1.1 Two important events or developments have taken place within the last two years which bear on the regulatory regime for mobile telephony. First, the Director General made a statement on 17 May 1994 announcing measures to eliminate unfair cross-subsidies to mobile service provision businesses owned by cellular telephone networks or their parent groups ("tied service providers", or "TSPs"), and prevent such cross-subsidies arising in the future. This followed an investigation of complaints by several mobile service providers which showed such cross-subsidies to have been provided. The measures required TSPs to comply with specified financial criteria, designed to ensure that the discounted airtime earnings expected from new subscribers are sufficient to cover the cost of acquiring those subscribers and yield a reasonable return. Monitoring of the TSPs has continued since that time. Second, in February 1996 Oftel published a Consultative Document, Promoting Competition in Services over Telecommunication Networks ("Promoting Competition in Services"). This put forward a number of proposals designed to encourage competition in the provision of services over fixed networks. 1 Two important events or developments have taken place within the last two years which bear on the regulatory regime for mobile telephony. First, the Director General made a statement on 17 May 1994 announcing measures to eliminate unfair cross-subsidies to mobile service provision businesses owned by cellular telephone networks or their parent groups ("tied service providers", or "TSPs"), and prevent such cross-subsidies arising in the future. This followed an investigation of complaints by several mobile service providers which showed such cross-subsidies to have been provided. The measures required TSPs to comply with specified financial criteria, designed to ensure that the discounted airtime earnings expected from new subscribers are sufficient to cover the cost of acquiring those subscribers and yield a reasonable return. Monitoring of the TSPs has continued since that time. Second, in February 1996 Oftel published a Consultative Document,
1.2 Against that background, the present Document:
(a) sets out the background and reviews developments in the mobile market since May 1994 (Section 2):
(b) examines whether the regulatory regime governing the relationship of the mobile network operators and businesses retailing their airtime ("Service Providers") is still pertinent to current market needs and conditions, or may need modification (Section 3). This section concludes:
(i) that the prohibition of undue preference and undue discrimination; the obligation to provide services to service providers for resale; the obligation to publish charges, terms and conditions; accounting separation; and the obligation to connect the customers of a service provider should continue for the time being to apply to all mobile network operators. However, operators should be allowed greater freedom to exercise "through-branding", and to control how their brands are presented to the public;
(ii) that, in the case of mobile network operators without significant market power, cross-subsidies to TSPs are not unfair;
(iii) that monitoring of compliance by Mercury One-2-One and Orange with the Oftel criteria for tied service provision businesses should be suspended during the Consultation period arising from this Document;
(iv) that the regulatory regime for mobile service provision should be kept under review, with the general objective of withdrawing, as soon as the development of network competition allows, from detailed control of how mobile services are distributed to the public and relying instead on general provisions for the control of anti-competitive behaviour and abuse of a dominant position.
(c) reviews whether, for organisations continuing to be caught by the prohibition on unfair cross-subsidy, the financial criteria and monitoring formula for tied service providers introduced in the May 1994 measures remain the best way of enforcing such rules, concluding that the formula should continue, for the time being, to apply (Section 4);
(d) examines whether, assuming that the formula is retained, there is a case for modifying individual components or extending it to cover market practices or financial flows at present excluded (Section 5 and Annex A). Various proposals are made;
(e) reviews how the unfair cross-subsidy rules and other fair trading rules should be applied to the provision of enhanced services by mobile networks or businesses within their Groups, concluding that these services should be treated on the same basis as airtime retailing (Section 6).
1.3 In conducting this review Oftel has been guided by its overall goal of seeking "the best deal for the customer in terms of quality, choice and value for money", and by the objectives it is pursuing to help deliver that goal. In particular, the regime has been reviewed against the objectives of promoting (i) services competition (which means ensuring that the regulatory framework encourages the expansion of the range and diversity of retail services offered to customers by a number of suppliers), and (ii) fair trading (ie ensuring that abuses of market dominance are propoerly controlled, and that anti-competitive practices are deterred). Oftel has also had regard to the desirability of keeping regulatory intervention and prescriptive rules to the minimum, and withdrawing from detailed regulation wherever possible.