Draft Oftel management plan 2003-04 - Consultation, 18 December 2002

Foreword

Executive summary

Chapter 1 Priorities for Oftel's final management plan

Chapter 2 Looking ahead to Ofcom

Chapter 3 Proposed projects and programmes 2003/4

Chapter 4 Oftel's resource plans for 2003/4

Chapter 5 Consultation process and questions and alphabetical list of projects and programmes

Annex A Oftel's regulatory principles

Annex B Summary of Oftel regulatory decisions - 2002/3

Annex C Indicative EU Market Review timetable

Annex D Indicative Consumer Protection Policy Review timetable

Annex E Developing Oftel's understanding of telecoms demand

This draft Management Plan sets out Oftel's proposed projects, programmes and budget for 2003/4. Oftel is seeking views from stakeholders by 31 January 2003.

This is, of course, likely to be a momentous year for all those concerned with the regulation of communications in the UK in that the Communications Bill, currently before Parliament, provides for the transfer of Oftel’s powers and responsibilities to Ofcom. This could mean in practice that Oftel will cease to exist during the course of the work covered by the draft Management Plan. We have decided, however, that ‘good governance’ makes it sensible not to anticipate the enactment of the Bill and that we should set out an agenda for Oftel for the full year in the usual way. We also set out in chapter 2 of the draft some ‘thoughts for the future’ which Ofcom may wish to bear in mind as it develops its own Management Plan.

It is also, of course, the reality of life that the market does not stand still while organisational change is being implemented. There have been major changes in the market place over the last year as a result of competitive developments and the uncertain financial environment for all companies in the industry and the Plan reflects this. We also have a major programme of work to implement the new EU regime for communications which needs to be completed by July and thus before Ofcom begins.

Oftel wants to receive views on its proposed work from all those with a stake in the UK electronic communications market – consumer groups, telecoms operators, service providers, other regulators and Government. We would also welcome views from other European regulatory authorities.

David Edmonds

Director General of Telecommunications

Oftel plans for 2003/4 - Executive summary

S1 There have been major changes over the last year in the telecoms markets as a result of increased competition, and because of an often-turbulent financial environment. Areas where Oftel has undertaken major initiatives include Oftel's EU market review programme, the continued work to create a regulatory framework that promotes effective competition in the broadband market, and major changes in how Oftel deals with dispute resolution.

S2 Oftel’s management plan for 2003-04 reflects the need to complete these major areas of work – particularly the EU market reviews – and to ensure that on-going projects and programmes continue to run smoothly in areas such as complaint handling and number allocations.

S3 Continuity of processes will be especially important given the other major change in 2003-04, the setting up of Ofcom. Oftel will continue to work with its partner regulators in the move towards the formation of the new organisation.

S4 The management plan looks at areas of Oftel’s work that will be developed during the coming year. For example we intend to employ tougher criteria for accepting and resolving disputes, and to use data more effectively.

S5 The plan also considers how further developments to the regulatory decision making process can be made. One option that will be explored is the adoption of a regulatory approach that acts as an incentive for action. For example we consider there is potential to apply more widely the approach Oftel took to BT price controls during this year which has stimulated a new wholesale market.

S6 Looking ahead there will be key policy challenges for Ofcom – notably the introduction of spectrum trading, the challenge of balancing increased competition in communications markets with public service broadcasting arrangements, and the need to work with other appropriate lead agencies for a broadband market that successfully addresses issues of content property rights to enable consumers to access what they want to see and hear while retaining incentives for content producers to develop attractive content.

S7 The draft plan sets out Oftel’s full work programme, proposed budget for 2003-4 and details a number of consultation questions for stakeholders to give their views and comments on in preparation for the formal adoption of the plan in the spring of 2003. The feedback from stakeholders will be considered in the drafting of the management plan statement for 2003-4.

Chapter 1

Priorities for Oftel's final management plan

Introduction

1.1 For the past 5 years, Oftel has consulted its stakeholders on its annual work plan. This document sets out Oftel's proposed work for 2003/4. During 2003/4 it is expected that Oftel will transfer its functions to Ofcom (the Office of Communications) in accordance with the forthcoming Communications Act (the current Communications Bill going through Parliament). The timing of the transfer will not be certain until the Bill is enacted.

1.2 The Ofcom board will be progressively involved during 2003/4 and they are likely to have responsibility for the issues in this plan for the latter part of 2003/4. Co-ordination and co-operation with the Ofcom Board has already begun and will develop increasingly during the year. However legal responsibility for all decisions will remain with the Director General of Telecommunications until powers are vested in Ofcom.

1.3 Oftel has two major aspects to its work in 2003/4

• planning for Ofcom
• implementing EU Directives

Both of these aspects should be underpinned in legislative terms by the passage of the Communications Bill, although there are contingency plans to implement the EU Directives by secondary legislation in the form of interim statutory instruments in the event that the Communications Bill is delayed.

1.4 In addition, the document addresses several other important areas of regulatory work:

• market reviews – essential to creating the new EU regulatory regime
• ensuring that ongoing regulatory activities continue uninterrupted through the run up and transfer process to Ofcom
• taking the opportunity to look ahead to Ofcom by identifying emerging regulatory processes that could usefully be further developed to ensure proportionality and appropriateness of regulation
• identifying Oftel’s contribution to the significant opportunities that Ofcom will have to increase benefits to consumers.

1.5 The structure of this consultation document is as follows:

Chapter 1 is focused on the priorities for 2003/4, against the background of market and regulatory developments, in the current year

Chapter 2 looks ahead to Ofcom in terms of current regulatory processes being developed that are likely to be relevant in future and the opportunities presented by Ofcom to promote competition in the interests of consumers

Chapter 3 sets out the specific proposed projects and programmes for 2003/4 that Oftel is planning to carry out

Chapter 4 summarises Oftel's proposed budget for 2003/4 to support the work plan set out in chapter 3

Chapter 5 describes the consultation process and questions for stakeholders and the informal consultation processes involved in preparing this document.

Background to the plan

1.6 Oftel's long standing aim of obtaining the best deal for consumers in quality, choice and value for money is achieved primarily through promoting markets that are effectively competitive. We intervene to protect consumers where competition is insufficiently established or where there are special features of networks or services that require intervention. This approach can be described as 'competition plus' ie competition wherever feasible and intervention where it is not.

1.7 The new EU Framework Directive sets out the overall regulatory framework, including objectives and principles that Oftel must take into account when making regulatory decisions. The general objectives set out in the Framework Directive are: promoting competition; contributing to internal market development; and promoting the interests of citizens. In operational terms this means seeking to achieve:

• effective competition - benefiting consumers;
• well informed consumers;
• adequately protected consumers; and
• prevention of anti-competitive practice.

1.8 Oftel's regulatory principles applied in pursuing these objectives are set out in Annex A.

1.9 Within this regulatory framework, Oftel needs to set its priorities. Doing this involves considering market developments and their implications, and reflecting on regulatory actions taken this year and how these can be built on during 2003/4.

Market developments

1.10 Two themes can be identified from market developments over the past 12 to 18 months:

• Demand for telecoms services overall is increasing but the focus continues to shift steadily from traditional voice telephony services towards mobile and Internet and , increasingly, broadband services.
• The telecommunications sector continues to be in a turbulent state. This inevitably has some effects on the extent of competition – and generally these effects are negative.

1.11 On the demand side consumers are increasingly active as evidenced by

• an increasing propensity to switch suppliers in newer markets
• a willingness to take up new services
• more sophisticated purchasing behaviour through looking at features of services, not just their price

1.12 The story for operators is somewhat different. A general lack of confidence by financial markets in the prospects for telecoms has undermined investment and growth plans by the telcos. This has been coupled with the legacy of the telecoms investment boom resulting in:

• over-capacity in long distance routes
• excessive debt levels reflecting excessive asset prices
• greater risk aversion.

1.13 Never the less industry turnover continues to grow.

Figure 1: Annual Turnover of UK Telecoms Industry 1996-2002

Source: ONS, all figures year to June at 2002 prices

1.14 This suggests that while there have been changes of ownership and management, the underlying infrastructure remains in place and continues to be used and the market continues to grow despite problems.

1.15 Three further aspects can be examined in considering market developments – growth rates, market shares and investment levels.

1.16 Figure 2 below sets out the rate at which different sections of the UK telecoms market grew in revenue terms between 2000/1 and 2001/2. This shows a variety of growth rates with the newer services generally growing faster than more mature fixed link switched services.

Figure 2: Estimated Retail Revenue Growth 2001 to 2002

Source: Oftel Market Information (all figures year to June except leased line figures (to March))

1.17 Market shares give some indication of competition although they are by no means the whole picture - see figure 3 – which shows that the market share of the player with the largest market share has fallen in three key markets in the last 7 years.

Figure 3: Retail revenue market shares 1996-2002

Source: Oftel Market Information (Fixed and mobile year to June, leased lines year to March)

1.18 There were high levels of investment in telecoms networks by both incumbent and competitors throughout 1990s and 2000 but more recent figures show decline in fixed link networks investment but steady levels in mobile (see Figure 4).

Figure 4: Capital Expenditure by UK Telecoms Industry

Source: 1995-2000 ONS; 2001-2003 Oftel estimates based on published company accounts and capital expenditure plans. 2003 figures subject to greater level of estimation.

1.19 Fixed build competitors are currently more interested in ‘buy’ opportunities but foresee a return to ‘build’ once capital and opportunities become available- see Chapter 2 for discussion of the possible impact of the introduction of spectrum trading on investment opportunities.

Market summary

1.20 Growth prospects can be characterised, at a summarised level, as lower in mature markets, and higher in newer markets based on a straight-line extrapolation of current growth rates. For example, taking a more mature market, the volume of fixed voice calls minutes fell by 2% in 2001/02 while fixed rentals grew by 6%. Even within the fixed calls market, though, the total volume is still up 15% over the last 5 years and some fixed voice markets are growing rapidly.

1.21 Competition prospects will again vary by market. Some markets have been found to have ‘effective competition in prospect ‘ as was the case for the last mobile market review while in others there is clear dominance and others are effectively competitive. The current round of market reviews are likely to find a range of levels of competition in the different markets and what will be appropriate in terms of regulatory action will depend on the circumstances and prospects in each market.

Regulatory action in 2002

1.22 Significant actions taken in 2002 against this background include:

• work to prepare for the programme of EU market reviews
• the price control review and the wholesale line rental product
• action to promote competition with leased lines market and broadband
• publication of Competition Act strategy
• dispute resolution
• introduction of new regulatory processes.

EU market reviews

1.23 Four new EC Communications Directives entered into force on 24 April 2002. These are the Framework Directive (FD), the Access and Interconnection Directive, the Authorisation Directive and the Universal Service Directive. These Directives must be implemented by Member States to take effect on 25 July 2003.

1.24 The new Directives include the requirement that Member States should carry out reviews of competition in communications markets, to ensure that regulation remains proportionate in the light of changing market conditions. The purpose of the new Directives is to establish a harmonised framework for regulation across Europe and establish a set of procedures to ensure the harmonised application of the regulatory framework throughout the Community.

1.25 The reviews are 'pro-active' in requiring national regulators to test whether dominance exists in defined telecoms markets and then to identify appropriate remedies. In this way they are complementary to the more 'reactive' response to specific competition cases and disputes brought to the regulators by individual telecoms network operators and service providers.

1.26 Oftel’s market review programme is now well under way and individual project teams have been set up. They have been conducting their market analysis throughout the autumn and most will be issuing consultation documents early in 2003 after the European Commission has finalised its Recommendation on the markets to be reviewed (see Annex C ). These reviews are a major piece of work and Oftel is dedicating substantial resources to ensure that they are completed and proposals put in place by July 2003.

Price control review and wholesale line rental

1.27 In June 2002 Oftel published a statement concluding its review of price control on BT in the residential fixed line market. This stated that a price control of no increase in real terms ( ie RPI-RPI) from July 2002 for 4 years would apply based on the spending patterns of the bottom 80% of residential consumers. However, in an important change from previous price control arrangements, the licence modifications proposed that the control set would be relaxed once BT provided a wholesale line rental product that Oftel considered was 'fit for purpose'. This product would allow service providers to rent lines from BT that had a direct connection to the customer, and would promote effective competition in the retail market for business and residential consumers. The service provider would be able to bill the end user for both rental and calls, and BT would not retain a direct link with the customer (unlike indirect access or carrier pre-selection arrangements).

1.28 This initiative has the potential to increase competition in the retail market significantly. The incentive properties of the initiative are discussed in chapter 2 as an example of a more forward looking, effective form of regulation.

Broadband

1.29 Over the past year Oftel has continued to work to create a regulatory framework that promotes effective competition in the broadband market and is conducive to further investment and rollout of broadband services.

1.30 In June 2002, Oftel issued a direction requiring BT to offer DSL interconnection services to enable operators to connect to BT's network and therefore provide a much wider range of wholesale and retail broadband services in competition with BT. Oftel has also taken significant action to drive forward competitive access to BT's local loop via Local Loop Unbundling (LLU).

1.31 Oftel has worked to increase competition in leased lines by requiring BT to provide partial private circuits (PPC) at cost-oriented prices.

1.32 In the retail market, Oftel has ensured that BT's wholesale DSL services are available to all service providers, including BT Openworld and BT Retail, on non-discriminatory terms and conditions. Oftel also published a statement clarifying the rules that govern BT's marketing of Internet services, thus reaffirming Oftel's commitment to ensuring that other service providers can compete fairly. The effectiveness of these rules is currently under review.

1.33 In the year 2003-4 Oftel will continue to promote wider rollout of services, and access to BT's network to facilitate competition amongst broadband service providers and provide consumers with a greater choice of broadband services. Central to this work will be promoting consumer awareness of the nature of broadband services and the choices available as well as the ongoing work to promote competition.

Competition Act strategy

1.34 During 2002 Oftel published its strategy for use of the Competition Act which stated that, where faced with behaviour that could contravene both the Competition Act and the sectoral regime, Oftel’s approach would in future be to investigate under the Competition Act from the start.

Dispute resolution

1.35 In competitive markets, disputes regularly arise between undertakings. Oftel already has a duty to resolve a wide range of disputes and is bound by the duty in the current Interconnection Directive to take steps to resolve disputes in six months. The new Directives reduce this deadline in relation to all classes of disputes (including disputes about spectrum) under the new framework to four months. Meeting this target will be challenging for Oftel and will require significant change in process and systems. It will also require some behavioural change on the part of both complainants and respondents. Some of the main changes are:

• 4 month deadline for resolution of disputes and new challenging deadlines for competition cases.
• The new dispute procedure will cover all types of disputes, not simply interconnection, including disputes about spectrum.
• As a general rule, Oftel will seek all the information that it needs to resolve the dispute, using its formal powers.
• Tighter submission requirements: Oftel will specify what it needs to see before accepting a case in terms of clear evidence of commercial negotiation, clear statements by the complainant on their preferred solution, information and background to a complaint and a clear assessment of the precise condition which the target of the complaint is alleged to be infringing. Oftel will refuse to consider referrals that do not meet its published criteria. This is further discussed in para 2.6.

1.36 It is Oftel's intention to begin working with the new procedures with effect from 1 April 2003 to ensure any potential problems or issues are identified early and removed when the statutory obligation takes effect in July 2003.

New regulatory processes

1.37 As part of its strategy development process, Oftel published new guidelines on how it will review consumer protection policies and assess the potential impact of policy options in June 2002. The guidelines are designed to enhance Oftel’s analysis and decision-making processes and provide greater clarity and transparency for stakeholders.

1.38 Oftel will use the Consumer Protection Policy Review (CPPR) guidelines to review policy areas not covered by market reviews or competition policy. For example, handling consumer complaints and the publication of information aimed at consumers (see Annex D for review timetable).

1.39 The complementary Regulatory Option Appraisal (ROA) guidelines set out the framework that Oftel will use to assess different options when taking its decisions. These guidelines will be used in all areas of Oftel's work, including consumer protection and competition-related issues, as a basis for assessing the impact of different policy options. Oftel has also published market research guidelines, which set out good practice in the use of market research resources at different stages of policymaking, implementation and compliance.

Monitoring performance

1.40 In terms of performance measurement Oftel has:

• set service delivery agreement targets, agreed with the Treasury and published in November 2000. These are summarised in table 1 below, and performance against these targets will be published in Oftel's 2002 Annual Report;
• prepared a monitoring log of key decisions taken (see Annex B ) and;
• developed international benchmarking of prices paid for baskets of telecoms services in different countries (reports published six-monthly).

Table 1 – Service Delivery agreement targets

1.41 The first set of service delivery outcomes was reported in Oftel's 2001 Annual Report. As noted above, outcomes on the above targets for the current year will be reported in Oftel's 2002 Annual Report.

Pressures on regulation in 2003/4

1.42 There are a range of pressures on regulation in 2003/4 against the above backdrop of market developments and regulatory actions taken in 2002. These pressures are:

• expectations of Oftel
• existing regulatory commitments and implications of strategy implementation
• preparations for the transfer to Ofcom.

1.43 Clearly Oftel needs to take account of and respond to the expectations of stakeholders. However, it does this within a coherent and explicit framework which has been articulated in terms of its strategy ie its goal, objectives and regulatory principles set out earlier in this chapter and in Annex A. Oftel's work plan for 2003/4 is therefore a combination of actions that flow from implementing its strategy (including existing and continuing actions), measured and managed responses to requests for action by stakeholders, and preparations to enable and assist the establishment of Ofcom.

Expectations of stakeholders

1.44 he expectations of Oftel by stakeholders are significant and are, broadly, as follows:

• Competitors to BT - be tougher and quicker on BT…. and more transparent and inclusive
• BT and mobile - want less regulation
• Consumers -
  • keep current successes (eg low prices, choice, quality), and extend broadband
• Government -
  
  • encourage broadband roll out and take up but, more generally, minimise regulation.

1.45 A more specific point is that there are greater demands from competitors to use BT’s network. Oftel needs to respond positively to this, but in so doing be careful not to close off future 'build' opportunities. Oftel's Access Guidelines (published in Sept 2002 ) set out the approach Oftel proposes to follow in balancing these demands.

Existing regulatory commitments and implications of strategy implementation

1.46 In a number of areas, Oftel has started or is committed to implementing regulatory processes which will be relevant to 2003/4 and will form a significant element of its work for the forthcoming year:

• Market reviews concluding summer 2003 - focus on implementation
• consumer protection policy reviews starting in 2003/4
• 4 month dispute resolution deadlines operational from start of 2003/4
• use of Competition Act growing
• licences replaced by authorisations by end of July 2003
• ensuring continuity of existing processes eg complaints handling and numbering administration.

Preparing for Ofcom

1.47 Throughout 2002 Oftel worked closely with our partner regulators in contributing to the creation of Ofcom. A key milestone was the major consultancy report completed in October 2002 and built on intensive background work by teams of regulators’ staff as well as consultation with stakeholders. It offers detailed thinking on how Ofcom should be organised and suggests an implementation plan for setting up the new body in 2003.

1.48 The Ofcom Board, to which appointments were made in October following Lord Currie’s appointment as Chair earlier in 2002, will be deciding how to take this work forward. Oftel will maintain its close involvement, right up to the point when enactment of the Communications Bill in the 2003/4 session provides for the transfer of Oftel’s functions and powers to Ofcom. In particular, Oftel will work to

• support the creation of Ofcom as an organisation that will deliver consistent and coherent economic regulation, focused on improving competition and the benefits consumers derive from this;
• ensure a smooth transition of powers and responsibilities, so that effective regulation and efficiency of operation are maintained up to the point of formal transfer.

1.49 Chapter 2 looks forward to Ofcom in more detail.

Chapter 2

Looking ahead to Ofcom

• improvements in regulatory processes emerging in Oftel that will help Ofcom develop its own regulatory approach;
• key opportunities where Ofcom can deliver benefits to consumers.

Improvements in regulatory processes

2.2 While Oftel's work is focused on achieving outcomes for consumers, it is important, in terms of accountability and inclusivity, that its processes are efficient, effective and transparent to all its stakeholders. This need will be even greater under Ofcom as the greater size of the regulator, and wider range of areas it will cover, means that the potential risk of unclear or inefficient processes is increased. Where regulation is well targeted it should produce benefits for consumers in terms of:

• faster development of products that can benefit consumers;
• less cumbersome and less resource intensive regulation in terms of development, implementation and monitoring; and
• developing competition more quickly which can reduce prices for consumers.

2.3 There are a number of current developments in terms of Oftel's regulatory processes that could be usefully considered, and as appropriate, further developed by Ofcom:

• actions to improve the focus of regulation, for example, in relation to dispute resolution, competition cases and in relation to consumer information initiatives
• actions that provide incentives to improve the speed with which regulatory responses to acknowledged problems are developed and implemented
• in developing competition more speedily which can reduce prices for consumers.

Focusing regulation

2.4 Oftel needs to ensure regulation is targeted and effective, particularly as the reduction in the availability of funds from capital markets is likely to continue to put more pressure on competitors to incumbents. This could result in more requests to the regulator to intervene to enable access to the incumbents' network. Often these demands can be contradictory and differing in their nature. It is therefore important to manage and prioritise regulatory workloads.

2.5 Where Ofcom is faced with competing demands for regulatory intervention that exceed the regulatory resources available it will need to have both robust mechanisms and a clear set of strategic objectives to allocate regulatory resources to those areas where they can be best used. Oftel’s experience in developing this approach should be helpful to Ofcom in this regard.

Targeting regulatory involvement in resolving disputes and other cases

2.6 Oftel issued a consultation document in November 2002 on how it proposed to enable disputes to be completed in four months. This will be achieved through a sharper focus of regulatory resources to enable more efficient processing of individual cases that Oftel accepts for investigation. Cases referred to Oftel which fail to meet minimum criteria will not be accepted as disputes. This is explained more fully in para 1.35.

2.7 These changes build on a number of changes to the structure and working methods of the Compliance Directorate in the course of 2002. These include the establishment of a new economic and business analysis unit, tighter case management processes and more flexible use of staff.

2.8 These actions were necessary not only to meet the new deadlines, but also to underpin greater and more effective use of the Competition Act since publication of the Competition Act strategy statement in July 2002.

2.9 Further actions to focus regulatory efforts in relation to casework are evident in

• a change in procedures which identifies weak cases early in the investigation process and the closure of cases where complainants have submitted such limited information that Oftel has little prospect of deciding whether there is a breach or not, or where possible consumer outcomes lead Oftel to decide that other cases deserve priority in resource allocation. The setting of priorities in this way allows Oftel to use its limited resources on the more promising cases
• better project planning to involve stakeholders in setting a forward agenda on areas such as Number Translation services, so avoiding the need for action to be taken forward via disputes
• work with industry focus groups to clarify Oftel's likely position on controversial areas, eg in relation to carrier pre-selection, to reduce potential for disputes and facilitate progress to agreed deadlines.

2.10 Oftel’s experience in applying and developing these approaches in the coming year should provide a useful contribution to Ofcom in its efforts to focus regulatory resources.

Use of regulatory option appraisals

2.11 Options open to the regulator to take action to address problems identified need to be carefully and transparently considered. As set out in Chapter 1 Oftel published a statement in July 2002 which sets out its approach to undertaking 'regulatory option appraisals' in respect of key policy decisions it takes.

2.12 Examples of option appraisals in 2002 include number portability framework options (published in June 2002) and proposals for improving the strategic focus of market information collected (January 2002).

2.13 Oftel will develop its approach in this area through application of appraisal techniques to policy and case remedy proposals. This experience should be valuable to Ofcom where the draft legislation requires rigorous and transparent assessment of proposals to be undertaken where these appraisals will benefit from taking place within cross-functional project and case teams responding rapidly to issues and allowing both the retention and sharing of expertise.

Targeting consumer information

2.14 As a part of its long-standing commitment to evidence-based regulation, Oftel is developing a number of techniques in relation to its understanding of consumer behaviour - which allow it, for example, to better target information designed to help consumers make more effective use of choice.

- Identifying types of consumers

2.15 Oftel's expanded market research programme is now in its third year and so provides a sufficiently extensive database to better understand consumer behaviour across the various telecoms markets in a forward looking way.

2.16 This is important both to help assess current initiatives from a consumer perspective, and as a preliminary look at how consumers can be considered in a more converged environment. It will, therefore, be of relevance to Ofcom.

2.17 The chart below sets out the main residential consumer groups identified through this analysis. (Details are given in Annex E.)

Figure 5: Summary of consumer profiles

Base: 8404 UK residential consumers, 2001/02

2.18 In terms of application, the cross-market analysis of consumers can be of considerable benefit by helping regulation to : target consumer information initiatives on the most relevant groups; help assess the likely size of markets for new products; identify those consumers who are most vulnerable; focus on the most relevant consumer groups who can help to exert pressure at a retail level and thus complementing regulatory initiatives taken at the wholesale level. This approach will therefore help to target and prioritise the use of regulatory resources.

2.19 The intention is to develop a similar analysis for small and medium sized businesses which will enable Oftel to further focus its small business information initiatives (eg TelecomsAdvice.org.uk) on appropriate business profiles.

2.20 Oftel’s experience in developing and using these consumer profiles will be available for Ofcom to consider and further develop and apply as appropriate.

Assessing if consumers are losing out

2.21 A further example of how Oftel is developing its approach to targeting its resources is in relation to concerns that consumers are losing out by paying more than the cheapest available price for telecoms services due to confusion over complicated tariff structures. This has been a recurring theme of consumer representatives and media commentators. From a regulatory point of view, what is needed is a way of identifying if consumers are in fact losing out or, conversely, to what extent they are making well informed choices based on factors other than price.

2.22 Oftel is developing an approach that will use market research, pricing and other data specific to the circumstances of the market in question. This analysis together with better targeting, enabled by the consumer profiles described above, should result in greater focusing of regulatory action.

2.23 This type of approach is likely to have a wide range of applicability for both telecoms markets and other markets with which Ofcom will be involved, where consumers are faced with choices over the purchasing decisions they can make. With this wider application in mind Oftel will continue to develop this approach, liasing with OFT and other regulatory bodies in the lead up to Ofcom and feeding into any early consultations Ofcom may undertake on these issues.

Incentivising a positive response to regulatory action

2.24 Oftel's recent experiences of developing regulation in relation to local loop unbundling, partial private circuits and carrier pre-selection has demonstrated that detailed regulation can take several years to put in place. Given the pace of change in electronic communications markets, many argue that regulation needs to move much faster than this. But the same stakeholders are often the most keen to ensure "due process", which restricts the scope for rapid action.

2.25 Exploring the scope to 'incentivise' dominant players (in an open, transparent way which meets legal requirements) to co-operate in achieving regulatory objectives may offer a prospect of avoiding the lengthy timescales and unavoidable "micro-management" characteristic of some recent initiatives.

2.26 Oftel is currently pursuing a wholesale line rental (WLR) initiative where Oftel will relax retail price control in the fixed link residential voice market, when it considers that BT has delivered a fit for purpose wholesale line rental product that enables the development of an effectively competitive retail market. This initiative has provided an incentive for BT to provide the wholesale products both swiftly and effectively.

2.27 This 'incentive' approach may have a wider regulatory application. A regulated company has a range of legitimate responses to regulatory initiatives including the route of appealing against a particular decision in terms of compliance with due process and, under the terms of the new EU framework, on the merits of the case as well. It can be argued that the existence of these rights, perfectly justified in terms of the company’s legal position, nevertheless encourages operators to adopt a tactical approach towards regulatory issues which then have the effect of delaying the introduction of market developments. To give the regulated company an incentive to take a more co-operative approach, it needs to know how the regulator will be likely to react to different actions which it might legitimately take in response to regulatory initiatives. Greater clarity of the consequences of action by the regulated company can improve understanding and secure greater commitment by all parties to achieving the stated aim.

2.28 Where a company has dominance and acts in a co-operative and timely way to help achieve regulatory goals, then it needs to be clear of the consequences of this, for example, that existing regulation is no longer necessary and would be removed.

2.29 Conversely companies with dominance need to be clear about the consequences of actions that are anti-competitive or in some other way frustrate the achievement of legitimate regulatory goals. This is relevant not only in terms of formal penalties under the Competition Act and the Communications Bill if enacted - in terms of powers to fine and for third parties to claim damages - but also in terms of lost opportunities to secure a lessening of regulation.

2.30 Additionally where telecommunications operator display a willingness to pursue self and co regulatory initiatives, they reduce the pressure on the regulator to impose formal regulation. Oftel's experience of encouraging stakeholders to take more responsibility for tackling problem areas themselves should be helpful to Ofcom.

2.31 Ofcom will be under significant pressure to deliver effective, rapid regulation. An understanding that the regulator will stick to its stated objectives and principles in a coherent, evidence based and transparent way - when faced with demands from players in the market predicting serious consequences for their business if regulatory decisions are not the ones they prefer - will give credibility and force to initiatives designed to incentivise co-operative behaviour by regulated companies.

Minimising risk

2.32 In the period leading up to Ofcom there is scope to develop further the application of these two approaches – of focusing regulation and enabling its more rapid development where regulation is needed - in other areas of Oftel's work.

2.33 A 'focus and fast forward' approach will allow more effective management of the principal risk Oftel (and Ofcom) faces ie of not delivering on regulatory objectives. More resources can be focused on the areas with the best potential for successful development and these resources can be used to best effect by using all the regulatory levers available. Better focusing of resources should help ensure adequate resources are committed to cases and so minimise risk of successful appeals. This may involve taking carefully judged risks in order to take timely action with best available rather than perfect information - compromises which may be critical to Ofcom given volume of work and pace of change it will face.

2.34 This approach may allow risk management to be properly considered in the context of the objectives Ofcom is seeking to pursue and the way it approaches its work.

Opportunities for a better deal for consumers under Ofcom

2.35 Ofcom is being established because of the changes brought about by digitalisation - a technological step change that massively increases the capacity and flexibility of networks. Networks and service delivery platforms that have been in separate markets will, increasingly, be able to carry the same or equivalent services and so will be able to compete with each other. Consumers can benefit from increased competition brought about by such increases in convergence.

2.36 In making progress to the longer term prospect of convergence, current and emerging consumer attitudes and views will need to be taken into account, in terms of

• concerns re availability of access to broadband and what is available on broadband in comparison to narrowband Internet access
• demands for low cost high speed access in outer urban and rural areas
• consumers using the most convenient means of communication eg use of mobile when a fixed link is not immediately available
• increasing awareness and take up of multi-channel broadcasting especially amongst younger consumers.

2.37 All these factors are relevant to Oftel's, and subsequently Ofcom's, consideration of regulatory challenges in the years ahead. Key policy areas, in which Oftel's current locus is limited, but where Ofcom will have greater opportunities for influence include:

• broadband developments;
• spectrum trading; and
• public service broadcasting and competition.

Broadband developments

2.38 Broadband take up is happening in the UK at a rate of almost 30,000 households a week. This represents an increase over previous levels and is likely to have been spurred by a combination of price falls and developments in broadband capability. Current broadband is, however, in most cases simply providing faster access to services and content that are also accessible by narrowband on a largely satisfactory basis particularly in terms of price of unmetered dial up services.

2.39 However if broadband is to achieve its potential to become a mass market service – similar to mobile – then users will probably need to be able to access more attractive content through broadband than is currently available. The need for compelling content was a key finding of a recent report commissioned by Oftel on factors to drive mass broadband take up.

2.40 If broadband is to access more attractive content and enable use of high definition websites then the issue of protection of intellectual property rights ("IPRs") and copyright over content will need to be addressed especially in relation to films and music where content producers have concerns that broadband will enable content to be pirated on a large scale. The concerns of producers of content - whether films or music or websites - is that if they fail to receive rewards for producing output then the incentive to develop further content will be undermined. Against this is the need to find ways of providing attractive content to make use of broadband capabilities.

2.41 Technology advances plus appropriate protection of intellectual property rights may provide the opportunity to exercise sufficient control to reward content providers while increasing access to attractive content for users. Oftel will be working with its stakeholders and Ofcom partner organisations and relevant lead government bodies, such as the Patent Office, to explore the scope for these developments at both a UK and international level and to consider what role regulation can play to bring these about. Given the scale of the task this is likely to be a major issue for Ofcom to tackle.

Radio in the local loop

2.42 The primary means for delivering broadband in the UK is via copper delivered ADSL or cable networks. However these fixed networks have their limitations in terms of being able to reach rural households; and hence tackle issues related to digital divide concerns. It is possible to use radio to provide wireless local loop services. Radio has a number of advantages, not least of which is the ability it offers to by-pass a local loop incumbent and promote competition in the provision of broadband services. It also has the advantage that in terms of economics, it is more suitable for lower population densities than the laying of new cables. To this end the Radiocommunications Agency (RA) has set aside spectrum for wireless local loop services in a number of frequency bands. The most recent was the award of spectrum in the 28 GHz band for broadband wireless access (BFWA). Licences for 60% of the UK population were taken up last year, and the companies that won these licences are beginning to trial and deploy such systems. There is also the possibility of using satellite based services for the provision of broadband in rural areas. However to date, although ubiquitous in availability, the cost of these technologies is high relative to broadband available via cable or copper.

2.43 The RA is also currently considering the award of spectrum at 3.4 GHz for wireless local loop, which will be especially suitable for provision of ADSL type services in rural areas. This is because of the technical characteristic of the spectrum, which gives it greater range than higher frequency bands (and hence greater coverage). There also developments in new radio technologies that allow the data for one household to be relayed by other households in the same radio network (mesh technology). This could allow deregulated spectrum (that is spectrum that is not licensed to any single user, but can be used by all) to be used to provide ADSL like broadband services using cheap and widely available radio equipment. This again would be especially useful in lightly populated areas such as hamlets and villages.

2.44 Looking forward, Ofcom will see the management of the radio spectrum and the regulation of telecommunications moving to a single organisation. This will help in providing a more of a joined-up approach for using both spectrum and network access (telecommunications) regulation to tackle such issues as broadband provision in rural areas.

Spectrum trading

2.45 Spectrum plays a pivotal role in the development of competition in the UK telecoms market and the Director General has a duty under the Telecoms Act 1984 to provide advice to the Secretary of State on competition issues relating to the licensing of spectrum. The review by Professor Martin Cave of spectrum management in UK published in February 2002 concluded that there was significant scope to release more radio spectrum into active, economic use by the introduction of spectrum trading. The Government response published in October 2002 agreed with the Cave report’s conclusions. Oftel considers, in agreement with Cave, that creating a market in spectrum has the potential to significantly increase the degree of convergence and competition across electronic communications networks and services to the benefit of consumers.

2.46 Spectrum is a vital part of the telecommunications market. The Radiocommunications Agency estimates that the value of spectrum to the UK is £20 billion a year. Spectrum supports a range of telecoms services including mobile phone services and wireless broadband networks. The current financial climate has put an even greater focus on the use of spectrum to provide competing infrastructure, because radio networks offer a cheaper alternative to creating networks including broadband, particularly in rural areas, compared to traditional cable or wire networks. All this makes access to spectrum vital for creating a potentially competitive telecommunications environment.

2.47 Given the ever increasing speed of technological change and convergence, and the complexity of decisions required to allocate spectrum by central planning, a market based system is essential to maximise the benefits to consumers and business that spectrum based services can provide. A flexible spectrum trading environment would allow the buyers of spectrum to make the commercial and technical judgements about what will be a viable business. In such a trading environment new and innovative ideas using spectrum could be more easily tested in the commercial world and those businesses that are best able to deliver the services consumers want would prosper.

2.48 Spectrum trading is a very important element in reducing barriers to entry into the telecommunications market, as well as being able to boost the UK's position in broadband. Whilst spectrum trading cannot remove all such barrier problems, easier access to it could become very important element in facilitating entry at the network level. Any spectrum trading environment does need to take account of concerns regarding harmful interference and international commitments. But the need for proportionate intervention to achieve this does not negate the benefits of improved economic efficiency; and the opportunity to enable broadband Britain to happen more quickly, and be available to a greater part of the UK population - particularly in rural areas - as a result of effective trading.

2.49 During 2003/4 Oftel will seek opportunities to work with Ofcom colleagues and stakeholders to develop key issues that will need to be addressed to underpin spectrum trading – in particular defining a spectrum property rights and a spectrum property register, and developing dispute resolution policy in relation to spectrum matters generally in line with the new EU framework.

Public Service Broadcasting and competition

2.50 Oftel is involved in the economic regulation of certain aspects of the broadcasting infrastructure in the UK. In particular:

• Regulating the terms and conditions for the supply of digital conditional access, access control and access to electronic programme guide listings (the latter jointly with ITC) to broadcasters; and

• Licensing, and applying, a price control to terrestrial analogue transmission.

2.51 Oftel's involvement in broadcasting regulation reflects both broadcasting’s traditional basis in terrestrial analogue services, where there were only a limited number of free to air channels, and of its expansion beyond these analogue origins into a multichannel, interactive future. As digitalisation increases the opportunities for more services, Ofcom faces a significant challenge in enabling the benefits of public service broadcasting to be retained alongside its role of promoting competition in the broadcasting sector.

2.52 The ITC’s review in 2002 of the programme supply market has focused attention on key aspects of this, including the ability of independent producers to negotiate retaining key rights to programmes (eg for overseas sales or repeat showings) which they have made for PSB broadcasters. Ofcom will have the opportunity to address any significant adverse effects on competition that may arise where those commissioning programmes are in a stronger position in terms of market power compared to those making the programmes.

2.53 Oftel will, where appropriate, contribute to the evolution of policy in the above areas through its experience of regulation in broadcasting and in telecoms. Its experience of successfully managing the development of competition alongside the operation of universal service obligations is usefully analogous to public service broadcasting. Oftel's experience of using the Competition Act in telecoms will also be valuable since Ofcom has now concurrent Competition Act powers in broadcasting.

Conclusion

2.54 Oftel is committed to helping Ofcom to be a successful regulator that delivers benefits to consumers. Ofcom will be an economic regulator to a substantial degree and therefore Oftel's experience and knowledge of regulating a £45 billion turnover telecoms industry will be a key asset for Ofcom.

2.55 Ofcom presents exciting opportunities at both a strategic level to improve the outcome for consumers and at an operational level, to adopt efficient and effective operational processes. Oftel will be working hard with its stakeholders and future Ofcom colleagues to realise these opportunities as soon as possible.

Chapter 3

Proposed projects and programmes for 2003/4

Introduction

3.1 The proposed projects and programmes for 2003/4 are described in this chapter. Table 1 lists the projects and programmes by quarter (beginning April-June).

Any organisation or consumer who wants to discuss a project or programmes should contact the named project or programme manager directly. This applies to

• suggestions as to the appropriate evidence base including market research;

• discussions of policy options; and

• suggestions on ways of conducting the project.

3.2 A number of Compliance Directorates projects have been combined into the Compliance Management Office (CMO). The CMO will cover the work of the previous projects of Retail Pricing, the Compliance Monitoring Unit and any parts of the former Casework Quality Programme that are not covered by the Business Assurance Programme (F4). The CMO will allow for a more focused and co-ordinated approach to these areas.

3.3 The EU Market Reviews Programme (A1) is under way and Oftel intends to have completed all necessary market reviews by the time the new Directives come into force in July 2003. An indicative timetable for the reviews can be viewed in Annex 2.

Stages of work

3.4 The planned work against objectives and type of activity reflects our focus in each subject area in 2003/4. Projects and programmes will contain elements that relate to other objectives and activities. Projects are likely to have the sequence of review – implementation – monitoring. The timescale will depend on the scale and complexity of the issue.

3.5 Oftel is committed to monitoring and evaluating its policies to see whether they are achieving the policy objective initially set. This will be on the basis of both pro-active monitoring and response to specific complaints.

3.6 Where a review, concludes no specific regulatory intervention is necessary, then the cycle of review – implementation – monitoring will end.

Evaluation of policy and case decisions

3.7 During 2003/4, Oftel will be using its review and appraisal processes to establish the basis for more rigorous assessments of the impact of its policy and case decisions.

3.8 Establishing more explicit criteria to assess and evaluate outputs and outcomes in individual areas is consistent with a more robust, targeted and faster evidence based approach as discussed in the previous chapter. In applying this approach, Oftel recognises there is not a mechanistic relationship between actions to promote competition and the resulting outcome. Outcomes need to be considered in relation to specific areas, but also 'in the round' at a broader level as picked up by Oftel's Service Delivery Agreement measures and targets.

Stakeholder involvement

3.9 The scope for stakeholder involvement will vary by subject area. Stakeholders can for example participate by providing evidence of competition, or evidence of consumer detriment and comment on which forms of regulatory intervention may be appropriate. For implementation activities, stakeholders may comment on operational details of how a policy is to work in practice. For monitoring activities, stakeholders may be involved eg as an end user in assessing comparative information produced by telcos. For all three stages of review, implementation and monitoring, Oftel will continue to ensure that progress towards the deadlines and outcomes set is maintained at an acceptable pace.

3.10 For the projects and programmes set out in Table 1 below, stakeholders are invited in to indicate where they would like to be involved.

Advisory Committees on Telecommunications and consumer experts

3.11 The Telecommunications Act 1984 establishes a number of committees (the ACTs) to give advice to the Director General, to represent the interests of consumers, and to give emphasis to especially those with least power. The Acts feed in suggestions to Oftel project managers to help Oftel focus on consumer concerns.

3.12 The ACTs respond to Oftel consultations, hold public meetings, meet the Director General and his senior staff, host seminars, participate in Oftel/industry working groups, liase with other consumer organisations, and publish their views via an independent web site (www.acts.org.uk). They are supported by secretariats in Cardiff, Belfast and Edinburgh, and a small unit within Oftel (see project C7).

3.13 The ACTs are independent of Oftel. Their annual objectives and work plans are therefore not incorporated in Oftel’s Management Plan but are consulted on and published separately. For information please contact the ACT Secretariat on:

e-mail: tamara.clements@oftel.gov.uk tel: 020 7634 8984.

Table 1- Proposed projects and programmes for 2003/4 – summary table as of October 2002

C10) Monitoring the Telecommunications 
Ombudsman Service

Business support

F1) Human resources

F2) Learning and development programme

F3) Budget management programme

F4) Business Assurance programme

F5) IS and IT

F6) Communicating Oftel's work to external audiences

F7) Research and Information Unit

List of projects and programmes for 2003-4

NB Q1 = Apr- June 2003 , Q2 = Jul- Sep 2003, Q3 = Oct- Dec 2003 , Q4 = Jan – Mar 2004

Effective Competition

Review

A1 EU market review programme

Objective: To ensure that the effective competition reviews required when new EU Directives come into force are carried out in a timely and efficient manner. Provide ongoing assistance to project managers to ensure that Oftel strategy is applied consistently across reviews and that individual reviews are carried out in an efficient manner, identifying synergies across reviews as appropriate.

• track progress on individual reviews and work with project managers to gain benefit from synergies across projects (Q1-2); and
• work with project managers to ensure that Oftel strategy and EU Directives and are applied consistently and results communicated systematically (Q1-2).

A2 Competition in mobile markets

Programme Manager: Elaine Axby (tel: 020 7634 8915, e-mail: elaine.axby@oftel.gov.uk)

Other contacts: Nic Green (tel: 020 7634 8891, e-mail: nic.green@oftel.gov.uk) Chris Handley (tel: 020 7634 8863, e-mail: chris.handley@oftel.gov.uk) Michael Knowles (tel: 020 7634 8706, e-mail: michael.knowles@oftel.gov.uk)

Objective: To ensure effective progress towards the development of competition in mobile markets.

• review mobile market competitiveness, including calls to mobile phones in line with new EU Directives (see project A1 for timings) and;
• implement any regulatory proposals agreed as a result of the market review (including the removal of regulation if appropriate).

A3 Access to the radio spectrum

Project Manager: Roberto Ercole (tel: 020 7634 8905, e-mail: roberto.ercole@oftel.gov.uk)
Other contact: Helen Hicks (tel: 020 7634 5316, e-mail: helen.hicks@oftel.gov.uk)

Objective: To work with the Radiocommunications Agency (RA) and the Department of Trade and Industry (DTI) policies to ensure that spectrum allocation policy and spectrum pricing promotes the economically efficient use of the radio spectrum; and to ensure spectrum is used to promote competition in the telecommunications market. To provide the competition advice regarding the use of radio spectrum as required by the Secretary of State under the 1984 Telecoms Act. By these actions promoting the interests of consumers in the management of the UK Radio Spectrum

• Contribute to wider debate on the future of spectrum management in the UK, in particular in relation to Government decisions and action following the Cave Review of Spectrum policy, implementation of those decisions and the development of spectrum policy and legislation through the Communications Bill, this work will flow into Ofcom (Q4-03); and
• contribute to RA implementation of spectrum trading in the UK. (Q2 - 03)

A4 Competition in broadcasting markets

Project Manager:Margaret Doherty (tel:,020 7634 8828, e-mail: margaret.doherty@oftel.gov.uk)
Other contacts:Jim Niblett (tel: 020 7634 8780, e-mail: jim.niblett@oftel.gov.uk)
Anil Patel (tel: 020 7634 8928, e-mail: anil.patel@oftel.gov.uk) Naaz Rashid (tel: 020 7634 8849, e-mail: naaz.rashid@oftel.gov.uk)

Objective: To develop with Ofcom partners a policy framework for the promotion of competition in broadcasting markets and to increase understanding and awareness of Oftel’s regulatory role eg in regard to conditional access and access control, Electronic Programme Guides (EPGs) and terrestrial transmission. This project will involve consolidation with the ITC on areas of overlapping responsibilities.

• Implement joint regulatory regime for EPGs with the ITC (Q1); and
• implementation of EU Directives in relation to broadcasting following the market review into terrestrial transmission (Q1-2).

A5 Internet policy and narrowband access

Project Manager:Justin Moore (tel: 020 7634 8859, e-mail: justin.moore@oftel.gov.uk)

Other contact:Lucy Rhodes (tel: 020 7634 8836, e-mail: lucy.rhodes@oftel.gov.uk)

Objective: To promote competition in narrowband Internet access and ensure that the UK regulatory environment is appropriate for the Internet.

• Review the wholesale narrowband Internet termination market, applying regulation where appropriate in this and the related call origination market (Q1);
• coordinate Oftel's strategy on FRIACO (Q1-Q4);
• monitor developments in Internet access, infrastructure and services, providing policy guidance where appropriate (Q1-Q4); and
• contribute as appropriate to the development and implementation of Government’s Internet and e-commerce strategy (Q1-Q4).

Implementation

A6 Strategy, development and implementation of broadband networks

Programme Manager: Jim Niblett (tel: 020 7634 8750, e-mail: jim.niblett@oftel.gov.uk)
Other Contact: Alistair Bridge (tel: 020 7634 8782, e-mail: alistair.bridge@oftel.gov.uk)

Objective: To promote effective and sustainable competition in the provision of broadband access and services within a regulatory framework that is conducive to further investment and more widespread roll-out.

• Ensure that local loop unbundling is made available in compliance with the relevant legal obligations (Q1-Q4);
• monitor the rollout of BT’s wholesale and retail ADSL products to ensure that other operators and service providers are able to compete fairly (Q1-Q4);
• monitor the provision by BT of partial private circuits (PPCs) for leased lines to ensure that other operators are able to compete fairly(Q1-Q4);
• liaise with the devolved administrations and other government departments in relation to their plans to stimulate broadband roll-out e.g. in rural areas (Q1- Q4);
• promote a high level of consumer awareness of the nature of broadband services and the choices available (Q1-Q4);
• continue to publish the bi-monthly broadband brief (Q1-Q4); and
• consider whether it would be useful to publish additional information e.g. a broadband guide similar to the Internet guide published in 2002 & the guide produced for UK Online by the SBTF (Q1).

A 7 Numbering Programme

Programme Manager: Ray Thornton (tel: 020 7634 8704, e-mail: ray.thornton@oftel.gov.uk)

Project Managers:

Numbering Allocations: Nicholas Good (tel: 020 7634 5333, e-mail: nicholas.good@oftel.gov.uk)
Numbering Administration Alan Pridmore (tel: 020 7634 8910, e-mail: alan.pridmore@oftel.gov.uk)
Corporate Numbering Liz Greenberg (tel: 020 7634 8758, e-mail: elizabeth.greenberg@oftel.gov.uk)
Premium Rate Services: Gavin Daykin (tel: 020 7634 5338, e-mail: gavin.daykin@oftel.gov.uk)

Objective: To enable consumers to benefit from competition and new services by ensuring the provision of adequate numbers and numbering ranges. To promote efficient number management by operators through number charging.

• To allocate numbers to communications providers within 21 days in accordance with agreed policy (from Q2);
• implementation of web-based approach to processing numbering applications (Q2);
• complete review of corporate numbering and introduce new policy (Q2);
• input to industry work on Pre-Allocation Portability and legislative changes for introducing number charging (Q1-4);
• appraise possible implementation methods for charging, including those for developing a selection process for identifying coveted numbers and auctioning highly coveted numbers (Q1-4);
• maintaining and developing industry and consumer input into numbering policy via the Numbering Forum and other mechanisms (Q1-4); and
• to ensure that consumers are adequately protected in the PRS market by providing support and advice to ICSTIS and monitoring emerging developments such as higher rate PRS, Chatline Services, Premium Rate SMS and E-Money (Q1-4).

A8 Directory enquiries implementation

Project Manager:Caroline Wallace (tel: 020 7634 8917, e-mail: caroline.wallace@oftel.gov.uk)
Other contact: Alex Campbell (tel: 020 7634 8970, e-mail: alex.campbell@oftel.gov.uk)

Objective: To assist the Industry in the implementation of the new arrangements for Directory Enquiries as set out in Oftel’s September 2001 Statement.

• To ensure that consumer awareness and behaviour is effectively monitored during parallel running (from December 2002 to August 2003) and that this information is used to ensure awareness raising activity is as targeted and effective as possible. (Q1-Q2);
• to make the necessary numbering arrangements for the legacy 192/153 (etc) DQ codes to allow a smooth transition to the new 118 DQ services (Q1-Q2);
• to facilitate the DQ Industry Working Group in addressing and resolving outstanding issues relating to the new DQ arrangements (Q1-Q4); and
• where necessary and possible, to use Oftel’s powers to resolve any outstanding issues including charging (Q1-Q4).

A9 Carrier pre-selection (CPS)

Project Manager: Caroline Wallace (tel: 020 7634 8917 e-mail: caroline.wallace@oftel.gov.uk)
Other contact: Alex Campbell (tel: 020 7634 8970, e-mail: alex.campbell@oftel.gov.uk)

Objective: To ensure the continued successful implementation of permanent CPS.

• To review if necessary charges previously determined, in the light of process changes, industry data or changes in market conditions (Q1-Q4);
• to ensure the successful continuation of CPS into the new regulatory regime (Q1-Q3);
• to work with industry to introduce the necessary changes to CPS processes to support the development of the new wholesale line rental (WLR) product (Q1-Q3); and
• to ensure the views of consumer representatives are taken into account within the CPS Industry Groups (Q1-Q4).

A10 Number portability

Project Manager: Warwick Izzard (tel: 020 7634 8981, e-mail: warwick.izzard@oftel.gov.uk)
Other contact: Steve Burniston (tel: 020 7634 5361, e-mail: steve.burniston@oftel.gov.uk)

Objective: To promote effective and sustainable competition in the fixed and mobile markets by ensuring that customers can retain their number(s), if they wish to do so, when switching between providers of fixed or mobile services.

• To develop, determine and implement policies regarding short and/or long term changes to the framework for number portability (Q1 – Q4);
• Monitor consumer experiences of number portability through periodic research. (Q1 - Q4); and
• To implement European legislation concerning number portability (Q1-Q2).

Monitoring

A11 Network interoperability programme

Project Manager: Bill Hawkins(tel: 020 7634 8807, e-mail: bill.hawkins@oftel.gov.uk)
Other contact: Roy Davies (tel: 020 7634 8906, e-mail: roy.davies@oftel.gov.uk)

Objective: To ensure that interoperability is effectively managed at network and customer interfaces, on the basis of co-regulation with the industry through the Network Interoperability Consultative Committee (NICC). This includes the harmonisation of UK network interfaces, the interconnection standards for networks and interoperability of support systems. It supports the work of various focus groups including the Operators’ Policy Forum.

• Provide support and regulatory advice to the industry to ensure the satisfactory resolution of interoperability issues (Q1-Q4);
• hold quarterly meetings of the NICC Board and provide technical secretariat (Q1,Q2,Q3 & Q4);
• hold the NICC Annual Open Forum to explore new developments, to exchange views with industry and to stimulate interest in new work (Q3); and
• monitor and facilitate the NICC work programme to achieve timely outputs consistent with Oftel’s policy objectives (Q1-Q4).

Well informed consumers

Implementation

B1 Raising Consumer Awareness

Programme Manager: Chris Rowsell (tel: 020 7634 8890, e-mail: chris.rowsell@oftel.gov.uk)
Other contacts: Chris Smithers (tel: 020 7634 8876, e-mail: chris.smithers@oftel.gov.uk)

Objective: To co-ordinate and optimise Oftel’s work in areas of consumer information including direct Oftel outputs and the encouragement of information from other sources.

• To monitor the impact of existing consumer information initiatives to ensure that consumer demands for information are being met (Q1);
• to identify the information consumers need by researching their awareness of their rights and opportunities and assessing potential detriment caused by any lack of information (Q1);
• to co-ordinate and optimise existing consumer information outputs to ensure their maximum effectiveness. To encourage the production – by Oftel or the industry – of consumer information if research identifies appropriate demand (Q1-4); and
• to enhance Oftel media initiatives to raise consumers’ awareness of rights and opportunities (Q1-4).

B2 Comparable Performance Indicators

Programme manager: Chris Smithers (tel: 020 7634 8876, e-mail: chris.smithers@oftel.gov.uk)
Other contact: Chris Rowsell (tel: 020 7634 8890, e-mail: chris.rowsell@oftel.gov.uk)

Objective: To enable customers to make well-informed buying decisions by ensuring the availability of information on the quality of service of fixed and mobile telephony companies. To improve the availability, visibility and accessibility of this information by working with the industry on a co-regulatory basis.

• Support the industry in its assessment of customer demands for information and its presentation. Improve awareness of the initiative and update the published data with new measures. (Q1-4);
• encourage the regular publication of comparable mobile quality of service surveys. Ensure comparable data is published for at least the 5 main service providers. Ensure that the new measurements (such as SMS and/or audio quality) are collected and published. (Q1-4); and
• increase customers’ awareness of both the fixed and mobile quality of service information. (Q1-4).

Monitoring

B3 Tariff Transparency 2003-2004
Project Manager: Ritu Manhas (tel: 020 7634 5309 e-mail: ritu.manhas@oftel.gov.uk)
Other contacts: Chris Smithers (tel: 020 7634 8876, e-mail: chris.smithers@oftel.gov.uk)

Objective: To ensure consumers are able to compare prices of telecoms services and develop policies that ensure consumers can readily identify the costs of their telephone services.

• To ensure that the Oftel Price Assurance Standard, Oftel’s accreditation scheme for websites providing accurate, up-to-date and impartial price comparisons, achieves its goal of providing consumers with the confidence to use such websites and make informed buying decisions. (Q1-Q4); and
• to encourage the provision of price information to end-users in accordance with the regulatory regime, and, where appropriate, to issue guidance on any policy issues that may arise (Q1 – Q4).

Adequately protected consumers

Review

C1 Wholesale Line Rental
Project Manager: Alan Pridmore(tel: 020 7634 8910, e-mail: alan.pridmore@oftel.gov.uk)
Other contact: Steve Unger (tel: 020 7634 8879, e-mail: steve.unger@oftel.gov.uk ) Gavin Daykin (tel 020 7634 5338, e-mail: gavin.daykin@oftel.gov.uk)

Objective: To develop a product specification for a commercially-viable, mass-market Wholesale Line Rental product and rules to protect consumers against misselling. To facilitate industry discussion and implementation of the product.

• Facilitate industry groups to develop and implement product specification
• (Q4); and
• assess implementation of WLR product (Q4)

C2 Consumer Codes of Practice

Project Manager: Chris Rowsell (tel: 020 7634 8890, e-mail: chris.rowsell@oftel.gov.uk)
Other contacts: Chris Smithers (tel: 020 7634 8876, e-mail: chris.smithers@oftel.gov.uk)

Objective: To ensure the production of effective consumer codes of practice on service delivery issues in line with the government’s proposals in the White Paper on Communications and the draft Communications Bill.

• Approve and monitor the implementation of Codes of Practice according to industry guidelines established during 2002-3;
• conduct CCPR of codes of practice(Q4); and
• ensure industry has CoPs in place by 25 July and if not take appropriate action (Q1-Q2).

Implementation

C3 Universal service obligation (USO)

Project Manager: Alan Pridmore (tel: 020 7634 8910, e-mail: alan.pridmore@oftel.gov.uk)
Other contact:
Public payphones:Alex Campbell (tel: 020 7634 8970, e-mail: alex.campbell@oftel.gov.uk)
Disability issues: Frank Phillips (tel: 020 7634 8871, e-mail: frank.phillips@oftel.gov.uk)

Objective: To ensure all consumers have access to those telecoms services which are: used by the majority and which are essential to full social and economic inclusion; made available to everybody upon reasonable request in an appropriate fashion and at an affordable price.

• Designate USO provider(s) and implement new conditions of entitlement (Q2 2003/4); and

• carry out review of USO Schemes (Q3 2003).

Project manager: Bernice Head (tel: 020 7634 8710,e-mail: (bernice.head@oftel.gov.uk)
Other contacts: Alistair Cox (tel: 020 7634 8733,e-mail: alistair.cox@oftel.gov.uk) Michelle Champion (tel: 020 7634 8712, e-mail: michelle.champion@oftel.gov.uk)

Objective: To deal with effectively with consumer complaints and to encourage the industry to deal satisfactorily with consumer complaints in the first instance.

• Encourage the removal by operators and service providers of the root causes of frequently experienced consumer problems (Q1-Q4);
• develop the Oftel Internet site to give information useful to consumers to allow them to be effective purchases. Ensure that frequently asked questions are fully updated so the site can be promoted as the first step for complaints. (Q1-Q4);
• publish summaries of complaints received every six months. ( Q1and Q3);
• conduct an ongoing consumer satisfaction survey on the handling of complaints and publish results twice a year (Q1and Q3); and
• develop effective working relationships with the Telecoms Ombudsman to avoid disruption and facilitate customer contact (Q1- Q4).

C5 Metering and billing scheme

Project Manager: Bill Hawkins (tel: 020 7634 8807, e-mail: bill.hawkins@oftel.gov.uk)
Other contact: Roy Davies (tel: 020 7634 8906, e-mail: roy.davies@oftel.gov.uk)

Objective: To enhance consumer confidence in the accuracy of telephone bills and to give wider consumer protection by an effective Oftel metering and billing systems approval scheme. Last year the Scheme was extended to all significant operators, made available to major service providers and broadened in scope to include all material elements of bills as appropriate. It has subsequently been republished to align with the new European framework whilst maintaining continuity.

• Systematically roll out the scheme to communications providers not yet included (Q2-Q4);
• commence review and consultation for extensions of scope of mandatory scheme beyond VFSTS (voice frequency switched telephony services) (Q4);
• monitor the work of the Approval Bodies by leading the Approval Body Forum and holding quarterly meetings to review and moderate activities (Q1-Q4);
• publish scheme information as required (Q1-Q4); and
• hold an annual Forum for representatives of stakeholders to review experience (Q4).

C6 Network Resilience, Business Continuity & Emergency Communication Programme

Project Manager: Bill Hawkins(tel: 020 7634 8807, e-mail: bill.hawkins@oftel.gov.uk)
Other contact: David Heath (tel: 020 7634 8818, e-mail: david.heath@oftel.gov.uk)

Objective: To develop the processes to co-ordinate, as appropriate, the essential activities of the telecommunications industry during emergencies. Oftel’s role is as a facilitator and communications channel between the industry and central government, rather than a directly operational one. Lines of communication will be established with both operators & other government departments. Reporting processes and business continuity plans will be developed in co-operation with the industry.

• Lead industry forum for business continuity and emergency planning. ( Q3-Q4);
• Forum established, inaugural meeting 21^st June further meetings held quarterly;
• develop operational documentation, including contact lists, criteria, definitions and process manual (Q2 Q4); and
• advise other government departments on telecommunications infrastructure, relationships, resilience and vulnerabilities. Liase with Civil Contingencies Secretariat and participate in working groups for emergency services access & communications.

C7 Supporting the Advisory Committees on Telecommunications

Project Manager: Paul Rogers (tel: 020 7634 8774, e-mail: paul.rogers@oftel.gov.uk )
Other contacts: David Edwards (tel:020 7634 8773, e-mail:david.edwards@oftel.gov.uk)
Flora Pieris (tel:020 7634 5301, e-mail: flora.pieris@oftel.gov.uk)

Objective: To assist the Director General in his duty to promote the consumer interest, by ensuring that the Advisory Committees on Telecommunications (ACTs) are able to provide him with informed advice in accordance with their statutory duty.

• Ensure efficient administrative support for the committees, co-ordination of work programmes, and effective communications between the committees and Oftel (Q1-Q4);
• ensure the committees give high quality advice to Oftel by providing them with effective advice, briefings, and training (Q1-Q4);
• ensure the committees' advice reflects consumer interests by commissioning consumer research, managing the ACT web site and publications, and ensuring the committees consult and liase with other consumer organisations (Q1-Q4);
• provide the Director General with annual reports on ACTs' activities (Q4); and
• advise on the transition arrangements to the Ofcom Consumer Panel (Q1-Q4).

Monitoring

C8 Input to other consumer protection legislation

Equality scheme for Northern Ireland
Race equality scheme
Welsh language scheme

Project Manager:Neil Paterson (tel: 020 7634 8732, e-mail: neil.paterson@oftel.gov.uk)

Other contacts:Julia Bradford (tel: 020 7634 8838, e-mail: julia.bradford@oftel.gov.uk)

Objective: To ensure Oftel meets its statutory obligations in relation to non-telecoms specific legislation concerning consumer protection. Specifically to ensure that Oftel's equality scheme is approved by the Equality Commission for Northern Ireland, that Oftel prepares and implements a race equality scheme and that Oftel meets its statutory obligations under its Welsh language scheme.

Equality scheme for Northern Ireland

• implement Oftel's scheme (Q1);
• monitor ongoing compliance with Oftel's scheme (Q1-Q4); and
• submit annual report to the Equality Commission for Northern Ireland (Q4).

Race equality scheme

• monitor ongoing compliance with Oftel's scheme (Q1-Q4); and
• submit annual report to the Commission for Racial Equality (Q4);

Welsh language scheme

• monitor ongoing compliance with Oftel's scheme (Q1 - Q4); and
• submit annual report to the Welsh Language Board; (Q4).

C9 Data protection in telecoms

Project Manager:Neil Paterson (tel: 020 7634 8732, e-mail: neil.paterson@oftel.gov.uk)
Other contacts:Frank Phillips (tel: 020 7634 8871, e-mail: frank.phillips@oftel.gov.uk)

Objective: To ensure compliance with the requirements of the Communications Data Protection Directive. To ensure with DTI and the Information Commissioner that the UK’s implementing regulations reflect experience gained to date under current Regulations.

• Ongoing monitoring of the performance of the Telephone and Fax Preference services; (Q1-Q4);
• ongoing provision of technical advice to the Information Commissioner; (Q1-Q4);
• detailed input into implementation of the revised Communications Data Protection Directive; (Q1-Q4);
• input into the redrafting of implementing Regulations. (Q1-2); and

C10 Monitoring the Telecommunications Ombudsman Service

Project Manager: Chris Rowsell (tel: 020 7634 8890, e-mail: chris.rowsell@oftel.gov.uk)
Other contacts: Chris Handley (tel: 020 7634 8863, e-mail: chris.handley@oftel.gov.uk)

Objective: To ensure that a Telecommunications Ombudsman is established, and that it meets the UK’s obligations for dispute resolution under the Universal Service and Users’ Rights Directive. The aim is to ensure the successful implementation of an independent industry-funded Ombudsman scheme, free of charge to consumers, which satisfies the criteria of independence, effectiveness, fairness, and public accountability. The Council of the Ombudsman Service and the Ombudsman are responsible for implementing the service itself.

• Liaison with independent industry Ombudsman as appropriate (ongoing); and
• continue to work with the DTI on development of appropriate legislation in the Communications Bill (Q1-4).

Prevention of anti-competitive practice

Reviews

D1 Financial information and systems programme

Project Manager: Gavin Greenfield (tel: 020 7634 8734, e-mail: gavin.greenfield@oftel.gov.uk)
Other contact:Dave Robinson (tel: 020 7634 8933, e-mail: dave.robinson@oftel.gov.uk)

Objective: To ensure that Oftel has access to relevant, accurate and timely financial and other information from operators necessary to ensure that competition and regulatory issues can be addressed effectively and efficiently. The provision of information by operators is necessary to ensure conformity with the provisions of, or decisions made in accordance with European Directives.

• Introduction of new financial reporting obligations under EU Directives (Q2);
• propose and implement changes to regulatory financial reporting arrangements necessary to comply with regulatory obligations eg local loop unbundling, partial private circuits, carrier pre-selection (Q1-Q4);
• monitor and evaluate compliance with regulatory financial reporting requirements as set out in operators’ licences/conditions of entitlement (Q1-Q4);
• assess and examine the processes, systems and procedures used by SMP dominant operators in preparing and delivering financial information requested by Oftel as part of regulatory requirements or competition investigations (Q1-Q4); and
• promote and review developments and enhancements to the accounting methodologies used by SMP operators in the above context (Q1- Q4).

Implementation

D2 Compliance Casework & Dispute Programme

Programme Manager: Heather Clayton (tel: 020 7634 8979, e-mail: heather.clayton@oftel.gov.uk)
Other contacts for projects and own initiative investigations within the programme:
Geoff Brighton: NTS project (tel: 020 76348925, e-mail: geoff.brighton@oftel.gov.uk)
Lucy Rhodes: 2 Part Charging (tel: 020 7634 8836, e-mail: lucy.rhodes@oftel.gov.uk)
Kalpesh Brahmbhatt: Disputes in 4 months (tel: 020 76348826, e-mail: kalpesh.brahmbhatt@oftel.gov.uk)

Casework includes investigation of complaints and own initiative investigations under the Telecommunications Act, Competition Act, and other UK and EU legislation under which the Director General has powers and duties.

Objective: Prevent anti-competitive practices by efficiently resolving disputes and managing own initiative investigations. Ensure that Oftel continues to meets published targets for performance in investigation and meets the 4 month deadline specified by the new EU Directives for dispute resolution in 4 months by:

• providing quality control on the substance of the full range of complaints and dispute resolution investigations (Q1-Q4);
• continue to improve the quality and timeliness of Oftel’s casework by implementation of new methods of working (Q1-Q2); and
• with the Compliance Management Office, ensure the right balance of priorities between different areas of work (Q1 – Q4).

D3 Implementing accounting separation under the new directives

Programme Manager:Chris Rowsell (tel: 020 7634 8890, e-mail: chris.rowsell@oftel.gov.uk)
Other contacts: Ruth Ashworth (tel: 020 7634 8709, e-mail: ruth.ashworth@oftel.gov.uk)

Objective: To implement accounting separation (AS) processes and obligations under the new European directives, where decided by the market reviews. This is necessary to ensure non-discrimination, cost-orientation and the prevention of unfair cross-subsidy by companies identified as having SMP in designated markets.

• Publish statement on new accounting separation condition or conditions (Q1-2); and
• to implement new processes and obligations as appropriate (Q1-4 2003/4)

Monitoring

D4 Compliance Management Office Programme

Programme Manager: Trevor Wood (tel: 020 7634 8854, e-mail: trevor.wood@oftel.gov.uk)
Other Contacts:Keith Loader (tel: 020 7634 8793, e-mail: keith.loader@oftel.gov.uk)
Peter Silverman (tel: 020 7634 8737, e-mail: peter.silverman@oftel.gov.uk)
Maeve Gallagher (tel: 020 7634 8777, e-mail: maeve.gallagher@oftel.gov.uk)

Objective: The Compliance Management Office (CMO) supports the running of the Compliance Directorate, including all aspects of casework quality, casework procedures, budget management and admin support. It is responsible for programmes on retail pricing and the monitoring of casework in the compliance phase. It is the first point of contact for Oftel’s advice on mergers and takes the lead in developing and implementing competition policy issues. The CMO has close links with Regulatory Policy and is responsible for allocating work in Compliance across a range of issues.

Retail Pricing issues:

To analyse competition effects of BT’s pricing proposals.

• To assess pricing proposals against licence conditions and competition law (Q1-Q4);
• to assess affinity deals and new service trials against licence conditions and Oftel guidelines (Q1-Q4); and
• to scrutinise PTO retail price change notifications and identify changes to be investigated by Oftel (Q1-Q4).

Compliance Monitoring Issues:

To ensure that compliance issues (such as casework in the compliance phase, obligations under licences etc) are effectively co-ordinated.

• To assess the information received in support of casework in the compliance phase and recommend actions to conclude cases where appropriate (Q1-Q4);
• to operate and develop the system for monitoring public network’s performance with regard to outages and continuity of 999 service (Q1-Q4); and
• To provide advice on the issue of Notices under the Telecommunications Code (Q1-Q4).

Casework Quality System:

To develop and operate a robust framework that enables compliance and competition casework to be conducted in an open, transparent and consistent manner.

• Operate an output based Casework Quality Monitoring System (Q1 – Q4);
• identify and introduce best practice and lessons drawn from the quality assurance assessments within the Compliance Directorate (Q1 – Q4);
• support NAO review of casework procedures and identify and implement changes as a result (Q1 – Q4); and
• continue process of making the Competition Bulletin ‘user friendly’ for external stakeholders (Q1-4); and

Mergers advice:

To provide advice on mergers requests from OFT and monitor markets accordingly.

• To respond to merger requests within 28 days (Q1 – Q4); and
• to maintain an overview of the telecomms industry and monitor industry trends.

Admin support:

To provide support to the directorate on a range of admin functions

• To monitor the Compliance budget.

Reviews

E1 Communications Bill

Project Manager: Neil Buckley (tel: 020 7634 5356, e-mail: neil.buckley@oftel.gov.uk)
Other contact: Tim Cross (tel: 020 7634 8798, e-mail: tim.cross@oftel.gov.uk )

Objective: To promote the development of a competitive market for converging services with appropriate consumer protection by working with Government and other stakeholders to update and reform the Telecommunications Act 1984 and the Broadcasting Acts.

• Contribute to the development of the Communications Bill as it progresses through the Houses of Parliament (Q1-Q2);
• work with the Communications Bill Team on the establishment of Ofcom’s Consumer Panel. (Q1-Q2); and
• advising the Bill Team on the implementation of the Communications Bill (Q1-Q2).

E2 General conditions of entitlement

Project Manager: Lucy Byers (tel: 020 7634 8892, e-mail: lucy.byers@oftel.gov.uk)
Other contact: Neil Buckley (tel: 020 7634 5356, e-mail: neil.buckley@oftel.gov.uk)

Objective: To draft a set of general conditions of entitlement to replace existing licences for non-SMP operators, as part of the new Directive implementation process. Such conditions will apply to those who provide electronic communications networks and/or electronic communications services. The conditions will apply under the general authorisation that will be introduced by the Communications Bill or Statutory Instruments under the European Communities Act implementing the new draft Directives. The general rules will implement the requirements of the new draft Directives as well as the Communications Bill (if appropriate).

• Issue final statement(s) and set(s) of conditions to apply from 25 July 2003, either under Communications Bill or Statutory Instruments (Q1).

E3 Research into consumer views

Project Manager: Karen Metcalfe (tel: 020 7634 8918, e-mail: karen.metcalfe@oftel.gov.uk)
Other contact:Lisa Etwell (tel: 020 7634 8741, e-mail: lisa.etwell@oftel.gov.uk)

Objective: To support evidence based policy development, implementation, and compliance actions, by providing regular and comprehensive information on residential and business consumer behaviour, opinion, and use of telecoms.

• Conduct continuous quarterly-rolling omnibus survey (carried out by an external agency and analysed by Oftel) amongst UK residential and business consumers on their use and opinion of fixed and mobile telecoms services, Internet, and other topics as required for Oftel work (Q1, Q2, Q3, Q4);
• conduct and develop more targeted and intensive ad hoc research in key areas as required by Oftel programmes and projects (Q1 to Q4);
• conduct continuous six-monthly customer satisfaction survey, amongst consumers who have contacted Oftel's Consumer Representation Section, examining their opinion of the service and assistance they received (Q1 and Q3);
• develop consumer profiles to assist understanding of different types of consumer behaviour and implications for market developments (ongoing);
• liase regularly with other Ofcom regulators on joint research projects (Q1 to Q4); and
• consider and examine relevant research from other sources and where necessary reconcile any differences with Oftel research (ongoing).

E4 Industry data collection programme

Project Manager: Kenny Osborne (tel: 020 7634 8973, e-mail: kenny.osborne@oftel.gov.uk)
Other contacts: Nick Collins (tel: 020 7634 8851, e-mail: nicholas.collins@oftel.gov.uk)
Robert Turner (tel: 020 7634 8778, e-mail: robert.turner@oftel.gov.uk)

Objective: To ensure that Oftel has sufficient information from the telecoms industry to allow evidence-based policy development by managing the regular collection and publication of accurate information from telecoms operators and service providers on an agreed range of services.

• ensure the consistent collection, analysis and publication of data from industry particularly to inform programme of EC reviews (Q3-Q4);
• contribute to development of Oftel policy on information gathering consistent with requirements of Communications Bill and EU directives (Q3-Q4); and
• liaise regularly with other Ofcom regulators to minimise burden on industry and ensure consistency of collected data by each regulator (Q3-Q4).

Implementation

E5 Developing international relations

Project Manager: Vince Affleck (tel:020 7634 8819, e-mail: vincent.affleck@oftel.gov.uk)
Other contacts:John Bean (tel: 020 7634 8821, e-mail: john.bean@oftel.gov.uk) Rachel Coldeboeuf (tel: 020 7634 5306, e-mail: rachel.coldeboeuf@oftel.gov.uk)Karine Oliver (tel: 020 7634 8763, e-mail: karine.oliver@oftel.gov.uk)

Objective: To improve customer outcomes in the UK by identifying and applying best regulatory practice from elsewhere in the world. To maintain Oftel's international reputation by promoting and explaining the work of Oftel internationally including transferring Oftel's experience of evolving regulation where appropriate.

Europe

• Develop relations with other European administrations and the European Commission (Q1-4);
• monitor Oftel’s compliance with European legislation, and liaise with the Commission in compiling yearly reports on Oftel’s progress in promoting competition in the UK telecoms market (ongoing and reports in Q3); and
• ensure the active participation of Oftel in:

Beyond Europe

• Maintain and enhance awareness within Oftel and key stakeholders of the international agenda, and continue to improve Oftel’s effectiveness in influencing this agenda (Q1-4); and
• represent UK interests in ITU and other international fora, as appropriate.

E6 Stakeholder relationships

Programme Manager: TBA
Project Managers:
Large Business User Panel Alan Pridmore: (tel: 020 7634 8910, e-mail: alan.pridmore@oftel.gov.uk)
Small Business Task Force: Geoff Delamere: (tel: 020 7634 8745, e-mail: geoff.delamere@oftel.gov.uk)

Objective: To ensure that Oftel makes full use of the knowledge and experience which stakeholders can bring to Oftel’s decision making, and to ensure that stakeholder and Oftel resources are used efficiently and effectively.

• Ensure that the Oftel Forum contributes strongly to the evolution of regulatory policy. Review the achievements of the forum in Q1;
• hold quarterly meetings of the Large Business User Panel, publicise outcomes through website and ensure views are fed back into Oftel policy development (Q1-Q4); and
• continue to hold meeting of Operators Policy Forum and similar groups as appropriate. (Q1-Q4).

E7 Implementation of the new EU Directives

Project Manager:Vince Affleck (tel:020 7634 8819, e-mail: vincent.affleck@oftel.gov.uk)
Other contacts:Jim Niblett (tel: 020 7634 8780, e-mail: jim.niblett@oftel.gov.uk) Michael Knowles (tel: 020 7634 8706, e-mail: michael.knowles@oftel.gov.uk

Objective: To ensure that Oftel implements the new EU Directives in a timely and efficient manner. Market reviews are covered separately in A1.

• Ensure that Oftel's work programme is sufficient to implement the new Directives in a timely and efficient manner (Q1);
• ensure consistency of policy decisions between work areas and, where relevant, with Commission guidelines and other NRAs (Q1 – Q2);
• identify where Oftel is at risk of not meeting its objective of timely implementation and work with project and programme managers to resolve problems (Q1-Q2);
• oversee preparation of transitional SIs and general conditions (Q1-2); and
• ensure effective communication across Oftel and with stakeholders (Q1-3).

E8 Ending of the Individual licensing regime.

Project manager: Peter Davies (tel: 020 7634 8923, e-mail: peter.davies@oftel.gov.uk)
Other contact: Laila Jhaveri (tel: 020 7634 5375, e-mail: Laila.Jhaveri@oftel.gov.uk)

Objective: To implement fully the proposed EU Authorisation Directive, abolish the individual licensing regime, removing one of the potential barriers to entry. The ending of the individual licensing regime will obviate the need for network operators and service providers to apply for licences prior to the commencement of their operations. Class licences will also be revoked.

Create a new regime for administrative charges following the ending of individual licensing and the existing fee regime.

• Issue communications to all individual licensees informing them of the changes which will take place (Q2);
• assist with the preparation of subordinate legislation to implement the changes to the regime (Q3 ) (Q4);
• consider and advise on any transitional provisions which need to be provided for and are consequential upon the ending of the existing statutory licensing process (Q3); and
• develop and implement a new policy for administrative charges and notifications (Q4).

E9 Oftel Strategy implementation

Programme Manager: Geoff Delamere (tel: 020 7634 8745, e-mail: geoff.delamere@oftel.gov.uk)

Project Managers:

Strategy Implementation/Self & co-regulation Nic Green (tel: 020 7634 8891, e-mail: nic.green@oftel.gov.uk)
Management Plan John Wimmer (tel: 020 7634 8742, e-mail: john.wimmer@oftel.gov.uk;
Performance Measurement Sarah Evans (tel: 020 7634 5320, e-mail: sarah.evans@oftel.gov.uk
Measuring Available Consumer Savings Kenny Osborne (tel: 020 7634 8973, e-mail: kenny.osborne@oftel.gov.uk

Compliance strategy programme

Maeve Gallagher (tel: 020 7634 877, e-mail: maeve.gallagher@oftel.gov.uk

Objective: To facilitate the implementation of Oftel's strategy as aligned with market circumstances and to prepare for integration with a wider Ofcom strategy.

• To update the analysis of Oftel’s strategy in relation to market developments (Q1), further develop processes to focus regulatory efforts and make best use of available regulatory levers to create incentives to achieve regulatory objectives ( Q2-4 ) and with Ofcom colleagues develop competition based approach to broadband, public service broadcasting and spectrum trading for integration into an across Ofcom strategy (Q1 and 2);
• to review the application of strategy guidelines re option appraisal (Q2) the implementation of strategy through market reviews (Q3) and consumer protection policy reviews (Q2-Q3);
• to integrate the established methodology for measuring available consumer savings to help focus regulatory resources (Q2);
• to feed into Ofcom's initial Management plan consultation ( Q3) and statement (Q4);
• to assess Oftel’s performance and development in the communications market (through measures such as Service Delivery Agreements) and develop, with Ofcom colleagues, a comprehensive set of performance measures for Ofcom based on an Ofcom strategy (as discussed in previous bullet above) (Q 1-2) and produce international benchmarking reports (publication in Q1 and Q3); and
• to input to Concurrency Working Party on Competition Act issues through bi-monthly meetings (Q1 to Q4) and to EU modernisation of competition law (Q 1-3) and through training programmes to ensure Oftel staff are aware of competition issues and Competition Act strategy (Q1 to Q4).

E10 Preparing for Ofcom

Project Manager: TBA

Objectives: work with other regulators and Government to support the development of the new Office for Communications (Ofcom) and ensure

i. that Ofcom has characteristics and methods which will deliver coherent economic regulation of converged services for the benefit of consumers;

ii. a smooth transition of Oftel responsibilities into the new organisation.

(This project deals primarily with the managerial implications and aspects of the new regime. Legislative issues are covered by project E1.)

• Ensure effective communication with all Oftel’s staff and stakeholders including the ACTs on the development of Ofcom (Q1-3); and
• support delivery of the Ofcom Board’s implementation plan to establish the new organisation and a smooth transfer of Oftel staff and functions (Q1-3).

E11 Better info on companies and markets

Project Manager: Justin Silvertown (tel: 020 7634 8748, e-mail: justin.silvertown@oftel.gov.uk)
Other Contacts: Despina Tasiopoulou (tel: 020 7634 5336 e-mail: despina.tasiopoulou@oftel.gov.uk) Robert Turner (tel: 020 7634 8778 e-mail: robert.turner@oftel.gov.uk)

Objective: Monitoring developments in telecoms and media companies and related markets, analysing their impact and disseminating these findings across Oftel/Ofcom. Assessing industry news, company announcements and reports, research by financial analysts, consultants and industry groups, direct meetings with companies.

Outputs will be under review to ensure responsiveness to Oftel/Ofcom needs. Currently to initially include:

• weekly and monthly commentaries on telecoms and media market issues;
• liaison with specific Project teams;
• development of relevant databases on company investment and financial performance; and
• ad hoc briefings for the Senior management.

E12 Electronic Communications Code and funds for liabilities:

Project manager: Peter Davies (tel: 020 7634 8923, e-mail: peter.davies@oftel.gov.uk)
Other contact: Laila Jhaveri (tel: 020 7634,(no telephone number as yet. e-mail: Laila.Jhaveri@oftel.gov.uk)

Objective: To develop Oftel’s thinking on how Ofcom will grant rights to make use of the new Electronic Communications Code. It is intended also to ensure the continuation of a viable and practicable scheme to facilitate the creation of communications infrastructure and to introduce a new scheme for funds for liabilities.

• Produce policy and process for the granting of Code powers to reflect the new communications legislation (Q3);
• consult on and agree on how such a policy should be pursued (Q4);
• supervise the implementation of any interim arrangements.(Q4 and beyond); and
• in agreement with DTI progress and conclude the process of implementing a new scheme for funds for liabilities following the consultation process which has now been completed (Q3).

Internal business support projects and programmes

F1 Human Resources

Programme Manager: Ros Badger (tel: 020 7634 8783, e-mail: ros.badger@oftel.gov.uk)
Other contact: Gill Loader (tel: 020 7634 8789, e-mail: gill.loader@oftel.gov.uk)

Objective: To ensure that Oftel implements effective strategies, policies and procedures for the recruitment, retention, recognition and reward of Oftel staff. The new system of performance and reward is aligned with both Oftel’s business needs and its employee’s aspirations and aims to maintain continuity and equality of staff in the lead up to Ofcom and beyond.

• Continue to run recruitment programme minimising delays and matching best practice elsewhere (Q1-4);
• introduce strategies to enable Oftel’s staff to make the transition to Ofcom (Q1-3); and
• actively promote and monitor a reduction in sick absence in accordance with Oftel’s target to maintain the reduction in the average number of days lost to sickness to 4.2 days per year (Q1-4).

F2 Learning and Development Programme

Programme Manager: Carol Coyne (tel: 020 7634 8997, e-mail: carol.coyne@oftel.gov.uk)

Objective: To ensure that Oftel can meet its business objectives by providing high quality learning opportunities accessible to every member of Oftel staff.

• Design, deliver and evaluate events which meet individual and business needs using the best practice methods required by the Investors in People (IiP) standard (Q1-Q4);
• respond to individual, team and organisational needs as they emerge to support the smooth transition into Ofcom (Q1-Q3);
• with the other Ofcom organisations, plan and implement joint learning/development/training initiatives which strengthen the links between each organisation (Q1-Q2); and
• develop computer based training packages for telecoms related topics not generally available to supplement existing off-the-job training (Q2-Q3).

F3 Budget management programme

Programme manager: Paul Heseltine (tel: 020 7634 8791, e-mail: paul.heseltine@oftel.gov.uk)

Objective: To provide an effective finance and accounting service to the department.

• Prepare Oftel’s annual accounts for NAO audit and publication (Q1-Q3);
• develop, with future Ofcom partners, proposals for harmonising finance policies and procedures (Q1-Q4); and
• consult stakeholders to prepare a 2004-05 budget (Q3-Q4).

F4 Business Assurance Programme

Programme Manager Ray Thornton (tel: 020 7634 8704, e-mail: ray.thornton@oftel.gov.uk)

Project Managers:

Disaster Recovery and Contingency: Hari Bains (tel: 020 7634 8796, e-mail: hari.bains@oftel.gov.uk

Supporting Project and Case Managers Rob Jex (tel: 020 7634 5350, e-mail: rob.jex@oftel.gov.uk )

Objective: This programme covers the need to ensure that Oftel’s processes and procedures are clearly identified and defined, supporting the delivery of better regulation within the organisation. It specifically supports the Statement of Internal Controls made by the Director General in the annual accounts each year.

The programme ostensibly covers all areas of operation in all directorates but focuses on Oftel-wide process and procedure. Specific areas to be covered by this programme include:

• to work with the Internal Audit Programme to ensure that the Director General has sufficient evidence to be able to agree and sign the Certificate of Internal Control (May 2003);
• outputs from the Quality Assurance Board, specifically the development and delivery of supporting guidance for managers;
• outputs from the Internal Management Board, specifically Business Continuity and Disaster Recovery; and
• compliance Quality Assurance Programme.

F5 IS & IT

Objective: To continue to provide efficient and effective Information Systems which support Oftel's business needs and plan for the transition to Ofcom.

• Maintain and control the quality of the network services and ensure that Oftel information system assets are adequately protected and their integrity and availability maintained. (Q1-Q4);
• ensure the successful implementation of the new Online Numbering Allocation System (Q1-Q2); and
• work with Ofcom partners to ensure that all transition requirements are well designed and carefully planned to minimise disruption to the operational requirements of the business (Q1-Q4).

F6 Communicating Oftel’s work to external audiences

Programme Manager:Duncan Stroud (tel: 020 7634 8750, e-mail: duncan.stroud@oftel.gov.uk)
Other contacts:Rachel Millns (tel: 020 7634 8752, e-mail: rachel.millns@oftel.gov.uk)

Objective: To ensure that Oftel’s work is communicated quickly and clearly to external audiences including the public, industry and media.

• Maximise opportunities to promote Oftel’s work through the media in order reach key stakeholder audiences. Promoting Oftel’s work with the other communications regulators to create Ofcom and the market review work for implementation of the new EU Directives will be two important elements of this work.(to Q4);
• publicise and promote Oftel’s work to stakeholders through non-media channels including the quarterly magazine Oftel News, Oftel’s website, conference speaking engagements and publications such as consumer guides, Guide to Oftel and Oftel’s annual report (to Q4); and
• support Oftel projects and programmes such as the Small Business Task Force, raising consumer awareness and Informing consumers and their advisors where communications is an important aspects of these projects. This also includes supporting work to share information across Oftel (to Q4).

F7 Research and Information Unit

Programme Manager: Anne Cameron (tel:020 7634 8958 , e-mail: anne.cameron@oftel.gov.uk)

Other Contacts: Hari Bains (tel:020 7634 8796, e-mail: hari.bains@oftel.gov.uk) Neil Paterson (tel:020 7634 8732, e-mail: neil.paterson@oftel.gov.uk) Rachel Reeve (tel: 020 7634 8762, e-mail: rachel.reeve@oftel.gov.uk)

Objective: Ensure that Oftel complies with, amongst others, the requirements of Data Protection, Intellectual Copyright and Freedom of Information. To manage Oftel's knowledge assets, ensuring continuity. To develop and impose Metadata standards, in line with Cabinet Office guidelines, that will help produce more accurate search results on both Internet and intranet.

• Maintain awareness of the requirements of Data Protection and Freedom of Information, including developing a publication scheme, in line with the requirements of the Information Commissioner, for publication end November 2002. Reviewed annually;
• provide an electronic file management databases for Oftel's Local Record Officers. To ensure records management compliance and ensure a good fit with future Ofcom plans; and
• to ensure that the intranet and Internet Metadata hold common standards.

Chapter 4

Oftel’s Resource Plans for 2003–04

4.2 The next financial year (April 2003 – March 2004) straddles two regimes for the recovery of the costs of the National Regulatory Authorities, namely the existing Licensing Directive (which is repealed on 24 July 2003), and the new Directives, which take effect from 25 July 2003. For the period up to 24 July 2003, licence fees will continue to be payable. However under Article 12 of the new EC Authorisation Directive (Directive 2002/20) and following abolition of the licensing regime on 24 July 2003, costs will be recovered instead from those operating under a general authorisation. Full details of Oftel’s proposed new charging regime for 2003–04 will be set out in a Consultation Document.

4.3 Based on Oftel’s current expenditure plans for 2003-04, some £0.7 million will be sought from Government sources to meet costs for those areas of work that cannot be funded under the charging regime.

4.4 The total administration costs of Oftel in 2002–03 are forecast at £19.5 million (2001–02 £17 million), an increase of some 14 per cent. For 2003–04 Oftel’s budget plans provide for total administration costs of £20.1 million, representing the smallest planned increase (3.3 per cent) for many years.

Table 1: Trends in Oftel’s spending: £’000

4.5 Oftel’s financing regime changed following acceptance of most of the recommendations in the 2001 report to HM Treasury on the External Efficiency Review of the Utility Regulators. The new regime, which was introduced in 2002 provides for licence holders, consumer committees and other interested parties to feed in any practical suggestions they may have for efficiency improvements as well as comments on Oftel’s expenditure plans. In response, Oftel implemented an Action Plan to take forward the key actions. The major action points included a commitment to:

• provide detailed resource bids including estimates of staff resources and consultancy support required for each project/programme;
• carry out post-implementation value for money reviews of major consultancy projects costing more than £250,000 (current contracts are below this threshold);
• identify projects/programmes costing over £250,000;
• produce a cost benefit analysis on all major policy proposals that will lead to additional regulation or to the continuation of existing regulation (to be reflected in consultation documents or other published outputs);
• continue to look for savings particularly in consultancy costs; and
• publish a breakdown of policy and support activities.

4.6 Oftel incorporated these proposals as part of its consultation process last year. Our consultation process has also involved early notice of key issues to stakeholders through a meeting of the Oftel Forum in October 2002. A more detailed update of progress against Oftel’s action plan will be included in Oftel’s 2002 Annual Report to be published in the Spring. The Annual Report will continue to be the main vehicle for reporting Oftel’s performance against its Service Delivery Agreement (SDA) targets.

4.7 The following tables provide an outline of Oftel’s budget for 2002-03 and its proposals for 2003-04.

Table 2: Summary of expenditure and outturns £

* Budget revised following Parliamentary approval of Oftel’s Winter Supplementary Estimate (November 2002).

4.8 These costs can be split by Directorate as follows:

Table 3: Planned expenditure by Directorate for 2003–04

Budget by main category of plan

4.9 The following tables provide an approximate breakdown and costings of main resources (salaries, consultancy) of Oftel’s external facing work programme (ie all work described in chapter 3 excluding Internal projects/programmes i.e. projects F1-F7) calculated through the grouping of projects/programmes in relation to Oftel’s high level objectives and by type of activity as set out in Chapter 3, for the years 2002-03, and the proposed work programme for 2003-04. These tables have been formulated through internal consultation with Oftel project/programme managers and by a ‘top down’ analysis of Oftel’s work programme. Whilst Oftel needs to remain flexible in terms of resource allocation to respond to emerging issues and priorities, these tables have been developed so as to provide stakeholders with an initial approximation of how Oftel intends to commit its resources over 2003-04.

Table 4: Budget 2002–03 – Strategy by Objective

Table 5: Budget 2003–04 – Strategy by Objective

4.10 Overall spend on projects & programmes is planned to increase by around 6% in 2003–04 compared to 2002–03. The major factors explaining the variance by category of work from 2002–03, can be determined as, increases in salaries (discussed below), the focus and changes in Oftel activity. The major increase by category of work from 2002–03 relates to 'prevention of anti-competitive practice'. This increase is due primarily to a re-allocation in consultancy of nearly £400K. The restructuring of the Compliance Directorate in 2002 has led to a number of budget areas being consolidated under 'prevention of anti-competitve practice'. Major areas of this consultancy budget include - extending or modifying existing cost models to support investigations and casework, quality assurance audit work on cost price calculations, benchmarking studies, ad hoc market research for Competition Act cases and the consolidation of legal advice relating to casework.

Main explanatory factors in 2003-04 budget increase

Recruiting and retaining staff

4.11 Oftel has continued to experience some difficulties in recruiting staff as the utility and communications regulators have to compete head on with private sector companies, with salaries to match for highly prized skills in a key area of the UK economy. However there is some evidence that Oftel’s Performance and Reward System introduced in 2001 has made a difference, for example improving our ability to recruit to some previously hard to fill specialist and professional vacancies.

4.12 Staff turnover dropped to16% in 2001 but turnover is increasing and the forecast outturn for 2002 is 21% against an average turnover of some 6 per cent across the whole of the Civil Service (2001 statistics).

4.13 Better pay and prospects are the main reasons given for leaving. With the creation of OFCOM expected in 2003, retention remains a key issue. The risk of a return to even higher turnover rates may increase during 2003-04 as we work towards transition to the new body.

4.14 In response to the high turnover of staff, pay had gradually been increased as far as possible within public sector pay constraints to reflect (but not match) market rates. As can be seen from the tables above, planned expenditure on the paybill for 2003–04 is significantly higher than current year forecast spend. This reflects not only the pay settlement sought to provide for the operation of the Performance and Reward System in its final year but also to meet the costs of the continuing change in the staff skills mix. Oftel has been reducing the number of support staff and taking on more senior and professional staff to handle the growth in complexity of regulatory work and demands for the speedier resolution of complaints and casework.

4.15 The following table identifies projects/programmes costing more than £250K reflecting approximate staff and consultancy costs.

Table 6

Staff Numbers

4.16 Planned staff numbers for 2003–04 are as follows:

Table 7

4.17 Oftel’s actual forecast outturn for 2002–03 is 234 full time equivalents.

Governance

4.18 The Director General of Telecommunications is the Accounting Officer for Oftel.

4.19 Oftel’s accounts are audited by the National Audit Office (Comptroller and Auditor General) and an internal audit service is provided by the Department of Trade and Industry. Oftel’s Audit Committee has an independent external chairman and the Committee meets at least three times a year with National Audit Office officials and Oftel’s head of Internal Audit in attendance.

4.20 Oftel also has a Remuneration Committee with an independent external chairman and member in addition to a single Oftel committee member.

Chapter 5

Consultation process and questions

5.1 This chapter sets out:

• consultation questions;
• consultations to date;
• how to respond to the consultation; and
• who is being consulted.

Consultation questions

5.2 Consultees are asked to respond to the following questions:

Consultations to date

Oftel Forum

5.3 On October 25 2002 Oftel Forum , stakeholders were split into groups and held a general discussion on preparatory consultation questions for the management plan. The following consists of the main points that came out of the discussions.

Q1: What do you think Oftel should be taking into account in preparing its 2003-4 plan?

5.4 There were a number of issues raised by the discussion groups. It was stated that the importance e-commerce and the advances in telecommunications to the general public needs greater recognition. There was concern that some sections of the community may become isolated from these benefits. As such the extent of USO obligations may require further thought. Codes of Practice (COP) were identified as being an area that would receive greater prominence in 2003-4. The comment was made that Wholesale Line Rental (WLR) was an area, which would require adequate resourcing during implementation to ensure effective product delivery. As regards the transition to Ofcom, it was stated that it would be important for Oftel to communicate to industry and other stakeholders which Oftel staff will be involved in Oftel’s current work programme, so as to ensure continuity.

Oftel comment

5.5 Oftel fully acknowledges the importance of adequate resources and commitment for the implementation of WLR. This commitment is recognised in Oftel’s Condoc on WLR published in November 2002. As regards USO obligations, Oftel is aware of the increasing importance e-commerce and telecommunications in peoples lives. Monitoring the scope and operation USO obligations to ensure that sections of society do not become unfairly disadvantaged in terms of having access to telecommunications technology is an ongoing process of review. Oftel recognises the importance of continuity in terms of its work programme during the transition to Ofcom. The need for the proper management of resources and the development of strategies to achieve Oftel’s objectives in areas like WLR is recognised in chapter 2. Keeping the stakeholders informed as to which staff are working on current Oftel projects/programmes will be a high priority for Oftel in the lead up to Ofcom.

Q2: Do we need to focus our regulatory efforts more effectively, and if so how?

5.6 Many of the comments from the group focused on issues that Oftel needs to take into consideration in the lead up to Ofcom in relation to the ACTs. The comment was made that Oftel needs to continue to engage the regions during the formation Ofcom, especially as Ofcom may not have regional secretariats. Maintaining a regional perspective was seen as important so as to ensure that regional issues are not overlooked, as was ensuring that policy issues of concern to the ACTs continue to receive prominence both prior to and during Ofcom’s formation. It will be important for Oftel to keep consumer representatives and the ACTs informed as to where organisationally and in what forums regional and other consumer policy issues will be addressed in Ofcom.

Oftel comment

5.7 Oftel recognises the importance of consulting with and keeping the ACTs informed in the lead up to Ofcom. Earlier this year Oftel re-issued guidance to project/programme managers on the importance of consulting with the ACTs in relation to any work with a consumer focus. Oftel will continue to work with the ACTs and seek their advice in the lead up to Ofcom. As regards the regions, Oftel will continue to engage with the ACTs to gain their perspectives on regional telecoms issues. Whilst Ofcom may not have regional secretariats, the Consumer Panel will however have board members representing regional areas.

Q3: What about beyond Oftel – what should happen now and in 2003-4 to ensure Ofcom gives priority to the most relevant issues?

5.8 The group made a number of points on this question. It was felt that Oftel needs to identify what is good and what is bad in its organisational culture and work practices. Oftel also needs to take account of any ‘lessons learnt’ in regards to achieving its objectives and getting the right focus and identifying most relevant issues in the lead up to Ofcom. Oftel needs to identify its strengths and weaknesses i.e. strategies and structures, for example it was raised that Oftel’s has good consultation procedures, but could learn from practices like the road shows of other regulators.

5.9 The comment was made that Oftel needs to focus more on identifying emerging issues. With the creation of Ofcom this will become increasingly important. Consumer input was identified as being important along with a greater use of consumer detriment analysis as regards complaint handling. Some stakeholders felt that there would be a greater use of self and co-regulation and Codes of Practice in the future, as such the issues of consumer resourcing needed to be addressed.

5.10 It was also felt that Competition Act decisions need to be speedier and that this will be an issue for Ofcom. The need for strong evidence based regulation was also seen as an important issue to take into Ofcom.

Oftel comment

5.11 Oftel recognises the need to retain what is best in its organisational culture and work practices to ensure that Ofcom prioritises the most relevant issues in the telecommunications sector. Ensuring that Oftel’s experiences and that any "lessons learnt" are appreciated and transferred into the new organisation is a high priority for Oftel, as is ensuring that Oftel’s work programmes continue to run effectively, transparently, efficiently and receive adequate resourcing during the transition period. Oftel is also interested in learning from its fellow regulators any successful examples of ‘best practice’.

5.12 Chapter 2 of the consultation document highlights the need for efficient, inclusive and accountable regulatory processes that are transparent to stakeholders as well as the need for a greater targeting of regulatory to achieve outcomes for consumers. In particular, in terms of continuing to develop regulatory processes to take into Ofcom, Oftel has identified: actions to improve the focus of regulation i.e. dispute resolution, competition cases & consumer initiatives, and actions that provide incentives to improve the speed with which regulatory responses to problems are developed and implemented, as areas that could be further developed by Ofcom.

5.13 Oftel appreciates the need for adequate consumer resourcing to ensure the proper functioning of any self & co-regulatory initiatives and that this will be an issue for Ofcom’s consumer panel. Oftel is committed to the use of consumer detriment analysis it its decision making and will take this focus into Ofcom. Oftel continues work to ensure that its decision making procedures in relation to Competition Act cases are as efficient as possible. Oftel recognises the desire amongst industry for speedier decision-making, however Oftel must balance the desire for quicker decision making with the need for providing transparent due process. Evidence based regulation has always been at the heart of Oftel’s work and will be continue to be a priority as Oftel transfers its functions into Ofcom.

How to make comments on the questions raised in this consultation document

5.14 Oftel is publishing this consultation document so that interested parties may comment on the issues which it addresses. The closing date for submitting comments is 31 January 2003.

5.15 Where possible, comments, and comments on comments, should be made in writing and sent by e-mail to john.wimmer@oftel.gov.uk. However, copies may also be posted or faxed to the address below. If any interested parties are unable to respond in one of these ways, they should discuss alternatives with the Oftel manager named below:

John Wimmer
Oftel
50 Ludgate Hill
London EC4M 7JJ

tel: 020 7634 8742
fax: 020 7634 8757

e-mail: john.wimmer@oftel.gov.uk

5.16 This document can be viewed in the publications section of Oftel’s website at www.oftel.gov.uk/publications/about_oftel/index.htm.

5.17 Alternative formats such as large print, Braille, disc and audio cassette can be made available on request. Please contact Oftel’s Research and Information Unit by phoning 020 7634 8761 or by sending an e-mail to infocent@oftel.gov.uk.

Publication of comments made by stakeholders

5.18 On this occasion, Oftel is not programming a formal period during which interested parties may comment on the responses made by others. Nevertheless, in the interests of transparency, all non confidential comments and comments-on-comments, will be published. Respondents should separate out any confidential material into a confidential annex which is clearly identified as containing confidential material. Oftel will take steps to protect the confidentiality of all such material from the moment that it is received at Oftel’s offices. However, in the interests of transparency, respondents should avoid applying confidential markings wherever possible.

5.19 Non-confidential responses can be viewed on Oftel’s website in the publications section under ‘Responses to Oftel consultations’. They can also be viewed at Oftel’s Research and Information Unit. Appointments must be made in advance by phoning 020 7634 8761 or sending an e-mail: to infocent@oftel.gov.uk.

e-mail notifications

5.20 Oftel has a free e-mail based mailing list to help people stay informed about the work that Oftel is doing. Each time an Oftel document is published and placed on Oftel’s website at www.oftel.gov.uk, subscribers to the list receive an e-mail alert. To register, please go to the ‘What’s New’ section of the website and access the electronic form.

Consultation criteria

5.21 Oftel considers that this document meets the Cabinet Office code of practice on written consultation documents except for the period of consultation which is explained below. The code is reproduced below for convenienc
e. If you have any comments or complaints about this consultation process please contact:

Robert JexOftel Co-ordinator for the Code of Practice
Oftel
50 Ludgate Hill
London EC4M 7JJ

tel: 020 7634 5350
fax: 020 7634 8943

e-mail: rob.jex@oftel.gov.uk

5.22 Timing of consultation should be built into the planning process for a policy (including legislation) or service from the start, so that it has the best prospect of improving the proposals concerned, and so that sufficient time is left for it at each stage.

5.23 It should be clear who is being consulted, about what questions, in what timescale and for what purpose.

• 3. A consultation document should be as simple and concise as possible. It should include a summary, in two main pages at most, of the main questions its seeks views on. It should make it as easy as possible for readers to respond, make contact or complain.

5.24 Documents should be made widely available, with the fullest use of electronic means (though not to the exclusion of others), and effectively drawn to the attention of all interested groups and individuals.

5.25 Sufficient time should be allowed for considered responses from all groups with an interest. Twelve weeks should be the standard minimum period for consultation (see note below for why a shorter period has been chosen for this consultation).

5.26 Responses should be carefully and open-mindedly analysed, and the results made widely available, with an account of the views expressed, and reasons for decisions finally taken.

5.27 Departments should monitor and evaluate consultations, designating a consultation co-ordinator who will ensure that all lessons are disseminated.

5.28 The formal consultation period for this document is 6 weeks. The shorter consultation period is justified on the following grounds:

• Treasury requirement for consultation plan by end of January 2002 in order
• to agree budget bid;
• fast moving nature of the industry means that earlier consultation would give less chance to reflect up to date position and less time to assess current year progress and developments;
• annual nature of consultation means it is more predictable for stakeholders; and
• Oftel Forum meeting in November gave stakeholders opportunity to give initial views on priorities for 2003/4 and to start considering their priorities for 2003/4.

5.29 The following organisations are being consulted:

• Advertising Standards Authority (ASA);
• Age Concern England;
• American Express Services Europe Ltd;
• Antelope;
• AUCS Communications Services (UK) Ltd/Infonet-Europe;
• Band-X;
• BBC;
• Broadcasting Standards Commission;
• Broadsystem Ventures Limited;
• BSkyB;
• BT;
• Cable & Wireless Communications Ltd;
• Carlton;
• Cellcom;
• Centre for Utility Consumer Law;
• Centrica;
• Cix-Compulink;
• COLT;
• Commerce Groups – CBI, Chambers of Commerce;
• Communications for Business (CfB) Advisory Committee;
• Communications Managers Association;
• Competition Commission;
• Concert;
• Consignia;
• Consumer Communications for England (CCE);
• Consumers' Association;
• Deaf Broadcasting Council;
• Department of Trade and Industry;
• DIEL (the Advisory Committee on Telecommunications for Disabled and Elderly Users);
• ECTRA;
• Ednet;
• Energis;
• Equant (Global One Communications);
• European Commission;
• Eversheds;
• Federation of Communication Services Ltd;
• Federation of Small Businesses;
• Forum for Private Business;
• Freephone User Group (FUG);
• Genesis Communications;
• Global Crossing;
• Granada;
• GTS (Esprit Telecom);
• Helplines;
• Hutchison 3G;
• Independent Committee for the Supervision of Telephone Information Services (ICSTIS);
• Independent Television Commission (ITC);
• ITV Network Centre;
• Internet Society;
• Internet Watch Foundation;
• Interoute Telecommunications;
• ISPA;
• KDD Europe Ltd;
• Kingston Communications;
• LINX;
• London Business School Centre for Marketing;
• Marconi;
• Mencap;
• NACAB;
• National Audit Office;
• National Consumer Council;
• National Regulatory Authorities for electronic communciations services for EU Member states;
• NEA;
• NIACT;
• Nominet UK;
• Nortel;
• NTL;
• Office of Fair Trading;
• Oftel Large Business User Panel;
• T-Mobile
• 186k;
• OneTel;
• Opal;
• Orange;
• Other government departments – DTI, DCMS, DfEE, Home Office, Cabinet Office;
• Parliamentary Committees and devolved administrations – TISC, PAC, PITCOM, House of Lords Science and Technology Committee, Welsh Assembly, Scottish Parliament, Northern Ireland Assembly;
• Powergen;
• Primus Telecommunications;
• Project Telecom;
• Public Utilities Access Forum (PUAF);
• Radio Authority;
• Radiocommunications Agency;
• Rocom Network Services Ltd;
• Royal National Institute for the Blind;
• Scottish Advisory Committee on Telecommunications;
• Service Provider Interest Group (SPIG);
• Servista;
• Six Continents;
• Spitfire Technology Group;
• Swiftcall;
• Liberty Broadband Ltd
• Telecoms Users Association;
• Teleglobe;
• Telewest;
• Telia;
• Telstra;
• Thus
• TIA;
• Tiscali;
• Trading Standards Offices (via LACOTS);
• Utility regulators – OFGEM, OFWAT, ORR;
• Vanco;
• VarTec Telecom (UK) Ltd;
• Ventelo;
• Virgin;
• Vodafone UK Limited;
• Welsh Advisory Committee on Telecommunications (WACT);
• Working Group on Hearing Impaired;
• World Trade Organisation (WTO);
• Worldcom Ltd; and
• Your Communications.

Alphabetical list of projects and programmes by title

List of projects in alphabetical order with project/programme reference

Annex A

Oftel’s regulatory principles – as updated April 2002

Annex B

Summary of Oftel regulatory decisions - 2002/3

This annex updates the information published in last years management plan and the 2001 annual report. The intention is to capture Oftel's main activities and decisions as reflected in its publications and press releases. The presentation of this material has been further developed since the annual report with further sub-categorisation as follows:

• The sections on "removal of regulation" and "formal regulation" are now subdivided into "proposed" and "implemented" (allowing a clearer distinction between ongoing activities and actual changes, and avoiding double counting from year to year); and
• the section on "Co-regulation" is subdivided into "Oftel/industry initiatives" and "Oftel guidance" (the latter are Oftel publications aimed at contributing to transparency).

April 2002 - October 2002 (including major cases)

Removal of regulation

Proposed

• Price Controls for Fixed Telephony - proposed relaxation of price control in return for the development of a fit for purpose Wholesale Line Rental product; and
• BT Licence Conditions - proposed removal of obligation on BT to provide accounting information is respect of Managed Network Services.

Implemented

• Mobile market – removed the determination that Vodafone and O2/BTCellnet have Market Influence (and hence lifted the obligation to supply air time to independent service providers);
• Mobile market Oftel Formula Returns - removed obligation on Vodafone and O2/BT Cellnetto provide financial data to monitor unfair cross-subsidy rules (consequence of above);
• BT Licence Conditions - reduced the notification period for price changes for a trial period (till Nov 03) for some products; and
• Number Translation Services - removed obligation on BT to provide Number Translation Services used for voice services.

Forbearance

• Conditional access services - licence not modified to allow the Director General to set ex ante prices for conditional access services.

Self-regulation

• Telecoms Ombudsman – industry developing funded scheme (with Oftel support of process); and
• Quality of service – indicators published 6 monthly by industry funded 3rd party.

Co-regulation

Oftel/Industry initiatives

• Price comparisons – launched Oftel's Price Assurance Standard
• Call success rates – test of mobile networks
• Industry Data Collection - published Oftel's strategic approach following consultation with industry
• Helping customers manage bills and avoid disconnection - published guidance for telecoms providers on a code of practice (report produced by telecoms industry, consumers and Oftel)
• Infrastructure liabilities - consulted on proposals to ensure that highway authorities have access to funds to cover the costs they incur when removing redundant telecoms apparatus

Oftel guidance / aids to transparency

• Published Oftel reports
• International Roaming research reports
• Market research
• Special Rate number allocations - market research report on SMEs' views and opinion of special rate numbers
• Market research into customer satisfaction with Oftel complaints handling
• International benchmarking
• Market information
• Management plan for 2002/03
• Consumer leaflets published by Oftel
• How to get the best from mobile phone
• Accessing the internet from home
• Getting best from mobile abroad
• Rights and choices as a telephone customer
• "Lines & Calls" Services Published Oftel guidance for operators
• Network Security and "999" services - guidelines published covering issues to do with network integrity and security, and an overview of fixed telephony "999" services
• Marketing internet services - published a statement setting out Oftel's policy on BT’s marketing for broadband and narrowband Internet services and joint billing of its ‘BT Broadband’ product.
• Significant Market Power (SMP) - guidance explained the criteria that Oftel intends to use to assess the existence of SMP when conducting market reviews in accordance with EC requirements
• Access Obligations Under the new EU Directives - guidance published to ensure that competing operators and service providers have a fair expectation of the kind of regulatory obligations that Oftel is likely to consider appropriate under the new Directives; and that SMP operators have clear indications of what is likely to be expected of them in the provision of wholesale products.
• Oftel guidelines: Terms of supply of conditional access:
• Frequently asked questions on the regulation of voice over IP services
• Competition Act Strategy
• Interconnection guidelines (still being consulted on)
• Consulted on Consumer Protection Policy review guidelines
• Consulted on Regulatory Option Appraisals

Formal regulation

Proposed

• Price of calls to mobile – the Competition Commission was granted a further six months to complete their investigation into mobile call termination rates
• Number portability - proposed enhancements for fixed and mobile systems to ensure speedier transfer of number blocks
• Premium Rate Services – proposed recognising ICSTIS Code of Practice covering controlled PRS
• BT Regulatory Accounting - proposal to require BT to produce enhanced annual regulatory financial statements to ensure that Oftel has access to more detailed, high quality, transparent financial information on which to base its regulatory decisions.

Implemented

• Broadband - requirement on BT to offer ATM interconnection products and to run a trial for a SDSL version of the interconnection services
• LLU – set out a requirement on BT to provide cost oriented LLU backhaul services.
• Partial Private Circuits – set retail price controls and safeguard caps for specified wholesale products. Reduced prices significantly.
• Unmetered internet access - amended the terms and conditions for Friaco products
• Metering – guidance set criteria for assessment of the systems and scheme. Determinations issued against several companies on metering arrangements
• Requirement on BT to offer a wholesale line rental product
• Carrier Pre-Selection - final determination of costs and charges for the provision by BTof permanent carrier pre-selection facilities and decision to include new codes within Carrier Pre-Selection "all calls" option

Other significant actions that do not fit readily fit into the above categories

• Directory enquiries – allocated new six digit numbers for DQ services to telephone companies
• General Conditions of Entitlement - sets out the draft requirements that operators will need to meet in order to provide electronic communications networks and services. This replaces the current licensing regime. The change in approach is not intended to lessen existing obligations.

Annex C

Indicative EU Market Review timetable

Note: Timings are subject to the Commission Recommendation on relevant product and service markets.

Annex D

The tables below indicate when existing consumer protection policy areas will be subject to review. The Table 1 lists projects & programmes that Oftel intends to give priority to reviewing in 2003-4*.Table 2 lists projects/programmes with later review dates or where review timings are still to be determined. The timetable has been split this way so as to give stakeholders indication of Oftel’s priorities as regards consumer protection policy review. The timetable also includes activities that will not formally be a CPPR, i.e. Ombudsman Service compliance check on ADR mechanisms. It should however be noted that this in an indicative timetable only and may be subject to revision.

Table 1

Table 2

*The first phase of a CPPR will include a feasibility study of the scope and complexity of a policy review area including pre-consultation review work, where appropriate this may lead to a change in the review timetable and extent of the review to be undertaken.

** Universal Service Obligations cover a range of issues, as such any reviews undertaken would cover specific and appropriate areas of policy within the context of fulfilling USO obligations

*** The Welsh Language Act & Northern Ireland Act require regular monitoring and review of both schemes which is detailed in the management plan. Whilst the existence of the schemes is not subject to review, their effectiveness will be subject to review.

Note to table The above list is based on projects and programmes appearing in Oftel's 2003-04 -management plan. It does not include areas of work, which are: primarily market review based; or relate to the overall framework of regulation; or, comprise a one-off action which is not suited to a cyclical review process.

Annex E

Developing Oftel’s understanding of telecoms demand

Over the last few years Oftel has considerably expanded and developed its research programme, consisting continuous quarterly surveys with consumers and SMEs, supplemented with a variety of ad hoc projects, contributing to the evidence base for Oftel’s decision making.

Reference to the ‘average’ consumer is a useful way of summarising the evidence and providing a general understanding of behaviour, but consumers exhibit a wide range of behaviours which can be obscured in this approach. Oftel has been developing a more ‘holistic’ approach to examining consumer behaviour, segmenting consumers into different groups, providing greater insight into different needs and issues and enabling more individualised solutions to be sought and implemented. This is a technique that Oftel regularly employs for specific market segments and has now extended to the telecoms market as a whole, offering a cross-market perspective to assist set the tone for policy making in the run up and transition to Ofcom. Consumers were segmented on their usage and attitude towards telecoms, from which six main groups were distinguishable (see group highlights below).

This tool can assist Oftel’s decision making in a number of ways:

• Assessing the extent of competition, demand, access; satisfaction with services; and identifying barriers to use of competition and areas and where further assistance is required.
• Developing and pre-testing policy options, exploring whether new policies and services are attractive to which types of consumers, indications of what might assist success / contribute to failure.
• Evaluating and monitoring success examining which groups have or have not made use of the choices available, and reasons for this behaviour.
• Identifying potential demand and content for consumer information and target groups for assistance.

Main messages

One of the main benefits of this type of analysis is the ability to differentiate between customer types and examine individual group issues. It is this granular level that Oftel shall be employing in its work, but at a more generic level it is useful to summarise some of the main messages that emerge from across the groups.

• Most groups, apart from those disadvantaged by cost, are generally satisfied with their telecoms services. Few choose their telecoms services on price alone – premiums are paid to ensure quality and reliability, along with innovation, bundled services, brands perceived to be trustworthy, and other valued features such as ability to control costs. Most decisions involve some balance or trade off between price and perceived quality or value of a service. This is not necessarily based on complete evidence, personal recommendations are the most widely used information source, although the advanced and progressive groups tend to make more use of information available in the market to make more balanced decisions.

• The advanced group readily adopts new services regardless of the cost, seeking increased functionality from their telecoms services. For those services with ‘mass-market’ potential, take-up spreads fairly rapidly to the progressive group, most of whom are currently using unmetered narrowband Internet packages, and are the potential next wave of broadband adopters. Take-up of new services remains considerably slower amongst the other groups, in most cases due to lack of interest and perceived need rather than significant barriers to adoption.

• The advanced and progressive groups form a significant minority who are interested in getting a better deal and are prepared to switch between services and suppliers to achieve this. Apart from these two groups, interest in switching to get a better deal and to a lesser extent adoption of additional telecoms services, is low and significantly slower amongst the other groups who form the majority of the population. A number of reasons for this include (i) fairly high requirements in terms of the level of savings that would encourage switching – 25% on average which equates to about £20 per quarter on the average bill, or about 40% savings on calls. (ii) falling call prices generally and increasing availability of deals such as unmetered off-peak call packages. (iii) annual telecoms expenditure accounts for less than 0.5% of household income and is considered ‘just another bill’. Compared with abroad, UK consumers are generally getting a good deal on the telecoms services.

Group highlights

Advanced users, 2% homes, ½ million

Essence – love telecoms and technologies. Are the first adopters of everything eg have broadband, WAP phones etc and not just for the sake of having it, they use it / genuine interest in it, but insufficient proportion of the population to drive competition. Quality and having the latest features are more important than price, although some price sensitivity. Heavy users and spenders, fairly sophisticated usage and demanding consumers, good awareness and making use of choices. Satisfied with their services, the information and most of the choices available.

Who - younger / middle aged men, single / with partner, no kids, own home, working, high income, AB social groups

Progressive quality seekers, 34% homes, 8.5 million

Essence – have a variety of telecoms services, heavy users, and their use / attitude goes slightly beyond functional need. Cost and quality equally important, want best not cheapest deal. Interested in getting a better deal, changing / developing their usage, have switched suppliers and / or packages. Brand image is vital and they’re prepared to a pay a premium to guarantee quality and reliability but are not entirely happy about having to do so. Higher than average awareness of choices though some areas for improvement, greater use of supplier information sources (rather than word of mouth).

Who - younger to middle aged, married / with partner and with children, working, slightly higher than average income, ABC1

Passive basic users, 41% homes, 10.25 million

Essence – fairly heavy but basic telecoms users, not very interested in telecoms / switching to get a better deal. Never switched supplier – no perceived need, satisfied with current services, perceptions of insufficient savings. Average awareness of choices, decisions make on the cost and recommendations from others, after initial adoption little interest in switching to a better deal.

Who - closest to the ‘average’ consumer demographic profile – average spread across most factors. The only distinction is a marginally higher proportion working, and hence slightly lower than average aged 55+ and DE.

Contented light users, 20% homes, 5 million

Essence – basic and light telecoms users. Have either a fixed phone or a mobile and little interest in having much else. Light spenders, less likely than average to have switched - did not perceive significant barriers to switching – are satisfied with their current suppliers and saw insufficient savings to merit switching. Few use Internet anywhere and none had it at home, low intention to adopt more telecoms – lack of need, few saw cost as a barrier.

Who - middle aged / older, retired, significant proportions living alone with no kids at home, lower income / C2DE, living in urban areas of medium-high deprivation.

Disadvantaged by cost, 3% homes, 2/3 million

Essence – want to make greater use of telecoms but cost barriers to doing so. Ability to control and manage costs is vital. Have only a mobile or no phone at all, but would like more. Few have Internet at home but a third use it elsewhere – cost barriers to home access. The ability to control and manage costs is the main issue for this group and they will pay a premium in order to retain this flexibility and control.

Who - mainly young, working in low paid jobs or unemployed, low income, DE social groups, living in rented accommodation (largely state), in deprived urban areas, single and/or with young children

Don’t want home telephony, <1% homes, 60,000

Essence - Infrequent telecoms users, don’t have any home telephony, claim don’t / wouldn’t use it enough to have a fixed or mobile phone, use payphone or someone else’s phone if need to make a call.

Who - older / retired, and/or disabled, live in rented accommodation, often alone, no kids, in urban deprived areas, low income, C2DE.