligations are not applied in practice at the retail level). In the mobile licences, the price publication and undue discrimination are not linked with the service obligations, so the trial exclusion under the “Exceptions and Limitations Condition” does not have any effect, ie they do have to publish prices and must not unduly discriminate in relation to trials.
1.11 The trial condition, and therefore these guidelines, will only apply where an operator has become well established. Where an operator is considered to be well established in some markets, the price publication and non discrimination conditions and guidelines will only apply to the operator in those markets.
Principles and procedures for trials
2.1 Where the publication and non discrimination conditions apply to a licensee’s service, these guidelines apply. The licensee shall follow the procedure below, to enable Oftel to consider whether a trial is consistent with a licensee’s licence conditions:
2.2 Notice:
a) The licensee must give at least 28 days written notice to the Director General before the trial service comes into effect;
b) If the Director General raises an objection to the introduction of the notified trial, the trial may be stopped from proceeding.
2.3 Information:
The licensee shall supply the following information to Oftel:
i) a full description of the trial service;
ii) the customer base expected to participate in the trial and the reason for their selection;
iii) the location of the trial sites, and why these have been chosen;
iv) the duration of the trial;
v) any previous trials of a similar service;
vi) the reasons for the trial, specifying whether it is for the purpose of evaluating technical feasibility or commercial prospects;
vii) the effect on competition (potential markets which may be affected);
viii) where appropriate, the arrangements envisaged for interconnection of other operators or involvement of service providers during the trial;
ix) the information that is being provided to customers;
x) the charges being made (to include any charges for rental of equipment during the course of the trial, the right to purchase ‘used’ equipment at the end of the trial, as well as charges for the services being trialed);
xi) any equipment being lent to customers;
xii) details of how the progress of the trial will be monitored and the criteria by which the success of the trial will be evaluated.
Applicable only to BT trials:
xiii) the interfaces to be used in the trial; where BT is using new or altered interfaces;
xiv) information to demonstrate that no new/changed SB service is needed to provide an input to the trialed SSB service; in such a case, the Director General is not likely to take action to stop such a trial.
2.4 The Director General has the right to ask for fuller information which he would expect to be available within seven days.
2.5 What constitutes a Trial?
In order to benefit from the modification to a licensee’s obligation under its licence in respect of trialed services (eg Condition 53.7 of BT’s licence), the trial service should be materially different from an existing or previous service, for example:
(a) i) there is a substantive change in network equipment or software providing a material enhancement to offered services;
ii) there is substantive change in operational processes necessary to support the provision of material enhancement of offered services;
iii) new technology is being developed for the speedier or more efficient delivery of a service;
iv) there is a significant alteration of the tariff structure of existing services; the Director General will consider this on a case by case basis. The Director General is only likely to accept such trialing for commercial feasibility where the tariff structure is substantially changed.
(b) The duration of the trial should not exceed 6 months, unless the licensee provides compelling justification for an extension.
(c) If a service is to be launched using a number of different service and network platforms, the trial must take place using all those platforms simultaneously, unless the Director General consents otherwise.
(d) An operator must pre-notify the trialing of an affinity deal, ie where a telecommunications operator/supplier makes an arrangement for its customers to receive benefits from another company whose main business is not within any telecommunications market. Affinity deals may be trialed in a selected area to check the commercial viability in advance of national launch. However, the trial conditions for commercial testing would be carefully analysed against the operator’s licence obligations and the financial arrangements between the two parties forming the Affinity Deal (Reference: Guidelines for Assessing Affinity Deals – July 1997).
(e) Customer Selection: typically, a trial should be limited to a small number of customers who should be selected on objective grounds. The Director General will take account of the potential anti-competitive effect of targeting specific customer groups, or offering existing customers a special service, as a loyalty bonus or as a disincentive to change operator. The Director General will take into account the competitive implications of proposed trials in deciding whether or not a trial constitutes undue discrimination or preference, or contravenes other licence conditions such as the Fair Trading Condition.
(f) Interconnection and Interoperability of Services: interconnection with other licensed operators should be made available where the trial of a new service incorporates, for example, number translation services. Where a trial is such that customers of other operators are likely to seek to obtain the benefits of the same service, facilities for interconnection should be made available eg where the opening of a national number group is required or where the number is widely disseminated and the participants require the customers of other operators to have access. To minimise the chances of an operator with market power either deliberately raising interconnection costs or, in the case of interoperability, imposing less than optimal solutions on the industry as a whole, Oftel would expect that no unfair advantage would be accrued in this respect.
There may not be the commercial incentives to offer interoperability of services with other smaller operators where there is actual or the potential for competition between these operators. Oftel therefore expects such operators to provide for the possibility of simultaneous launch of the interconnection for Co-operative Network Services with the retail launch. Where interest from other operators is apparent, it would be desirable to include them in the trial of such a service, in order to ensure a successful service launch. However, Oftel does not wish to suppress innovations which would emerge as part of the competitive process by seeking to impose standard solutions. Therefore, Oftel would encourage interoperability between networks in cases where it could be proven that this would widen the addressable market for services and, at the same time, have the minimum impact on the motivation to innovate.
Oftel’s policy on interconnection and interoperability was set out in the Statement, Interconnection and Interoperability: A Framework for Competing Networks published in April 1997.
2.6 The Director General may take enforcement action in relation to the trial, on immediate notice, if he is made aware of facts or circumstances which were not notified during the 28 days notice period, or if the licence holder fails to comply with a condition imposed by him before the trial is allowed to start.
2.7 Notification of Trial Tariffs and Terms and Conditions
The terms and conditions of the trialed service and related tariffs must be notified to the Director in advance of the commencement of the trial. If the licensee is subject to an obligation to publish its prices, it must get the Director’s prior consent to non-publication of prices in each case. If the trialed service becomes a commercial service, following the cessation of the trial period, subscribers to the service must be advised of the commercial tariff in advance of the launch of the service.
2.8 Publication of Commercial Tariffs
Prior to the launch of any commercial service originating from a trial, BT must give 28 days’ advance notice of any new tariff as set out in licence Condition 16 (Publication of Charges, Terms and Conditions to be applied).
Other licensees with an obligation to publish tariffs must publicise the tariff before it becomes a generally available commercial tariff, in accordance with their licence conditions.
Conclusion
Testing with a limited group can help to identify and remove technical problems related to the introduction of new technologies and support systems before a service is made universally available. In this way, network operators and consumers can have reasonable confidence that new services work reliably and efficiently. The Director General does not wish to inhibit technical innovation and considers that a facility to permit trials for the purposes of technical feasibility should remain.
Where commercial prospects of a new service need to be evaluated separately from technical viability, the purpose of the trial is to enable the commercial risks inherent in the launch of a full national service to be reduced even where the new service is considered to be technically sound. To the extent that this encourages innovation, this too can provide long term benefits to the consumer.
These Guidelines are not legally binding. As the Director General cannot fetter his discretion in advance, he therefore retains the ability to depart from the Guidelines where circumstances warrant this. However, he would normally expect to follow the Guidelines and to give his reasons if he does not.
The Guidelines will be amended from time to time as necessary in the light of experience of their operation and after consultation with interested parties.
26 November 1997