Foreword

Chapter 1 Strategy update

Chapter 2 Strategy development

Chapter 3 Projects and programmes 2002/3

List of projects and programmes

Chapter 4 Oftel's budget 2002/3

Chapter 5 Responses to consultation process and questions

Alphabetical list of projects and programmes

Annex 1 Summary of Oftel regulatory decisions – 2001/2

Annex 2 Non-market reviews timetable

Annex 3 Market research plans for 2002/3

Foreword from the Director General of Telecommunications

This management plan for 2002/3 updates Oftel’s strategy to meet its objectives and sets out Oftel's projects, programmes and budget for 2002/3.

The plan is set against a background of change in demand for more sophisticated services such as broadband though basic telephony remains of fundamental importance. There have been major changes over the last year as a result of competition and because of the financial environment. Major change in 2002 will come from the new European framework, and related new UK legislation.

The plan includes:

• lessons drawn from the experience of the past two years;

• initiatives to promote competitive broadband markets and steps to prepare for OFCOM;

• work needed to start implementation of the new European Directives in 2002; and

• the appropriate focus of regulatory resources.

The plan has been consulted on widely. Oftel has benefited from the views expressed by domestic and business consumers and the telecoms industry and others with an interest in telecoms.

Oftel looks forward to working with a wide range of organisations and individuals as it tackles the important issues over the year ahead.

David Edmonds

Director General of Telecommunications

Chapter 1

Strategy update

Introduction

1.1 Oftel's aim to obtain the best deal for consumers in quality, choice and value for money is achieved primarily through promoting effectively competitive electronic communications markets. Oftel intervenes to protect consumers where competition is insufficiently established or where there are special features of networks that require intervention.

1.2 Oftel’s objectives are:

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

1.3 Since January 2000, Oftel has adopted a 'competition plus' approach to achieve these objectives.

1.4 The 2002/3 plan takes account of experience, and looks ahead to the European framework and OFCOM. The context for 2002/3 management plan, is set out in this chapter by considering

• strategy achievements
• focusing on Oftel's managed response to promote competition
• lessons learnt
• external developments impacting on strategy, and
• improve the applicability of strategy principles and implementation processes

Strategy achievements

1.5 Some telecoms markets are becoming increasingly competitive though effective competition has yet to be achieved in others. The pace of change of technology and consumers’ demands means constant need for investment in new networks and services. Regulatory action needs to be focused on its objectives and should not undermine incentives for investment and innovation. Oftel should pursue the minimum regulation necessary to achieve the best deal for the consumer. Additional and existing regulation should be reviewed and justified.

1.6 Oftel does this by:

• reviews of market segments to assess the degree of effective competition, and what level and type of regulation is appropriate;

• explicit assessments of the advantages and disadvantages of policy options as well as its overall impact;

• performance measures which focus on the extent of effective competition in markets within Oftel’s scope; and

• transparent and robust decision making, with high quality evidence.

1.7 Regular market reviews to ensure appropriate regulation is reflected in the EU Framework Directive, which will come into force in 2002.

1.8 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 2001 Annual Report;

• prepared a monitoring log of key decisions taken (see Annex 1 for log for 2001/2); 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

Oftel’s managed response to promote competition

1.9 As noted above Oftel has, as one of its four high level operational objectives, the achievement of 'effective competition – benefiting consumers'. It seeks to do this by promoting competition at all levels in both networks and services. This translates into actions which are both pro-active and re-active:

• pro-actively developing a framework within which competition can flourish by removing barriers to entry (eg establishing an interconnection regime and making number allocation independent of players in the market) and removing barriers to customers switching (eg introducing number portability); and

• re-actively responding, in a way that is consistent with its strategy, to individual suppliers requests for access to and interconnection with networks of dominant operators.

1.10 In most of the 1990s, the focus was on developing infrastructure competition in both the fixed and mobile sectors. This strategy was to a considerable extent successful in establishing alternative networks over the UK with:

• over half of UK households now covered by cable networks;

• four UK-wide mobile networks;

• for business customers, key business areas of major cities covered by one or more alternative metropolitan networks; and

• significant capacity in trunk networks between major cities.

In investment terms, some £8 billion was invested in UK telecoms networks of all types in both 2001 and 2000 and builds on substantial investment in the 1990s by cable, BT, mobile and other operators of around £50 billion.

1.11 In the last few years, development of infrastructure competition has slowed down as the cable companies finish their build rates and the mobile industry achieves full national coverage. At the same time there has been greater demand from service providers for access to BT's network, particularly in relation to unmetered internet access and to broadband services. Oftel's response has been to use its discretion, both in granting access to the network and also in setting the terms and conditions on which access is to be made available.

1.12 In seeking a balance between the various objectives of protecting consumers, promoting competition and encouraging investment and innovation in the provision of telecoms services, account has been taken of whether services in question are new and the degree of risk facing the operators in providing them. Typically the extent of regulation for 'new' services provided by BT is less intrusive in order to avoid undermining its incentives to invest in such services. A key related factor is the extent of risk facing development and launch of new services: where risk is high action should be commensurate to reward the level of risk. So, for example, access to BT's ATM network has been proposed despite it being a new service but has been done so the basis of ‘retail minus’ prices in order to avoid undermining BT's incentives to invest in new network facilities. In contrast it has been proposed to mandate private partial circuits as an interconnect product with prices set on the basis of 'cost plus' reflecting the limited risk facing BT of providing such products in a mature market.

1.13 The greater emphasis on developing access to networks, both by other network providers and particularly by service providers in recent years, does not reflect a policy change away from infrastructure competition. Oftel's goal is to have competition at all levels in provision of wholesale and retail services. The regulator cannot predict, nor can it create, investment in infrastructure amongst aspiring entrants. Oftel sets the rules consistent with its overall strategy and in response to the needs of new entrants and overall impact on the market.

1.14 Initiatives to enable local loop unbundling and carrier pre-selection could be seen as moves away from infrastructure competition. This is not the case. These initiatives are more a recognition that getting rid of entry barriers to promote infrastructure competition will enable investment to take place but eventually this build will tail off. Once the infrastructure is built, there will be other opportunities in the market (such as LLU and CPS) which Oftel has responded to in a way that does not undermine any incentives to further investment. The recent difficulties experienced by telcos in raising funds to invest are more a feature of turbulent capital markets than a result of regulatory uncertainty.

1.15 Where new opportunities for infrastructure competition arise in future, (eg introduction of spectrum trading on a widespread basis) then Oftel (or its successor) will need to be both pro-active in seeking opportunities to promote further competition in infrastructure and respond positively to requests to promote such competition.

1.16 Where there is sufficient, self-sustaining competition then Oftel can withdraw from promoting competition. This is unlikely to come about until there is sufficient infrastructure competition that will itself, develop and sustain services competition over competing networks.

Individual decisions to promote competition

1.17 In summary actions to promote competition can be grouped into three main categories all concerned with the basis on which competitors can get access to networks of players with market power.

High intervention

• access or interconnection at ‘cost plus’ based prices

Medium intervention

• access or interconnection at ‘retail/minus’ based prices
• access or interconnection at non-discriminatory retail prices

Non intervention

• no access or interconnection requirements

1.18 The basis chosen will be dependent on the assessment of the current and prospective states of competition in the relevant market including the degree of certainty and level of risk in the market. New markets where there are high levels of risk are not usually suitable for high levels of intervention to enable market entry to promote competition. Conversely where there are mature markets with relatively low levels of risk, it will be more appropriate to take a more interventionist approach to enabling market entry to promote competition.

1.19 The consistency of these different bases with Oftel’s overall strategy can be assessed by considering the outcome of the action. Where the outcome has been on a sustainable basis to improve the deal for consumers in terms of prices paid, choice available, improvements in quality of service and value for money, then the initiative can be seen to be appropriate. In those cases where an initiative has not initially succeeded consideration needs to be given to whether there are on going prospects for competition and how best to achieve this.

Oftel’s future approach to promoting competition

1.20 Each case is considered in relation to Oftel’s overall strategy and options appraised for fit with the strategy. The action taken will depend on:

• the market analysis undertaken (market definition, assessment of market power); and

• identification of appropriate action in relation to the prospects for competition.

1.21 The drivers for making these assessments and coming to decisions are from two sources:

• EU requirements to carry out reviews, over the period to summer 2003, of all markets where market power has been identified;

• requests from individual suppliers for interconnection/access to the networks of players with market power.

1.22 These two processes which will overlap and interact provide both an element of predictability (in terms of EU reviews) and reactiveness to demands from the market players. To this extent, the outcome of these activities cannot be forecast precisely. Oftel's aim therefore is to foster the conditions for competition to develop effectively in all markets through:

• clearly establishing a framework for analysis and evaluation that stakeholders understand; and

• consistently and transparently applying its strategy in relation to decisions taken.

Lessons learnt

1.23 Taking account of the strategy achievements and the managed response to promoting competition set out above, the lessons learned by Oftel can be summarised as follows:

• as competition has intensified, and technology has increased opportunities for new services, there has been increased demand for regulatory action. For example, rival operators have requested Oftel to enable access, at regulated prices, to BT's different levels of networks. This goes beyond traditional PSTN and covers interconnection to requests for access to, and interconnection with, eg ATM/IP networks as well;

• increased demand for faster decision making at the same time as demands for 'due process' to be maintained from other players;

• the difficulty of measuring the effectiveness of competition in different often evolving market segments, against a background of rapid change;

• many stakeholders are opposed to lightening or lifting regulation;

• self and co-regulation may be complex and time consuming to implement; and

• use of Competition Act powers can be expanded to deal with anti-competitive practice.

External developments impacting on strategy

1.24 There have been some major changes in the external environment:

• large reductions in share prices, lower debt ratings, and market sentiment have reduced availability of funds for investment particularly for newer entrants which has impacted on the development of competition;

• increasing focus on, and demands for, broadband services;

• a new EU framework will provide the basis of most of Oftel’s regulatory powers and functions from 2002 onwards, working closely with other European regulators on its implementation;

• the Communications White Paper set out proposals for new converged regulation and the creation of OFCOM as the converged regulator; and

• number portability and Atlantic Telecom: The collapse of Atlantic Telecom raised various issues around number portability and the transfer of number blocks. Oftel will be further considering these issues during 2002/3.

1.25 Oftel’s strategy has been robust in the face of those changes; but Oftel now needs to update it. Strategy issues in relation to the new EU framework, broadband and OFCOM are considered in Chapter 2.

Improving the applicability of strategy principles

1.26 Oftel has identified regulatory principles to provide clarity and predictability. These have been updated following the suggested amendments set out in the draft plan in December and consultation responses received (see Table 2 below).

Table 2: Oftel strategy principles – updated April 2002

Improving strategy implementation processes

1.27 Three key processes are being updated for 2002/3. These are set out below.

1.28 First, in assessing policy options, Oftel will have an approach that meets Government's Regulatory Impact Assessment (RIA) and consumer groups' Customer Impact Assessment (CIA) requirements while recognising that Oftel is an independent sectoral regulator with EU Directive requirements, and specific statutory duties. Oftel will issue Option Appraisal guidelines in spring 2002 to cover these aspects.

1.29 Second, market analyses guidelines (incorporating existing effective competition review) will be issued to:

• incorporate lessons learnt;
• meet the requirements of new EU legislation; and
• reconcile competition cases and market analyses timetables.

1.30 Third, Oftel will develop a non-market reviews (NMRs) methodology to better identify consumer interest criteria, which can trigger regulatory involvement, and the principles, which should shape proportionate intervention. These will primarily be used to review existing regulatory action in areas such as data protection, ombudsman scheme, numbering (see annex 2 for indicative forward review timetable).

Chapter 2

Strategy development

Introduction

2.1 Oftel's needs to ensure its direction is clear when addressing new challenges. Key among these will be:

• aligning Oftel's strategy with EU Directives;
• broadband regulatory strategy; and
• looking ahead to OFCOM.

Aligning Oftel's strategy with new EU Directives

2.2 The strategy needs to align with the framework in the five new EU Directives on regulation of electronic communications (Framework, Access and Interconnection, Authorisation, Universal Service and Communications Data Protection Directives).

2.3 The Directives are due to take effect in April 2002 and there is 15 months in which to transpose the directives into national law. Oftel will work with other regulators and the Commission to ensure consistency. There will be changes needed in Oftel’s internal processes. Market analyses will be obligatory before regulatory rules promoting competition are imposed under the new Directives, and Oftel’s programme of analyses begins in 2002/3.

2.4 There are two related projects in relation to the EU Directives: to oversee the implementation programme of work; and to co-ordinate the market analyses.

2.5 The Framework Directive sets three objectives for regulatory authorities:

• promoting competition in networks and services;
• contributing to the development of the internal market; and
• promoting the interests of European Citizens.

2.6 For 2002/3, these objectives will be Oftel’s guiding objectives, with the existing objectives being used at the operational level.

Table 3: Alignment of Oftel objectives with overall EU objectives

2.7 Oftel currently supports the internal market by, for example, tackling barriers to entry. Oftel will work most closely with NRAs and the Commission and through bodies such as the European Regulatory Group (ERG) to ensure consistent application.

Impact of the new EU Directives

2.8 Agreement has now been reached between the Council of Ministers and the European Parliament on a new package of Directives that will establish a framework for the regulation of the electronic communications network and services throughout Europe. The Directives will enter into force when they are published in the Official Journal of the European Community. Member States will have 15 months in which to transpose the provisions into national legislation and to bring regulation into line with the new Directives.

2.9 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.

2.10 There are five directives:

Framework Directive (FD)

2.11 As the name implies, this Directive sets the overall framework, including objectives and principles which Oftel must take into account when making regulatory decisions. In addition, the framework directive sets out the principle that, in most cases, market reviews must be carried out before regulation is imposed and that regulation is only to be imposed where the market is not effectively competitive. Significant Market Power has been newly defined so that it is equivalent to the competition law concept of dominance.

2.12 Other provisions in the FD include the obligations on NRAs to consult with the Commission and other NRAs before taking decisions and procedures to ensure the harmonisation of regulation across Europe.

Authorisation Directive (AD)

2.13 This Directive requires the abolition of the existing licensing regime. The providers of electronic communications networks and services will no longer be required to obtain explicit approval before they can offer services. Where NRAs require it, operators may be required to submit a notification of their intention to offer networks and services.

2.14 The AD sets out a maximum list of obligations that can apply to all providers of networks and services. These 'general conditions' will replace existing licence conditions.

Access and Interconnection Directive (AID)

2.15 This Directive deals with wholesale relationships between providers of networks and services and associated facilities. The AID places general obligations on operators to negotiate interconnection.

2.16 This Directive also sets out the responsibilities of NRAs and the limits of their discretion in imposing obligations related to access or interconnection. For the most part, such obligations can be imposed only on those found to have SMP in the relevant wholesale market.

Universal Service Directive (USD)

2.18 The USD sets out a procedure for designating providers of universal service and a minimum set of services that these operators must provide.

2.19 In addition to dealing with universal service, the USD details specific obligations that may be imposed on particular providers that are found to have SMP in retail markets, much as the AID does for wholesale markets. Also included in the USD are provisions covering consumers’ contracts with telecoms providers, number portability and procedures for providing consumers with an out of court dispute resolution process.

Data Protection Directive (DPD)

2.20 This directive aims to ensure protection of users’ right to privacy in the processing of telecommunications data. The DPD is lagging behind the other directives in the negotiation process and the final text will be agreed later than the other four Directives.

Impact on Oftel’s workplan

2.21 During the transitional period (from entry into force until transposition of the directives into national law) Oftel must:

• work with the DTI to transpose the Directives;
• carry out market reviews; and
• adjust all its processes and procedures to be in line with the new Directives including the introduction of particular procedures to meet Oftel’s obligation to contribute to the harmonised application of the new framework across Europe.

2.22 On the day after the Directives enter into national law:

• all individual licences will be revoked and the new authorisation regime will apply;
• all regulatory actions will be carried out under the new Directives;
• Oftel will publish its determinations of SMP and specific obligations on SMP operators; and
• Oftel will publish designations of Universal Service Operators, details of universal service obligations and specific interconnection and access obligations.

The market reviews

2.23 As noted above, the new framework will oblige Oftel to review markets, prepare SMP designations and review all regulatory measures currently in place in all telecommunications markets ready for when the Directives enter into national law.

2.24 Oftel envisages at this stage that the process by which market reviews are carried out will be similar to that for Oftel’s current programme of effective competition reviews. The process will be updated by:

• reviewing experience to date on effective competition reviews – this is currently being done and will be continued in Q4 2001/2; and
• taking into account any guidelines issued by the Commission.

2.25 The markets to be reviewed and the order in which they are reviewed will be defined by a number of factors including:

• Oftel and stakeholder priorities, particularly related to when previous reviews have been carried out;
• the Commission’s recommendation on market definitions; and
• the need to co-ordinate and discuss decisions with the Commission and other NRAs.

2.26 The current indications from the commission are that regulatory authorities will not see any indication of Commission defined markets until the directives come into force. However, Oftel envisages reviews being carried out in at least the following broad sectors which will cover voice and data, and both retail and wholesale markets, where appropriate:

• mobile – including calls to mobile;
• fixed PSTN; and
• leased lines.

2.27 In addition, the Directives require the obligations that the Directives will automatically impose on providers of conditional access in the broadcasting market to be reviewed. It is also envisaged that some form of broadband market review, including local loop unbundling and wholesale DSL provision will be needed. Oftel is currently undertaking a review of all obligations under the current directives so that it can ensure that they are reviewed in the appropriate market review.

2.29 It is useful to indicate the current position in terms of market reviews being conducted by Oftel as these reviews will have an influence on the timing and scope of EU market reviews to be conducted by Oftel.

Mobile

• market review undertaken in 2001/2 – statement issued in September 2001; and
• charges on calls to mobile also reviewed in 2001/2 and statement issued in September 2001.

Fixed PSTN

• review of retail price controls on BT currently underway, due to complete summer 2002.

Leased lines

• review of partial private circuits is underway in response to a number of requests for determination – a final statement on National Leased Lines is due in Q3.

Dial-up Internet access

• consultation document published July 2001 – statement published in first quarter of 2002.

Conditional access

• consultation document published in October 2000. Statement to be published Q1 2002.

2.30 Oftel intends to inform and informally consult with stakeholders on the EU market review process in Q1 when the EU publishes its draft list of recommended markets for consultation. Scope for formal consultation will be limited by the constraints imposed by the EU timetable and the scope and timing of any mandatory requirements made by the Commission on Oftel.

Broadband regulatory strategy

2.31 Oftel’s strategy needs to be able to provide a coherent basis for new areas of work. A key issue remains appropriate regulation of broadband networks and services to meet emerging consumer demands, as reflected in Oftel's projects and programmes for 2002/3 as described in chapter 3. A fuller description of Oftel’s regulatory strategy for broadband was published in December 2001. www.oftel.gov.uk/publications/broadband/other/stratb1201.htm

2.32 Oftel’s aim is to enable consumers’ demands for broadband to be met. Large businesses, SMEs and residential consumers all have different needs. Different supply routes and technologies – fixed, mobile and satellite – are likely to be needed. Regulation sets the framework. The outcomes will be determined by the actions of commercial firms meeting the demands of their customers.

2.33 Oftel’s focus is to meet demands through effective competition at all levels in the provision of broadband services: in infrastructure (ie in access, the middle mile and backbone networks) and in services provided over networks.

2.34 It is vital in developing markets which require large investment that effective competition is promoted through appropriate regulation ie the minimum regulation required to deliver outputs. Oftel must balance incentives to invest and innovate with prevention of excessive pricing.

2.35 For broadband, Oftel will use the generic competition analysis rules to assess the case for appropriate regulatory action:

• appropriate market definition in accordance with competition law. Market definitions need to be consistent across all cases dealing with broadband, and reviewed from time to time in the light of market developments;
• market power – analysing who has market power in the defined market(s), and only taking formal regulatory action if the operator has market power. Again, regular reviews are necessary;
• regulation should only be applied to the extent necessary to deliver effective competition; and
• appropriate terms and conditions – regulation should be proportionate to the problem identified so that terms and conditions, including wholesale prices, are set to encourage sustainable competition.

2.36 Oftel has:

• intervened to mandate commercial negotiation and subsequently impose appropriate terms and conditions, where industry could not agree in areas such as local loop unbundling, wholesale DSL and partial private circuits where market power exists with the extent of regulation imposed tailored to the state of the market; and
• not intervened in other areas such as cable modems, 3G, broadband fixed wireless access where operators do not have market power.

2.37 The future course of consumer demand for broadband is unclear. Technologies to deliver broadband services are still developing. The future development of the broadband market(s) is uncertain. In such circumstances the regulator needs to be especially sensitive to the impact of intervention on market developments and investment. Oftel’s strategy provides a framework to ensure that the impact of regulatory decisions is taken fully into account. This applies equally to Oftel’s work to prevent anti-competitive behaviour. This will ensure a coherent and predictable approach to regulatory action.

2.38 Oftel will also continue to work with Government departments, to help increase consumer awareness of broadband services. Oftel will work with the Small Business Task Force to provide information; publish bi-monthly briefings on availability and takeup of broadband.

2.39 The regulatory framework should be coherent and predictable. Oftel will continue to monitor availability of broadband services. Oftel will contribute to the work of the Broadband Stakeholders Group and the delivery of Government conclusions on its recommendations.

2.40 Oftel will support this work with an extensive programme of data gathering and market analysis and international benchmarking.

Looking ahead to OFCOM: key policy issues

2.41 In 2002/3 Oftel will contribute to developing thinking for OFCOM. The combined regulator will enable ‘joined-up’ decision making. For example in spectrum trading, where Oftel welcomes moves to remove barriers to the further development of competition, or in the issue of access to networks for service providers, in particular the interaction between competitive converging markets and requirements for specific types of content to be available to all.

2.42 Oftel will develop ever closer joint working with its fellow regulators to help develop a consistent, consumer-focused basis for regulation under OFCOM.

Chapter 3

Projects and programmes for 2002/3

Introduction

3.1 The projects and programmes for 2002/3 are described in this chapter. Projects contain a number of one-off tasks which are time specific while programmes usually encompass either a series of related projects or comprise ongoing work such as case handling. Table 4 lists the projects and programmes followed by a detailed list showing activities for each project/programme by quarter (beginning April-June 2002).

3.2 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.

Project/programme changes since December draft management plan

3.3 There are several projects looking at broadband issues. Three relevant projects were identified in the consultation document

• broadband regulatory strategy;
• Partial Private Circuits;
• access to broadband services

These are now combined into a single programme of work, 'strategy and development of broadband networks' (A6).

3.4 Separately there are also two areas of work which consider narrowband Internet access:

• wholesale market for unmetered Internet access (via FRIACO) (A7); and
• Internet and e-commerce (A5).

3.5 In addition to the consolidation of the above broadband projects, during the consultation period there have been a number of changes to Oftel’s proposed work programme. The references below are project/programme numbering as per the consultation document unless otherwise stated. The main changes are listed below:

• A6 ‘Licence Condition review programme’ – the work of this project has now been incorporated into A1 ‘EU Market Reviews Programmes’ where the individual market areas to be covered will be published in Q1.
• B2 ‘Informing consumers and their advisers' – the work of this project has now been incorporated into B1 ‘Raising customer awareness’
• A15 ‘Internet and e-commerce’ moved from monitoring to review in Table 4
• C12 ‘Calling Line Identification’ – having developed a CLI Code of Practice (COP), the work of this project is now part of C12 ‘Data Protection’
• E11 ‘Telecommunications Code’ replaced with projects – E12 ‘Communications Code and Funds for Liabilities’ and E8 ‘The Ending of Licensing Regime’
• New project – C8 ‘Network Resilience, Business Continuity and Emergency Communication Programme’

How Oftel's planned activities relate to its organisational structure

3.5 To put the management plan projects and programmes in context it is useful to explain how they relate to Oftel's organisational structure and how the structure in turn relates to Oftel's strategy.

3.6 Oftel has three Directorates:

• Regulatory Policy
• Compliance
• Business Support

3.7 Regulatory Policy activity is primarily project based and concerned with developing and implementing policy in relation to Oftel's objectives of achieving effective competition including enabling consumers to be well informed, protecting consumers in the absence of competition and setting the overall framework for regulation.

3.8 This type of work is readily summarised, in most cases, in terms of projects that describe a series of milestones for the completion of tasks and production of outputs.

3.9 In contrast, the majority of activity in the Compliance Directorate is responsive to external demands for Oftel to act in specific cases. It therefore has a greater proportion of its activity in the form of programmes of ongoing streams of work dealing with individual cases generated by complaints about specific telcos and service providers from suppliers and customers. Nevertheless, this work is equally relevant to that of Regulatory Policy in the development and implementation of Oftel's strategy especially in terms of preventing anti-competitive practice, but also in protecting consumers and achieving competition.

3.10 Compliance activities implement and enforce aspects of the Telecoms Act 1984 and the Competition Act 1998 and European Directives. This legislation provides the overarching framework for most of these activities and can therefore on occasion constrain both what the Directorate does and its way of working. However in recent years many of the key developments led by Oftel eg on FRIACO and broadband – have emerged directly from consideration of complaints rather than from ‘pure’ policy work.

3.11 Within the legislative bounds, Oftel’s compliance activities must

• act as a strong deterrent to future anti-competitive behaviour by players with significant market power;
• actively manage expectations of the regulatory role in solving consumer problems;
• shape, develop and implement policy to promote competition in key new areas such as broadband in a way that is proportionate and retains incentives to invest in the market; and
• develop its own procedures, systems and practices to match changing legislation and expectations of market players.

3.12 The management plan represents a snapshot of planned work for the coming year and so it cannot easily illustrate how these processes of investigations, policy development and enforcement take place within compliance programmes. To do this, where possible, compliance programmes in the plan this year include illustrations of specific action being taken or due to be taken as well as descriptions of processes to be carried out. In addition for 2002/3, Oftel will improve the transparency of processes and outcomes of compliance work and their relation to strategy through:

• further developing the quarterly Competition Bulletin to draw out trends and relate remedies pursued to Oftel’s strategy objectives eg by including a cross-cutting analysis of cases closed on a half yearly basis;
• Continued discussion of investigations and their implications at the Oftel Forum and other appropriate stakeholder venues to improve the understanding of Oftel's approach;
• continuing to develop use of the Competition Act in terms of its investigatory methods and remedies and being more transparent in individual cases or reasons for selecting sector – specific or competition law approaches; and
• co-ordinating the functions of Oftel's section handling consumer representations with those of the industry funded Telecoms Ombudsman (when established) to provide effective and proportionate protection for consumers.

Stages of work

3.13 The planned work against objectives and type of activity reflects Oftel’s focus in each subject area in 2002/3. Projects and programmes will contain elements that relate to other objectives and activities.

3.14 Projects are likely to have the sequence of review – implementation – monitoring. The timescale will depend on the scale and complexity of the issue.

3.15 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.

3.16 The review cycle for market segments fits with this approach, and the timetable for specific reviews is being revised as part of the work in implementing the new EU framework.

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

Stakeholder involvement

3.18 The scope for stakeholder involvement will vary by subject area. Stakeholders can participate by providing evidence of competition, 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.

3.19 For the projects and programmes set out in Table 4 below, stakeholders were invited as part of the consultation process to indicate where they would like to be involved. As noted in Chapter 5 where responses indicated interest these have been passed to relevant project and programme managers.

Advisory Committees on Telecommunications and consumer experts

3.20 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 at all stages of work to Oftel project managers to help Oftel focus on consumer concerns.

3.21 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, liaise 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 C9).

3.22 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: flora.pieris@oftel.gov.uk tel: 020 7634 5301.

Table 4: Projects and programmes for 2002/3 – summary table

Business support

F1) Human resources

F2) Learning and development programme

F3) Budget management programme

F4) Business Assurance programme

F5) Electronic records management system

F6) IS and IT

F7) Communicating Oftel's work to external audiences

F8) Research and Information Unit

List of proposed projects and programmes for 2002/3

Effective competition – benefiting consumers

Reviews

A1 EU market review programme

Programme manager:
Elaine Axby (tel: 020 7634 8915, e-mail: elaine.axby@ oftel.gov.uk)
Project Manager (Strategy implementation):
Nic Green (tel: 020 7634 8891, e-mail: nic.green@oftel.gov.uk)
Project Managers (Market reviews): TBA

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.

• Issue a list of markets to be reviewed, with timings and nominated project managers (Q1);

• work with project managers to develop and communicate realistic workplans for the reviews (Q1);

• track progress on individual reviews and work with project managers to gain benefit from synergies across projects (Q1-4), and

• work with project managers to ensure that Oftel strategy and EU Directives are applied consistently and results communicated systematically (Q1-4).

A2 Competition in mobile markets

Programme Manager:
Elaine Axby (tel: 020 7634 8915, e-mail: elaine.axby@oftel.gov.uk)
Other contacts:
Heather Clayton (tel: 020 7634 8979, e-mail: heather.clayton@oftel.gov.uk)
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.

• Continue implementation of measures emerging from Oftel’s review of mobile market published in September 2001. In particular, produce guidance for consumers when purchasing mobile phones (Q2) and review policy on SIM locking (Q1);

• monitor market developments, including pricing and profitability and the development of third party access to networks for new services on 2G and 3G networks (internal reports quarterly), and;

• review mobile market competitiveness, including calls to mobile phones in line with new EU Directives (see project A1 for timings).

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.

• 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; ( Q 3 )

• participate with RA in consultation over the use of 40 GHz for potential broadband wireless services; ( Q2)

• contribute to RA consultation and implementation on spectrum trading in the UK. (Q3)

Above timings are dependent on the Radiocommunications Agency.

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)

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

• Take necessary implementation and/or monitoring action in the light of the conclusions Oftel reaches in relation to its current review of conditional access charging regime, due to report by April 2002 (Q1-4);

• conduct a market review into Access Control (Q2 to Q4); and

• conduct a review of price controls in Terrestrial Transmission for NTL (Q1 to Q4).

A5 Internet and e-commerce

Programme Manager:
Elaine Axby (tel: 020 7634 8915, e-mail: elaine.axby@oftel.gov.uk)
Project Managers:
Lucy Rhodes (tel: 020 7634 8836, e-mail: lucy.rhodes@oftel.gov.uk)
Justin Moore (tel: 020 7634 8859, e-mail: justin.moore@oftel.gov.uk)

Objective: To ensure that the UK regulatory framework is appropriate to encourage the development of the Internet, thereby helping the UK become a world leader in e-commerce.

• Produce guidance for consumers connecting to the Internet to encourage a better understanding of the types of packages and different payment schemes available and to enable consumers to take advantage of market opportunities resulting from competition (Q2);

• continue to monitor developments in Internet and e-commerce adoption and usage to ensure that the regulatory regime remains appropriate (Q1-Q4);

• contribute as appropriate to the development and implementation of Government’s Internet and e-commerce strategy and to action by national, regional and local authorities in relation to Internet access (Q1-Q4); and

• monitor emerging services such as enhanced multi-media services, messaging and voice over IP to assess their impact on consumers and whether they raise any new regulatory issues (Q1).

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 Contacts:
Trevor Wood (tel: 020 7634 8854, e-mail: trevor.wood@oftel.gov.uk)
Alistair Bridge (tel: 020 7634 8782, e-mail: alistair.bridge@oftel.gov.uk)
John Russell (tel: 020 7634 8830, e-mail: john.russell@oftel.gov.uk)
Neil Buckley (tel: 020 7634 5356, e-mail: neil.buckley@oftel.gov.uk)
Ian Moss (tel: 020 7634 8861, e-mail: ian.moss@oftel.gov.uk)
Maeve Gallagher (tel: 020 7634 8777, e-mail: maeve.gallagher@oftel.gov.uk)

Objective: To further develop and implement a strategy for competition in broadband access and services across the UK. To ensure that the rollout of local loop unbundling is in line with the relevant legislation. To monitor the rollout of BT’s ADSL products and to ensure that these are in line with regulatory requirements. To ensure that competition exists in the provision of partial private circuits for leased lines.

• Ensure implementation of relevant recommendations from Governments response to Broadband Stakeholder Group (Q1-Q3);

• monitor market and regulatory developments in the UK and elsewhere and assess their regulatory and compliance implications (Q1-Q4); and

• provide advice to relevant devolved administrations and government departments in relation to their plans for roll-out of Broadband access(ie in relation to rural areas and education) (Q1- Q4).

Partial private circuits (PPC)

• Consider position after responses to current consultation (Q1);

• address issues arising from direction(s) (Q1); and

• take the appropriate action through issuing a statement on National Leased Lines. (Q3)

Access to broadband

• To encourage rapid ADSL rollout fully compliant with BT’s legal obligations (Q1 and Q4);

• to ensure that BT’s Operational Support System is used efficiently to order all LLU services (Q1); and

• to consider the prospects for effective competition in very high bandwidth services and formulate appropriate regulatory solutions (Q2).

A7 Wholesale market for unmetered Internet access – Flat Rate Internet Access Call Origination (FRIACO)

Project Manager:
John Kemp (tel: 020 7634 8885, e-mail: john.kemp@oftel.gov.uk)
Other contacts:
Brian Malone (tel: 020 7634 8925, e-mail: brian.malone@oftel.gov.uk)
Geoff Brighton (tel: 020 7634 5349, e-mail: geoff.brighton@oftel.gov.uk)
Justin Moore (tel: 020 7634 8859, e-mail: justin.moore@oftel.gov.uk)

Objective: To ensure that BT complies with Oftel’s Directions in relation to FRIACO at BT’s local and regional exchanges, and to ensure that future arrangements for Internet traffic are robust and avoid congestion problems, including by facilitating progress on Internet Protocol (IP) interconnection for calls to Internet services. Key aspects:

• Oftel to ensure arrangements are developed so BT can supply FRIACO to other operators without requiring rearrangement of other operators' traffic using enforcement action if necessary including resolution of pricing, ordering, delivery, ‘stranded assets’ and ‘overflow’ issues (Q1-Q3); and

• IP interconnection – Oftel to facilitate agreement for IP interconnection between operators and BT (Q1-Q2) (taking action on a formal basis if necessary Q3-Q4).

A8 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)
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 customer choice in numbers and efficiency through pre-allocation and the introduction of individual number allocations. To promote the efficient management of numbers by operators through number charging.

• To allocate numbers to telecom companies within 28 days in accordance with agreed policy (Q1-Q4);

• implementation of web-based approach to processing numbering applications (Q4);

• complete review of corporate numbering with the aim of determining demand for corporate numbers; (Q1-Q2);

• input on to industry work on Pre-Allocation Portability and/or to legislative changes for introducing number charging (Q1-Q4);

• appraise possible implementation methods for charging, including those for developing a selection process for identifying coveted numbers and for auctioning highly coveted numbers (Q3-Q4);

• maintaining and developing industry and consumer input into numbering policy via the Numbering Forum and other mechanisms (Q1-Q4); and

• to monitor developments in PRS market in particular Higher Rate PRS and Pay-for-Product, monitor any trial re-introduction of Chatlines and give support and advice to ICSTIS (Q1-Q4).

A9 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 the Working Group addresses and resolves key issues relating to the new DQ arrangements (eg timetable for implementation, billing arrangements, number allocation processes, informing consumers) (Q1-Q4);

• where necessary and possible, to use Oftel’s powers to resolve any outstanding issues (Q1-Q4);

• to ensure that Oftel issues DQ numbers in accordance with the agreed processes (Q1); and

• to ensure successful launch of new DQ arrangements within industry-agreed time scales (Q3).

A10 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 facilitate Industry agreement and implementation of new CPS customer ordering process (Q2);

• review charges previously determined if necessary, in the light of process changes, industry data or changes in market conditions (Q2);

• work with industry to identify and undertake a programme of further process improvements (Q1);

• resolve consumer and operator disputes arising from permanent CPS (Q1-Q4); and

• to ensure the views of consumer representatives are taken into account within the CPS Industry Groups (Q1-Q4).

Monitoring

A11 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.

• Monitor consumer experiences of number portability through periodic research. (Q1- Q4) – results published twice yearly as part of quarterly market research programme (Q1 – Q2);

• to monitor technical developments in the routing of calls to ported numbers and consider related matters such as economic signals (Q1-Q4); and

• develop/implement European legislation concerning number portability within the context of the Communications Bill (Q1-Q4).

A12 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). To support the harmonisation of UK interface and interconnection standards. To support the work of various focus groups including the Operators Policy Forum.

• To provide support and regulatory advice to the industry to ensure the satisfactory resolution of interoperability issues (Q1-Q4);

• to hold quarterly meetings with the NICC Board and to ensure that work programme outputs are consistent with Oftel’s policy framework and strategy (Q1, Q2, Q3 and Q4);

• to hold the NICC Annual Open Forum to explore new developments, to exchange views with industry and to stimulate interest in new work (Q3); and

• to facilitate the work of the DSL-TG in producing the Access Network Frequency Plan for sub-loop unbundling and VDSL technology (Q2).

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 (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 demand (Q1-4); and

• to enhance Oftel media initiatives to raise consumers’ awareness of rights and opportunities (Q1-4).

B2 Comparable Performance Indicators (CPIs)

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 help 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 and consumer groups on a self-regulatory basis.

• To support the industry in its assessment of customer demands for information and its presentation. To encourage the establishment of an interactive website for the fixed CPI initiative. (Q1-2);

• encourage the regular publication of comparable mobile quality of service surveys. Encourage the expansion of these surveys to cover issues such as mobile text messages and customer service (Q1 and Q3); and

• to increase customers’ awareness of both the fixed and mobile quality of service information (Q1 and Q3).

Monitoring

B3 Tariff Transparency

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.

• Launch an accreditation scheme aimed at increasing consumer confidence in third-party price comparison websites (Q1); and

• review the future requirements for itemised billing in the context of the implementation of EU directives and in the light of developments such as unmetered services – produce guidelines for the industry (Q1 onwards).