TELECOMMUNICATIONS ACT 1984
PROVISIONAL ORDER UNDER SECTION 16
WHEREAS:
1) On 22nd June 1984, the Secretary of State granted a licence ("the Licence") to British Telecommunications under section 7 of the Telecommunications Act 1984 ("the Act") for the running of the telecommunications systems specified in Annex A to the Licence ("the Applicable Systems");
2) By virtue of section 109 of, and paragraph 20 of Schedule 5 to, the Act, the Licence has effect as if granted to British Telecommunications plc ("the Licensee")
3) Condition 1 of the Licence places on the Licensee an obligation to provide certain classes of telecommunication services. The condition states (inter alia):
1.1 The Licensee shall provide to any person who requests the provision of such services at any place in the Licensed Area:
(a) voice telephony services; and
(b) other telecommunication services consisting in the conveyance of Messages;
by means of the Applicable Systems ……. and the Licensee shall ensure that Applicable Systems are installed, kept installed and run for those purposes.
4) Condition 17 of the Licence prohibits the exercise of undue discrimination and/or the showing of undue preference on the part of the Licensee. In particular, paragraph 17.1 of the Licence states (inter alia):
17.1 The Licensee shall not (whether in respect of the charges or other terms or conditions applied or otherwise) show undue preference to, or exercise undue discrimination against particular persons or persons of any class or description ….. as respects:
(a) the provision by means of any of the Applicable Systems of any telecommunications service ….. in accordance with an obligation imposed by or under this Licence;
[or]
(aa) the provision of any Relevant Service
5) Further, paragraph 17.2 of the Licence states:
17.2 The Licensee may be deemed to have shown such undue preference or to have exercised such undue discrimination if it unfairly favours to a material extent a business carried on by it in relation to the doing of any of the things mentioned in paragraph 17.1 so as to place at a significant competitive disadvantage persons competing with that business.
6) For the purposes of the Licence "persons" means either natural or legal persons.
7) Since 19 October 1998 the Licensee has offered to supply a Service known as "Calls & Access" ("the Service") to service providers. The Service allows a service provider to contract directly with the end user for the provision of the end user’s telephone line and of the ability to make calls over those lines. When a line is provided by the Licensee to a service provider the contractual relationship between the end user and the Licensee is terminated. The Licensee provides the line to the service provider who then provides it to the end user. Insofar as the contract provides for this, the Licensee is contractually responsible to the service provider for the repair and maintenance of the line and for the quality of the call service as all calls are made utilising the Licensee’s infrastructure. The service provider provides the point of direct contact for the end user who receives a telephone bill from the service provider. In addition to simple re-selling of the Licensee’s services, service providers are able to "bolt on" additional value-added services. Such services may include monthly billing, automatic routing of national and international call via alternative operators to secure lower call costs and the provision of an internet service offering low cost or free access call charges.
8) Since the introduction of the Service the Director has received numerous complaints from two service providers, NextCall Telecom plc ("NextCall") and Localtel Limited ("Localtel") regarding the Licensee’s alleged failure to take appropriate measures to ensure that service providers can take over contractual responsibility for serving end users from the Licensee without end users suffering any disruption to their service. Many individual consumers have also complained to Oftel about such disruption.
9) In particular, it appears to the Director that a significant number of end users have been completely disconnected from any telecommunication service at the time their service was transferred from the Licensee to their chosen service provider. As this transfer is a procedure which does not require any physical alteration to any of the equipment involved in provision of the end user’s service, it appears to the Director there should be no disruption to the end user’s service during the transfer process.
10) Oftel wrote to the Licensee on 14 July 1999 asking the Licensee to provide an assurance that the transfer process would be carried out by the Licensee in such a way as not to cause periods of involuntary disconnection. On 16 July 1999 the Licensee wrote to Oftel acknowledging disconnections had occurred and blamed this on a faulty computer programme in the Licensee’s premises which separated the "cease service" order, from the "commence Calls and Access service" order (the "stop-start process") meaning that the former could be implemented without the latter taking place. The Licensee stated that the problem had now been resolved ("we now ensure that there is never a gap of more than 30 minutes between the stop and start orders unless the Service Provider requests it") and that it was "not aware of any new problems affecting particular customers regarding possible loss of service."
11) However following the Licensee’s reply Localtel made further complaints to Oftel that disconnections were occurring and supplied 150 examples where it alleged that this had taken place. Oftel wrote to the Licensee on 9 August 1999 asking for it to investigate these allegations, to confirm that disconnections had taken place, and to explain their cause. The Licensee replied on 11 August 1999 confirming that 53 out of the 150 alleged disconnections had taken place. Of these 53 disconnections the Licensee stated that 15 were due to the previously identified computer error, while 18 were due to ‘process failure’ on the Licensee’s part and 20 were due to ‘input errors’ on the Licensee’s part. The information provided by the Licensee also confirmed that the 53 disconnections occurred during May, June, July and August 1999. Several customers were disconnected for as long as 27 or 28 days, and one customer was disconnected for 33 days over the period 29 June to 1 August 1999 inclusive.
12) Further to the immediately apparent effect of disconnections, the Licensee’s failure to synchronise properly its stop-start process can have major ongoing effects upon the billing process. These effects manifest themselves in two main ways:
i) when an end user moves his service from the Licensee to a service provider, disruption to the stop-start process has resulted in the service provider being billed for service from the Licensee without being provided with the additional data necessary for the service provider to bill the individual end user in accordance with its contractual and statutory obligations;
ii) when an end user moves service back to the Licensee from a service provider, disruption to the stop-start process has resulted in bills being sent to the service provider for a line which is no longer administered by it. The end user can then be billed twice over for his telephone service, once by the service provider and once by the Licensee.
13) On 20 August 1999, following specific complaints raised by Localtel, the Director required the Licensee to provide, inter alia, an explanation of apparent billing errors. By a letter from the Licensee to Oftel dated 24 August 1999, the Licensee stated:
"When it is proposed that a line be transferred back to BT, a "stop" command is executed to stop the Localtel service and a parallel "start" command is executed for the transfer back to BT. The start command automatically starts the retail billing process. However, at the moment in the case of Calls and Access there needs to be a manual intervention in the process to stop the feed of Call Data records (CDRs) to the Service provider. In the cases brought to light so far … this activity was not carried out………. We are now urgently undertaking a search of the data file so as to identify those customers on the file who may be affected and take the appropriate corrective action."
14) Subsequently, in the course of a telephone conversation between the Licensee and Oftel on 25 August 1999 and further in a meeting on the same day between the Licensee and Oftel, the Licensee stated that the search of the data file had revealed:
i) in relation to transfers from the Licensee to all service providers in the period from 26 June to 20 August 1999, a significant number, amounting to approximately 10% of all such transfers, had resulted in no customer call data records data being passed to the service provider concerned, thus preventing the service provider from billing the end user; and
ii) in relation to transfers to the Licensee from service providers during the same period there had been duplication of billing resulting in some end users being billed twice for the same service. The search revealed that this was a potential problem in approximately 30% of all such transfers.
15) It appears to the Director that by:
i) failing to take all practicable steps to ensure that end users do not suffer any disruption to their telephone services as a result of providing the Service to service providers; and
ii) failing to take all practicable steps to ensure that service providers are provided with sufficient and accurate billing data such as would allow them to bill end users in an efficient, timeous and accurate manner,
the Licensee has shown undue preference to its own retail business contrary to Condition 17 of the Licence.
16) It appears to the Director that once a service provider has contracted with an end user to provide services, on the basis of the Service, the end user will hold the service provider responsible for subsequent disruption to their service or difficulties with their billing process, even if the actual responsibility for the such disruption or difficulties lies with the Licensee. Such disruption therefore has a direct adverse effect on the reputation of service providers. This in turn may encourage end users affected by such disruption to return to the Licensee, deter end users who might otherwise have contemplated switching from the Licensee to other service providers from doing so,, and deter other service providers which might otherwise have sought to acquire the Service in order to compete with the Licensee from doing so.
17) Further, it appears to the Director that failure to provide sufficient and accurate billing data to a service provider thereby preventing that service provider from being able to obtain revenue from its customers would have potentially serious effects upon a service provider. These effects are all the more damaging having regard to the fact that service providers are relatively new entrants into the market having to build up customer bases and revenues from zero.
18) It appears to the Director therefore that the Licensee’s failure to take the steps referred to at (15) above has a material actual or potential effect on competition in the provision of telecommunication services to end users in the UK.
19) It appears to the Director that the Licensee is likely again to contravene Condition 17 in the manner described above. In this regard the Director has noted that, while the Licensee had originally identified one problem which was causing the disconnections errors in the stop-start process leading to disconnections (and stated to Oftel it was not aware of any others), it later identified further reasons, within its control, for the apparent ongoing errors in the stop-start process. In addition, it appears that, in spite of knowledge of disconnections being caused by the switch to service providers from as early as May 1998 (if not earlier) the licensee Licensee has not yet conducted a full audit end-to-end review of its systems and processes with a view to identifying all such potential problems within its control, and taking appropriate remedial steps. The Director is not therefore satisfied that the Licensee has yet identified all reasons for the disconnections or that it has taken all practicable measures to ensure that further such disconnections and process errors will not take place.
20) The Director has had regard to the duties imposed on him by section 3(2) of the Act to exercise his functions in the manner which he considers is best calculated, inter alia, to "promote the interests of consumers" of telecommunications services and to "maintain and promote effective competition between persons engaged in commercial activities connected with telecommunications".
21) Having regard to all the relevant matters arising from his examination of the complaints referred to above and, in particular, to the fact that service providers and end users are likely to sustain loss or damage in consequence of anything which, in contravention of Condition 17 of the Licence, is done or is likely to be done, or omitted to be done, before a Final Order is made, it appears to the Director to be requisite that a Provisional Order be made on the following terms.
THEREFORE THE DIRECTOR IN EXERCISE OF THE POWERS CONFERRED ON HIM BY SECTION 16(2) AND 16(6) OF THE ACT MAKES THE FOLLOWING PROVISIONAL ORDER:-
(1) The Licensee shall take all reasonably practicable steps to ensure that, with effect from 6 September 1999 the stop-start process and all associated procedures related to the service are carried out so as to ensure that:
i) , no end user suffers any interruption in its services as a result of the end user seeking to acquire services from a service provider or seeking to resume service from the Licensee;. and that
ii) service providers are provided with such accurate and timeous data such as to allow service providers to bill individual end users for telephony services.
(2) The Licensee shall, by 5pm on 6 September 1999, inform Oftel of the steps it has taken to achieve each the objective specified in (1) above, and give Oftel a detailed explanation of how each step contributes to the achievement of that objective.
(3) The Licensee shall, by 5pm on 24 September 1999 undertake a full audit review and risk analysis of the order handling, transfer of service and provision of service procedures in place with service providers in respect of the Service, to ensure by 5pm on 23 October 1999 that in all respects the provision of the Service does not cause or contribute to any breach by the Licensee of the Licence.
This Provisional Order shall take effect on 27 August 1999. If not previously confirmed by the Director under section 16(4) of the Act or revoked, it shall cease to have effect on 26 October 1999.
In this Provisional Order words or expressions used have, except where the context otherwise requires, the same meaning as in the Act or the Licence.
DAVID ALBERT EDMONDS
DIRECTOR GENERAL OF TELECOMMUNICATIONS
26 August 1999