October 1999

Chapter 1         The nature of a Mobile Virtual Network Operation

Chapter 2         Is there a basis for regulatory intervention?

Annex A         Consultation process, responses and terms of access

Annex B         Technical issues

Annex C         Other European MVNO developments

Annex D         Glossary

In June 1999 Oftel published a consultation document: Mobile Virtual Network Operators: Oftel inquiry into what MVNOs could offer consumers. The consultation document was in response to demand from some commercial organisations to establish Mobile Virtual Network Operators (MVNOs) on mobile networks. Oftel’s consultation was designed to investigate what benefits MVNOs might bring to consumers and invite comments on the legal and technical issues surrounding MVNOs. This Statement summarises the responses to the consultation, presents Oftel’s view of the costs and benefits of MVNOs, and the case for and against regulatory intervention to require the provision of services to MVNOs.

An MVNO is an organisation that offers mobile subscription and call services to customers but does not have an allocation of spectrum. It would therefore pay Mobile Network Operators (MNOs) for the use of the mobile networks. Oftel’s consultation document considered the different ways that MVNOs might interact with mobile networks. Respondents indicated that the greatest interest was in the development of a form of MVNO that would require the least use of the mobile operator’s network, ie use of the radio interface only. Services suggested by potential MVNOs largely involve taking advantage of the flexibility that MVNOs would have to integrate together different elements of fixed and mobile voice, data and content services.

Most respondents in favour of regulation to require the provision of services by MNO to MVNOs argue that intervention by Oftel is necessary to allow MVNOs to operate. They maintain that this will increase competition and deliver consumer benefits such as: greater choice; a wider range of innovative services; and lower retail prices. In response to Oftel’s discussion on the legal framework that might apply to MVNOs, proponents argued that the services required are covered by the EU Interconnection Directive (EC/97/33), and therefore Oftel has the power to resolve disputes concerning the provision of services to MVNOs under the Interconnection Directive (ICD). Opponents of regulatory intervention stressed that the mobile market is already competitive or approaching competitiveness, and intervention to require MNOs to supply services to MVNOs is potentially damaging to the market and will reduce consumer benefits. In addition, opponents argued that the services required by MVNOs are not covered by the ICD and questioned Oftel’s powers to require the provision of these services.

There is widespread debate in Europe on the exact nature of MVNOs, and on the relevant interpretation of the ICD. Given this debate, Oftel believes that it is not yet clear whether the services required by MVNOs are covered by the ICD. However, even if the services required by MVNOs are not covered by the ICD, if Oftel decided that the introduction of MVNOs would promote effective competition and increase consumer benefits, for example, it would be open to the Director General to propose a modification to mobile network operators’ Telecommunications Act Licences requiring the services needed by MVNOs to be provided. This would require the network operators’ consent or, following a reference by the Director General, a favourable report from the Competition Commission.

Oftel has considered, among other factors, the potential economic costs and benefits associated with intervention to require the provision of services to MVNOs, including the potential impact on competition and the potential benefits to consumers. Oftel’s conclusion is that there is not enough evidence to justify intervention by Oftel at present. With the prospect of effective competition in the mobile market, Oftel is reluctant to take the significant regulatory step of requiring that services be provided to MVNOs, particularly since the impact on competition of Indirect Access (IA) from mobile networks has yet to be gauged, and there is the prospect of increased competition from the entry of one or more new entrants from the Third Generation spectrum auction.

If the ICD does apply to the provision of services to MVNOs, in the future Oftel may be asked to resolve a dispute concerning the provision of services to MVNOs under the ICD. However, Oftel would still decide if regulatory action to require the provision of services to MVNOs was justified by considering factors similar to those considered in this Statement, including the impact of MVNOs on competition and consumers and the other criteria set out in Article 9(5) of the ICD. In this Statement, consideration of these factors has led to the conclusion that regulatory action to require the provision of services to MVNOs is not justified at present.

While Oftel does not intend to act now, the mobile market is reviewed regularly. MVNOs will not be specifically reviewed in the next review of the mobile market (in the year 2000), but if competition in the mobile market is found not to have developed to the extent expected, various options for regulatory intervention will be considered. Competition in the mobile market is developing, and a further stimulus is expected to be provided by the introduction of mobile IA. In addition, the prospect of one or more new entrants after the auction of the Third Generation spectrum will increase the likelihood that the mobile market will be effectively competitive in the future and the need for intervention would be less likely.

Oftel is maintaining close links with European NRAs and the European Commission which is also examining MVNO developments. Oftel will continue to participate in discussion and debate on the possible economic benefits of MVNOs and the legal framework that might be applicable.

1.1 Oftel’s consultation document Mobile Virtual Network Operators: Oftel inquiry into what MVNOs could offer consumers, published in June, was designed to clarify the nature of mobile virtual network operations, and to identify the key issues to be addressed by industry and regulators in assessing what advantages Mobile Virtual Network Operators (MVNOs) may offer to competition and consumers. The document outlined a number of issues already identified by Oftel as a result of discussions in the UK and abroad, and of the potential demand from commercial organisations to establish themselves as MVNOs operating on mobile networks. For the purposes of this exercise, TETRA operators are excluded because their networks are currently technologically incompatible with GSM networks.

1.2 This Chapter explains the consultation outcome on:

• the types of facilities MVNOs may require from mobile network operators;
• the types of services MVNOs might offer; and
• the number of MVNOs that may seek to enter the market.

1.3 Oftel’s conclusions on whether regulatory action is justified are outlined in Chapter 2, where the costs and benefits from the perspective of a competition and economic analysis are assessed, and where the legal issues that bear on the status of MVNOs are explored.

1.4 Details of those who responded to the consultation are contained in Annex A; altogether there were 28 responses to the consultation, and 5 further sets of comments on these responses. A discussion of the retail-minus charging basis is also contained in Annex A. An overview of the technical issues regarding the operation of MVNOs is presented in Annex B, and an update of other European MVNO developments is contained in Annex C.

1.5 Only Mobile Network Operators (MNOs) have licences to run networks using the radio spectrum. At the minimum, all MVNOs would therefore pay one or more MNO for the use of the essential radio segment of the mobile network(s) in order to originate (and deliver) the customers’ calls. Beyond that minimum dependence on the MNO, the MVNO must either invest in all the other facilities required to deliver the service to the customer, or rely on some or all of the facilities of one or more MNO. The consultation responses generally indicate that the most likely form of MVNO to be developed is one which requires the minimum of facilities from the MNO, ie use of the radio interface (and minimum transmission and switching to route the call out of the mobile network) only. This would maximise the MVNO’s control over its customers and their calls. At the other extreme (maximum use by the MVNO of the MNO’s facilities), all the MVNO would directly control would be the SIM card and the Mobile Network Code (MNC), although it is likely that even those MVNOs intent on minimising their risk would also want to control their own Home Location Register (HLR) and Authentication Centre (AUC) functions.

1.6 Ultimately, the facilities required by the MVNO will depend on the extent the mobile networks are unbundled, and whether the MVNO is able to provide its own facilities more efficiently than the MNO. It may be that this capability will develop progressively as MVNOs develop their markets and experience: on this basis, Oftel can expect MVNOs to seek unbundled services from the MNO so that they can progressively reduce their dependence on the MNO facilities. The basis on which charges are set for these facilities will clearly be a key factor in these decisions. MVNOs will need to take account of the likely basis being retail-minus, as indicated in the consultation document. Further discussion of the charging basis is contained within Annex A.

1.7 The responses suggested that by making use of the IN (Intelligent Network) functionality in their networks, MVNOs may be able to provide a wider range of services than those currently provided by the MNOs themselves. By offering their own handsets and marketing their own products under their own brands, MVNOs could, it was said, offer packages and tariffs which are more flexible than those currently offered by MNOs. These assessments are based on the fact that MVNOs would control access to the customer completely, not just (as with IA operators) the individual calls their customers choose to route via alternative suppliers.

1.8 The majority of all the respondents indicated that a range of fixed and mobile integrated services may be developed which centre on a single handset with superior coverage, enabling tracking services such as ‘one number’ to be developed (so that the called customer, when willing, can always be contacted). This was seen as being achieved by bundling together different elements of fixed and mobile voice, data, and content services. The common vision was that such services would be accompanied by a ‘one stop shop’ for billing and customer services.

1.9 Respondents who oppose the introduction of regulation to require that MNOs provide services to MVNOs have stressed that there is very little evidence regarding the types of new services an MVNO could offer, and that the types of services it is claimed an MVNO may offer are already being offered, or could be developed through the current competitive process, by the present participants (without requiring MVNOs).

1.10 It is clear from the responses that some of the potential benefits of MVNOs depend on regulation that would require that MNOs provide services to MVNOs and permit seamless switching between all four mobile networks. If it were possible for MVNOs to switch their customers between different mobile networks, respondents argued that MVNOs could overcome the existing differences in geographic coverage. Consequently, customers of the MVNO would not be tied to the coverage of any single MNO, and could be provided with the convenience of obtaining dial tones/ signal in any area where at least one of the MNOs offers coverage.

1.11 Respondents have argued that although the current MNOs have focussed on building secure, reliable networks, new players may be needed to add more to the ‘mobile experience’, ie offering consumers new value added services, particularly through data transfer. Respondents suggested that such service innovation may occur because of the potential entry into the market of new players bringing with them brand strength and close customer knowledge.

1.12 Some respondents favoured the argument that the increase in the choice of service providers presented by MVNOs could lead to a reduction in retail prices as MNOs compete to secure the services of MVNOs as a way to market (charges to MVNOs being based on the retail price under retail-minus). The strength of this argument is discussed in paragraphs 2.21 and 2.23 of Chapter 2.

1.13 Based on the consultation responses, Oftel has estimated that there are approximately twenty organisations who have expressed an interest in setting up as an MVNO. It is apparent that MVNO status may be sought by fixed operators, independent service providers, and organisations with strong brand names, such as high street retailers, entertainment companies, and financial institutions. However, several respondents indicated that their presumptions on the benefits of MVNOs were made on the basis of cost-plus charging; the consultation document made it clear that Oftel’s view of the appropriate charging basis is retail-minus (further discussion of the charging basis is contained within Annex A).

1.14 The majority of potential MVNOs have indicated the need for regulation to enable their entry into the market. It has been argued that MNOs will not voluntarily negotiate agreements with MVNOs, particularly when the services to be provided will be competing with the MNOs own retail services. Whether regulatory action is justified at this point in time is discussed in Chapter 2.

2.1 Oftel’s goal is to achieve the best possible deal for consumers in terms of quality, choice and value for money. Oftel believes that the best way to achieve this is through competitive supply of services. Accordingly, it is Oftel’s intention to withdraw or refrain from regulation where markets are effectively competitive.

2.2 Oftel’s recent review of the mobile market (Oftel’s review of the mobile market, July 1999) concluded that the mobile market is not yet fully competitive but competition continues to develop. The mobile market presents a particular challenge to Oftel. On one hand, the market is moving towards effective competition which should enable there to be less regulation. On the other hand, there is pressure both from consumers and industry for regulatory intervention in the market. The consultation on MVNOs was designed to aid Oftel in exploring what possible benefits MVNOs could offer consumers in a mobile market that is not yet effectively competitive. These possible benefits must be weighed carefully against the costs associated with significant regulatory intervention, in particular with the risk that if regulatory action is disproportionate it may deter investment and discourage innovation. Intervention must be justified on the basis that MVNOs would contribute to the development of competition in the mobile market or bring net benefits to consumers that would not otherwise be achieved.

2.3 This chapter considers:

• the possible benefits and costs of MVNOs;
• whether regulatory intervention is justified or not;
• the legal basis of requiring (or resolving a dispute about) the provision of services to MVNOs; and
• the prospect that MVNOs might be achieved by commercial negotiation.

2.4 The consultation document indicated that an economic assessment of whether Oftel should require that MNOs provide services to MVNOs would need to consider the relevant market and its competitiveness. Oftel has received a number of comments on the possible benefits to competition and consumers of MVNOs and whether the benefits justify regulatory action.

2.5 As discussed above, Oftel has concluded that the mobile market is not yet effectively competitive. Consequently, there could in principle be benefits from increased competition if Oftel were to require that MVNOs are provided with the services that they need. Most respondents in favour of regulation to introduce MVNOs stress this point, arguing that intervention is necessary to deliver increased competition. Moreover, they argue that

increased competition will deliver the potential benefits outlined in the consultation document, namely:

• expanded choices for the consumer;
• wider range of services and innovation; and
• lower retail prices.

2.6 Benefits to consumers identified by respondents include lower retail prices and high quality, innovative, fixed and mobile integrated services, a wide range of value-added services and improvements in network coverage and customer care. In addition, the market would, in the view of MVNO proponents, attract a number of new service providers who would be able to offer innovative tariff schemes and brands. These would include players with significant strengths in other markets.

2.7 Conversely opponents of regulatory intervention have stressed that the mobile market is already competitive, or approaching competitiveness, and regulatory intervention in support of MVNOs is potentially damaging to the market and consumers.

2.8 The consultation document indicated that a key factor in any decision to require MNOs to supply services to MVNOs would be based on an economic assessment. This involves considering the potential economic costs and benefits associated with intervention, including the potential impact on network and services competition, as well as the benefits to consumers. The key themes of the responses are summarised below along with Oftel’s comments (in italics).

2.9 A number of respondents stressed that MVNOs would provide significant benefits to consumers by increasing choice and satisfaction. Regulatory intervention in support of MVNOs would encourage greater innovation leading to a wider range of value added services, including mobile access to the internet, innovative data applications over the mobile network, unified messaging, voicemail and SMS-based services.

2.10 A key development would be that fixed network operators could enter the mobile market to provide fixed-mobile integrated services, including a wider choice of fixed and mobile tariff bundling, and a single point of contact for billing and customer services. MVNOs would effectively ‘own’ the customer in both fixed and mobile markets and could provide an integrated service beyond the billing level, including a single handset and integrated messaging, information and call management services.

2.11 As discussed in the July review, Oftel is keen to encourage the development of value added services over mobile networks. Oftel accepts that MVNOs may lead to a wider range of products and services than currently available in the mobile market. In particular, they may help to overcome some practical technical and commercial constraints hindering the development of a fully integrated fixed-mobile service. However it is not clear that innovation leading to a wider range of value added services or fixed-mobile integrated services is dependent on Oftel taking regulatory action to help establish MVNOs as such. It is likely that market developments will lead to innovation and a wider range of services without Oftel’s intervention on the issue of MVNOs. Annex B outlines Oftel’s views on the technical issues surrounding fixed-mobile integrated products.

2.12 Several companies are already providing a version of an integrated fixed-mobile service, which includes one bill, a single point of contact for service queries and one number fixed-mobile products. It is Oftel’s view that some of the fixed-mobile products that MVNOs might provide could be provided without MVNOs if companies combined fixed services, Indirect Access (IA) and Mobile Service Provision. Oftel indicated in the July review that it had concerns about the nature of the wholesale product supplied to independent service providers as well as unfair cross-subsidy of tied service providers; Oftel has since opened a competition investigation on this. Moreover, any complaints about refusals to supply airtime, which would inhibit the development of fixed-mobile products, would be investigated carefully for evidence of anti-competitive behaviour.

2.13 Also it is not clear that innovative tariffs will only be achieved by MVNOs; the development of IA products and the (potential) increased flexibility associated with the provision of unbranded airtime should enable service providers to develop new tariffs.

2.14 Respondents suggested that action by Oftel to require that MNOs supply MVNOs with the services that they require would help overcome the problem of spectrum scarcity as a barrier to entry, in some cases arguing that competition will never be effective with only four operators.

2.15 Oftel has concluded that the development of effective competition is possible with four/ five mobile operators and that the market is moving towards this. Moreover, MVNOs will not directly address spectrum scarcity, although they might mitigate its effects if the intensity of competition between underlying networks is increased. In addition it can be argued that the entry barrier is not binding, other than in the short term; the auction of 3G licences should increase the number of operators in the market by at least one, and the introduction of spectrum trading may diminish the barrier over the longer term. Likewise it has been suggested that Dolphin, producing services over spectrum in the TETRA band, may emerge as an effective competitor to the GSM/ 3G operators, although it is too early to reach any conclusions about this.

2.16 The consultation document identified increased competition between the existing network operators as a potential benefit from the entry of MVNOs. This could occur if MVNOs are able to reduce barriers to effective competition between the existing four network operators, such as the costs of consumers switching suppliers.

2.17 In addition it was suggested that if MVNOs were companies already well established in other sectors, they might induce growth in the mobile market. This is likely to benefit all players in the market. Moreover, competition in the market would increase as new players, including service providers, would be attracted to the market leading to wider distribution channels and brands.

2.18 Oftel is aware that MVNOs may be able to reduce switching costs which make it more difficult for customers to change network operators. The benefit of this to consumers would depend on the ability of MVNOs to easily switch between networks and the extent to which they pass benefits onto the consumer. If MVNOs can switch their business easily away from a particular mobile operator, this may increase the intensity of competition between the networks, although it is likely that the importance to consumers of switching costs will decline with the introduction of pre-paid packages, number portability and dual-band handsets. However MVNOs may have an impact on any remaining switching costs. For example, MVNOs may be able to gather information about relative tariff levels more efficiently than consumers.

2.19 There is evidence that established non-telecom brands are already beginning to enter the market, and increases in the flexibility of the supply of unbranded airtime, which Oftel is considering, may facilitate a wider range of brands available in the market. It is Oftel’s view that the incremental impact of MVNOs on competition at the service provider level will be limited since entry barriers are low, given the current regulatory environment.

2.20 Several respondents argue that prices would fall as a result of increased competition at the network level. Proponents of MVNOs argued that increased competition between the networks would result in a fall in the prices of calls from mobile telephones.

2.21 It is not clear to Oftel what the outcome for consumers in terms of prices would be. If MVNOs could switch between the underlying networks to the cheapest they could effectively arbitrage the networks’ tariffs. This could induce more intense competition between the networks (to supply to the MVNO) and push prices downwards, although services supplied to MVNOs on retail-minus terms might limit the extent of this downward pressure. This process could be expected to bring about convergence in prices, albeit at a lower level than currently exists. However, this result relies on the ability of the MVNO to switch seamlessly between networks. Such a significant new regulatory measure is not consistent with Oftel’s view that as effective competition is emerging, significant regulatory intervention might be at best superfluous and at worst potentially damaging. Moreover, the extent of the impact on retail prices would clearly depend on the intensity of competition between MVNOs, although if barriers to entry as an MVNO are low, then competition may be relatively strong.

2.22 Proponents of MVNOs argued that the cost of calls to mobiles would fall if a fixed network operator becomes an MVNO; incoming calls could be routed over the fixed network where possible (if the MVNO operated an intelligent fixed-mobile ‘follow-me’ service for example) and charged as per fixed network rates, rather than mobile rates. It was also argued that if MVNOs could choose the least cost route (between the four mobile networks) to deliver a mobile call, this would increase competition between the mobile network operators on incoming mobile termination rates.

2.23 Prices of incoming calls to mobiles would not necessarily fall with the introduction of MVNOs. There will be many calls that must be delivered over a mobile network and the fixed network cannot be used as an alternative delivery route. Even where the MVNO has a choice of mobile network to deliver an incoming mobile call to its customer there will be no additional competitive pressure on call termination charges. The MVNO will face the same (weak) incentives to reduce incoming charges as the existing network operators.

2.24 Proponents of regulatory intervention stressed that increased competition between the networks would lead to improvements in service quality and customer care; MVNOs will be able to offer customers the highest quality of service and coverage by switching seamlessly between the four mobile networks. In addition, it has been argued that if MNOs became MVNOs (effectively introducing national roaming between all mobile operators), this would reduce inefficient duplication of network infrastructure. However, opponents of intervention by Oftel argue that requiring MNOs to supply to MVNOs with the services they require would have an adverse impact on incentives to invest in network infrastructure.

2.25 Oftel accepts that depending on the form of MVNO the incentives to invest in infrastructure may decline, diluting the benefits of infrastructure competition. If switching between networks is seamless, increased price competition between network operators is likely to reduce the expected return from investment and increase the uncertainty associated with returns on investment.

2.26 Investment in network coverage may decline as a result of MVNO entry; existing network operators will not face the same incentives to build out their network. This is because it is already possible that the revenues from use of the network in some outlying areas alone may be insufficient to cover the cost of network build there. Operators invest in coverage in such areas primarily in order to attract new customers to the network, who value the ability to make calls over a wide area even though they may make relatively little use of the network outside the main population centres. MVNOs would enable a small network to achieve the same coverage as a larger one without needing to match its infrastructure investment, which would largely remove the desire to gain competitive advantage in attracting subscribers as a motive for network expansion. Even retail-minus terms might then provide insufficient return to justify extending networks to outlying areas because the cost of serving such areas as an MVNO could still be less than the cost of building a network. Whilst it could be argued that duplication of infrastructure in outlying areas is anyway inefficient, it is possible that coverage by all networks could be reduced. Given the existing wide coverage of all the four networks, it may be that both the potential benefits and the costs of MVNOs in terms of its effect on network coverage, are limited. However, there may be adverse effects on investment in maintaining the quality of coverage.

2.27 One of the main purposes of the MVNO consultation was to investigate the costs and benefits associated with MVNOs. As already discussed, Oftel is interested in the net benefits that MVNOs might bring to consumers that could not be provided by any other means.

2.28 It is clear from the responses that the key benefits (in the form of network competition and reduced retail prices) resulting from MVNOs would only be delivered if MVNOs were able to require services from all four mobile networks simultaneously. In the absence of seamless switching, the net benefits associated with MVNOs appear minimal. Oftel takes the view that many of the benefits attributed to MVNOs by respondents could be achieved by market developments in the absence of MVNOs. These limited benefits could be outweighed by the costs arising from establishing MVNOs, namely the potential adverse impact on infrastructure investment and network costs. Potential network costs are discussed more fully in Annex B. They include the fixed technical set-up costs incurred by network operators to accommodate MVNO services, and ongoing costs associated with capacity planning and development.

2.29 Regulatory action supporting a form of MVNOs that allowed the transfer of customers between all four networks is a significant regulatory step that may have far reaching consequences for the way in which networks compete with each other, and would also impose specific regulation on networks without SMP. Such a step is inconsistent with Oftel’s view that effective competition is emerging in the market and Oftel’s strategy to withdraw or refrain from regulation where possible. Requiring that MVNOs are supported on fewer than four networks (to the two network operators with SMP for example) would reduce the benefits associated with seamless switching between the networks. Obviously, support of MVNOs on one network only would remove all of the benefits associated with alternative mobile delivery paths to and from mobile customers.

2.30 Benefits in the form of new services suggested by potential MVNOs largely involve taking advantage of the flexibility that MVNOs would have to bundle different elements of fixed and mobile voice, data and content services together (including seamless transition between DECT and GSM). However, it appears that most of these services could be replicated by a combination of fixed services, mobile IA and the ability to be a Mobile Service Provider (particularly if the supply of unbranded airtime becomes more flexible). It is possible that some of the additional benefits of MVNOs over those methods of service provision available today would only be obtained if charging for MVNOs were on a cost-plus basis. Oftel believes that if MVNO services were to be offered the logical principle for charging would be retail-minus. Oftel would not expect to adopt for mobile services the same cost-plus basis that is applied to most of BT’s services supplied to other operators (further discussion of the charging basis is contained within Annex A). While Oftel recognises that MVNOs might be a convenient way to provide the services suggested by respondents in favour of MVNOs, it is not convinced that very similar services could not be provided without MVNOs.

2.31 The direct control of inbound calls to mobiles is one of the most significant differences between MVNOs and a fixed operator using call forwarding, IA and Mobile Service Provision to provide FMI services. Some respondents argued that MVNOs would address the ‘market failure’ of a lack of competition on incoming mobile call termination charges, as the MVNO would be able to choose which network to use to deliver a call to the mobile customer. The MNOs would thus be encouraged to compete on incoming mobile termination charges. Oftel believes that generally, the MVNO would not have any greater incentive than a MNO has to reduce incoming call termination charges to benefit the calling party. This is because these costs are not usually paid by the called customer but by the calling customer (this is the reason why price controls on call termination charges have recently been introduced). Thus there is no direct link between the charge for call termination (paid by the calling party) and the choice of terminating MVNO (selected by the called party).

2.32 With the prospect of effective competition in the mobile market, Oftel is reluctant to take the significant regulatory step of requiring that MVNOs are provided with the services that they require without strong justification. Oftel does not consider that there is enough evidence to justify regulatory intervention at this point in time. Oftel has only recently considered a dispute about the provision of IA on mobile networks. It is possible that IA might provide some of the same benefits of MVNOs with fewer network modification costs, less risk of inappropriate regulation, and less impact on network investment incentives than a form of MVNO that allowed switching between the mobile networks. With effective competition in the mobile market a real possibility, Oftel believes that regulatory action to establish MVNOs, at a point when the impact of IA is yet to be seen, is premature. In addition, the auction of 3G spectrum provides the opportunity for a fifth mobile operator to enter the UK mobile market, which should contribute significantly to the development of effective competition and is another way in which some of the main benefits of MVNOs might be achieved.

2.33 The mobile market is reviewed regularly, and the next review of competition in the mobile market will take place in the year 2000. The concept of MVNOs will not be specifically reviewed, but if competition in the mobile market is found not to have developed to the extent expected, various options for regulatory intervention will be considered.

2.34 Oftel will also monitor European developments (see Annex C for a review of the actions of other European NRAs). Oftel is maintaining close links with European NRAs and the European Commission which is also examining MVNO developments. Oftel will continue to participate in discussion and debate on the possible economic benefits of MVNOs, and the legal framework that might be applicable.

2.35 Oftel has received a number of comments on the legal framework that might apply to MVNOs. The responses generally expressed one of two opposing views. The first view is that Oftel has the power to require MNOs to provide service to MVNOs based on either the Interconnection Directive (ICD) or the Director General’s duty under Section 3 of the Telecommunications Act 1984. The second view is that the service required by MVNOs is not covered by the ICD, and requiring a new form of service using Oftel's statutory duties under Section 3 of the Telecommunications Act would be unjustifiable.

2.36 Oftel received many replies from proponents of MVNOs who argued that the service they require from MNOs is covered by the ICD. There is still widespread debate on the nature of MVNOs and on the interpretation of the ICD. If the ICD does apply to MVNO services, in the future Oftel may be asked to resolve a dispute under the ICD. Oftel would decide how to settle such a dispute by considering similar factors to those considered in this Statement, including the interests of the user and the promotion of competition and the other criteria mentioned in Article 9(5) of the ICD.

2.37 If the Director General believed that action to require that MNOs provide MVNOs with the services they require was justified under Section 3 of the Telecommunications Act, it would be open to him to propose a modification to mobile operators’ Telecommunications Act Licences, under Section 12 of the Telecommunications Act. This would need the mobile network operators’ consent or, failing that, after a reference by the Director General, a favourable report from the Competition Commission.

2.38 Based on the issues discussed during this consultation process and the present state of the mobile market, it is likely that the Director General would find that there is currently no basis for requiring the provision of service to MVNOs either under the ICD or as a result of his duty under Section 3 of the Telecommunications Act.

2.39 Regulatory action to require the provision of services to MVNOs would be a significant step that might fundamentally alter the way the mobile market operates. The risks associated with dictating the future market structure by regulation must be considered carefully. Oftel is not certain that a fully competitive mobile market would support the existence of MVNOs, at least not in a form that Oftel might anticipate in advance.

2.40 Most respondents in favour of MVNOs expressed the view that regulatory action is necessary in order to enable MVNOs, but presented little evidence that they have tried to negotiate with all four mobile network operators and failed to secure services. Mobile network operators state that they have not been approached seriously by potential MVNOs. The arrangements that One2One have recently announced (in a joint venture with a non-mobile commercial enterprise) do not appear to represent a move towards ‘full MVNOs’ as described in the consultation document, but might provide some of the same benefits.

2.41 Oftel is reluctant to take action that might dictate a particular form of MVNO when some of the benefits might also result from different arrangements that can be achieved by commercial negotiation. Oftel believes that the best way to identify the exact form of MVNO operation that minimises the costs associated with MVNOs and adds maximum value to the mobile industry and consumers, is by commercial negotiation between network operators and potential MVNOs.

1 In June 1999, Oftel published a consultation document seeking views on the development of what are known as Mobile Virtual Network Operators (MVNOs). Responses on the issues raised were sought by 30 July 1999, and comments on these responses were invited by 20 August 1999.

2 The consultation document was sent to generalist and specialist telecommunications consumer groups including Oftel’s Advisory Committees on Telecommunications, National Consumers Council, Consumers Association, Telecommunications Managers Association and the Telecommunications Users Association. All leading operators were consulted (including a presentation to the Operators Policy Forum (OPF)), as were service providers (those attending the Service Providers Forum), other Government departments and other NRAs.

3 Responses were received from the following organisations (in alphabetical order):

• ACC Telecom
• Advanced Telecom
• Bridge Trading International
• BT
• BTCellnet
• Cable & Wireless
• Cellcom
• COLT
• Consumer Communications for England (CCE)
• Dolphin
• Energis
• Federation of the Electronics Industry (FEI)
• First Telecom
• Fusion
• International Integrated Information Systems Services
• Kingston Communications
• Mannesmann Mobilfunk
• MCI Worldcom
• Nokia
• Norweb Telecom
• One2One
• Orange
• RSL Com
• Scottish Telecom
• Service Providers Interest Group (SPIG)
• Tele2
• Vodafone
• World Telecom

4 Comments on these responses were received from the following organisations:

• BT
• Energis
• Fusion
• Nortel Networks
• Vodafone

5 Since an MVNO would not have spectrum of its own and would have limited infrastructure, it would rely on one or more of the existing network operators to provide services to its customers. The need to rely on another network for service means that the terms on which an MVNO buys this service dictate the terms on which the MVNO can offer services to its customers.

6 The consultation document made it clear that Oftel was considering that services be provided to MVNOs on a retail-minus basis. This is consistent with Oftel’s proposals for resolving disputes about 3G roaming on 2G networks, and Indirect Access (IA) for mobile networks.

7 Most respondents questioned the retail-minus approach, with non-mobile network operators arguing that the charging should be in terms of cost-plus. The question of cost-plus versus retail-minus charging was discussed at some length in the consultation on IA for mobile networks, and Oftel takes the view that similar considerations would apply to setting terms for MVNOs. Charging for IA from mobile networks was resolved in favour of retail-minus on the grounds that regulatory intervention which has the effect of reducing retail prices to close to the level of costs was unnecessary in a market which was becoming increasingly competitive. Retail-minus charging helps to avoid the case where regulation directs the pattern of changes in retail prices; this is consistent with Oftel’s long term strategy in light of the assessment that the mobile market is becoming increasingly competitive. Moreover, cost-plus charging could damage incentives to invest in infrastructure. A retail-minus approach would encourage efficient competition, encouraging MVNO entry only where they can effectively compete with existing mobile network operators in supplying substituted elements of services.

8 Existing mobile operators also opposed pricing on retail-minus terms, arguing that it would have an adverse impact on investment in infrastructure. This issue is covered in Chapter 2. In addition, it was argued that if MVNOs have the ability to switch networks at will, there would be problems associated with congestion and quality of service on existing networks. Moreover, the network being switched away from would suffer from over-capacity (particularly if investment had been made to cope with MVNO demand). Oftel accepts that network planning problems may impose additional costs on networks, but takes the view that this is a practical problem which would need to be addressed in commercial negotiation. It may not be an insurmountable problem; it is likely that commercial agreements, addressing additional investment costs and planning problems, would emerge.

1 For background information, the non-technical reader is advised to read the original consultation technical Annex. Figure One below is a diagram of a typical Global System for Mobile Communications (GSM) network that was used in the initial consultation, and it is included here to help clarify the discussion below.

2 If Oftel were to ever become involved in any regulatory intervention on this issue it would not seek to get involved in detailed technical negotiations in the first instance. Oftel would only seek to make a determination on those technical issues that cannot be resolved. Commercial negotiation and agreement are preferable to regulatory intervention.

3 An MVNO is an organisation which provides mobile telephony services to its customers but does not have an allocation of spectrum. The MVNO must use part of the MNO’s network in order to provide services. The extent to which the MVNO would use the network elements of the MNO was discussed in the consultation document. Most proponents of MVNOs indicated that there was the most interest in ‘full MVNOs’. A full MVNO is one with a Home Location Register (HLR), Mobile Switching Centre (MSC), Authentication centre (AUC), Equipment Identity Register (EIR) and associated signalling capabilities. A Subscriber Identity Module (SIM) card controlled by the MVNO is recognised as a key requirement of an MVNO. The MVNO would probably also require an Intelligent Network (IN) platform if it wished to provide its customers with its own value-added services rather than relying on those available from the host MNO.

4 The ability to have the SIM card route outbound calls without the need for customer input override codes is a major advantage, although this could be possible for an IA operator with control of their own SIM card. Swisscom has developed a SIM card application platform called NATELsicap which modifies the header of a mobile terminated SMS (Short Message Service). The SIM can then distinguish this SMS from normal text messages. The ‘Sicap’ message is used to modify the subscriber options in the SIM service table. This mechanism would appear to be most of the functionality required to realise the control of outbound calls. Developments within SIM-toolkit (next generation of SIM cards) would also seem to make this type of call control technically feasible (see below).

5 Inbound calls could be routed directly to the ‘full’ MVNO’s Gateway MSC (GMSC) and then routed using data in the MVNO’s HLR. If the MVNO had the use of more than one mobile network, the MVNO could choose over which mobile network to deliver the call. If the MVNO could update the SIM card remotely, the MVNO might select the mobile network to use based on the lowest call termination charge. Once the MVNO has decided over which mobile network an inbound call will be delivered, it will route the call to the relevant MSC of that mobile network. The call would be passed to the MNO and terminated in the normal manner. It could take around 30 seconds for a mobile to change ‘connection’ from one mobile network to another; this means that the MVNO’s ability to switch its customers from one network to another in ‘real time’ (ie during call set up) could be limited.

6 For outbound calls, the MVNO would want to route the call away from the visited network to its own network at the earliest opportunity. This might involve some form of targeted transit type product provided by a third party (such as BT). This recognises on a call-by-call basis that certain calls (in this case outbound MVNO ones) should not be passed on in the normal manner by the MNO, but directly to a particular point (MVNO switch) regardless of the number dialled by the MVNO customer (except perhaps for emergency calls).

7 Technically, the majority of the services proposed for an MVNO could be implemented by using a combination of fixed telephone lines with cordless/ GSM handsets, with the added functionality of IA on mobiles and ‘one number’ or ‘follow me’ type services.

8 One could conceive of a fixed operator with a customer who had a DECT phone (Digital Enhanced Cordless Communications Telecommunications) with a base station at home and at the office. This type of service would have very limited geographic coverage compared to that offered by mobile networks. Inbound calls could be routed using one number and follow me type services, with outbound calls controlled by the consumer/ caller. With such restricted coverage however location based services are of limited value.

9 A customer could have a DECT/ GSM phone (such as BTCellnet’s Onephone). With this type of phone, an outbound call could be routed via the DECT service when this is available (ie one is in range of the base station). The consumer would be able to manually select either the DECT or GSM routes. When a DECT outbound call is not possible the consumer would have the option to use IA (when available) on GSM to route his/ her call.

10 For an inbound call, the operator may have the ability to route the call from their switch to either the DECT or GSM element using a ‘follow me/ one number’ type service. An operator may be able to automatically determine if the customer’s mobile is within range of the DECT base station and then using this information route the call over the fixed line instead of the mobile network. Without this ability the notification of where the consumer was would need to be sent manually. Another option might be to try the DECT phone first and then the GSM phone.

11 To date DECT/ GSM phones have not been widely available. This may be due to the extra cost of the handsets. Using a DECT/ GSM type solution means that the vast majority of consumers would not be able to currently use such a service unless they changed their handset. It may be that in the near future the cost of these combined handsets may come down in price as the price of DECT only phones has.

12 This combination of DECT and GSM could probably offer most if not all of the services mentioned for MVNOs in responses to the consultation, albeit in a less elegant technical manner. This would result in more inputs (access codes, changed location, etc) being required from the consumer. A DECT/ Fixed phone only combination would be limited in terms of coverage and hence location based value added services.

13 Many proponents of MVNOs quoted the benefits of integrated fixed and mobile services, and one bill for fixed and mobile calls. An MVNO would have the capability to intelligently route inbound calls and outbound calls. MVNO functionality would obviate the need for consumers to enter manually a message to their service provider each time they changed location. With MVNO functionality this could be provided seamlessly. It would also do away with the need to enter override codes to control outbound calls.

14 Outbound call control will be possible with IA, but the control of a SIM card does give the benefit of making this easier for the consumer. One of the other possible advantages of an MVNO would be access to customer location. Using information such as cell ID (ie which radio cell the customer is in) will give an MVNO the ability to offer targeted location information. Due to the large variation in cell size this may be imprecise (a cell may be a few kilometres in size). Future development work is ongoing within the GSM community to offer more accurate location information. This has been spurred on by regulatory requirements for location information for mobile emergency calls in the USA.

15 An MVNO may rely on CAMEL (Customised Applications for Mobile Network Enhanced Logic see below) to provide its customers with value added services and features which require the MNO to use intelligence in the home network (the MVNO) throughout the duration of the call.

16 Some value added services that can be provided by an MVNO will only be dependent on the size of the ‘bit pipe’ that GSM offers. Services such as internet browsing and file download which are transparent, and will not rely on any specific GSM capabilities. These types of services could be offered by a fixed operator using a home or office cordless phone (such as DECT) connected to the fixed network or a GSM/ DECT phone. Others will be specific to GSM capabilities such as location based services or those reliant on the SIM card for authentication of financial transactions. Due to the inherent security of a SIM card it could be an ideal platform for e-commerce type applications.

17 Consultation respondents suggested that MVNO’s will be more focused on delivering value added content services and will offer a greater variety than might otherwise be available.

18 Respondents made the point that to date in the UK only two IN services have been implemented across different mobile networks; these are Mobile Number Portability (MNP) and SMS, which required extensive discussion within the industry and compatibility testing. Concern was raised that if MVNO type services are to be implemented they should go through the same form of process. This could entail the formation of a NICC (Network Interoperability Consultative Committee) group, along the lines of the one used to implement MNP. This would involve the industry trying to agree a technical implementation which would in all likelihood take many months.

19 The decision to implement such an approach (ie formation of NICC type group) could only be made if and when Oftel regulatory intervention on this issue occurred or appeared likely. It would depend (in part) on the technical complexities that presented themselves at that time. Oftel would need to be satisfied that any implementation had no significant detrimental effect on the mobile networks in terms of security or reliability or quality of service.

20 There would be costs involved with the implementation of MVNO type services. These would fall into two main categories: one off costs involved in adapting the MNO equipment, and ongoing costs involved in maintaining MVNO customers ability to use a mobile network. These might include software upgrades, extra switching capability, modification to billing systems, etc. An exact figure on such costs is not available to Oftel at this time. Without detailed work on how an MVNO would be implemented a more accurate figure is hard determine.

21 It appears to Oftel, however, that such costs would be in excess of those involved in IA, that is the ability of a mobile subscriber to ‘use’ another network. In the fixed world, an example of IA would be a BT subscriber dialling a 132 prefix to make his/ her call via Cable and Wireless.

22 Unlike IA the MVNO would also handle the inbound call, and would probably wish to offer their own value added services. This would be likely to require more complex interworking processes to be implemented. Oftel has stated its intention to require IA under the European Union Interconnection Directive (for BTCellnet and Vodafone), but this has yet to be technically implemented on mobile networks within the UK.

23 GSM network Quality of Service (QOS) could be undermined by extra traffic generated by an MVNO, so how will this be planned for? The MVNO could be required to provide forecasts of traffic to the MNO. This must be sufficiently accurate so as to allow any extra capacity that is required in specific areas to be catered for by the MNO. If the traffic forecasts did not prove accurate enough then agreed contingencies should be used. This would be the subject of commercial negotiation normally.

24 This issue of capacity might be aggravated by the projected growth in data services which would add extra parameters such as guaranteed delivery times and bit error rates needing to be considered.

25 How will operators be able to maintain the integrity and security of their networks to full MVNOs with possible access to sensitive databases and signalling? Operators can take such measures as can be demonstrated to be required and proportionate. Oftel would expect reasonable measures to be possible by mutual agreement and inherent in GSM standards. Oftel hopes that the standardisation process within ETSI for CAMEL and SIM toolkit will help to address these issues. To an extent current international roaming means that security issues have already been addressed. It is recognised that they are voluntary agreements but might serve as useful templates in any future negotiations.

26 The current regime for allocating GSM Mobile Network Codes (MNCs), which are administered by the Department of Trade and Industry, does not appear to require significant amendment for MVNOs currently. Using the currently proposed principles should be sufficient to meet the projected MVNO demand for MNCs. These principles include that the applicant for an MNC being able to demonstrate that a roaming agreement is (or will be shortly) in place, and also a proposed 12 month ‘use it or lose it’ clause. Should MNC demand linked to MVNOs rise then other allocation methods may be required, as might the need for MVNOs to share MNCs.

27 The ability to have an MNC (or number subspace within one) would however allow an MVNO to issue its own SIM card and to have full control of that SIM card using over the air signalling.

28 Will MNOs be prevented from implementing new services because of need to maintain backward compatibility with MVNOs? As Oftel is not currently proposing any determinations be made on MVNOs this would be a matter for commercial negotiation. GSM standards such as CAMEL would hopefully help overcome some of the technical problems and make it possible to implement new services for roamers without the need to extensively change the host network and vice versa. However should this be an issue for Oftel to determine, a view would need to be taken as to how proportionate the proposed action by the MNO is. Issues such as the purpose of the proposed change, how often such changes occur and the net benefit to consumers would need to be considered.

29 Oftel would not seek to unnecessarily deny new and innovative services to consumers. The two extremes might be changes proposed by the MNO to solely disadvantage MVNO, and an MNO being held back from implementing new and innovative services by an MVNO with poor technical implementation.

30 SIM toolkit is the GSM implementation of intelligent SIM cards in mobile networks. SIM Toolkit offers extra functionality than is available in older GSM SIM cards. Initially SIM cards were in effect ‘slave’ units within the handset. They provided information when the handset or network required it, and stored information that the networks required for authenticating and ciphering mobile calls. The original concept was that a subscriber would be able to use different phones on his/her subscription, rather than being tied to one particular phone.

31 The new generation of SIM cards with their increased processing power and memory can now act as ‘master’ units in the handset. That is they are proactive and can initiate calls/functions and override the handset commands and what appears on the handset screen. It would appear that the functionality offered by SIM toolkit will now or very shortly offer the capability to significantly enhance the services offered to roamers in the sense of keeping the functionality of the handset apparently the same. That is the SIM card will recognise when the user dials home network specific commands and may ‘translate’ them to those compatible with the host network. It should also be possible to alter the number dialled by the caller to include the IA type override codes if required.

32 Using SIM toolkit cards it should be possible for an MVNO to route customer outgoing calls on a call by call basis. With access to Short Message Service (SMS) facilities it should also be possible to change this profile over the air. That is by sending a radio signal to the mobile, and not require the subscriber to take his/her phone to a service centre. This could be a major advantage over IA due to the perceived customer unwillingness to enter override codes (although an IA operator with control of its customers SIM card might be able to overcome the need for the customer to enter access codes). This ability to route calls via different mobile networks would require an MVNO to have agreement with more than one MNO.

33 Customised Applications for Mobile Network Enhanced Logic (CAMEL) represents the attempt of the GSM standardisation community to implement Intelligent Network (IN) technologies in mobile networks. The main concept of IN being the flexible implementation of services in public networks. This is done by having basic call functions within the MSC/ GMSC and having the intelligent service control functions in a centralised location which is connected to all the MSC/ GMSC. For MNO’s this means that their own service can be implemented quicker and more easily because only one network node (one point in the network) needs to be updated, rather than many points (ie all MSCs). This can drastically reduce implementation times and costs. It also (in theory) reduces compatibility problems.

34 It is recognised that another benefit is to the services offered to roaming customers from another network. Currently services are limited to those available on the host network. When a subscriber roams his/ her service profile is transferred from the home network to the host one. This contains a profile of the value added services available on the roamer’s home network. Subject to commercial agreement between the two networks and the services being available on the host network, these will be available to the roamer. But they are the host network’s implementation, and as such may appear ‘different’ to the roamer. That is different key sequences are required to access them. With CAMEL-IN the host network is only responsible for basic call processing, the extra intelligence to provide value added services resides in the home network. This means that each call relies on intelligence from the home network, and will need the home networks participation on a call by call basis. This does not necessarily happen currently for roamers, where information may be exchanged periodically (say every 24 hours) relating to billing only.

35 Value added services are seen as a key feature for MVNOs. It has been suggested that MVNOs will be able to provide such services to customers in shorter time scales than MNO's due to their main focus on such services. They quote SMS interconnect delays in UK and the relative lack of SMS based value added services in UK compared to abroad as an example of this.

Note: The photograph in Figure One has been reproduced with permission from Mike P’s UK GSM & UMTS Pages at http://www.prattfamily.demon.co.uk/mikep/gsmnet.html

1 In the June 1999 consultation document, Oftel gave an overview of the state of policy development in other European countries. In conducting its research, Oftel found that it was early days for European regulators – policy issues had not been discussed in any great detail, and hence most regulators were not in a position to provide clear statements of policy. The exceptions were the Scandinavian regulators who were already considering applications from a Norwegian service provider requesting MVNO services from mobile networks. Four months on from Oftel's initial consultation, it is apparent that the Norwegian, Danish and Swedish regulators have raised the level of debate surrounding the MVNO concept. The situation in Finland is unchanged. Some background detail on these developments now follows:

2 Danish telecomms legislation is currently being revised, and our understanding is that a political agreement has been reached which will allow MVNO services to be provided. In the mobile market, it is anticipated that there should be no price regulation of interconnection products, and it has been decided that MVNOs should be ensured national roaming in mobile networks to the extent that this is technically feasible, ie restricted to numbers within the Danish numbering plan (currently, operators are only required to conclude national roaming agreements with other licensed operators).

3 The Finnish Telecommunications Administration Centre has been reviewing the issues surrounding the MVNO concept since March 1998 – triggered in particular by complaints from operators on the difficulties they are having reaching commercial agreement for MVNO facilities with the national SMP mobile supplier. Up until now, no request to resolve a dispute has been registered with the NRA, but the NRA has encouraged potential MVNOs to continue to negotiate their preferred terms with the incumbent.

4 In August 1999, the Norwegian Ministry of Transport and Communications published a consultation document on MVNOs. The Ministry intends to present its findings to the Norwegian Parliament before the end of the year, and it is anticipated that the consultation process will clarify the current regulatory environment in order to avoid unnecessary disputes.

5 The Swedish National Post & Telecom Agency (PTS) has considered the MVNO concept in some detail, and believes it would be beneficial to the competitiveness of the Swedish mobile market, and particularly in the encouragement of downstream competition at the service provider level, if MVNO services were offered. Earlier this year, PTS proposed amendments to the Swedish Telecommunications Act which would oblige networks to provide services to MVNOs. However, the Swedish Government has since requested PTS to carry out additional investigations before deciding to amend the Act. One such investigation is to consider other means of achieving enhanced competition, such as via the implementation of carrier pre-selection on mobile networks, or mandatory roaming. A second investigation is exploring the impact of MVNOs on investment in mobile networks.

AUC (Authentication Centre) – commonly associated with the HLR, the AUC contains the information required to verify that the SIM card in the mobile is the one that is announcing itself to the network.

CAMEL (Customised Applications for Mobile Network Enhanced Logic) – allows roamed customers to access the value added services of their home network, even if the visited network does not support those services.

Cost-Plus – a charge which covers the costs incurred by the network operator in providing services for other operators, including a reasonable return on capital employed.

DECT Handsets (Digital European Cordless Telecommunications) – cordless handsets for domestic and business use.

EIR (Equipment Identity Register) – checks that the mobile handset is valid.

FMI (Fixed Mobile Integration, but also known as Fixed Mobile Convergence) – the merging of fixed and mobile services into an integrated service whereby the customer will be offered both fixed and mobile services and will receive one bill and/ or receive and make calls using one terminal.

GMSC (Gateway Mobile Services Switching Centre) – the first point of contact between the PSTN and the GSM network.

GSM 900/ 1800 MHz – Global System for Mobile Communications in the 900 and 1800 MHz frequency bands.

HLR (Home Location Register) – a database that contains the subscriber information required to provide customer services without knowing the exact location of the mobile within the network.

Indirect Access – a situation where a customer contracts to buy a telecommunication service from an operator to which the customer is not directly connected, and where the second operator pays the first operator for the use of that connection.

Interconnection – the physical and logical connection of two operators’ networks thereby allowing customers of one system to connect with customers of the other, or to access services provided from the other system.

Interconnection Directive (ICD) – the European Union Directive which came into effect from 31 December 1997, setting rules for, amongst other things, who has rights and obligations for interconnection and the terms on which it should take place.

Market Power/ Market Influence – the ability to raise prices above the competitive level for a non-transitory period without losing sales to such a degree as to make this unprofitable.

MNC (Mobile Network Code) – the MNC is part of the International Mobile Station Identity (IMSI), and it identifies the subscribers host network.

MNO – Mobile Network Operator, ie Vodafone, BTCellnet, Orange or One2One.

MSC (Mobile Services Switching Centre) – co-ordinates the setting up of calls to and from mobile phones in the GSM operator’s network.

Network operator – the operator of a telecommunication network with a PTO licence which provides, amongst other things, network services.

NICC (Network Interoperability Consultative Committee) – a leading UK telecommunications industry group which deals with the technical issues associated with network competition. It produces voluntary technical specifications on behalf of the industry and is a source of advice to the Director General of Telecommunications on the harmonisation of interconnect arrangements.

NRA (National Regulatory Authority) – the body or bodies, legally distinct and functionally independent of the telecommunications organisations, charged by a Member State with the elaboration of, and supervision of compliance with, telecomms authorisations.

Originating operator – operator on whose network the call originates, ie the operator with the line to the customer.

PTO (Public Telecommunications Operator) – network operators providing services to the public with powers granted by the Secretary of State for Trade and Industry under the Telecommunications Act 1984, to enable them to install their systems on public and private land.

Retail-Minus – a charge based on the retail price to the end user minus the costs of all elements of the call which are no longer supplied by the mobile network operator (since they will now be supplied by the MVNO).

Roaming – the provision of connection services by means of the Applicable Systems to authorised mobile operators in respect of teleservices and bearer services pursuant to a national roaming agreement between the licensee and a relevant mobile operator.

Service provider – provider of telecommunication services, or services with a telecommunication service component, to third parties whether over its own network or otherwise.

SIM (Subscriber Identification Module) – a small smart card device which is fitted into the mobile handset (usually on purchase), and is required in order to allow the user to make normal calls.

SIM Toolkit – new GSM SIM card capability that allows operators to use the full computer processing power of a SIM card to create new services.

SMP (Significant Market Power) – the SMP test is set out in various European Directives, notably the Interconnection Directive. It is used by Oftel to identify those operators who must meet additional obligations under the relevant Directive. It is not an economic test; rather it requires a consideration of the factors set out in the test within a specified market – much is left to the NRA’s discretion.

SMS (Short Message Service) – GSM specific messaging service of alphanumeric strings of up to 160 characters.

Targeted transit – allows a call to be carried from the MNO’s switch back to the MVNO’s switch. Conceptually this can be thought of as a direct cable from the MNO to the MVNO.

Terminating operator – the operator on whose network a call terminates.

Third Generation (3G) mobile systems – A European 3G mobile communications system will provide an enhanced range of multimedia services (such as high speed Internet access). 3G networks are expected to enter service in 2002/3 using radio spectrum in the 2GHz bands.

VLR (Visitor Location Register) – responsible for keeping accurate information as to where the mobile phone is located within the GSM network.