Rights and obligations to interconnect under the EC Interconnection Directive

April 1999

Summary

• From 30^th June 1999, when the provisions in the Licensing Directive which affect existing licences will be fully implemented in the UK, new rules will govern who is entitled to inclusion in the list of operators with rights and obligations to interconnect, known as the Annex 2 list;

• There will be amendments to the current rules on inclusion in Annex 2, which were put in place when the Interconnection Directive was implemented at the end of December 1997;

• Some operators are entitled to rights and obligations to interconnect for the first time. Others who previously had only rights, now also have obligations;

• Some operators could lose their interconnection rights and obligations if it is established that they do not in practice meet the Annex 2 criteria;

• It is no longer necessary to hold an individual licence to have interconnection rights;

• It is no longer necessary for an operator to build their own infrastructure: inclusion in Annex 2 is open to operators whose networks are made up of leased infrastructure;

• Inclusion in Annex 2 depends on what an operator actually does in practice. It does not depend on the activities described in an operator’s licence or service authorisation.

  

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This statement sets out the types of operator who will be able to claim rights (and have obligations) to interconnect from June 1999. It describes the criteria for inclusion in Annex 2, and sets out the detailed information which an operator will have to produce to justify inclusion in the Annex 2 list. The definitive Annex 2 list will be held in the Oftel library and concurrently published on the Oftel website.

Part 1 of the statement sets out Oftel’s current policy on granting rights and obligations to interconnect, including changes which will take effect in June 1999. This is intended to be a guide for existing and prospective operators which helps them to establish whether or not they are eligible for interconnection rights and obligations and if so, what that means in practice.

Part 2 of the statement responds to the main points raised in the consultation in Spring 1998. Some important policy issues were raised in the consultation. These are summarised with Oftel’s responses. Many of the issues which arose have also been considered by DTI and Oftel as part of the Licensing Directive implementation programme.

Part 3 of the statement contains a practical guide to having Annex 2 status, including a standard application form which details what an operator has to establish to be included in the list. This part also deals with the process for removing from the Annex 2 list those operators who do not meet the criteria in place from June 1999.

Applications for inclusion in the Annex 2 list may be made at any time, but those eligible under the new rules described below will not have enforceable rights until the relevant regulations which implement the Licensing Directive take effect.

1.1 Since January 1998, rules governing the grant of rights and obligations to interconnect have been largely governed by EC legislation. The Interconnection Directive, implemented in the UK in December 1997, set a framework for who should have these rights, but leaves a considerable degree of flexibility to individual member states to give practical effect to the principles set out in the Directive. The principles in the Directive are given effect in the UK by the Telecommunications (Interconnection) Regulations 1997 No. 2931 which were adopted in the UK in December 1997. Annex 2 is transposed by Schedule 2 of those regulations. At present, Schedule 2 reflects the rules for rights and obligations to interconnect as they were in January 1998. Schedule 2 will be amended to reflect changes to Oftel’s policy as set out below, to bring it into line with the relevant provisions of the Licensing Directive.

1.2 The EC interconnection rules are designed to ensure end-to-end interoperability of networks, equality of access and universality of service. In practice, this means ensuring that customers to whom access is provided by one operator, can contact customers to whom access is provided by a different operator. Thus, regardless of who provides the facilities which customers elect to use to access telecoms services, they can communicate with one another.

1.3 The EC rules on who should interconnect are set out in Article 4(1) and Annex 2 of the Interconnection Directive. Annex 2 describes the categories of operator which are deemed to have rights and obligations to interconnect with each other. Article 4(1) defines these rights and obligations as being to negotiate interconnect with each other for the provision of publicly available telecommunications services. Additional obligations are imposed on operators with significant market power (SMP) by articles 4(2), 6, 7, and 8.

1.4 Thus operators who have rights and obligations to interconnect because they meet the criteria described in Annex 2 of the Directive, have rights to negotiate interconnection with any other operator included in Annex 2, and an obligation to negotiate interconnection where it is sought by another operator in Annex 2. This is so regardless of the respective market positions of the operators concerned. The ICD emphasises the importance of commercial negotiation. Where the operators are unable to reach agreement on the terms, conditions or charges for interconnection between them, Oftel has powers under ICD Article 9(5) (given effect in the UK by Regulation 6 of the Interconnection Regulations) to intervene to settle disputes, to require specified conditions to be observed, to specify issues to be covered in interconnection agreements, or to set time limits for conclusion of negotiations.

1.5 The Directive describes in more detail the obligations of operators who have SMP. According to Article 7(3), fixed network SMP operators are required to offer interconnection according to the terms of a ‘reference interconnection offer’. Charges for interconnection with the fixed networks of SMP operators and mobile operators who have SMP on the national market for interconnection, are required to be cost orientated; terms and conditions for interconnection with any SMP network must be transparent and non-discriminatory.

1.6 In the UK, because an operator’s interconnection rights have traditionally been dependent on the type of authorisation under which it operates, licensing rules are relevant to policy and procedures for granting interconnection rights. Throughout the EU, licensing policy is now governed by the provisions of the EC Licensing Directive. Thus member state rules on who gets interconnection rights must comply with the provisions of the Licensing Directive as well as the Interconnection Directive.

1.7 The Licensing Directive requires Member State rules on licensing to be proportionate, non-discriminatory, objective and transparent. This means that, for licensing purposes, like operators are expected to be treated alike and differences in the way they are treated must be objectively justified.

1.8 Prior to 1997, interconnection in the UK depended on an operator having relevant connectable system (RCS) status. RCS status was in principle dependent on an operator investing in infrastructure. For the purposes of implementing the ICD, DTI and Oftel took the view that this condition for obtaining interconnection rights was not incompatible with the provisions in the ICD. Thus on 1^st January 1998 when the ICD was given effect in the UK, those operators who were eligible for RCS status under the domestic rules continued to be eligible and those operators who were not eligible for RCS status gained no new rights. There was one significant change – because the Licensing Directive favours a system of class authorisations rather than individual licences, it became possible in principle for operators who satisfied the Annex 2 criteria to acquire interconnection rights and obligations without holding an individual licence.

1.9 However, it was not clear that RCS rules – or, more accurately, the way in which those rules have historically been applied – comply with the requirements of the Licensing Directive. This is largely because the way the RCS rules are defined mean that in practice all operators who have an individual licence can claim interconnection rights. This can create inconsistencies and competitive distortions without objective justification.

1.10 Changes to the RCS framework to bring UK provisions on the grant of interconnection rights into line with EC licensing rules, were proposed in a DTI consultative document on implementation of the Interconnection Directive, published in October 1997. However, further clarification was sought of the justification for changes in the UK rules and of the processes for applying them. This was provided in an Oftel consultative document on rights and obligations to interconnect, which was published in March 1998. In December 1998, the DTI signalled in the consultative document accompanying the new draft standard PTO licence, that it intended to implement the requirements of the Interconnection and Licensing Directives on the basis of the March 1998 consultative document. Although rules which comply with the Interconnection Directive are already in place, these will be modified to bring them into line with the Licensing Directive when the relevant provisions of the Licensing Directive are implemented in June this year.

1.11 Oftel and DTI are implementing the EC provisions on rights and obligations to interconnect in a way which avoids a step change or a significant reduction in interconnection rights. Implementation reflects, as closely as possible, pre-existing UK rules, altering the framework by the minimum required to satisfy the provisions of the Licensing Directive. Under the new rules, most operators who already have interconnection rights will keep them, although some will acquire obligations to interconnect for the first time. In addition, some operators who were not previously eligible for interconnection, for example because they were operating under a class licence, will become eligible.

1.12 Since January 1998, it has not been necessary for an operator to hold an individual licence in order to have interconnection rights. Operators who are authorised by the Telecoms Services Licence (TSL) for example, who meet the relevant criteria, are likely to be eligible for inclusion in the Annex 2 list. No operator has either rights or obligations to interconnect unless or until they are deemed by Oftel to be included in the Annex 2 list, which will be regularly updated. Inclusion in the Annex 2 list, as amended from time to time, constitutes notice of an operator’s right and obligation to negotiate interconnection.

1.13 Inclusion in the Annex 2 list depends on what an operator is actually doing in practice (subject to the need for transitional arrangements) and not on what they are authorised by licensing provisions to do. Oftel will consider new applications for inclusion in the Annex 2 list according to the processes described in part 3 of this document.

1.14 To be included in the Annex 2 list, all operators must satisfy all of the following threshold criteria:

• They must be authorised to provide public telecommunications networks or publicly available telecommunications services; and
• They must be providing publicly available network services (bearer services); and
• They must be running a system with which to interconnect to others, which will comprise transmission and, where appropriate, switching.

1.15 In the UK, the Telecommunications Services Licence (TSL) is a general authorisation to provide services. It is a universal qualification. It is therefore not necessary to hold an individual licence to satisfy this criterion.

1.16 The EC rules do not provide a definition of what constitutes ‘publicly available’ telecommunications services (PATS). Oftel considers that, for the purposes of EC rules, a PATS service is one which is available to any user who is prepared to pay the price offered and abide by any applicable terms and conditions. A PATS service may be of interest only to a particular type of end-user, as long as any end-user who could use the service is eligible to do so. Services available only to closed user groups or on an individual contract basis cannot be said to be publicly available.

1.17 In the March document, Oftel offered a definition of bearer capabilities. The source of this definition is discussed in Part 2 below. In the UK context, bearer capabilities are better known as network services – as opposed to enhanced services. At their simplest, network services consist of a basic conveyance service. The services which are comprised in BT’s ‘systems business’ (SB) are network services, whereas the services in BT’s supplemental services business (SSB) are not. As far as data services are concerned, to the extent that they can be aligned with the ‘open systems interconnection’ (OSI) model, bearer capabilities are deemed to be equivalent to services up to and including layer 3, the network layer.

1.18 Annex 2 operators must be running a system with which to interconnect to others. The system should meet the usual requirements for a system under the Telecommunications Act, ie it will comprise transmission and, where appropriate, switching. This means that systemless service providers cannot qualify for inclusion in the Annex 2 list.

1.19 If an operator satisfies these threshold criteria, it will then have to show that it meets the requirements of at least one of the 4 categories described below. Most operators who are eligible for interconnection for the first time under the new rules will be included in category 4. The rules for inclusion in the different categories vary and prospective applicants will need to identify the Annex 2 category for which they believe they are eligible. This is further explained in part 3.

1.20 Category 1 is defined in the ICD and schedule 2 of the Interconnection Regulations as follows:

1.21 Category 1 includes operators who operate the networks and services described in Annex 1 of the ICD, which are considered to be of major importance at European level. To be eligible for category 1, operators engaged in the switched provision of these networks and services must control access to a network termination point identified by a number in the national numbering plan. Most UK operators who formerly had RCS status will be included in category 1, eg PTOs with directly connected customers. Other operators (voice, telex or data), who control the means of access either physically or logically via the specified numbering scheme may also qualify.

1.22 Category 2 is defined as:

This category includes those operators who provide and operate the physical leased line infrastructure into the premises of end-users or other operators as carriers carriers. It does not include those who merely resell private circuits which are owned and operated by others, nor does it include operators who provide dark fibre. Given the end-to-end interoperability objectives of the ICD, Oftel considers that it is not necessary for resellers to have interconnection rights, but rather, as long as the infrastructure provider controls the access to the customer, it should be they who are included in Annex 2.

1.23 In practice this means that operators who provide publicly available telecoms services in the form of private circuits into user premises should be deemed to be included in Annex 2 category 2. In fact, most UK operators who provide private circuits, also in practice offer the type of switched services which would make them eligible for category 1 as well – although in terms of rights and obligations, it makes no difference whether an operator is in category 1 or category 2.

1.24 Category 3 is defined as:

1.25 This category is by definition an empty set in the UK. It includes operators who have special or exclusive rights to provide international circuits between the EU and third countries. These services are fully liberalised from the UK. Operators who provide these services but who do not have special or exclusive rights are included in category 4.

1.26 Category 4 is defined in the Directive as:

1.27 Member states have discretion to include in category 4 those operators to whom they grant interconnection rights and obligations under domestic licensing rules. Oftel includes in this category those operators who already have interconnection rights and obligations but who do not fit into categories 1, 2 or 3 (and whose services are not covered by Annex 1) and those operators who it is deemed ought to be eligible for inclusion to ensure competitive neutrality amongst operators who need interconnection to serve customers, in line with the requirements of the Licensing Directive. Whereas the way in which the pre-1998 rules have been applied has tended to produce results which are not competitively neutral or which could not be objectively justified or which might be considered to be discriminatory, Oftel’s new rules will ensure that the Licensing Directive’s provisions are satisfied by competitively neutral means.

1.28 Oftel believes that by ensuring competitive neutrality, the requirements of ‘objective justification’ and ‘non-discrimination’ in the Licensing Directive, will be satisfied. In other words, for the purposes of deciding who should have rights to interconnect, in the absence of material, objectively justifiable, differences, distinctions should not be based on the technology which is used to supply services by operators who are in competition with one another. Further, it is appropriate that decisions about who should have interconnection rights should take in to account that, for many services, UK-based operators now compete in a European market, rather than one which is purely domestic: failure to take account of differences in implementation of the EU rules by different Member States could lead to competitive distortions.

1.29 Competitively neutral policies on granting rights and obligations to interconnect are one way to avoid market distortions where there is a high level of liberalisation and technological diversity such as is now present in the UK telecommunications market. Therefore, where it is deemed justified to include an operator in categories 1 to 3 on the grounds that they offer the types of interconnectable services envisaged by the Directive, but that operator would be excluded from categories 1 – 3 because of technological or regulatory differences between what the operator does and the classifications set out in the Directive, Oftel hopes to ensure competitive neutrality by including those operators in category 4. This reflects the level of liberalisation, technical diversity and competition which now exists in the UK and is expected to promote innovation without distorting the investment decisions of operators or the choices they make as to which technology to use.

1.30 Oftel believes that a policy based on competitive neutrality will not only promote competition but will also directly benefit UK consumers. In particular this is because newer technologies and innovative service offerings will often be more economic than traditional networks and service packages and therefore to exclude variants on the norm such as IP from interconnection would deprive customers of the efficiency improvements which these newer technologies can deliver.

1.31 The operators who will be included in category 4 include:

• Type A: operators who would be in category 3 but for the fact that they have no special and exclusive rights. This includes IFL and ISR operators;
• Type B: operators who would be included in category 1, but for their use of numbers from an international, rather than a national numbering plan. This includes Internet service providers who operate under a worldwide naming scheme which depends on a worldwide numbering scheme;
• Type C: operators who provide personal numbering, number translation services or conveyance services for premium rate services (but not PRS service providers themselves) and who control the logical access to the end users of these services by means of relevant numbers in the specified numbering plan;
• Type D: carriers’ carriers who do not provide leased circuits into users premises (ie those not automatically included in category 2), and who provide transit interconnection services between other operators which fall within the definition of network services.

1.32 It is anticipated that regulatory arrangements for ISPs who are included in Annex 2 will continue much as before except that they will be able to purchase BT’s standard services at cost-orientated interconnection rates. An end to end service will still only be available at retail or service provider prices – these services are considered to be outside the objectives of the ICD, which is designed to facilitate interconnection between public networks. ISPs will have the right to negotiate interconnection with any other Annex 2 operator, to purchase, for example, call origination and call termination. Because peering agreements between ISPs in Annex 2 will be treated as interconnection agreements, Oftel will have a right to inspect such agreements pursuant to Article 9(4), should this be necessary. Other relevant provisions in the ICD will also apply to ISPs.

1.33 It should be noted that leased circuits will not be available at network charge controlled interconnection charges under condition 13 of BT’s licence, since these are always sold at retail prices whether or not an operator has interconnection rights.

1.34 In order to benefit from BT’s standard interconnection charges, ISPs will need to invest in C7 based terminating equipment (switches). The services they would then be able to buy would comprise all present standard services, but of principal use would be:

C7 interconnect at DMSUs for terminating NTS calls such as 0845

C7 interconnect at DMSUs for originating and terminating ISR traffic

IP interconnect with BT’s IP services operated from its systems business (eg BT Net).

1.35 Operators who are not eligible for Annex 2 status may still get access to the networks of operators with SMP under Article 4(2) of the ICD. Oftel will shortly publish draft guidelines on special network access.

1.36 Annex 2 operators will be able to buy any of the interconnection services in BT’s list of standard services. Where a service is not available, any Annex 2 operator may make a request to Oftel to determine that that service is reasonably required under Condition 13 of BT’s licence.

1.37 Where an operator is included in Annex 2, they are eligible for any standard service, including interconnection services which are unrelated to the activities which allowed them entry into Annex 2.

2.1 In March 1998, Oftel and DTI published a consultative document entitled ‘Rights and obligations to interconnect under the EC Interconnection Directive’. This document responded to calls from the UK industry to provide more explanation of the October proposals for granting interconnection rights.

2.2 Responses to consultation were largely balanced between network operators who believe that the pre-existing framework for granting interconnection rights should remain intact, at least in the short term, and beneficiaries under the new rules who believe that reform of the existing framework is justified and welcome. General concerns were expressed that the process for inclusion in Annex 2 and arrangements for monitoring of ongoing eligibility should be fully explained. The following section considers some of the main points which arose.

2.3 Some respondents argued that Oftel’s proposals go further than is required by the Interconnection Directive and that consequently vires do not exist under the European Communities Act to implement the new rules. Whilst Oftel accepts that the pre-1998 RCS framework would in principle probably adequately meet the requirements of the Interconnection Directive, it believes that the way in which application of the RCS rules has evolved would be unlikely to satisfy the demands of the Licensing Directive. Whilst a framework, which distinguishes between operators who make a significant contribution to investing in infrastructure and those who do not, can in theory be objectively justified and non-discriminatory, in practice such a policy has proved difficult to apply in an objective and non-discriminatory way. For example, some operators have been granted interconnection rights because of investment in infrastructure which has turned out to be very limited. Others, perhaps competitors, who have not made the same minimal investment, have not been granted interconnection rights, in which case competition may have become distorted between them without even achieving the objectives of the original RCS policy because in neither case has an operator built their own network.

2.4 DTI and Oftel have therefore reached the conclusion that the pre-1998 rules, cannot in practice satisfy the requirements of the Directives. Whilst the new rules do go further than the old rules, it is considered that the classifications now adopted are the most viable way to ensure objectivity and non-discrimination without major changes to underlying policies on interconnection.

2.5 Some operators suggested that the UK rules go significantly further than interconnection rules in other member states. This, they said, would create distortions between competitors in the UK and competitors elsewhere. In particular, operators competing in a variety of European markets might benefit from cost based interconnect in the UK without making any investment here, whereas UK operators would not get comparable rights in other member states without making a substantial contribution to infrastructure development. It was argued that where such operators were in competition with one another, the non-UK based operator would be at a competitive advantage because of a market distortion created by unequal and non-reciprocal regulatory arrangements.

2.6 Mindful of the need to avoid competitive distortions between operators who wish to offer international services to UK customers or a range of services to customers in more than one member state, Oftel has included IFL and ISVR operators in category 4 of Annex 2. Oftel’s relatively inclusive Annex 2 rules are tailored to the UK interconnection environment, given the extent of liberalisation and technological diversity in this country. Oftel has no control over implementation in other member states where different circumstances and policies may prevail.

2.7 But the Interconnection Directive and the wider framework of Community law make provision for questioning whether EU rules have properly been given effect in a particular member state. Where an operator believes they are at a competitive disadvantage as a result of interconnection provisions in another member state, for example because of rules which require them to build a network in order to interconnect with and compete against an operator who already has a network, then these concerns should be addressed with the relevant national regulatory authority or the European Commission.

2.8 For the purposes of interconnection services provided to UK operators by operators in other member states, such as call termination, these must be provided by SMP operators on a non-discriminatory basis which treats all Annex 2 operators alike, regardless of the member state in which they have Annex 2 status. This puts UK Annex 2 operators in the same competitive position as operators given Annex 2 status by other member states. The same is true for interconnection services, such as call origination, provided to UK based operators who are offering retail services to customers in member states other than the UK: these too must be provided on a non-discriminatory basis by SMP operators. Domestic operators should be subject to the same requirements as UK operators, for example to invest in infrastructure or to set up a specified number of points of interconnection.

2.9 Oftel’s consultative document put forward a definition of the bearer capabilities which are made a pre-condition for gaining interconnection rights. The source and authority of this definition has been questioned by some respondents.

2.10 ‘Switched and unswitched bearer capabilities’ are not defined in the Directive except to say that other services depend on them. However, this concept is not new and should be understood to mean ‘bearer services’. The term is used extensively in ISDN standards and includes both circuit mode and packet mode services. Oftel considers that the meaning of bearer services corresponds closely to the meaning of the term ‘network services’, as now included in the new PTO licences, which distinguishes between basic and supplementary services and which identifies those services which SMP operators may operate from their Systems Business, as opposed to value added services which must be provided from their Supplemental Services Business. SSB services, of course depend on SB services for their basic conveyance and this conforms to the words used in the Directive.

2.11 The March consultative document set out that operators who complied with the requirements of categories 1 and 2 of Annex 2 were automatically covered by its provisions and to have both interconnection rights and interconnection obligations, giving obligations to some operators for the first time. Oftel went on to say that operators of a type covered by category 4 would have a choice as to whether or not they wished to be included in Annex 2 and that those who do not wish to have interconnection obligations can decline to acquire interconnection rights.

2.12 Some respondents to the consultation questioned this distinction. Several said that all operators should be treated in the same way and either all should be able to opt out of Annex 2 or none should. Some went on to say that it is inappropriate to impose interconnection obligations on any operator who does not have market power, but if such obligations must be imposed, it should be possible for any operator to relinquish interconnection rights in order to avoid imposition of obligations.

2.13 The Directive states quite clearly that any operator with interconnection rights should also have interconnection obligations. Oftel has no discretion to vary or apply these rules in a way which fails to achieve these objectives.

2.14 Further, the rules in the ICD are designed to achieve end to end interoperability so that customers to whom access is provided by one network or service provider can communicate with customers accessed via another. The UK has an obligation under Article 3(2) of the Directive to achieve this objective by ensuring the interconnection of networks providing the services described in annex 1. This requirement is given force in the UK by regulations 3 and 5 and schedule 1 of the Interconnection Regulations. Annex 1 corresponds to the networks and services described in categories 1 and 2 of Annex 2. This is why inclusion in Annex 2 is automatic for category 1 and category 2 operators.

2.15 However, there is no corresponding obligation to ensure interconnection between Annex 2 operators whose activities are not included in Annex 1. Thus category 4 operators who carry out activities which are not included in Annex 1 are not automatically included in Annex 2. Objective justification is probably necessary for applying different treatment to operators in categories 1 and 2 and operators in category 4. It is Oftel’s view that objective justification comes from the fact that the Directive itself treats Annex 1 services differently to other services. In addition, Oftel believes it would be both undesirable and impractical to include category 4 operators in Annex 2 without their consent

2.16 As the March document set out, for the purposes of inclusion in Annex 2, the Interconnection Directive makes no distinction between operators using leased infrastructure and those who are building their own infrastructure. This means that the UK rules will no longer rest on a requirement that interconnection rights should only be granted to those investing in alternative networks. Some respondents to the consultation suggested that this indicates that Oftel is abandoning its historical commitment to network competition.

2.17 Oftel has stated that it anticipates little impact from the inclusive nature of the Annex 2 rules and therefore Annex 2 implementation should not undermine the UK’s historical (and continuing) commitment to infrastructure competition.

2.18 Several operators expressed concern that a more inclusive policy for granting interconnection rights would exacerbate existing tensions between unrebalanced retail charges for access and cost based charges for call origination which, they said, do not at present allow local access operators to recover the costs of the access network. It was suggested that the retail/network charging tensions should be addressed before implementation of the new Annex 2 rules.

2.19 Oftel believes that these tensions need to be addressed as part of Oftel’s review of BT’s network charge control arrangements. In a competitive framework based principally on competing local access provision, disparity in retail/network charges can be sustainable since all operators can recover any access deficit through retail services other than line rental. However, where competition is largely between competing service providers who buy call origination services from access providers in order to supply retail services to end-users in place of the access provider, these tensions may become unsustainable. The timing for decisions on call origination pricing was the subject of an industry workshop hosted by Oftel in November 1998. The consensus of that meeting was that the issue has to be considered in the broad context of the network and retail price control review. Oftel therefore proposes to take that forward in the work programmed for the review which is now underway.

2.20 Some operators argued that the purpose of category 4 should be to give NRAs a discretion to grant interconnection rights and obligations in meritorious cases but to be able to withhold such rights from other operators where appropriate. To achieve this, hard and fast rules should not be identified in advance but it should be open to those seeking interconnect to put their case.

2.21 The Licensing Directive requires member state rules on the grant of interconnection rights to be transparent, non-discriminatory and objectively justified. Oftel does not believe that an arbitrary or case by case discretion for granting such rights, with no criteria laid down in advance, would be the most suitable and transparent way to satisfy the provisions of the Licensing Directive. Instead, Oftel will base decisions according to a short list of high level, familiar, descriptors which may be objectively identified and which may apply equally to different technologies. This appears to be the best way to future-proof the system.

3.1 From June 1999 when the Licensing Directive is implemented fully in the UK, any operator who appears on the Annex 2 list on the Oftel web site will be deemed to have the right to negotiate interconnection with any other operator on the list. Operators included in Annex 2 will have an obligation to negotiate interconnection with any other operator in Annex 2. This obligation may be temporarily limited where there are technically and commercially viable alternatives to the interconnection being requested. Annex 2 operators who wish to rely on this caveat would need to make a case to Oftel explaining both the grounds for seeking a limitation and proposals for an alternative. Oftel would also have to be persuaded that the interconnection sought was inappropriate in relation to the resources available to meet the request. The terms, conditions and charges to be applied to interconnection between operators who do not have SMP are not specifically regulated and would therefore be subject to commercial agreement (save where referred to Oftel for dispute resolution).

3.2 All Annex 2 operators will be eligible to benefit from the terms and conditions and charges which operators with SMP are obliged to offer by the ICD. In the UK, BT and Kingston have SMP for the provision of fixed networks and services and leased lines, and Cellnet and Vodafone have SMP in the markets for mobile networks and services. Operators wishing to interconnect with one of the fixed SMP operators described above should contact that operator in the first instance for a copy of their reference interconnection offer. Mobile SMP operators are not required by the ICD to make a reference interconnection offer, but they do have obligations not to discriminate in the interconnection terms which they offer.

3.3 Where operators negotiating interconnection are unable to reach commercial agreement, they may refer the matter to Oftel (or Oftel may voluntarily intervene) pursuant to the dispute resolution provisions in Articles 9(3) and 9(5) of the ICD (regulation 6 of the Interconnection Regulations and equivalent provisions in licence conditions). Oftel may impose terms on the parties or may set in train processes to assist the parties to come to agreement. Oftel would generally expect to follow the dispute resolution processes set out in its Interconnection Guidelines which are available from the Oftel web site. Where the dispute would involve Oftel taking a policy decision which might have a wider application than to just the parties in dispute (for example where one of the parties has a non-discrimination obligation which could require the interconnection service in question to be made generally available to other Annex 2 operators, or where it might set a precedent for future interconnection disputes), it may be necessary to conduct a public consultation (which might, in some cases, extend the timescales within which the dispute could be resolved).

3.4 It will be for Oftel to decide whether an operator should be included in the Annex 2 list. Oftel’s decisions will be subject to the appeal procedure on which DTI expects shortly to consult.

3.5 Where Oftel is satisfied that an operator should be included in the Annex 2 list, that operator’s name will appear in the list which is kept in the Oftel library and posted on the Oftel website. This will be notice to other operators in Annex 2 that the operator in question has rights and obligations to interconnect under the Interconnection Directive.

3.6 Operators wishing to be included in the Annex 2 list will have to follow the process documented below. Oftel wishes to make this process as straightforward and accessible as possible. A standard application form is published at the end of this document. This sets out the information which Oftel will require in order to decide if an operator meets the criteria described in part 1 of this document. The underlying principle is that inclusion in Annex 2 will depend on what an operator actually does in practice – not the nature of the service authorisation under which they operate. For example, the mere fact that an operator is registered as operating ISVR services will not be sufficient to entitle it to inclusion in the list. They will have to lease an IPLC, and provide the last point of connection within the UK mainland for outbound calls or the first for in bound calls and thus control access to international facilities. Moreover, documentary evidence will have to be provided which supports the application. Transitional arrangements will be made for those who are not yet offering service but who need to be included in the list in order to get started. These are described below.

3.7 The application form will be available from the Oftel website. The form may be returned in person, by post, or by e-mailing the completed version with hard copies of supporting documentation supplied by post. Send documents to the Annex 2 Secretariat, Oftel, 50 Ludgate Hill, London EC4M 7JJ and e-mail to annex2@oftel.gov.uk (from 30^th April 1999). If you have further queries in the meantime, please contact Trevor Griffiths at Oftel on tel no: +44 (0)20 7634 8895.

3.8 Oftel will acknowledge receipt of the application within 5 working days. Oftel will have a period of 30 working days in which to give the application initial consideration. By the expiry of 30 days, Oftel will notify the applicant as follows:

• that the application has been successful. In this case the operator’s details will be added to the Annex 2 list the next time the list is updated;
• that further information is required. In this case the information needed will be specified, including timescales within which the information must be provided. The applicant will be notified that the application has been deemed to lapse if the further information is not provided within the specified timescales, where no extension has been expressly agreed between Oftel and the applicant;
• that the applicant does not satisfy the Annex 2 criteria. Notification with reasons will be provided.

3.9 In all cases, the applicant will be notified of Oftel’s decision within 5 working days of Oftel reaching a conclusion. In some cases Oftel may require longer than 30 days to consider an application. In this case, the applicant will be notified and given reasons for the delay.

3.10 Where an applicant needs to negotiate interconnection in advance of taking practical steps to qualify for Annex 2 status, but is unable to do so without appearing on the Annex 2 list, the following procedures may be followed. Prospective applicants are advised to make applications for Annex 2 status concurrent with licence applications.

3.11 The applicant must complete the application form for inclusion in Annex 2, providing full details of the service which it proposes to provide together with a description of proposed supporting documentation. Oftel will follow the process described above for considering applications for Annex 2. Where an operator’s plans meet the relevant criteria, it will be added to the Annex 2 list on a provisional basis. The operator’s provisional status will be clearly marked. Provisional Annex 2 status entitles the operator to negotiate interconnection and for practical purposes, this status is no different to full Annex 2 status.

3.12 However, documentation to show that the services described in the application are in fact being provided must be delivered to Oftel within 6 months from the date of publication of the operator’s details in the Annex 2 list on the Oftel web site. Failure to provide this documentation within 6 months will result in removal from the Annex 2 list. Applicants will be given 30 days notice of removal. The operator will lose its right to cost orientated interconnection charges from SMP operators, with retrospective effect to the date of provisional inclusion in the Annex 2 list.

3.13 Oftel does not anticipate that this provision should result in operators being required to refund the difference between cost orientated rates and other applicable rates. The provision is intended to ensure that relevant documentation is in fact provided in a timely way. Where the applicant has implemented their proposals so that interconnection charges are incurred, documentation will be available. If no documentation is available because the proposals have not been given practical effect, interconnection services will not have been provided and no charges will be payable.

3.14 The 6 month deadline may be temporarily extended in writing by Oftel in appropriate cases.

3.15 The licensing status of an applicant must be cited as part of the application but it will not be treated as evidence of eligibility for Annex 2. Oftel will make no distinction between operators who hold an individual licence and those who operate under a class authorisation.

3.16 The Annex 2 list will be updated monthly. Successful applicants can expect to see their details appear on the list at the end of the month in which they are notified that their application has been successful. Oftel will provide a letter of confirmation to the successful applicant within 5 working days of Oftel’s decision. Oftel will notify the European Commission of updates to the Annex 2 list.

3.17 Oftel reserves the right to review ongoing eligibility for Annex 2. Where there is a change in an operators’ activities which would effectively deprive them of the right to be included in Annex 2, the operator must inform Oftel within 30 days. Where eligibility is deemed to have ceased at a date which is earlier than the date at which the loss of eligibility is brought to Oftel’s attention, the operators’ interconnection rights will be considered to have been terminated from that earlier date. Interconnecting operators will be deemed to have no obligation to interconnect from that earlier date. This may lead to claims to refund the difference between the interconnection charges paid and charges payable by operators without interconnection rights, subject to contractual arrangements in the particular circumstances.

3.18 Commencing in July 1999, Oftel will be reviewing the current Annex 2 list to ensure that all operators who currently have Annex 2 status are in fact entitled to it because they are currently carrying out the activities envisaged by Annex 2. Having a relevant authorisation alone will not be sufficient for ongoing inclusion in Annex 2. All operators currently included in the list will shortly receive a letter with an application form. This should be completed and returned to Oftel by 1^st July 1999. Oftel will complete its consideration of current Annex 2 operators by 31^st December 1999. Because this one off exercise is likely to be resource intensive, the timescales set out above for new applicants will not apply. Where it appears that an operator is not entitled to continued inclusion in the Annex 2 list Oftel will either:

• seek further information about that operators’ activities; or
• specify the period within which the operator must comply with the Annex 2 criteria or be removed from the Annex 2 list. Oftel will detail what will be necessary to comply; or
• in clear cases, remove the operator from the list. Operators will be given 30 days notice of removal from the list. Operators will be able to re-apply for inclusion in the list in which case the process set out above for new applicants will be followed. Oftel anticipates that very few operators will lose their Annex 2 status.

3.19 Where an operator is no longer deemed to satisfy the Annex 2 criteria, their details will be deleted from the Annex 2 list. They will be notified in writing 30 days before removal. Notice of removal of an operator from the list will be included when the list is updated at the end of each month.

3.20 For operators who have already paid the relevant fee for an individual licence, no charge will be made for inclusion in Annex 2.

3.21 It is intended that class licensees and ISVR licensees who are determined as having Annex 2 status will pay an initial fee (ie after first qualifying for Annex 2 status) of £3000 and thereafter a fixed renewal fee, again of £3000.

This will be detailed in a forthcoming Oftel statement on UK licence fees.

3.22 Removal of an operator from the Annex 2 list will have no effect on any licence fee paid. Removal from the Annex 2 list is without prejudice to an operators licence or authorisation to operate except that removal from the list effectively terminates the operator’s rights to negotiate interconnection with other Annex 2 operators and benefits from the interconnection provisions in the ICD, in particular the right to cost orientated interconnection charges for the services in the reference interconnection offer of SMP operators.

3.23 In appropriate cases, operators who operate under the TSL will be able to gain numbering allocations. This means that access to numbers will not be a barrier to inclusion in Annex 2 and conversely, the fact that an operator has a numbering allocation will not automatically constitute grounds for inclusion in Annex 2.

3.24 It is intended that DTI will amend the Interconnection Regulations to reflect the Annex 2 classifications described above, with effect from 30^th June 1999.

Please click here to download an electronic version of the Annex II applications form

Individual licensees – specify your licence number as it appears in the Oftel Register

ISVR licensees – provide a copy of DTI notification of inclusion in Oftel’s ISVR register

Provision of publicly available network services (see explanatory note 2)

Which network services are you providing to the public?

• voice telephony
• ISDN
• Leased lines
• Basic data transport eg IP
• Telex
• Other (please specify other qualifying services)

Provide a brief description of your network facilities and state the extent to which they are leased or owned, including a description of transmission and switching facilities (see explanatory note 3)

Describe how your services are made available to the public. (see explanatory note 4)

Provide details of your geographic number allocation (ranges 01, 02) from Oftel including date of allocation, number blocks allocated and whether they are currently in use. Show how they provide the exclusive means of access to end users. (see explanatory note 6)

Category 2

Give a brief description of self provided access links, sold as leased lines, to user’s premises (see explanatory note 7)

Category 3

Since the abolition of special and exclusive rights for international circuits, this category is empty.

Category 4

ISVR operators – describe your ISVR bearer circuits (see explanatory note 8)

IFL operators – give details of facilities provision (see explanatory note 9)

Internet service providers – give details of provision of the sole means of IP based inward access to the end-user. This may be physical or logical access.

Operators providing personal numbering and number translation services – provide evidence of an Oftel number allocation from an appropriate number range (07, 08, 09). (see explanatory note 10)

Provide details of network services provided to other operators (other than leased lines) and the names of operator’s served (see explanatory note 11)

If you currently have interconnection rights and obligations but wish to terminate these rights and be deleted from the Annex 2 list, please provide details below.

1. This information should be provided for identification purposes. Operators with an individual licence (ie those not operating under class licence or a registrable licence) should provide their licence number as listed in the Oftel Register of Licences. ISVR licensees do not have an individual licence number but should be able to show that they are listed in the Oftel register. Other operators without an individual licence or who are not registered under the ISVR licence are not listed on the Oftel register, but it will be assumed that they have the relevant authority under the Telecommunications Services Licence (TSL).

The Oftel Register can be viewed on Oftel’s website (www.oftel.gov.uk). Copies of the Register and details of operators listed are available from Oftel’s Research and Intelligence Unit, 50 Ludgate Hill, London EC4M 7JJ, telephone 0171 634 8761, fax 0171 634 8946, e-mail infocent.oftel@gtnet.gov.uk.

2. "Network Services" means any of the following:

1. a service consisting only of functions which enable end-users to send, receive, or both, messages to or from one or more end-users, including functions which enable the establishment of a prior connection between such end-users;
2. a service which consists only of functions which could not practically be provided to any end-user in identical form by anyone other than the Licensee, because those functions are dependent upon the functions referred to in paragraph (i) above;

(iii) any service which has been agreed by the Licensee and the Director.

See Interconnection Directive Article 2 for further definitions. Broadcasting services do not qualify. Reference may also be made to Appendix 3 of Oftel’s March 1998 consultative document, ‘Rights and obligations to interconnect under the EU Interconnection Directive’ for an explanation of bearer capabilities.

3. Supporting documentation may include copies of planning consents, evidence of exercise of code powers, copies of contracts to lease lines. For operators using leased infrastructure, it will be necessary to show that the operator is in fact running a system, rather than reselling a system run by another infrastructure provider. Evidence of this could include a description of the products being leased or bought – whether they are retail or wholesale for example

4. Whether a service is ‘publicly available’ is likely to be a question of fact and judgement which will depend on all the circumstances. As a minimum, it is likely that a telecommunication service will be publicly available, if it is ‘on offer’ to anyone who is prepared to pay for it probably with standard terms and conditions. In some circumstances, however, this criterion may not be sufficient. Public accessibility of the network over which the service is provided may also need to be taken into account. Supporting evidence may take the form of a sample contract.

Those providing only to limited customers or closed user groups will not qualify. Applicants may detail the number of customers they serve, excluding those within the operator’s own group.

5. Where the applicant believes they are eligible for more than 1 category, they should state which categories they believe they are eligible for and complete details for each category

6. Control of access means control of physical access or logical switching using the allocated number. Physical access depends on control of transmission plant into the user’s premises and other physical infrastructure.

7. Access links must be self-provided. This category does not include those who only lease infrastructure which is provided and controlled by others into user’s premises

8. Details of ISVR bearer circuits should include contractual details to show who is providing the circuit and evidence of switching facilities at the UK end and in distant countries

9. Evidence should be provided of outright cable ownership agreements or IRU capacity in an international cable; alternatively, there should be evidence of a right to use a satellite earth station with evidence of a contract for satellite channel use

10. Qualifying allocations include those from number ranges other than 07, 08 or 09, made before the introduction of the national numbering plan, which would be included in 07, 08, or 09 if made today. Details should be provided of arrangements for number translation facilities for the set-up phase.

11. For example, carriers’ carriers providing forms of transit interconnection between other operators, such as PSTN (including targeted transit), ATM based services and IP backbone service. Operators may wish to use evidence of the system which they run to support this part of the application.

Applications may be supported by diagrams