Contents

Summary

Chapter 1 - Introduction
Chapter 2 - Responses to Oftel’s public consultation
Chapter 3 - Oftel’s decision

Annex A - List of respondents
Annex B - Modifications to the Annex to the General Conditions of Entitlement
Annex C - Experience from other European countries
Annex D - Consumer awareness statistics
Annex E - Assessment of options against Oftel’s six principles of cost recovery

Glossary

Summary

S.1 In September 2001, Oftel decided to promote competition for directory enquiry (DQ) services by introducing new access codes for DQ services starting with ‘118’, and to make unavailable (after a period of parallel running) the existing DQ numbers such as ‘192’. At the same time, Oftel decided that the ‘195’ DQ service for customers unable to use a conventional paper directory will remain available.

S.2 In December 2002, DQ services using the new 118 numbers were launched on the UK network. The existing DQ numbers such as 192 also continued to be available.

S.3 In March 2003, Oftel published a consultation document entitled The Future Use of Legacy Directory Enquiry Numbers (www.oftel.gov.uk/publications/consumer/2003/dqs0303.htm) (the Consultation Document). In the Consultation Document, Oftel sought views on the timing of the end of the parallel running period between the new 118 numbers and the legacy numbers. Oftel also set out five different options for the handling of the legacy DQ numbers after the end of the parallel running period, and the consequential changes to the General Conditions of Entitlement and (where necessary) the National Telephone Numbering Plan required to support each option. The five options focussed on different choices for the format and content of recorded announcements played to consumers who continue to dial the legacy DQ numbers when those numbers are no longer available for DQ services. Oftel sought views on these five options, the set of criteria that Oftel had proposed for assessing the options and Oftel’s initial view as to how each option performed against the proposed criteria. This Statement should be read in conjunction with the Consultation Document.

S.4 During the consultation period, Oftel received 30 responses from consumers, consumer representatives, network operators, DQ service providers and other regulators. This Statement summarises those responses and sets out Oftel’s consideration of the key points raised. This Statement also includes information about the experience of similar changes in other countries in Europe, the results of Oftel’s market research into awareness of the changes amongst consumers in the UK and the outcome of Oftel’s assessment of the economic efficiency of the way the costs of the five options proposed would be recovered.

S.5 In the light of responses to the Consultation Document, the other information collected, and Oftel’s own analysis, Oftel has come to the following conclusions:

• The date for the end of the parallel running period should be 24 August 2003 as proposed in the Consultation Document;
• The period of network messaging should be extended from 22 February 2004 (as proposed in the Consultation Document) to 20 June 2004;
• The five assessment criteria proposed in the Consultation Document (namely consumer interest, promotion of competition, promotion of network access and interoperability, practicability and certainty) are the criteria that should be used to assess the options, with particular weight placed on consumer interest, promotion of competition and practicability;
• Option B(iii) should be implemented because it performs best against the criteria.
• The designations of 192 and 153 in the Annex to the General Conditions of Entitlement will be modified as set out at Annex B in order to implement Option B(iii).

S.6 Option B(iii) means that consumers continuing to dial the legacy DQ numbers will receive a free network message (provided and paid for by the network operator in the event that the operator adopts the legacy DQ numbers). This message will advise that DQ numbers have changed to 6-digit numbers starting with 118 and provide a freephone number for consumers to call to obtain a 118 number. This freephone service will be open to all 118 DQ service providers and will provide at least one appropriate 118 number to callers on a fair and impartial basis.

S.7 This Statement concludes with some guidance for network operators and DQ service providers as to the next steps to be taken to put into practice Oftel’s decision.

  Chapter 1

Introduction

Background

1.1 On 10 December 2002, directory enquiry (DQ) services using new 6-digit telephone numbers starting with ‘118’ were made available on the UK telephone network for the first time. Consumers are currently still able to dial the existing DQ numbers such as 192. This is known as the ‘parallel running’ period, and is intended to ensure a smooth transition to the new arrangements and to allow consumers to become aware of the 118 DQ numbers.

1.2 On 10 March 2003, Oftel published a consultation document entitled The future use of legacy directory enquiry numbers www.oftel.gov.uk/publications/consumer/2003/dqs0303.htm ("the Consultation Document"). In the Consultation Document, Oftel sought the views of stakeholders on a number of options for the treatment of the existing directory enquiry (DQ) numbers 192 and 153 at the end of the parallel running period.

1.3 This Statement should be read in conjunction with the Consultation Document. The Consultation Document set out the background to the liberalisation of the UK DQ market and the legal framework that Oftel would use for changing the use of the legacy DQ numbers. It also explained that Oftel had already made a decision in Oftel’s September 2001 Statement Access codes for directory enquiry services ("the September 2001 Statement") to make the existing 192 and 153 DQ numbers that tie consumers to one DQ service provider unavailable for DQ services after a period of parallel running. This change is necessary to achieve ‘numbering parity’ between all DQ service providers.

1.4 The Consultation Document proposed timescales for the end of parallel running and for the duration of any network message on the legacy DQ numbers. It also set out five possible options for the treatment of the legacy DQ numbers and proposed a set of criteria by which those options could be assessed. The consequential changes to the General Conditions of Entitlement and (where necessary) the National Telephone Numbering Plan ("the Plan") required to support each option were provided. Oftel’s initial view as to the preferred option was given. Stakeholders’ views were sought on all these options, along with any suggestions for other options that Oftel should consider.

1.5 Oftel received 30 responses to the Consultation Document during the six-week consultation period from network operators, DQ service providers, consumers, consumer representatives and other regulators. Non-confidential responses are available on the Oftel web site at www.oftel.gov.uk/publications/responses/2003/tfutuse0403/index.htm. A list of respondents is set out at Annex A. Respondents have been classified as network operators or DQ service providers according to the perspective they have adopted in providing the majority of their comments to Oftel, although it is acknowledged that in several cases, respondents are both network operators and DQ service providers. The classification as network operator or DQ service provider is merely for the purposes of dealing with responses in a coherent manner.

1.6 During this period, Oftel has also requested and received information about the treatment of legacy DQ numbers from other European countries that have liberalised the DQ market and made the legacy DQ numbers unavailable for DQ services, or that are in the process of doing so. A summary of this information is set out at Annex C.

1.7 In addition to the criteria alluded to in paragraph 1.4, Oftel has carried out an assessment of the options presented in the Consultation Document against Oftel’s six principles of cost recovery, and the results are set out at Annex E.

1.8 The information collected from other European countries and the assessment of the options against Oftel’s six cost recovery principles helped inform Oftel’s decision making process as part of Oftel’s consideration of the options against the criteria set out in the Consultation Document.

1.9 The purpose of this Statement is to document Oftel’s consideration and analysis of stakeholders’ responses, and to set out Oftel’s final decision as to the future use of the legacy DQ numbers at the end of the parallel running period.

1.10 Chapter 2 of this Statement summarises the responses Oftel received during the consultation period, and sets out an analysis of the points made and Oftel’s conclusions. Chapter 3 explains Oftel’s final decision on the issues raised in the Consultation Document, including the timescales for the network message on the legacy DQ numbers, and the required content of that message. As noted above, a list of respondents to Oftel’s consultation is provided at Annex A. Annex B contains the modified text of the Annex to the General Conditions of Entitlement required to support Oftel’s decision. Annex C summarises the evidence Oftel has obtained of the impact of various different approaches to legacy DQ numbers in other European countries. Annex D contains a summary of the results of Oftel’s market research into consumer awareness of the changes to DQ services in the UK. Annex E presents an assessment of the five options in the Consultation Document against Oftel’s six principles of cost recovery. A glossary appears at the end of the document.

Scope

1.11 This Statement covers the future arrangements for the 192 access code (used for national DQ services) and 153 (used for international DQ services) once these numbers are no longer available for such services. The 195 code for DQ services for consumers unable to use a conventional paper directory will remain in use and is not affected by this Statement. All references to ‘legacy DQ codes’ or ‘legacy DQ numbers’ or the number ‘192’ or ‘153’ should be taken to include both 192 and 153 (unless the context makes it clear otherwise).

Chapter 2

Responses to Oftel’s public consultation

General

Responses about ICSTIS requirements when promoting DQ services

2.1 The Independent Committee for the Supervision of Standards of Telephone Information Services (ICSTIS) is the industry-funded regulatory body for all premium rate charged telecommunications services including DQ services. ICSTIS regulates the content and promotion of such services via its Code of Practice.

2.2 Many respondents including ICSTIS itself pointed out that any mention of a specific 118 number on the network message on the legacy DQ numbers (or on a freephone service) would constitute a promotion for the purposes of the ICSTIS Code of Practice. The relevant requirements in the ICSTIS Code of Practice for pricing information, service provider identity and contact details to be provided would therefore apply.

2.3 Oftel agrees with this view, and considers that the provisions of the ICSTIS Code of Practice will make a very effective contribution to minimising consumer confusion and potential consumer harm, whilst also enhancing the prospect that consumers will benefit from competition. Oftel understands that the absence of such information on the network message on the legacy DQ numbers in Norway did generate complaints from consumers.

2.4 Oftel notes that implementing the requirements of the ICSTIS Code of Practice in full will lengthen any network message which will increase costs. Oftel considers that the provision of pricing information and service provider identity is nevertheless essential. Following discussion with ICSTIS, Oftel notes that there may be some scope for dialogue between ICSTIS and the Industry to arrive at an acceptable mechanism for the provision of DQ service provider contact details in a way which reduces the burden of doing so.

Network operator responses

2.5 One network operator noted that historic Oftel research shows that more than 75% of consumers dial DQ less than once a month, with about 60% stating that it was more important to keep 192 than have a wider choice. This network operator therefore felt that some form of announcement must be used, not Option A. A message that rotated through alternative 118 numbers was felt to cause particular customer confusion problems. The appropriateness of any 118 number provided was considered to be particularly important ie it must be possible for the consumer to be able to access that 118 number from the network and line type that they are using to make the call.

2.6 Another network operator agreed with Oftel that competition in DQ services would not develop unless the legacy numbers no longer provided a DQ service.

2.7 A group of network operators did not see a need for Oftel’s proposed changes. This group considered that the Annex to the Conditions of Entitlement should remain as drafted and consulted on by DTI. This group was concerned that the proposed changes covered by the Consultation Document were only very briefly mentioned within the DTI’s consultation on the General Conditions of Entitlement. The group’s response implied that this might mean that Oftel was either not able to make the changes to the DQ legacy numbers as envisaged in the Consultation Document, or that in doing so, there might be a detrimental impact on the implementation of the General Conditions. The group was of the view that other UK number changes and DQ liberalisation were not directly comparable; noting that change in the DQ market was commercially driven while most other numbering changes were due to the need to increase numbering capacity.

2.8 One network operator was concerned that Oftel’s consultation would pre-empt the outcome of negotiations between it and 118 DQ service providers about the opening of 118 numbers on its network, including the content and format of network messages. This operator believed that the option chosen by Oftel might be appropriate for BT as the dominant operator but perhaps should not be mandated on a universal basis, and that to do so might be outside Oftel’s powers under the current and new regimes.

2.9 Another network operator considered that Oftel had not done a cost-benefit analysis or a regulatory impact on each option.

DQ service provider responses

2.10 One DQ service provider noted that in Spain, the regulator had determined that a network message available to all DQ service providers was essential to promote competition, and that the incumbent had only taken three weeks to implement the regulator’s decision. This DQ service provider noted that in its experience of operating DQ services in other European countries, calls to new DQ services were distributed in proportion to the share of announcements on the legacy number.

2.11 Another DQ service provider noted that it would not have entered the UK market unless the decision had been taken to make the legacy DQ numbers unavailable for DQ services. This respondent argued that allowing network operators to announce their own 118 numbers would replace one default dial string with another, and that network operators should not be able to leverage existing dominance in DQ services into the newly liberalised DQ market. This respondent considered that the network messages on the legacy DQ numbers were the last opportunity for Oftel to encourage non-dominant network operators to open their networks to competitive DQ services. This respondent suggested that Oftel choose an option that forbids a network operator promoting its own 118 number unless competing 118 services are also promoted (provided such services were in compliance with the ICSTIS Code of Practice). In addition, the respondent suggested that Oftel only allow network announcements on networks where more than one 118 DQ service provider is available – otherwise network operators would be able to promote only their own services. Such network operators could be required to announce non-118 DQ services (if such services were available and were in compliance with the ICSTIS Code of Practice).

2.12 Another DQ service provider also stressed that new entrant DQ service providers must be given the same opportunities to compete as existing players in the market. This respondent agreed that the message must be free to consumers and suggested that DQ service providers and/or network operators cover the costs of the message. If this were not possible, then no 118 number should be given, only sources of further information (but the respondent noted that this would not be ideal for new entrants who have not yet set up well-established promotional channels).

Consumer group and independent responses

2.13 Two consumer groups responded that DQ liberalisation had created much potential confusion for consumers, including costly follow-on services and loss of privacy (eg reverse searching, whereby callers give a telephone number and the service provider gives the address associated with that telephone number). Consumers will be particularly unhappy if put to additional inconvenience. Notices about DQ services in public payphones were considered important, and it was noted that calls to the new 118 numbers from public payphones appeared to be much more expensive than the existing 192 service. It was felt that the call box operator’s 118 number should be preferentially displayed to avoid lengthy confusing notices. If any service is free or significantly cheaper, this number should be prominent in any notices. There should be no charge for calling the 192 network message from a public payphone after the end of parallel running.

Oftel analysis and conclusions

2.14 Oftel recognises the potential for consumer confusion at the end of the parallel running period between the legacy DQ numbers and the new 118 DQ numbers. Oftel acknowledges the fact that many stakeholders expressed concern about such potential confusion in their responses to the Consultation Document. All options for action have been assessed against the criterion of consumer interest, taking into account the potential for consumer confusion.

2.15 Oftel also remains of the view that making the legacy DQ numbers unavailable for DQ services is a vital pre-requisite for effective competition in the DQ market. The network message played on the legacy DQ numbers is a unique and unmatchable marketing channel and is therefore vital to ensure that all DQ service providers have an equal opportunity to compete in the liberalised market. Respondents’ experience of similar changes in other countries and Oftel’s own discussions with other National Regulatory Authorities (NRAs) in Europe support these conclusions.

2.16 The DTI consultation of 19 March 2003 on draft General Conditions of Entitlement (www.communicationsbill.gov.uk/Interim_Implementation_update.htm) notes the existence of this consultation process. It also notes that the text describing the legacy DQ numbers in the Annex to the General Conditions may be subject to change as a result. Oftel considers that this separate consultation has been the appropriate vehicle for making changes to the designation of the legacy DQ numbers given the detailed nature of the issues concerned, notwithstanding the fact that the DTI consultation on the implementation of the new regime through the General Conditions of Entitlement has been underway simultaneously. Oftel considers that stakeholders have been adequately informed of the possible changes to the designation of the legacy DQ numbers by means of Oftel’s consultation and the DTI’s consultation.

2.17 Oftel does not agree with the concerns expressed by one network operator that Oftel’s consultation would pre-empt the outcome of negotiation between it and 118 DQ service providers about the opening of 118 numbers on its network, including the content and format of network messages. All network operators will be subject to the General Conditions of Entitlement. The Annex to the General Conditions will set out designations of numbers that are available for adoption without specific allocation, and network operators must under the terms of the General Conditions (if they adopt these numbers) use them in a manner that is consistent with their designation in the Annex. It is not possible for Oftel to make the designation for the legacy DQ numbers different for dominant and non-dominant operators (or indeed for network operators that have opened their networks to competing 118 services and those that have not, as suggested by another respondent). Oftel disagrees with the view of this respondent (which was not particularised) that Oftel might be acting outside its powers in mandating the use to which the legacy DQ numbers can be put on a universal basis. Oftel considers that the legal framework for the proposed action was set out very clearly in the Consultation Document.

2.18 One respondent noted that Oftel had not carried out a cost-benefit analysis or a regulatory impact assessment on the options considered in the Consultation Document. It is Oftel’s policy (as set out in Oftel’s Regulatory Option Appraisal Guidelines at www.oftel.gov.uk/publications/about_oftel/2002/roa0602.htm) to carry out a regulatory option appraisal in policy making. The Consultation Document and this Statement represent the output of that regulatory option appraisal process in this case. One part of a regulatory option appraisal can be a cost-benefit analysis (although Oftel notes that there is no requirement in the Communications Bill to carry out a formal cost-benefit analysis before proposing a particular obligation). A cost-benefit analysis tends to be most useful where a monetary value can be relatively easily assigned to the benefits. This is not the case here were the costs and benefits to consumers are highly qualitative.

2.19 Oftel notes the issues raised by consumer representatives in relation to costly follow-on services, loss of privacy and the cost of calling 118 DQ services from public payphones.

2.20 Oftel considers that the issue of costly follow-on services should be dealt with by the ICSTIS requirement that pricing information is provided prior to any onward call connection. However Oftel will look at any evidence that this requirement is not sufficient to prevent problems in this area and review what other steps may be necessary. Oftel considers that the introduction of 118 DQ services is separate from the important issue of privacy in relation to DQ services, which is currently being considered as part of a DTI consultation (www.dti.gov.uk/industries/ecommunications/directive_on_privacy_electronic_communications_200258ec.html) on the implementation of European Directive 2002/58/EC on privacy and electronic communications. The cost of calling 118 DQ services from public payphones is also beyond the scope of this Statement, but Oftel is in the process of reviewing this issue with BT and will shortly be in a position to discuss it in more detail with the Industry and the DQ Consumer Group.

Timescales

Summary of Oftel’s proposals in the Consultation Document

2.21 In the Consultation Document, Oftel proposed that the end date for parallel running between the legacy DQ numbers and the new 118 DQ numbers should be 12.01am on Sunday 24^th August 2003, which is during the weekend of the England, Wales and Northern Ireland August Bank Holiday. Oftel considered that this date should remain in place, regardless of which option was chosen for the treatment of the legacy DQ numbers. This was because call volumes are likely to be particularly low during this period, and because it was likely to give the Industry sufficient time to implement Oftel’s decision about the legacy DQ numbers (particularly given the new European regulatory regime for electronic communications networks and services). Oftel also acknowledged the considerable operational and commercial planning that the Industry was likely to have already undertaken based on this date.

2.22 Oftel also proposed that any network messages be withdrawn at 12.01am on 22 February 2004, and that the legacy numbers would then no longer be available for any sort of message other than ‘number unobtainable’. This was because evidence from previous number changes such as The Big Number indicated that consumers continue to dial legacy numbers whilst they can still obtain services on those numbers, despite being aware of the new numbers to dial. Oftel therefore considered that it was possible that any misdialling threshold specified in advance by Oftel would never be achieved regardless of high levels of marketing and consumer awareness. Oftel also felt that it was important that all stakeholders had certainty as early as possible about the duration of any period of network messages on the legacy DQ numbers, to enable efficient planning of consumer awareness raising activities. Providing this certainty was considered by Oftel to be particularly important if an independent network messaging option was chosen, so that funders of the network message would have some idea about the degree of financial outlay likely to be required. 12.01am on 22 February 2004 was proposed rather than 12.01am on 24 February 2004 because 22 February 2004 is a Sunday. Oftel and the Industry prefer to implement number changes during the weekend when peak call volumes are likely to be lower.

2.23 In the Consultation Document, Oftel asked if stakeholders agreed with the proposed end date for parallel running, and the proposed end date for the network message itself.

Network operator responses

2.24 Network operators in general agreed with Oftel’s proposal for the end of parallel running to be 24^th August 2003, pointing out that as this date had been informally agreed for some time, it would cause significant disruption to change it at this stage. Only one network operator suggested that the end date for parallel running should depend on how long the optimum messaging option would take to implement, but noted that in any case, it did not foresee significant implementation difficulties.

2.25 Some network operators agreed with a six month messaging period (in one case noting that this would amount to 15 months since the launch of 118 DQ services). Others expressed concern about whether six months would be sufficient for consumers who only infrequently use DQ services. One network operator considered that the network messaging period should be similar in length to that used for other number changes, and suggested that no end-date need be set now (but that the end date should in any case be no earlier than September 2004). Some operators suggested that if the network message were only to be in place for six months, then network operators should be allowed to continue a network message of some form on the legacy DQ numbers at their discretion beyond this period to manage mis-dials.

DQ service provider responses

2.26 DQ service providers emphasised the importance of maintaining the August 2003 end date for parallel running, due to the amount of business planning that had already been carried out based on this date, and the fact that this date had already been publicised to consumers. One DQ service provider pointed out that implementation of the regulator’s network messaging decision in Spain took only three weeks. Another DQ service provider felt that the August 2003 date should be maintained only if this did not preclude implementing the best option for network messaging.

2.27 In general, DQ service providers also considered that six months was a sufficient period for network messages (one suggested three months only). This was particularly felt to be the case when incentives on consumers to change their dialling behaviour (eg access to cheaper services or innovative services) were taken into account, which could mean that changes to consumer behaviour were faster than with other number changes.

Consumer group and independent responses

2.28 Responses from consumer groups focussed on the length of time any network messages should be available (although one consumer group was of the view that parallel running itself should continue for longer than the proposed August 2003 deadline as it felt consumers were not yet sufficiently aware of the changes, although it did not propose an alternative date). Most consumer respondents felt strongly that six months was too short, given that residential consumers may only dial a DQ service once every few months. It was noted that some phone books containing details of the legacy DQ numbers would still be current in February 2004, when Oftel had suggested that the network messages be withdrawn. However, two respondents felt that six months was about right, provided consumer behaviour changed, and one noted that this would minimise the cost of running the network message. Consumer respondents warned of loss of confidence in DQ services that might result if the network message was withdrawn too early. Respondents suggested that the network messages continue for 12 or 18 months.

Other regulators’ responses

2.29 ICSTIS considered that continuing as planned with the August 2003 timescale for the end of parallel running would provide certainty to both operators and consumers, given that this date had been the target date for some time.

Oftel analysis and conclusions

2.30 Many DQ service providers and networks operators have undertaken significant planning based on an August 2003 date for the end of parallel running, and to change this date now would cause disruption. This date has also been in the public domain for some time, and therefore arguably this is also what at least some consumers are already expecting. The period of parallel running in the UK commenced in December 2002, the aims of parallel running have largely been achieved already, and eight months of parallel running is already longer than in other European countries undergoing similar changes. Call volumes in general, and to DQ services in particular, are likely to be at a seasonal low over the August Bank Holiday, making it a particularly good time to implement these sorts of changes. Similar suitable opportunities are unlikely to arise for several months after August. Oftel acknowledges that this date has become a defacto expectation due to its appearance as a target date on the Industry project plan for some time, but considers that there was considerable informal consultation on this target date in the Directory Enquiry Implementation Working Group, which was specifically charged (through its terms of reference) with managing the project plan for DQ liberalisation.

2.31 Oftel therefore considers that the date for the end of parallel running should be 24^th August 2003, as proposed in Oftel’s consultation.

2.32 Oftel notes the concerns that have been expressed in responses to the Consultation Document about the duration of the network messaging period, in particular the view that six months may be too short a period. Oftel agrees that experience from previous number changes may not be a good indication of likely consumer behaviour in relation to the legacy DQ numbers.

2.33 On the one hand, Oftel’s own research (details available at www.oftel.gov.uk/publications/research/2001/q3fixr.htm) shows that some consumers dial DQ only once every few months. Unlike previous number changes there has been minimal centrally co-ordinated advertising of the change because all DQ service providers have strong commercial incentives to do their own advertising. Oftel also recognises that in February 2004, some phone books containing details of the legacy DQ numbers will still be current, and this is likely to be the case until at least June 2004. On the other hand, Oftel notes that (unlike previous number changes), there will be incentives on consumers to use the new 118 DQ numbers in order to access lower priced and more innovative DQ services. Also, by February 2004, there will already have been 15 months of parallel running between the legacy DQ numbers and the 118 DQ numbers.

2.34 One possibility that Oftel considered was that the end of the network messaging period should remain February 2004, but with a review of consumer dialling behaviour and a possible re-consultation on extending this period if consumers were still dialling the legacy DQ numbers in significant numbers. However such a review will be largely impractical because under a Statutory Instrument regime (ie if the Communications Bill has not come into force), then the requirement for consultation plus parliamentary procedures for amendment of the relevant Statutory Instrument could mean that the review would have to be based on consumer behaviour in September or October 2003 (as this would be the only data available at the time the review had to commence). Such data would be unlikely to be a reliable predictor of behaviour in February 2004.

2.35 Therefore Oftel has decided to extend the period of network messaging in the designation of the legacy DQ numbers to June 2004, in particular to 12.01am on Sunday 20^th June 2004. By that date, the distribution of phone books with information about the DQ numbering change will be largely complete. If the volume of calls to the legacy DQ numbers drops swiftly after the end of parallel running, then the extension of the network messaging period to June 2004 is unlikely to significantly increase the cost of a network messaging solution. If volumes of calls to the legacy numbers do not drop swiftly, then the extension of the network messaging period will act as an important safeguard for consumers, particularly infrequent users of DQ services.

2.36 Oftel will reconsider the duration of the network messaging period (to the extent that it is practical to do so given the consultation obligations in force at the time) in the light of information about consumer dialling behaviour after the end of parallel running, with a view to reducing it if possible.

Criteria for evaluating options

Summary of Oftel’s proposals in the Consultation Document

2.37 Oftel explained in the Consultation Document that any option considered would depend on changes to the Annex to the General Conditions of Entitlement and/or the National Telephone Numbering Plan. Therefore a pre-requisite for all options is that the tests for modifying the General Conditions and the Plan as set out in Clause 44 and Clause 57 of the Communications Bill respectively are met ie the changes are objectively justifiable, non-discriminatory, proportionate and transparent. (The latest version of the Communications Bill at the time of writing this Statement is the version introduced into the House of Lords on 5 March 2003, available at www.communicationsbill.gov.uk. All clause numbering used in this Statement refers to this version, which is why some clause numbers may differ from those given in the Consultation Document).

2.38 In the Consultation Document, Oftel proposed a set of criteria for evaluating options against each other, using the European Community requirements as set out in Clause 4 of the Communications Bill as the starting point. The proposed criteria were:

• Promotion of competition
• Encouragement of the provision of network access and service interoperability for the purpose of securing sustainable competition, efficiency and benefit to customers and those making available associated facilities
• Consumer interest
• Practicability
• Certainty

2.39 Oftel asked stakeholders for comments on these criteria, whether there were any additional criteria Oftel should consider and what relative weight Oftel should place on each factor.

Network operator responses

2.40 Network operators agreed with many of the criteria proposed by Oftel. A number of operators considered that consumer interest should be given priority (with one mobile operator noting particular inconvenience for mobile users if the message was overly long or required redialling) and that practicability and certainty were also important.

2.41 Whilst two operators felt promotion of competition should be given priority alongside consumer interest, several operators were of the opposite view and felt that promotion of competition was not a suitable criterion as DQ service providers should promote their services through the normal marketing channels. One respondent expanded on this line of argument by setting out its view that the network operator has created DQ traffic through its own commercial efforts and that 192 traffic did not exist because Oftel determined that 192 should be used for DQ services. This respondent considered that mentioning competitive 118 numbers in the network message would be an unfair attempt to hand market share to competitors. Another network operator stated that competition should be considered only if consumer needs were met.

2.42 One operator stated that network access and interoperability should not be considered as a criterion. Another interpreted the network access and interoperability criterion as meaning that ‘reciprocity’ should be encouraged, and that given that Oftel’s formal powers in relation to non-dominant networks were likely to be limited in this respect, this criterion would suggest a solution which would be implemented voluntarily. Another operator respondent expressed concerns about Oftel’s methodology, noting that Oftel had not carried out a cost-benefit analysis. Another operator suggested that Oftel should have included its six principles of cost recovery as explicit top level criteria to assess the options, so that economically inefficient options could be ruled out. On the other hand, a different respondent felt that Oftel’s six principles were irrelevant, because Oftel should not be expecting that network operators would refer to competing 118 DQ services. This operator considered that commercial terms only would be appropriate for providing network announcements and messaging services, and only if network operators choose to do so voluntarily.

DQ service provider responses

2.43 DQ service providers in general considered that competition and consumer interest should carry more weight than the other criteria. Several DQ service providers noted that the purpose of Oftel’s liberalisation of the DQ market was to introduce competition, and that therefore the network message on the legacy numbers must not undermine competition. One DQ service provider noted that Oftel’s apparent lack of formal powers to make competing 118 services available across all the different UK originating networks made consideration of competition an even more important factor when Oftel decided on the appropriate network messaging option.

Consumer group and independent responses

2.44 Responses from consumers were heavily in favour of consumer interest taking the highest priority. One consumer group response stated that this meant that consumers dialling a legacy DQ code should be provided directly with a 118 number, and should not be charged for hearing this message. In two cases, consumer groups considered that minimising inconvenience for those consumers who only occasionally use DQ services was vital.

Other regulators’ responses

2.45 ICSTIS felt that the consumer interest should take precedence, because directory enquiry services are intended to provide information for consumers. ICSTIS noted in particular that some consumers might be using DQ services to obtain socially valuable information, and that consumer confusion regarding DQ services could contribute to an increase in social exclusion.

Oftel analysis and conclusions

2.46 Oftel notes that the Director is obliged to consider all the requirements in Clause 4 of the Communications Bill in exercising his functions to ensure that, where they are relevant, he is acting in accordance with those requirements. Promotion of competition is a requirement set out in Clause 4(3) of the Bill and is highly relevant to the issue of network messages on the legacy DQ numbers, as the content of these messages will clearly have an impact on competition in the liberalised DQ market. Depending on the precise messaging option chosen, matching that impact through traditional marketing channels might be very difficult for DQ service providers. The argument that network operators have entirely through their own efforts built up traffic on the legacy DQ numbers is not entirely persuasive to Oftel, as the historical fact that the same short, memorable code (ie 192 or 153) was made available for DQ services on all networks clearly has a role to play in the development of traffic on these numbers. It is not possible therefore, as some respondents suggested, to ignore the promotion of competition as one of the criteria when assessing options for the legacy DQ numbers.

2.47 The requirement to encourage the provision of network access and service interoperability is also a requirement set out in Clause 4 of the Communications Bill. Whilst this is clearly not limited to provision by particular providers only, whether or not to encourage such provision in a particular case is a matter for the Director, and he only needs to do so to the extent that he considers appropriate for the purposes of securing sustainable competition, efficiency and benefit to customers and those making available associated facilities. This criterion does not impose a blanket requirement to encourage ‘reciprocity’.

2.48 One respondent noted that Oftel had not carried out a cost-benefit analysis or a regulatory impact assessment on the options considered in the Consultation Document. Oftel’s response to this point is set out at paragraph 2.18.

2.49 Whilst one respondent considered that Oftel’s six principles of cost recovery should have been included as explicit top level criteria in order to ensure that an economically efficient option would be chosen, another considered that these principles were irrelevant as in no case should network operators be obliged to refer to competing DQ services, and that commercial terms only should apply for cost recovery. Oftel notes that in this case, efficiency is only one of the goals set out in Clause 4 of the Communications Bill, and Oftel must clearly balance this requirement with the other requirements inter alia to promote competition and consider the consumer interest.

2.50 Oftel therefore concludes that all the criteria set out in the Consultation Document should be used for assessing the options for network messaging on the legacy DQ numbers, namely:

• Consumer interest, including the potential to minimise consumer confusion, rapidly raise consumer awareness of the new 118 DQ numbers and to speed changes in consumer dialling habits.
• Promotion of competition (as required by Clause 4(3)) – does the proposed solution promote competition in the provision of telephone Directory Enquiry Facilities to end users?
• Encouragement of the provision of network access and service interoperability for the purpose of securing sustainable competition, efficiency and benefit to customers and those making available associated facilities (as required by Clause 4(7) and Clause 4(8)). As regards efficiency, Oftel has considered whether the proposed solution encourages best use of resources and good value for money. In particular, does the proposed solution mean that costs will be recovered in a manner that accords as closely as possible with Oftel’s six established principles of cost recovery? Two of these principles are already included on this list of criteria, namely effective competition and practicability. However, Oftel has considered whether the method of cost recovery accords with the other principles as well, namely cost causation, cost minimisation, distribution of benefits, and reciprocity.
• Practicability - is the proposed solution technically and commercially feasible in the time available before the end of parallel running in August 2003?
• Certainty - does the proposed solution provide all stakeholders with clarity about what will happen and when, or is it possible that further changes or Oftel intervention will be necessary?

2.51 Given that the goal of Oftel’s liberalisation of the DQ market was to introduce competition for the benefit of consumers and in light of responses to the Consultation Document, Oftel considers that the consumer interest and promotion of competition criteria should be given particular weight over the other criteria when carrying out this assessment. The consumer interest criterion covers short term consumer convenience. Clearly the consumer interest is also served in the medium-to-long term by effective competition, and this aspect of consumer interest is covered by the promotion of competition criterion.

2.52 Oftel has decided that the date for the end of parallel running should remain 24 August 2003 as proposed in the Consultation Document. Oftel therefore considers that the practicability criterion should be given greater weight relative to the other criteria as well. This should help to ensure that the Industry has a realistic opportunity to implement any network messaging option chosen by Oftel.

Option A

Summary of Oftel’s proposals in the Consultation Document

2.53 Under Option A, the legacy DQ codes are removed from the Annex to the General Conditions of Entitlement at the end of parallel running and do not appear in the Plan. The Numbering Condition of Entitlement only permits the adoption of numbers where there is an allocation by the Director or where there is a stated exception in the Annex to the General Conditions. Therefore no Communications Provider can adopt the legacy DQ numbers for any purpose. A consumer dialling 192 or 153 would receive a ‘number unobtainable’ tone.

2.54 Oftel’s initial assessment of Option A was that it would score well against the promoting competition, practicability and certainty criteria, but not against the consumer interest criterion for the reasons set out in the Consultation Document. Oftel noted that it would take a view on the extent to which this option encouraged network access and interoperability in the light of responses to the consultation.

2.55 In the Consultation Document, Oftel asked stakeholders for comments on Option A, and whether they agreed with Oftel’s initial assessment.

Network operator responses

2.56 Network operators identified several benefits of this option such as ease of implementation, emphasis being placed on commercial marketing of DQ services and all operators being guaranteed to implement the same solution. However, all network operators also identified the major consumer detriment that would result from having no network message at all, and the likely resultant confusion and frustration for consumers. Respondents also noted that customers might respond by dialling their access operator’s customer service number, thereby increasing indirect costs and degrading the quality of service for other consumers trying to contact customer services. One respondent identified the risk that in dialling customer services, consumers might simply be given the access operator’s 118 DQ number, which in this respondent’s view would harm competition. Some network operators did not agree with Oftel’s suggestion that it would be possible for network operators to offset the additional customer services cost against this promotional benefit due to the cost of dealing with customer service calls, and the fact that customer service centres are not designed for dealing with calls about DQ services.

DQ service provider responses

2.57 Like the network operators, DQ service providers identified several benefits of this option such as competitive neutrality and ease of implementation, but in general considered this option was unacceptable due to the likely consumer detriment. One DQ service provider believed it would be extremely beneficial for competition, as it would encourage network operators to provide access to a range of 118 DQ services, particularly those that were being heavily advertised. Another DQ service provider felt Option A might not be pro-competitive, as consumers dialling network operators’ customer services numbers would be given the network operators’ 118 DQ numbers.

Consumer group and independent responses

2.58 Responses from consumers were almost unanimously opposed to Option A due to the detriment to consumers, particularly those who only infrequently dial DQ services. One consumer group rejected the idea that consumer behaviour would change rapidly because of the number of infrequent users of DQ services. One respondent identified that large businesses might find this option most attractive as they would be able to decide in-house which new 118 service to use, but that clearly this option would not be good for residential, mobile or public pay phone users. Concerns were also expressed by the burden placed on network operators’ customer services facilities

Other regulators’ responses

2.59 The view of ICSTIS was that this option would cause a great deal of consumer confusion, with a detrimental impact on the most vulnerable.

Oftel analysis and conclusions

2.60 Oftel consulted on Option A in order to provide a ‘baseline’ against which the other, more complex, options could be evaluated. The cost of any departure from Option A (which would be the quickest and easiest solution to implement) should be justified by the benefits such a departure would bring to stakeholders, as assessed by the criteria set out by Oftel.

Consumer interest

2.61 In light of responses to this consultation and Oftel’s own assessment, it is clear that this option would be severely detrimental to consumers (particularly those who only infrequently dial DQ services) despite its other attractions. As particular weight is being attached to the consumer interest criterion in assessing the options, this is likely to count heavily against this option.

Promotion of competition

2.62 Oftel considers that on balance this option would promote competition, and the potential harm to competition done by network operators giving out their own 118 numbers to consumers calling customer services would be outweighed by the benefits to competition of making all DQ service providers rely in the first instance on traditional forms of marketing and promotion.

Network access and interoperability

2.63 As the legacy DQ numbers would not be available for adoption under Option A, a discussion of whether Option A encourages network access and interoperability in relation to the legacy DQ numbers is not relevant. As a secondary consideration, this option appears to Oftel to contribute to encouraging network access and interoperability for the 118 DQ numbers themselves because consumers would place pressure on network operators to open access to those 118 services which they saw being advertised, as advertising would be the most important means of communicating the new 118 numbers to consumers. As set out in Annex E, Option A does not, when compared to the other options, appear to present any particular problems when assessed against Oftel’s six principles of efficient cost recovery, not least because the total level of costs incurred under Option A would be lower than under the other options.

Practicability and certainty

2.64 Responses indicate that this option would be practicable. This option would also appear to provide certainty with little risk of further Oftel intervention.

Summary

2.65 Oftel’s assessment of this option against the established criteria may therefore be summarised as follows:

Option B

Summary of Oftel’s proposals in the Consultation Document

2.66 The legacy DQ codes remain Type A Access Codes. However, the designation of these numbers in the Annex to the General Conditions of Entitlement would change. If a Communications Provider did adopt the legacy DQ numbers, it would be obliged (by the Numbering General Condition of Entitlement) to adopt the numbers in order to provide network messages advising callers that DQ numbers had changed and advising of sources of information about the new 118 services, and not for any other purpose. It would not be permitted to announce any specific 118 numbers at all.

2.67 Oftel proposed that one or more of the following sources of information be mentioned in the network message:

1. A web address for an impartial listing of numbers.
2. The customer services number of the network operator.
3. A freephone number for an impartial listing of appropriate 118 numbers. The freephone service itself would be run and paid for by an independent group of DQ service providers.

2.68 Oftel’s initial assessment of Option B was that it would score well against the promoting competition criterion if the caller was pointed to an impartial web site or freephone service, and to a lesser extent if the customer was additionally given the network operator’s customer services number. Oftel considered that Option B would rate well against the consumer interest and certainty criteria, and reasonably well against the practicability criterion. Oftel noted that it would take a view on the extent to which this option encouraged network access and interoperability in the light of responses to the consultation. The reasons for this initial assessment are set out in the Consultation Document.

2.69 Oftel asked stakeholders for comments on Option B, including which source or sources of information should be provided via the network message and whether they agreed with Oftel’s initial assessment.

Network operator responses

2.70 Network operators did not in general see Option B as the best option for the future use of the legacy DQ numbers.

2.71 Network operators considered that this option would not be as consumer friendly as some of the other options considered, as consumers would have to dial an additional number to obtain a 118 DQ number or visit a web site. One network operator asked if there would be an option for onward connection to the 118 DQ services from the freephone number or from customer services. Network operators would have to cover the cost of additional calls to customer services that might result. For mobile consumers, writing down multiple telephone numbers would be particularly tricky. The fact that consumers would receive a different 118 number each time they phoned the freephone number was felt to potentially add to consumer confusion. Network operators were concerned that the appropriateness of any 118 number provided would vary depending on the caller’s network and calling line type. Resellers and virtual network operators might want a different number provided to their customers. That would however require technical development which would not be feasible in the short to medium term. Calls to 192 from payphones were identified as a particular issue, as only 118 numbers charged on an elapsed time basis (ie with retail charges that depend solely on the length of the call) are available from payphones. BT noted that it currently allows callers to DQ services from Wales to receive a Welsh language version of the service, and that it was not clear how this facility could be continued under Option B, other than by making reference to the network operator’s customer service number. It was suggested that the message should include a disclaimer advising that any 118 services provided (for example) via a freephone number were not the network operator’s responsibility. It was noted that ICSTIS requirements would need to be met every time a 118 number was promoted.

2.72 Network operators in general considered that a web site was unlikely to be useful, as not all consumers have access to the web (including mobile users) and consumers with access to the web were felt likely to use the free DQ services available on the web. Attention was drawn to the fact that socially disadvantaged customers are more likely not to have access to the web, and the fact that web site addresses are not easy to communicate verbally. It was suggested that the only suitable impartial web site would be one created and maintained by Oftel listing all 118 numbers diallable from any UK network.

2.73 The idea of providing the network operator’s customer services number was noted, and it was suggested that in this scenario, it would be reasonable for network operators to provide their own 118 numbers to any consumers dialling customer services. It was however considered in general that this would be better achieved by means of Option C.

2.74 One network operator thought that the best source of information for an impartial 118 DQ number would be a freephone number run and paid for by a group of DQ service providers. This network operator did not totally reject Option B, but considered it should be simplified.

2.75 In relation to competition, one network operator felt that only DQ service providers with substantial marketing budgets could afford to participate in the freephone service, which would damage competition. Concern was expressed that network operators’ brands might suffer if customers accessed a 118 DQ service via a freephone number that was not necessarily the best value-for-money service or the best service in other respects for that particular consumer (compared to the service of the network operator, which the consumer would be arguably expecting to receive). The commercial viability of a freephone service was questioned, as it was felt that the promotional benefits might not outweigh the cost of participating. One network operator noted that only a small number of DQ service providers are likely to be sustainable in the market and that they should do their own advertising, rather than being subsidised by consumers and network operators if unwilling to make their own investments in promotion. Several network operators considered it disproportionate for originating network operators to have to cover the cost of the network message as this would require them to cover the costs of sending their customers to competitors.

2.76 Option B was felt by some network operators to be more acceptable if the network operators could provide their own 118 numbers, followed by a freephone number or web site address if necessary.

2.77 In relation to network access and interoperability, it was noted that if the message includes a freephone number, network operators might choose not to adopt the legacy numbers. Some network operators did not consider it was appropriate for network operators to be forced to cover the costs of promoting a competitor’s DQ service. The fact that freephone services are often not free from mobile phones was considered to increase the likelihood that mobile operators would not adopt the legacy DQ numbers under Option B(iii). One network operator claimed that originating operators would have to carry the cost of three times as many calls for DQ as currently. Also, one network operator noted that some network operators are not making a full range of 118 numbers available on their networks, whilst others are. This would mean that the freephone service for some network operators would provide only one 118 number, whilst freephone services for other network operators would have to make many different 118 numbers available. It was felt that this would represent an unfair lack of reciprocity between network operators.

2.78 It was pointed out that current Industry freephone origination arrangements are not popular with some network operators. Depending on the network operator hosting the freephone number, it was noted that additional interconnect capacity might be required which might be expensive and hard to arrange at short notice.

DQ service provider responses

2.79 DQ service providers also pointed out that this option would be cumbersome for consumers because they would have to make an additional phone call or visit a web site to obtain an appropriate 118 number, rather than being given one directly. One DQ service provider noted that this inconvenience might encourage consumers to change their dialling behaviour. Concern was expressed that consumers might try to use the same freephone number from different originating networks and therefore receive an inappropriate 118 number. A web site was not generally considered to be very useful or friendly for consumers.

2.80 DQ service providers felt that Option B might undermine competition if network operators were allowed to provide their customer services number, as network operators would then give out their own 118 numbers to any consumers who called this number. This was seen by at least one respondent as allowing BT to leverage its dominance from the fixed access line market into the newly liberalised DQ services market. If this sub-option were not available, then Option B would be acceptable to many DQ service providers (although not as good as Option E to some). At least one DQ service provider considered that if a freephone number on its own were mandated, this would rate highly against all Oftel’s proposed criteria. Several respondents and the MoU Group itself suggested that the MoU Group (by means of Directory Affairs Ltd) could provide the network message on the freephone number. Another respondent suggested that if more than one 118 number were to be given out on the freephone number, then this should be done on a rotating basis, not in a fixed order.

2.81 As regards practicability, the cost of providing a freephone service was noted to potentially be higher than providing a network messaging service on 192, as the volume of calls would be lower because of the additional effort required by consumers, thus making the cost per message higher. DQ service providers noted that the existing freephone model might not be commercially attractive enough for network operators to open access to the required freephone numbers. The MoU Group proposed that if necessary it would enter commercial negotiations if the normal freephone commercial arrangements were not acceptable to network operators.

2.82 At least one DQ service provider noted that if network operators gave out their own 118 numbers as a result of calls to customer services numbers as a result of the message on the legacy DQ numbers, DQ service providers might bring complaints to Oftel generating uncertainty for the Industry.

Consumer group and independent responses

2.83 Consumer representatives in general expressed serious reservations about Option B and its impact on consumers, particularly infrequent users of DQ services. They noted that the consumer would be required to make three calls to obtain a DQ service, and that this could have serious implications, particularly for consumers in vulnerable positions. They also noted that freephone calls were chargeable on some networks, increasing the potential harm to consumers. The web site was not considered to be a good source of information due to its limited accessibility for mobile users and users without Internet access (in particular the elderly and those on low incomes).

2.84 One consumer group response supported Oftel’s proposal to implement Option B, and accepted Oftel’s view of the practical difficulties of Option E which might otherwise have been a good choice as well.

Other regulators’ responses

2.85 ICSTIS noted that in its view, the desirability of Option B would depend on what information source or sources were mentioned in the network message. ICSTIS considered that a web address on its own would be of no value due to the significant proportion of the UK population without web access. In relation to mentioning the network operator’s customer service number, ICSTIS noted that network operators would probably mention their own 118 numbers, unless unable to do so on competition law grounds. If unable to do so, ICSTIS questioned what other information customer service advisors could give to callers. As regards a freephone number, ICSTIS noted that the consumer would be required to make three calls to obtain a DQ service. If customers were charged for the freephone call (eg if calling from a mobile network) this would cause additional annoyance. ICSTIS suggested that if Oftel were to choose Option B, Oftel should give more consideration to how consumer confusion could be minimised.

2.86 ICSTIS noted that provision of specific 118 numbers would constitute a promotion of those numbers for the purposes of the ICSTIS Code of Practice, and there would therefore be requirements that pricing information be given.

2.87 The Isle of Man Communications Commission agreed with Oftel’s preliminary view that Option B would be the best option for the future use of the legacy DQ numbers. The Commission suggested that after a period of one or two years, Oftel could redesignate the legacy numbers as Type C access codes, thus making them available for any network operator to use without specific allocation. The Commission considered that this would give network operators greater flexibility and would improve consistency in the new National Telephone Numbering Plan. The Commission noted that in any event, Manx Telecom would continue to use 153 and 192.

Oftel analysis and conclusions

General

2.88 It appears to Oftel in the light of responses to the Consultation Document that there will be little value in the provision of web site details on the network message. This is because of its limited accessibility to mobile users and users without Internet access, the difficulty of providing a web site address verbally and the fact that users with Internet access may well use the free DQ services available on the web instead. Oftel therefore does not consider this sub-option further in this document.

2.89 Oftel also considers that the provision of the network operator’s customer services number would not be a useful addition to the network message, either on its own or in conjunction with a freephone number and/or a web site address. Most consumers already know their network operator’s customer services number anyway. Network operators have expressed concern about the additional costs of dealing with customer services calls, and DQ service providers have noted the potential for this approach to adversely affect competition in the newly liberalised DQ services market. The potential for harm to competition and legal action by DQ service providers in this situation introduces in Oftel’s view unacceptable disadvantages into implementing this sub-option, given what are likely to be limited informative benefits to consumers and possible costs to network operators. Oftel therefore does not consider this sub-option further in this document.

2.90 Oftel’s analysis and conclusions will therefore focus on Option B(iii), the provision of a freephone number. At least one network operator, several DQ service providers and one consumer group indicated that this would be an acceptable option.

2.91 Oftel notes the comments made by the Isle of Man Communications Commission in relation to the legacy DQ numbers. Oftel has no jurisdiction over the Isle of Man and the other Crown Dependent Territories. These Territories voluntarily opt into the UK telephone numbering arrangements but retain the right to continue to use 192 and 153 regardless of Oftel’s decision in this Statement. Oftel does not intend to redesignate the legacy DQ numbers as ‘Type C’ access codes in the future, as this could encourage network operators to begin to use these numbers for DQ services again, which would undermine the market liberalisation process.

Consumer interest

2.92 Oftel considers that Option B(iii) is reasonably beneficial to consumers. As far as Oftel is aware, it should be possible to ensure that consumers are given a 118 number appropriate to the network and line type they are calling from, by providing callers with a different freephone number (and hence a different freephone message) depending on the network and line type they are calling from. Requirements for callers from Wales could also be handled appropriately by a similar mechanism.

2.93 Oftel acknowledges that it would be preferable for consumers (as pointed out in many responses to the Consultation Document) to receive a specific 118 number directly when dialling 192 to minimise confusion and frustration. The possibility of additional consumer confusion or frustration is of great concern to Oftel, and Oftel and Industry will be taking steps to promote consumer understanding of these changes both during and after the run-up to the end of parallel running. However, in order to promote competition effectively, it is important that the 118 numbers provided to consumers on the legacy DQ numbers are not the network operator’s 118 numbers only. Competition should maximise consumer interest over the medium-to-long term, and has already delivered a DQ service that is half the price of BT’s 192 service, as well as having made innovative services such as call completion and combined white pages and classified listings more widely available. DQ service providers have made it clear (in accordance with Oftel’s own belief) that these services will not continue to be available to consumers unless the conditions for fair competition are fulfilled. Effective competition will also make it possible for DQ service providers to invest resources in promotion, thereby helping to reduce consumer confusion.

2.94 Having reviewed the responses to the Consultation Document and as a result of Oftel’s own examination of the issue, Oftel no longer considers that it is necessarily less confusing for consumers if the same 118 number is given out on the freephone number on every occasion. Oftel considers that a significant number of consumers will only hear the network message in its entirety once, and will hang up immediately when mis-dialling 192 again subsequently. Oftel also considers that a proportion of consumers will simply dial 192 out of habit rather than out of ignorance of the changes to DQ services. Such consumers will again hang up as soon as they hear the start of any message alluding to the withdrawal of 192. Therefore the question of whether or not the same 118 number is given out on every occasion via the freephone number is not of prime relevance. If some consumers do hear the network message in its entirety more than once, the fact that a different 118 number may be provided on the freephone message will make consumers aware of the choice available to them.

2.95 Oftel notes suggestions that consumer confusion will be generated because the 118 number obtained may not work if a consumer dials it again from a different line type (eg another fixed network or from a payphone). Oftel considers that this will be the same for Options B, C, D and E under which the consumer is provided directly or indirectly with a 118 number to dial. This observation does not particularly help distinguish the benefits of one option from another. Oftel also notes that consumers can always dial 192 again and obtain an appropriate 118 number for that network if they are having difficulties.

2.96 Oftel acknowledges that some mobile operators may charge consumers for the call to the freephone service. Such a scenario would clearly not be ideal. Oftel notes however that if mobile network operators make a charge for a call to a freephone service, they must notify callers at the start of the call of the charges, giving consumers the option of not continuing with the call. Mobile consumers are familiar with having to pay for freephone calls, the tariffs are not particularly high and the freephone message will be short, so any such charges should not be too unexpected to consumers. Oftel understands that making off-network calls free-to-caller on mobile networks would require in some cases significant investment of resources and time, and in Oftel’s view the benefits of doing so would be unlikely to outweigh the costs.

2.97 At least one respondent was concerned that consumers might retain the freephone number provided on the network message, and dial it again from a different network and therefore obtain an inappropriate 118 number not available from that network. Oftel considers that this would depend on the consumer remembering a freephone number in preference to the 118 number used on the previous occasion, a scenario which Oftel does not think is likely to occur very often.

2.98 It is not correct in Oftel’s view to argue that consumers dialling 192 are somehow expecting explicitly to receive the network operator’s DQ service. Given the existing absence of service-level competition in telephone directory enquiry services, consumers can only be argued to be expecting a general DQ service of some description when dialling 192, as this is all that they have historically received. At present, the provider of the 192 service and the precise characteristics of that service vary from network to network in a way which is unlikely to be uppermost in a consumer’s mind when dialling 192. At present consumers are of course not expecting to access a competing DQ service when dialling 192, as this has never before been available to them. Oftel notes that the characteristics of some network operator’s DQ services have changed significantly with the introduction of competition in this market. For example, some network operators are charging prices for their new 118 DQ services that are different from the prices charged for the network operators’ 192 services. Consumers’ historical expectations are therefore of less relevance in the context of a liberalised market.

2.99 The purpose of Oftel’s liberalisation of the DQ market is to allow consumers to make a choice between different DQ service providers, all of whom are able to compete on as level a playing field as possible, rather than being routed by default to their network operator’s DQ service. An argument that because consumers have previously by default been using their network operator’s DQ service they should continue to do so is not in Oftel’s view valid given the context and goals of Oftel’s DQ market liberalisation.

2.100 One respondent asked if the freephone number would have a facility for onward connection to a DQ service. Whilst this would clearly be ideal, Oftel understands that a mid-call tariff change from a free call to a paid-for call for a call originated and terminated on different networks is not technically possible at the moment and would require substantial development.

2.101 In relation to consumer interest, Option B (iii) clearly scores better that Option A as it provides consumers with an identified source of information about the new 118 DQ numbers. Because Option B (iii) requires that consumers make another call to find out a 118XXX number (assuming they are still dialling 192 out of ignorance of the changes rather than habit), then Option B (iii) is less in the short-term interest of consumers than Options C, D or E which all provide a consumer with a 118XXX number immediately.

Promotion of competition

2.102 In relation to the promotion of competition, one network operator felt that only DQ service providers with substantial marketing budgets could participate in the freephone service (or indeed in Option E). Oftel does not consider this argument to be very strong. Network operators are on average many times larger than independent DQ service providers, and their marketing budgets are likely to be correspondingly much larger. Whilst network operators may not focus their marketing currently on DQ services, this is a commercial choice made by the network operators which they are free to change. Oftel does not therefore consider that in this case this represents a barrier to network operators competing in this market to an extent that would justify the exclusion of independent DQ services providers from the message on the legacy DQ numbers. The marketing opportunity represented by the legacy DQ numbers is a very important channel as it provides information to the consumer who has a need at that exact time to access a DQ service, and is therefore likely to be more effective than other channels. The opportunity to use the legacy DQ numbers as a marketing opportunity must be available to all DQ service providers, regardless of the position they occupy in the value chain.

2.103 It was suggested that DQ service providers should use traditional marketing channels, rather than relying on the legacy network messages to promote their services. Oftel considers that a similar argument could be used for the DQ services of network operators, yet network operators are clearly very keen themselves (from their responses to Option C) to use the legacy network messages. This appears to be a tacit admission by network operators that the legacy network messages will be an extremely effective form of promotion. Oftel notes with interest that the amount of traditional promotion of 118 numbers done by network operators is in general much smaller so far than that done by independent DQ service providers, suggesting that network operators may be relying on marketing channels that are not generally available to DQ service providers to increase consumer awareness of their services.

2.104 Oftel continues to be of the view that Option B(iii) scores well against the promotion of competition criterion because all DQ service providers are given an equal opportunity to promote their own 118 numbers on the network message on the legacy DQ numbers. Oftel considers that Option B(iii) is comparable to Option E in this respect. Option B(iii) scores better than Option D on this factor because of the problems with free-riding under Option D (see below). Option B(iii) scores better than Option A against this criterion because under Option A, network operators will have a greater opportunity to promote their own 118 numbers via calls to customer services.

Network access and interoperability

2.105 In relation to network access and interoperability, some network operators expressed concern about possible damage to network operator’s brands if responsibility for the 118 services was not clear to consumers, which could act as a disincentive to adopting the legacy DQ numbers. At least one suggested that some form of disclaimer would be appropriate on the network message or freephone number. Oftel does not consider that this is a strong argument. All 118 DQ services available in the UK (whether national or international) will be providing a DQ service that meets certain minimum quality requirements by virtue of Oftel and ICSTIS requirements placed on 118 DQ numbers. Differences in pricing and responsibility for services will be dealt with by the ICSTIS requirements to provide pricing information and the identity of the service provider with any promotion of a 118 number. Oftel notes that network operators routinely provide access to premium rate services on this basis and so are clearly able to manage the impact of such services on their own brand image to a degree that they currently accept. Oftel therefore believes that Option B(iii) (and other options considered in this consultation whereby the consumer is given an alternative service provider’s 118 number) cannot be argued to damage the network operator’s brand to a significant extent.

2.106 Oftel has considered the views of some network operators that the costs of Option B(iii) might be excessive, and that the fact that calls to freephone numbers on mobile networks may not necessarily be free might deter network operators from adopting the legacy numbers. As described in the assessment against Oftel’s six principles of cost recovery in Annex E, under Option B(iii) network operators would have to bear the cost of providing a free-of-charge network message to consumers dialling the legacy DQ numbers, together with any incremental calls to customer services – as under Options C and D. However, DQ service providers wishing to promote their services will have to cover the costs of the provision of the freephone service (supplied by network operators at normal freephone origination rates), and manage the fair and equitable distribution of network messages amongst DQ service providers. This effectively shares the costs of the network messaging solution in its entirety between the originating network operator and the DQ service providers. Oftel’s analysis in Annex E shows that Option B(iii) scores better than Option D but not as well as Options A, C and E against the ‘distribution of benefits’ principle. Option B(iii) does not appear to present any particular problems when assessed against the other principles. Given network operators’ comments elsewhere in their responses about the importance of minimising consumer confusion and calls to customer services, Oftel considers that there will be reasonable incentives on network operators (including mobile network operators) to adopt the legacy DQ numbers.

2.107 Oftel is aware that some network operators are not making a full range of 118 numbers available on their networks, whilst others are. It remains Oftel’s policy goal that all 118 DQ services should be available on all networks, and Oftel has actively encouraged network operators and DQ service providers to achieve this goal. However the reasons for the current limited availability are much wider than the issue of what network messages should be played on the legacy DQ numbers at the end of the parallel running period, and relate to the current interconnection regime for these services. Oftel acknowledges that this means the freephone service for some network operators might only be able to provide consumers with one 118 number, whilst freephone services for other network operators would have to make many different 118 numbers available. However, as Oftel has explained above, the requirement in the Communications Bill to encourage the provision of network access and service interoperability does not impose a blanket requirement to encourage ‘reciprocity’.

2.108 In relation to network access and interoperability, Oftel considers that Option B(iii) scores better than Option D because under Option D, the network operator must bear the cost of the entire network messaging solution. Oftel has ranked Option B(iii) as highly as Option E against this criterion because, although network operators can recover all costs from DQ service providers under Option E, Option B(iii) will be simpler for network operators to implement. Option C scores more highly against this criterion than Option B(iii) as under Option C, the network operator is able to exclusively promote their own 118 services.

Practicability and certainty

2.109 Oftel considers that Option B(iii) offers both practicability and certainty, and has scored this option well against both these criteria. As noted above, it should be relatively simple to ensure that consumers are given 118 numbers appropriate to the network operator and line type by use of different freephone numbers, including consumers using pay phones or callers from Wales. Several DQ service providers and the MoU Group itself note that Directory Affairs Ltd (DAL) could provide the freephone network message. Directory Affairs Ltd is the not-for-profit company limited by guarantee set up by several DQ service providers to be the legal entity responsible for providing the network message on the legacy numbers under Option E, and providing the freephone service under Option B(iii). The MoU Group’s response indicates that arrangements have been put in place between DAL and a supplier of a network messaging platform that has ample experience in dealing with high-volume calling events and for which sufficient interconnection capacity should be in place. DAL has informed Oftel that it will be putting a process in place to establish that DQ service providers who wish to promote their 118 DQ numbers on the freephone message are likely to have sufficient capacity to deal with the 118 DQ calls driven into their call centres as a result. The use of freephone numbers should mean that existing commercial arrangements for freephone origination can be used, without the need for further commercial negotiations. As Option B(iii) promotes competition, the risk of further complaints to Oftel or the courts from DQ service providers (and the resultant uncertainty) should be minimised.

Summary

2.110 Oftel’s assessment of Option B(iii) against the established criteria can be summarised as follows:

Option C

Summary of Oftel’s proposals in the Consultation Document

2.111 Under Option C, the legacy DQ codes would remain Type A Access Codes. However, the designation of these numbers in the Annex to the General Conditions of Entitlement would change. If a network operator did adopt the legacy DQ numbers, it would be obliged (by its Numbering General Condition of Entitlement) to use the numbers for network messages advising that DQ numbers had changed and providing at least one appropriate 118 number, and not for any other purpose. Oftel considered it likely that network operators would use the network message to announce their own new 118 numbers, and not those belonging to other DQ service providers.

2.112 For the reasons set out in the Consultation Document, Oftel’s initial assessment of Option C was that it would not score well against the promotion of competition criterion. However, Oftel considered that it would encourage network access and interoperability, would be in the consumer interest in the short term (but less so in the medium-to-long term) and that it would offer certainty and practicability. Oftel considered that Option C would rate well against the consumer interest and certainty criteria, and reasonably well against the practicability criterion.

2.113 Oftel asked stakeholders for comments on Option C and whether they agreed with Oftel’s initial assessment.

Network operator responses

2.114 Network operators in general were strongly supportive of Option C. Their responses noted that this solution would be easy to implement. In the case of mobile networks, it would be easier to make calls to the legacy DQ numbers free-to-caller under Option C than under some other options because under Option C calls to the legacy DQ numbers would be entirely on-network. Network operators also noted that consumers would be provided directly with a specific 118 number to dial which would always be the same and that it would be reasonable to expect network operators to cover the cost of provision of the network message. The risk of non-adoption was felt to be minimised because of the benefits available to network operators. Several network operators argued that when the consumer dials a legacy DQ number, the consumer is expecting to receive an operator’s DQ service, and therefore it is reasonable that the consumer is provided with the network operator’s 118 number. It was noted that there would be no potential damage to the network operator’s brand under this option, and no problems with inappropriate international 118 DQ numbers being given out.

2.115 Two respondents agreed with Oftel’s view that this option would undermine competition, although at least one other network operator argued that the impact on competition might not be as severe as Oftel’s initial assessment. This was because the network message would advise that alternative DQ services were available. Damage to competition would also be limited because (it was argued by one network operator) independent DQ service providers in general have larger marketing budgets for DQ services than network operators, and DQ service providers would be able therefore to use traditional marketing channels more effectively than network operators. Allowing network operators to use the legacy DQ numbers to promote their own 118 services would encourage a diverse range of DQ services (ie those from both independent service providers and network operators) to be successful in the market. One network operator considered that Option C would be the equivalent to BT putting its 118 code on the cover of its Phone Books. In a couple of responses, network operators offered to provide a freephone number advising of alternative services on the message as well on normal commercial terms. One network operator noted that premium rate services providers have to use traditional marketing channels, and the same should apply to independent DQ service providers.

2.116 One network operator considered that Option C was the only option that was consistent with what it saw as the flexibility available to non-SMP operators, who "effectively own their 192 number" and who have no dominance to abuse. In this operator’s view, Option C would allow network operators to come to commercial arrangements with DQ service providers that would include network messaging provisions. This operator stated that Oftel’s concerns about promotion of competition were unfounded given that non-SMP operators have the right to negotiate messaging facilities with service providers. This operator undertook to give any 118 numbers accessible from its network equal status in any information given to consumers when dialling legacy DQ numbers.

DQ service provider responses

2.117 All independent DQ service providers who responded to this question considered Option C unacceptable because in their view it does not promote competition and undermines Oftel’s decision to liberalise the DQ market. It would confuse consumers by mentioning that alternative DQ services existed, but providing only the network operator’s own 118 number. Additionally, several felt that this option would not fulfil the non-discrimination test for modifying the General Conditions as set out in Clause 44 of the Communications Bill because it would give network operators an advantage. Several DQ service providers noted that if Option C were chosen, they would require access to the network announcements themselves, and if this were denied by network operators, this would lead to complaints to Oftel and the courts that would introduce significant uncertainty and delays. One service provider considered that Option C would discourage the provision of network access and interoperability, because operators without any-to-any obligations would have a further incentive not to open access to competing 118 numbers, as only network operators’ own 118 numbers would be announced, and consumer pressure to provide access to competing services would be diminished.

Consumer group and independent responses

2.118 A number of consumer responses contained favourable views of this option, as consumers will receive a 118 number directly, and it is likely to be the same 118 number on each occasion the consumer hears the message. One respondent did not accept Oftel’s initial view that a disadvantage of this option would be lower incentives on consumers to change their dialling habits. Some concern was expressed that this 118 number would not necessarily be the cheapest, and there would be some detriment to consumers from not being presented with a choice. Two respondents argued that consumers dialling 192 will expect to get the network operator’s service, and that Option C fulfils this expectation.

Other regulators’ responses

2.119 ICSTIS considered that this option would not stimulate effective competition, based on the evidence from other number changes that show that consumers do not change their dialling habits until forced to do so. ICSTIS questioned therefore how Oftel could assert that this option would contribute to the goal of effective DQ service competition (paragraph 3.33 of the Consultation Document).

Oftel analysis and conclusions

Consumer interest

2.120 It is not correct in Oftel’s view to argue that consumers dialling 192 are somehow expecting explicitly to receive the network operator’s DQ service. Nor is it a valid argument that because consumers have previously by default been using their network operator’s DQ service, they should continue to do so. Oftel has explained its position on both these issues at paragraphs 2.98 and 2.99 above.

2.121 In assessing the degree to which Option C is in the consumer interest, Oftel acknowledges that this option would provide consumers directly with a specific 118 number, which would be likely to be the same on all network messages on a particular network. However, whilst the direct provision of a 118 number helps minimise consumer confusion, Oftel no longer considers that it is necessarily less confusing for consumers if the same 118 number is given out on every network message on the legacy DQ numbers for the reasons set out a paragraph 2.94.

2.122 Some consumer respondents did express concern that consumers would be given no choice under Option C, and may not be given the cheapest 118 number. Oftel notes that to an extent, this is a feature of Options B, C, D and E, as it is proposed that under any of these options, only one 118 number is given out at any one time. Under Options B, D and E, it is proposed to give out only one 118 at a time because of the practical difficulties and cost implications of providing longer lists of 118 numbers from which the consumer would then be able to make a choice.

2.123 One consumer response disagreed with Oftel’s initial view that a disadvantage of this option would be lower incentives on consumers to change their dialling habits. Oftel considers that Option C does create lower incentives on consumers to change their dialling habits than Options A and B because the consumer is put to less immediate inconvenience under Option C, and so may continue to rely on dialling 192. Oftel considers that this is important, because changes in consumer dialling behaviour in a managed way is one of the main justifications for incurring the expense of a period of network messaging on the legacy DQ numbers in the first place. Oftel nevertheless considers that Option C scores about as well against the consumer interest criterion as Options D and E, and better than Options A and B(iii).

Promotion of competition

2.124 Many network operators suggested that DQ service providers should use traditional marketing channels, rather than relying on the legacy network messages to promote their services. Oftel does not consider that this is a realistic or fair suggestion for the reasons already set out at paragraph 2.103 above.

2.125 The analogy drawn by one respondent between the marketing of DQ services and the marketing of premium rate services is not in Oftel’s view valid. There has never been a historical default telephone number for premium rate services (unlike 192 and 153 for DQ services) and therefore the question of the promotional benefits of network messages on legacy PRS numbers has never arisen.

2.126 Oftel is not persuaded by the argument that network operators do not have large marketing budgets like independent DQ service providers, and therefore network operators should be allowed to capitalise on their existing relationships with customers to promote their own new 118 services on the legacy DQ numbers. The reasons for Oftel’s view are set out at paragraph 2.102.

2.127 The Director notes the argument that there is a parallel between Option C and BT advertising its 118500 number on the front cover of the BT Phone Book. The Director is currently investigating a complaint that BT's practice of placing its 118 number on the cover of the BT Phone Book is anti-competitive. In the course of this investigation, BT has agreed to give the Director an undertaking to cease the rollout of phone books with these covers until the full investigation is complete. The Director therefore considers that this argument is not relevant in support of Option C.

2.128 Despite the views of one respondent, non-SMP operators do not ‘own’ their 192 numbers and are not free to commercially negotiate with service providers about the designation of telephone numbers from the UK National Telephone Numbering Scheme. The designation and use of such numbers is governed by the Numbering Arrangements Condition in all operators’ licences and in the future will be governed by the Numbering General Condition of Entitlement, regardless of SMP status.

2.129 Some DQ service providers considered that Option C would not fulfil the non-discrimination test for modifying the General Conditions as set out in Clause 44 of the Communications Bill because it would give network operators an advantage. Oftel notes that the test in Clause 44 is whether the measure is ‘unduly discriminatory’. The word ‘unduly’ makes it clear that not all discrimination is unlawful, if it is objectively justified (for example to achieve over-riding policy objectives). It would be up to Oftel to decide whether any difference in outcome as a result of implementing Option C (if that is what Oftel wished to do) could be objectively justified in this manner.

2.130 Oftel continues to be of the view that Option C will not promote competition in the provision of the new 118 DQ services to any appreciable extent and would be likely to significantly undermine Oftel’s decision to liberalise the DQ market, a view shared by all independent DQ service providers (and some network operators) who responded to Oftel’s consultation. Announcing that other services are available or providing a freephone number as well (as suggested by some respondents) would not be sufficient to offset the harm to competition clearly foreseen by Oftel.

2.131 Evidence from other European countries provides circumstantial evidence that if an approach similar to Option C is adopted, incumbent service providers retain a large market share after liberalisation at least in part because of this decision. One respondent queried why Oftel had stated at paragraph 3.33 of the Consultation Document that this option would contribute to the goal of effective DQ service competition. Oftel notes that this paragraph related to whether Option C would meet the legal tests set out in Clause 44 of the Communications Bill for modifications to the General Conditions. Oftel was merely noting that, to the extent that Option C would allow the legacy DQ numbers to become unavailable for DQ services, it would contribute broadly to the development of DQ service competition and therefore the consequential change to the General Conditions would be proportionate. Oftel was not commenting in detail at that stage about the relative degree to which Option C would promote competition.

Network access and interoperability

2.132 Oftel continues to be of the view that Option C would encourage network access and interoperability, at least in relation to the legacy DQ numbers themselves. This view is borne out by the strong support for Option C from network operators. The support from network operators indicates that despite network operators incurring costs to provide a network message, because they will receive major benefits they have a good incentive to adopt the legacy DQ numbers. The analysis of Option C against Oftel’s six principles of cost recovery at Annex E indicates that Option C performs better than the other options against the six principles, although as discussed in this Annex, Oftel has given greater weight to the other criteria when assessing the options overall.

2.133 Oftel is not particularly persuaded by the argument that a further benefit of Option C to network operators is that there is no damage to the network operator’s brand. This is because Oftel considers that the argument that there will be damage to network operators’ brands under the other options is not strong for the reasons set out at paragraph 2.105 above.

2.134 One service provider considered that Option C would discourage the provision of network access and interoperability, because operators without any-to-any obligations would have a further incentive not to open access to competing 118 numbers, as only network operators’ own 118 numbers would be announced, and consumer pressure to provide access to competing services would be diminished. Oftel considers that the impact of this option on access to the 118 numbers themselves is a secondary consideration to its impact on access to the legacy DQ numbers, where Option C clearly promotes access and interoperability. In Oftel’s view, network operators without any-to-any obligations will decide whether or not to open access to 118 numbers for much broader reasons (related to competition and the UK interconnection regime) than the message that is or is not played on the legacy DQ numbers.

Practicability

2.135 Oftel continues to be of the view that Option C is practicable, and that it would be easy and fast to implement. One mobile network operator who responded pointed out that it would be easier for it to make an on-network message free-to-caller rather than an off-network message, as envisaged under some other options considered. One respondent noted that the issue identified in the Consultation Document relating to international 118 DQ numbers that do not cover a comprehensive range of countries would not arise with this option. Oftel does not consider that this argument is a particularly strong argument in favour of the practicability of this option over and above other options because Oftel is now satisfied (as explained elsewhere in this Statement) that this issue can be adequately addressed for the other options considered as well.

Certainty

2.136 In light of responses to the Consultation Document, Oftel no longer considers that Option C offers a particularly high degree of certainty. Several DQ service providers have clearly stated their requirement to have access to network operators’ announcements if Option C were implemented. These respondents have also stated that if network operators declined such requests, further regulatory and legal disputes would almost certainly arise. There appears to Oftel to be significant uncertainty and risk of delay to the end of parallel running associated with this option as a result.

Summary

2.137 Oftel’s assessment of Option C against the established criteria may therefore be summarised as follows:

Option D

Summary of Oftel’s proposals in the Consultation Document

2.138 Under Option D, the legacy DQ codes remain Type A Access Codes. However, the designation of these numbers in the Annex to the General Conditions of Entitlement would change. If a network operator were to adopt the legacy DQ numbers, it would be obliged (by its Numbering General Condition of Entitlement) to use the numbers for a message (provided by the network operator) that states that the number no longer connects to DQ services, provides one 118 number selected at random from a list approved by Oftel, and advises that other 118 numbers are also available.

2.139 For the reasons set out in the Consultation Document, Oftel’s initial assessment of Option D was that it would score well against the criterion for promoting competition, and reasonably well against the criterion for consumer interest. Oftel considered that Option D might not encourage the provision of network access and interoperability. Oftel’s initial view was that Option D would also not score well against the practicability or certainty criteria.

2.140 In particular, Oftel asked stakeholders for comments on whether it was technically feasible to configure high-volume call announcement platforms in the way envisaged under Option D and whether they agreed with Oftel’s initial assessment.

Network operator responses

2.141 Network operators considered that consumers might be confused if a different 118 number was provided on each occasion a consumer dialled 192. Also it was argued that consumers might not be clear who was responsible for the 118 service in the event of a complaint.

2.142 Several network operators considered that Option D was an effective solution as it promoted competition.

2.143 Some network operators felt that consumers might assume that the network operator endorsed the 118 service, and there might be resulting customer services issues such as additional queries and complaints for the network operator. Several network operators expressed concern about mechanisms (if any) for network operators to recover their costs in providing the network message under Option D (which could be significant), and noted that it was unfair and heavy handed (and increased the risk of non-adoption) to expect network operators to cover the costs without the exclusive promotional benefits. The risk of free-riding was felt to be real, and not requiring beneficiaries (namely DQ service providers) to contribute to the costs would violate the principle of ‘cost benefit apportionment’. It was suggested that only DQ service providers who contributed to the costs of the network message be permitted to promote their 118 services on the network message.

2.144 One network operator noted that they were unaware if they would be able to provide a technical solution to support Option D in the time available, as their existing high volume network messaging platforms were not designed to select messages at random on a per-call basis from a pre-agreed list. Several other network operators felt that Option D would be technically and administratively complex (one stating that long-term unspecified developments would be required in its network) however a different network operator stated that Option D should be technically feasible. One network operator stated that any requirement to provide transit to such a network message would need to be clarified.

DQ service provider responses

2.145 Several DQ service providers disagreed with Oftel’s initial assessment that it is better for consumers to always hear the same 118 number on any network announcement. Instead it was suggested that being made aware of alternative 118 services would be more beneficial to consumers. It was suggested that consumers might change their dialling behaviour more quickly than with previous number changes due to the incentive to do so to access lower cost services and innovative services. It was noted that network operators’ concerns about responsibility for the 118 services would be made clear by the ICSTIS requirements, and that in any case, this was a problem common to Options B and E also, not just Option D.

2.146 Several DQ service providers acknowledged the risk of free-riding and the associated detriment to consumers and competition. However another DQ service provider felt the risk of free-riding was overstated, and would be outweighed by the benefits to competition. It was suggested that free-riding would not be attractive due to the costs of market entry, and could be prevented by Oftel requiring evidence of long term commitment to the market such as a call centre lease.

2.147 One DQ service provider suggested that this option would be desirable if at least BT and the mobile operators could be compelled to adopt the legacy DQ numbers. Another DQ service provider considered that network operators would have some incentive to adopt the legacy DQ numbers under Option D as they would be able to promote their own 118 numbers on the network message themselves. This respondent felt there would be greater harm to network access and interoperability by allowing network operators only to announce their own 118 DQ services (eg under Option C) as this would run the risk of putting competing DQ service providers out of the market. This respondent also considered that it would be reasonable and appropriate for network operators to charge DQ service providers for the provision of this service.

2.148 The practicalities of allocation of the network messages between DQ service providers was raised, including the treatment of DQ service providers with multiple 118 numbers. One respondent noted that Option D should be technically feasible, because the response of the MoU Group to the Consultation Document demonstrated that suitable high volume network messaging platforms did exist.

2.149 It was suggested by one respondent that whilst this solution would be a good one, Option E would have the advantage that Oftel would not need to get involved.

Consumer group and independent responses

2.150 Consumer representatives in general considered this option to be similar to Options C and E from the consumer’s perspective. It was noted that Option D would promote competition, but might cause some consumer confusion due to a different 118 number being provided on each call to a legacy DQ number. The implementation complexities were also noted.

Other regulators’ responses

2.151 ICSTIS noted the competition benefits of this option but shared Oftel’s concerns about the risk of free-riding. ICSTIS also accepted that this option would not be as effective at raising consumer awareness as having the same 118 number announced all the time. ICSTIS noted the need for compliance with the ICSTIS Code of Practice under this option, as specific 118 numbers would be provided.

Oftel analysis and conclusions

Consumer interest

2.152 In relation to consumer interest, Oftel continues to believe that Option D scores well against the consumer interest criterion, as (in common with Options C and E) consumers are provided with at least one appropriate 118 DQ number to dial directly.

2.153 Oftel no longer considers that it will be a significant disadvantage to consumers if they were to hear a different 118 number on each call to 192 for the reasons set out at paragraph 2.94. Consumers will have incentives to change their dialling behaviour more quickly than with other number changes such as access to lower cost and innovative services.

2.154 Oftel considers that the ICSTIS requirement that the identity of the service provider must be made clear in any promotion of 118 number will mean that the responsibility for the 118 DQ service is made as clear as possible to the consumer in the event of a complaint.

2.155 In light of the above, Oftel ranks Option D as highly under the consumer interest criterion as Options C and E.

Promotion of competition

2.156 Oftel considers that Option D scores well under this criterion as all DQ service providers with active 118 numbers would be able to have their 118 number or numbers promoted on the legacy DQ numbers. However, Oftel does not think that Option D will promote sustainable competition to the same extent as Options A, B(iii) and E due to the risk of free-riding which arises because all DQ service providers are able to benefit from the network message under Option D without having to cover the costs of doing so. Oftel notes that some respondents suggested that mechanisms could be put in place to recover the costs of the network message from DQ service providers or to vet DQ service providers up front about their long-term commitment to the market to minimise the risk of free-riding and to encourage network operators to adopt the legacy DQ numbers. However Oftel considers that this would be likely to create disputes between network operators and DQ service providers about the appropriate cost items incurred and the appropriate charges for recovering these costs, or disputes between DQ service providers and Oftel about eligibility criteria. It is also doubtful in Oftel’s view whether Oftel would have the necessary power to undertake the envisaged vetting of DQ service providers. Disputes about cost recovery and eligibility would in Oftel’s view almost inevitably end up in complaints being brought to Oftel, generating significant uncertainty and risking delay in the end of the parallel running period. Oftel has therefore ranked Option D higher than Option C against this criterion, but lower than Options A, B(iii) and E.

Network access and interoperability

2.157 Oftel continues to have significant concerns about the degree to which Option D promotes network access and interoperability. Several network operators have responded that it is unfair and heavy handed to require network operators to cover all the costs of the network message without promotional benefits to them. Oftel is of the view that the risk of non-adoption of the legacy DQ numbers is significant because of this issue. As Oftel explained in the Consultation Document, it is not possible for Oftel to compel network operators without any-to-any obligations to adopt the legacy DQ numbers in the absence of a specific access obligation to do so. Under Option D, network operators have to bear greater costs than with any other option considered. The analysis of Option D against Oftel’s six principles of cost recovery presented at Annex E indicates that Option D scores poorly against the ‘distribution of benefits’ principle. In conclusion, Oftel considers that Option D scores worse against the network access and interoperability criterion than Options A, B(iii), C and E.

Practicability and certainty

2.158 Oftel continues to have concerns about the certainty and practicability of Option D. On the positive side, unlike Option E, under Option D the network message is provided on the network of all originating operators, minimising the complexities of interconnect arrangements. However some network operators have indicated that suitable network messaging platforms that can select a 118 number from a pre-agreed list on a per-call basis might be difficult to develop. Without Oftel vetting of DQ service providers’ call centre and interconnect capacities (which might in any case be beyond Oftel’s powers), it seems likely to Oftel that (as was the case in Norway) some DQ service providers will not be able to deal with the volume of DQ calls driven into their call centres as a result of the network message. On balance, Oftel considers that Option D scores better than Option E in terms of practicability and certainty, but not as well as Options A and B(iii). In relation to Option C, Oftel considers that Option D scores better in terms of certainty (because there is less risk of DQ service providers complaining to Oftel or the courts) but not as well in terms of practicability (because Option D is more demanding of the network messaging platform).

Summary

2.159 Oftel’s assessment of Option D against the established criteria may therefore be summarised as follows:

Option E

Summary of Oftel’s proposals in the Consultation Document

2.160 Under Option E the legacy DQ codes would change from Type A Access Codes to Type B Access Codes. This would mean that the legacy DQ codes would have to be removed from the Annex to the General Conditions of Entitlement (which contains numbers such as Type A Access Codes available for adoption without allocation), and added to the Plan (which contains numbers such as Type B Access Codes available for allocation).

2.161 Each legacy DQ number would be allocated to a DQ network messaging provider by the Director in accordance with the provisions of General Conditions 20.8 and 20.9 for the purpose of a free-to-caller network message advising that DQ numbers have changed and providing at least one appropriate 118 number for access to a DQ service. All DQ service providers would need to be given the opportunity to promote their 118 numbers on this network message on reasonable, non-discriminatory and transparent terms. Oftel proposed in the Consultation Document that (in the event Option E was chosen) both legacy DQ numbers (192 and 153) be allocated to the group open to all DQ service providers that had been set up under a Memorandum of Understanding (the MoU Group). Oftel noted that before choosing Option E, Oftel would need to be completely persuaded of the technical and commercial viability of the proposed network messaging solution. The network messaging provider would also need to demonstrate to Oftel that it was subject to a legally binding commitment to fully fund the network messaging service in accordance with the timescales and objectives set out by Oftel.

2.162 For the reasons set out in the Consultation Document, Oftel’s initial assessment of Option E was that it would score well against the promotion of competition criterion and reasonably well against the consumer interest criterion. However, Oftel considered that it would not fully encourage network access and interoperability and that there might be some problems with practicability and certainty as described in the Consultation Document.

2.163 Oftel asked stakeholders for comments on Option E and whether they agreed with Oftel’s initial assessment. Oftel also asked stakeholders if they agreed that if Option E were chosen, then the legacy DQ numbers should be allocated to the MoU Group. If not, Oftel asked to whom stakeholders considered the legacy numbers should be allocated.

Network operator responses

2.164 Network operators expressed concerns about the practicability and efficiency of this option (particularly given the proposed six-month lifespan of the service). Network operators were not clear about the mechanism for them to recover their costs of originating calls to an independent network message (both set-up costs and per call costs). Some doubted that a high volume call announcement platform could be put in place in the required timescale. One mobile network operator noted that making an off-network call free-to-caller would require significant development and would be particularly difficult for that network operator’s first generation prepay customers. Several noted that originating operators would need to have contractual agreements in place with the terminating service provider before this solution could proceed and that they had no such agreements in place. One group of network operators asked whether the costs of additional calls to their customer services functions as a result of this network message would be recoverable. BT noted that it was not considering developing a product which would allow other originating network operators to pass a call to 192 to BT for transit – originating operators would need to translate 192 to the required geographic numbers first.

2.165 The commercial viability of an independent network messaging solution was also called into question. It was argued that the mechanism for sharing the network messages between DQ service providers in a fair manner was not clear. Due to the amount of marketing activity, it was felt that any assumptions made by the MoU Group about call volumes to the legacy DQ numbers (and consequential cost assumptions) might not be valid. Concern was expressed that smaller DQ service providers choosing to promote their 118 numbers on the message might not be able to cope with the volume of calls generated to their services. If the MoU Group discontinued its network message as a result, then consumers would receive ‘number unobtainable’. Consumers might be confused as a result of obtaining a different 118 number on each call to the legacy DQ numbers, and responsibility for the service would not be clear. If only one network message was played to all callers regardless of originating line type, then pricing information and service availability might not be correct and 118 numbers might be given to users of public payphones that are not actually available from payphones.

2.166 One network operator considered there was a risk of damaging competition because only DQ service providers with large marketing budgets would be able to purchase space on the network messages. This operator also did not consider the legacy DQ numbers should be allocated to the MoU Group, but did not give reasons or alternatives.

2.167 Another network operator felt that Option E was worthy of further consideration as to technical and commercial viability because of the benefits to competition, and the fact that consumers would be provided with a 118 number directly. This operator also considered that the risk of network operators not adopting the legacy DQ numbers under this option was high and that there was a risk of damage to the network operator’s brand due to the consumer receiving a number for a 118 service that was more expensive or of lower quality than the network operator’s DQ service.

DQ service provider responses

2.168 Many DQ service providers considered that Option E was the best option for the legacy DQ numbers. Option E was considered to promote competition and to be in the interests of consumers, as a suitable 118 number would be provided directly without the consumer having to redial. It was noted that the issue identified in the Consultation Document about international DQ services that did not cover a comprehensive range of countries could be dealt with by permitting only 118 services that cover a full range of countries to be announced on the 153 message. The fact that a different 118 number is provided each time was not considered a disadvantage to consumers, but instead was considered to promote consumer choice.

2.169 Option E was also considered to promote network access and interoperability, as this option could be more financially attractive to network operators than using freephone arrangements, because additional payments could be made to originating network operators by the network messaging provider. It was felt that it was unlikely that network operators would choose not to adopt the legacy DQ numbers, as this option provides a valuable information services to the network operator’s customers at no charge to the network operator. It was noted that in any event, the fact that some network operators without any-to-any obligations were able not to adopt the 118 numbers themselves had not stopped Oftel taking a decision in 2001 to liberalise the market.

2.170 The uncertainty due to the risk of legal challenge by DQ service providers as regards allocation of network messages under Option C (and possibly Option D) was felt to be avoided by Option E.

2.171 Oftel received a very detailed response from the MoU Group, informing Oftel of the creation of a not-for-profit company limited by guarantee called ‘Directory Affairs Ltd’ (DAL). It was proposed that DAL would be the legal entity to which Oftel could allocate the legacy DQ numbers, and that DAL would be responsible for provision of the independent network message (and the allocation of network messages to DQ service providers) as envisaged by Option E. It was envisaged that a 118 number appropriate to the caller’s originating network would always be given out by asking originating operators to translate 192 (or 153) into an 0800 number specific to the originating operator, which could then be recognised by the network messaging provider. Detailed information was provided to Oftel about the structure of DAL, the principles for allocation of network messages between DQ service providers and the contractual arrangements between DAL and a network messaging supplier. The technical capabilities of the network messaging supplier were outlined, and the availability of sufficient interconnect capacity between the supplier’s hosting network operator and all major network operators was confirmed. The response noted that both technical and commercial planning had been carried out on the basis of experience about call volumes gained from a similar transition to new DQ services in the Republic of Ireland, alongside appropriate information from the Big Number in the UK. The MoU Group response explained that four DQ service providers had signed an agreement to act as ‘funders of last resort’ for DAL, which means that these service providers will purchase any network announcements remaining unsold after all DQ service providers have had an opportunity to purchase announcements. The response confirmed that DAL would be prepared to commercially negotiate additional fees for call origination with network operators bi-laterally if freephone arrangements were not considered by network operators to be adequate. In this response and in other responses from DQ service providers, the view was taken that all Oftel’s concerns about technical and commercial viability and certainty (as set out in the Consultation Document) had been addressed.

Consumer group and independent responses

2.172 One consumer group response noted that it was not clear if the caller would receive a single 118 number chosen at random or a listing of 118 numbers. The respondent noted that consumers would prefer a shorter message. In general, this option was felt to be similar from a consumer perspective to Options C and D.

Other regulators’ responses

2.173 ICSTIS noted the competitive benefits of Option E, and the fact that this would have to be traded off against the fact that (in ICSTIS’ view) this option would not be as effective in raising consumer awareness as having the same 118 number announced all the time. ICSTIS pointed out that this option would be superior to Option B for minimising consumer confusion because a caller would only have to make two calls to obtain a DQ service (rather than three calls as with Option B). ICSTIS noted the need for compliance with the ICSTIS Code of Practice under this option, as specific 118 numbers would be provided.

Oftel analysis and conclusions

Consumer interest

2.174 In the Consultation Document, Oftel identified a potential issue in relation to international DQ services offered by certain DQ service providers that do not cover a comprehensive range of countries. Oftel notes that the majority of international 118 DQ services that have been launched do in fact cover a comprehensive range of countries. Oftel therefore considers that this issue could reasonably be dealt with by permitting only such 118 services to be announced or referred to on the 153 message, as suggested by at least one respondent. The proposed designation of 153 in the Consultation Document under options B, C, D and E refers to the provision of ‘at least one appropriate 118 number’. In the case of international DQ services, Oftel will interpret this as meaning a 118 number which covers a comparable range of countries to the 153 services currently provided by network operators.

2.175 As regards consumer interest, Oftel considers that in common with Options C and D, Option E is consumer-friendly in that a suitable 118 number is provided to callers without the caller having to redial. Oftel no longer considers that it is a disadvantage to consumers if a different 118 number is given out on every network message on the legacy DQ numbers for the reasons set out in paragraph 2.94 above. Oftel therefore considers that Option E rates as well against the consumer interest criterion as Options C and D.

Promotion of competition

2.176 Oftel considers that Option E would promote competition because all DQ service providers (whether they happened to be network operators or not) would be able to promote their 118 DQ numbers on the legacy numbers network message, which will undoubtedly be a particularly effective and probably unmatchable marketing channel. One network operator considered there was a risk of damaging competition because only DQ service providers with large marketing budgets would be able to purchase space on the network messages. Oftel does not see any inherent difficulty with this for the reasons set out at paragraph 2.102.

Network access and interoperability

2.177 In relation to network access and interoperability, one operator considered the risk of non-adoption of the legacy DQ numbers to be high. This is because (it was argued) there would be fewer benefits for network operators in connecting callers to an independent messaging service, and the risk of damage to the network operator’s brand due to lack of clarity for the consumer about who was responsible for the network messaging service. Oftel does not find the argument about brand damage particularly persuasive for the reasons set out at paragraph 2.105.

2.178 However, Oftel acknowledges that it is a matter for network operators without any-to-any obligations to decide whether or not to adopt the legacy DQ numbers after the end of parallel running. Oftel notes that many network operators have expressed concern about possible consumer confusion, and the cost of additional calls to their customer service functions as a result.

2.179 One group of network operators asked whether the costs of additional calls to their customer services functions as a result of this network message would be recoverable. Oftel acknowledges that Option E may result in costs to network operators from dealing with additional calls to customer services, but considers that this may be the case for all options considered in the Consultation Document. Oftel does not propose that there be a specific mechanism for network operators to recover the costs of these calls. Oftel has considered these costs as part of Oftel’s analysis of how well the proposed cost recovery arrangements under each option accord with the ideal cost recovery arrangements as suggested by Oftel’s six principles. However, Oftel does not consider that cost recovery considerations alone should dictate the option to be implemented.

2.180 Oftel considers that under Option E, there will be incentives on network operators to adopt the legacy DQ numbers to minimise consumer confusion and calls to customer services. These incentives will be stronger than in the case of Option D because under Option E, network operators will not have to cover the cost of the network message (and the network messaging provider has offered to make additional payments to originating network operators if freephone arrangements are not considered sufficient by network operators).

2.181 Oftel acknowledges that the incentives for adoption under Option E may not be quite as strong as under Option C (which allows network operators to exclusively promote their own 118 services on the network message). The analysis at Annex E shows that Option E rates about as well as Options A and C against the ‘distribution of benefits’ principle (but rates higher than Options B(iii) and D against this principle). Option E also does not rate as highly against the ‘cost minimisation’ principle as the other four options considered.

Practicability

2.182 In relation to practicability, many of Oftel’s initial issues have been addressed during the course of the consultation, particularly as a result of the creation of Directory Affairs Ltd (DAL). According to information currently available to Oftel (largely provided by DAL), Oftel no longer considers that the following issues are significant barriers to the practicability of Option E:

• Technical arrangements for the provision of appropriate numbers to consumers depending on originating network and line type of caller (including pay phone users and callers from Wales). DAL has suggested that this can be achieved by means of a number translation process;
• provision of appropriate 118 numbers to consumers dialling 153 for an international DQ service, given that 118 international DQ services need not cover every single country outside the UK. As set out above, Oftel intends to address this problem by interpreting ‘appropriate’ as meaning a 118 number which covers a comparable range of countries to the 192 services currently provided by network operators.
• capability and capacity of a suitable network messaging platform, and interconnect capacity for the hosting network operator. DAL has identified and contracted with a provider of a network messaging platform with a strong track record of dealing with high volume calls to recorded announcements;
• mechanisms for sharing network messages between DQ service providers in a fair manner. DAL has proposed message allocation rules that appear to Oftel to be reasonable, non-discriminatory and transparent on the basis of information currently available.

2.183 Oftel has discussed its outstanding issues about the practicability of Option E with DAL, and DAL has been given an opportunity to provide additional information to Oftel. However, DAL has not been able to adequately address all of Oftel’s concerns, including for example payments to network operators for call origination. The innovative nature of the number translation envisaged (from a Type A access code to a non-geographic number) would be likely to require feasibility studies and possibly development work by network operators. As a result, it seems unlikely in Oftel’s view that the normal freephone origination charges would be acceptable to originating network operators. These concerns were echoed in network operators’ responses to the Consultation Document. In BT’s response, BT noted that it had no plans to develop a product to allow originating network operators to transit untranslated 192 traffic via the BT network. DAL was unable to provide any evidence of final agreements on call origination charges with originating network operators, and Oftel particularly noted the evidence that network operators had not been formally approached about feasibility. Further, the response from one mobile network operator indicated that making off-network calls free-to-caller would require significant development, particularly for first generation prepay customers. Oftel has no reason to believe that such difficulties are not genuine, and considers that it is of fundamental importance that the network message on the legacy DQ numbers should be free, even if a follow-up call to a freephone number is not free. Lastly, the lack of recourse for Oftel in the event that DAL withdraws from the provision of the network message also causes uncertainty.

2.184 Therefore Oftel continues to be of the view that Option E does not rate well against the practicability criterion.

Certainty

2.185 Oftel considers that Option E would minimise the risk of legal challenge by DQ service providers as regards allocation of network messages, unlike Option C. However, there would be increased uncertainty caused by the need for agreements to be reached between originating network operators and the network message provider regarding inter alia the appropriate payments for call origination. Given the likely complexity of such negotiations, Oftel believes that this would seriously jeopardise the August 2003 end-date for parallel running. Therefore Oftel remains of the view that Option E does not perform well against the certainty criterion.

Summary

2.186 Oftel’s assessment of Option E against the established criteria may therefore be summarised as follows:

Oftel’s initial view as to the preferred option

Summary of Oftel’s proposals in the Consultation Document

2.187 In the Consultation Document, Oftel set out its initial view that Option B was likely to be the best of the options considered for the future use of the legacy DQ numbers. This was because Oftel considered that it scored well against almost all the criteria proposed by Oftel ie promotion of competition, consumer interest, practicability and certainty for the reasons set out in the Consultation Document. It was noted that Oftel would take a view on whether this option encouraged the provision of network access and service interoperability in the light of responses to this consultation, although Oftel’s initial assessment did not show particular problems in this area.

2.188 In contrast to Option B, Oftel’s initial view was that each of the other options considered in the Consultation Document rated very poorly against at least one of the proposed criteria.

2.189 Oftel asked if stakeholders agreed with Oftel’s initial view that Option B was the best option, and if not, which other option they considered to be the best option.

Network operator responses

2.190 In this section, network operators’ responses are summarised at a top level only. The detail of their responses can be found earlier in this Chapter under the separate assessments of each option.

2.191 Network operators pointed out the detriment to consumers of having to take an additional step to obtain a 118 DQ number. It was claimed that the impact of DQ service provider marketing was already showing that the competitive impact of the network message was less likely to be significant. Option C was generally considered by most network operators (but not all) to be better, and cheaper and easier to implement. Several suggested that Option D or E be more fully explored.

DQ service provider responses

2.192 In this section, DQ service providers’ responses are summarised at a top level only. The detail of their responses can be found earlier in this Chapter under the separate assessments of each option.

2.193 DQ service providers in general favoured Option E, and considered a modified version of Option B (without the network operators’ customer service number) to be an acceptable second choice (or in some cases Option D).

Consumer group and independent responses

2.194 In this section, consumer responses are summarised at a top level only. The detail of their responses can be found earlier in this Chapter under the separate assessments of each option.

2.195 Consumer representatives opposed Option B because it would not provide consumers with a 118 number directly, but would require them to take additional steps. Consumer representatives were of the view that the message should at least provide one 118 number and then it could perhaps provide a freephone number for an impartial listing of other 118 numbers to address competition concerns. One respondent suggested that callers could be directed to a web site or the phone book.

Other regulators’ responses

2.196 ICSTIS pointed out the possible consumer confusion if Option B were to be implemented, depending on exactly how the network message were to be set up. ICSTIS suggested that Oftel consider how Oftel could use its good offices to minimise this confusion and promote awareness of the DQ numbering change.

Oftel analysis and conclusions

2.197 Oftel’s analysis and conclusions on this question are set out in the next Chapter.

Other options proposed

2.198 In the Consultation Document, Oftel asked stakeholders whether there were any other options that Oftel should consider and how these options would rate against the proposed criteria.

Network operator responses

2.199 One network operator suggested that Option C be modified to allow reference to a listing of other 118 services on the network operator’s website. This was argued to address Oftel’s competition concerns whilst minimising costs to consumers and network operators.

2.200 Another network operator suggested that Option D be modified to allow consumers to access more than one 118 number if they were not happy with the first number obtained. This respondent suggested that Oftel should have conducted consumer research into the preferred option.

DQ service provider responses

2.201 DQ service providers did not propose any specific alternatives in response to this question in the Consultation Document.

Consumer group and independent responses

2.202 Several consumer groups suggested that a ‘call steering’ message could be provided, whereby the message could invite users to press 1 for further details of the new services, 2 for the network operator’s service or 3 to reach a service at random. This was considered to be especially good for mobile users.

2.203 Another consumer group suggested that the message should advise that DQ services on 192 are no longer available, should provide a specific 118 number and a freephone number where consumer can obtain information about competitors’ services.

Other regulators’ responses

2.204 No further options were identified.

Oftel analysis and conclusions

2.205 Oftel notes that several respondents have suggested options for network messages on the legacy DQ numbers that are effectively hybrids of the options proposed in the Consultation Document. As such, Oftel considers that the analysis of Options A-E as set out earlier in this Chapter broadly applies to the additional options proposed. In some cases (such as the suggestion that a freephone number be added after the announcement of the network operator’s own 118 number under Option C) the modification would go some way towards improving the assessment of the option under the established criteria, but would clearly not be cause for a radical reassessment. The impact on competition of such a message would be very similar to Option C on its own because the network operator’s own 118 number would still be the first thing that consumers would hear. Several other options (eg allowing consumers to access another 118 number under Option D or the use of call steering) would add additional complexity to the solution. In the case of the call steering proposal, Oftel considers that this would run the risk of complaints from DQ service providers about unfair prominence being given to the network operator’s 118 DQ number. Also, the option to connect to a service at random is unlikely to be technically feasible, as Oftel is not aware of a mechanism for changing the tariff in the middle of a call where the call originates and terminates on different networks.

Modifications to the text of the Annex to the General Conditions and the Plan

2.206 In the Consultation Document, Oftel asked stakeholders if they had any comments on the text of the proposed modifications to the Annex to the General Conditions and the Plan as set out in Annex A to the Consultation Document.

2.207 Most respondents did not have substantive comments on the text proposed by Oftel in the Consultation Document (as opposed to the actual options proposed). Some noted that the end date for network messages should be modified in light of previous comments about the network messaging period being too short.

2.208 One group of network operators considered that the text remain as currently consulted on by the DTI. These network operators were concerned that there would be an unspecified detrimental impact on the implementation of the General Conditions as a result of this consultation process. Oftel has addressed this point earlier in this Chapter.

2.209 One DQ service provider suggested that the text of Option B be modified to give a freephone number followed by a web address.

  Chapter 3

Oftel’s decision

Summary of Oftel’s conclusions

3.1 As set out in Chapter 2, Oftel has decided that the end of parallel running should be 24 August 2003, as proposed in Oftel’s Consultation Document. Oftel has also decided that the period of network messaging should be extended to 20 June 2004.

3.2 In relation to the criteria and the assessment of Options A-E against the criteria, Oftel’s conclusions are summarised in the following table. The details of Oftel’s analysis are presented in Chapter 2.

3.3 Option B(iii) scores better than Option A against the consumer interest and promotion of competition criteria (both of which are higher weighted criteria), and it scores the same as Option A against the practicability and certainty criteria. Overall therefore Option B(iii) scores better against the established criteria than Option A.

3.4 Option B(iii) performs more strongly overall against the three higher weighted criteria (consumer interest, promotion of competition and practicability) than Option C, as Option B(iii) scores two ‘highs’ and one ‘medium’, whereas Option C scores two ‘highs’ and one ‘low’. On the remaining criteria of network access and interoperability and certainty, Option B(iii) also performs more strongly than Option C, with one ‘high’ and one ‘medium’ whereas Option C has one ‘high’ and one ‘low’. Overall therefore Option B(iii) scores better against the established criteria than Option C.

3.5 Option B(iii) rates better that Option D in terms of promotion of competition and practicability (both higher weighted criteria), and it also rates better than Option D in terms of network access and interoperability and certainty. Overall therefore Option B(iii) scores better against the established criteria than Option D.

3.6 Option B(iii) rates as well as if not better than Option E on the promotion of competition, promotion of network access and interoperability, practicability and certainty criteria. Whilst Option E scores better on the consumer interest criterion than Option B(iii), overall Option B(iii) scores better against the established criteria than Option E.

3.7 Oftel therefore considers that Option B(iii) should be implemented.

3.8 Oftel acknowledges the possibility (highlighted by respondents to the Consultation Document) that Option B(iii) will cause consumer confusion and frustration because consumers will not receive a 118 number directly. Oftel will therefore be taking its own steps to promote consumer understanding of these changes, and will be working with the Industry to encourage it to do so as well. Oftel is reassured to a certain extent by the statistics gathered as part of Oftel's on-going programme of consumer awareness monitoring that by April 2003, 63% of residential consumers surveyed were aware of the changes to the arrangements for DQ services (see Annex D for further details, including the source of these statistics). Oftel does however acknowledge that there is a considerable distance still to go, particularly as at best only about 15% of DQ calls on for example BT’s network (at the time of writing) were to the new 118 DQ numbers, according to figures distributed by BT to the DQ Implementation Working Group.

3.9 However, in coming to a final decision, Oftel has had to balance the risk of some short term consumer confusion with the benefits to competition of implementing Option B(iii), and being able to do so in a timely and orderly manner. All DQ service providers will have an equal opportunity to promote their new 118 DQ services in a fair and equitable manner by means of the network messages accessed via the legacy DQ numbers. Despite the relative success of the marketing campaigns already undertaken by DQ service providers, the format of the messages on the legacy DQ numbers still represents a one-off marketing opportunity that would be likely to give a significant advantage to whichever DQ service provider is able to exploit this channel. The impact of the messages will be extremely high as they will be played to consumers at the precise instant the consumer is seeking a DQ service. It is unlikely that the impact of the messages could be replicated by traditional forms of marketing (eg billboards, TV, radio etc). Competition is already bringing benefits to consumers in terms of lower prices and innovative services, and Oftel considers that ensuring the unique promotional power of the messages on the legacy DQ numbers is used fairly is vital to ensure these benefits continue.

3.10 Oftel did consult on Options D and E, under which consumers would have been provided directly with a 118 number from a rotating list of appropriate services on an impartial basis. Oftel has come to the view that both Options D and E are impractical for the reasons set out above.

3.11 Oftel considers that the network message on the legacy DQ numbers will be a safety net, albeit a safety net that is particularly important to consumers who dial DQ services less frequently. Oftel considers that Option B(iii) will encourage consumers to modify their dialling behaviour, whilst still providing an impartial recourse for consumers who do not know or cannot recall a specific 118 DQ number.

Implementing Oftel’s decision

3.12 The required modifications to the Annex to the General Conditions of Entitlement to implement Option B(iii) are set out in Annex B. The text in Annex B largely mirrors the text proposed in the Consultation Document, with minor modifications to take account of Oftel’s decision that only one source of information should be provided (namely a freephone number) and the network message should run until 20 June 2004 rather than 22 February 2004.

3.13 Oftel continues to consider (as set out in the Consultation Document) that Option B(iii) meets the tests for modifying the General Conditions as set out in Clause 44 of the Communications Bill.

3.14 The modification to the Annex to the General Conditions can be objectively justified in that a change in the designation of the legacy DQ numbers is necessary to ensure that competition in DQ services develops effectively whilst also ensuring that consumers obtain some advice about where to obtain information about the new 118 DQ services. Option B(iii) scores best against the criteria that Oftel has established as a result of this consultation process.

3.15 The modification is non-discriminatory in that all undertakings must use the legacy DQ numbers for the same network message after 24 August 2003. All DQ service providers have an equal opportunity to have their 118 DQ number announced on the freephone number.

3.16 The modification is proportionate in that it contributes to the goals of effective DQ service competition and minimising consumer confusion without placing an undue burden on originating network operators. Whilst network operators will have to cover the cost of the network message on the legacy DQ numbers, DQ service providers wishing to promote their 118 DQ numbers will have to cover the costs of providing the freephone service. The extent to which this situation accords with Oftel’s principles of optimal cost recovery is discussed in Annex E.

3.17 The modification is transparent in that the precise nature of the modification and the intention of the modification are clear from the modified text in the Annex to the General Conditions and this Statement.

The next steps

3.18 Without fettering the Director General’s discretion in the event that he is called upon to investigate a complaint in the future or to intervene on his own initiative, Oftel nevertheless considers that it would be useful to set out some guidance as to the next steps for the Industry, in the light of Oftel’s decision to implement Option B(iii). This guidance is not intended to be exhaustive or overly prescriptive. Oftel considers that it is possible that further detailed issues (not currently foreseen) will arise in relation to the implementation of Option B(iii) that will require additional consideration by Oftel and the Industry.

3.19 Oftel notes that Option B(iii) refers to a freephone service only, and does not specify who should provide this freephone service. However, it is Oftel’s view that the service proposed by Directory Affairs Ltd (DAL) in the MoU Group’s response to the Consultation Document would be likely to be an appropriate service. Oftel strongly encourages network operators and DQ service providers to work co-operatively with DAL to enable the further development of DAL’s solution.

3.20 Oftel considers that there will be an incentive on network operators to work with DAL, as network operators will then avoid the management overhead cost of having to set up their own fair and impartial freephone service open to all 118 service providers. Network operators and DQ service providers could usefully take advantage of the considerable work DAL has already undertaken in the following areas:

• Setting up a not-for-profit company limited by guarantee to provide the freephone service;
• Development of rules for allocating network messages between participating 118 service providers;
• Establishing costs and mechanisms for DQ service providers to purchase network messages;
• Identification of and contracting with (subject to the outcome of this consultation process) a suitable supplier to provide the network messaging platform.

3.21 In any case, originating network operators will need to liase closely with the provider of the network messages on the legacy DQ numbers to ensure that only appropriate 118 DQ numbers are provided to consumers dialling from that network.

3.22 Oftel expects that DAL will now work with the established DQ Industry Groups to make the arrangements for DQ service providers to participate in DAL’s freephone service transparent, practicable and equitable, subject to the constraints of avoiding excessive complexity, management overhead and the need for further Oftel intervention.

3.23 Purely for the purposes of guiding subsequent discussions with the DQ Industry Group, Oftel considers that some suitable top-level milestones for the finalisation of the arrangements for the message to be provided on the legacy DQ numbers are as set out in the following table. There may of course be others.

  Annex A

List of respondents to Oftel’s March 2003 consultation

Annex B

Modifications to the Annex to the General Conditions of Entitlement

A.1 Annex to the General Conditions

SCHEDULE 1

  Annex C

Evidence from other European countries

C.1 Other European countries have opened DQ services up to competition over the last few years. For example, Germany, Norway, the Republic of Ireland, Austria, Sweden and Luxembourg have all liberalised DQ services and have attempted to achieve ‘numbering parity’. ‘Numbering parity’ means that all DQ providers use the same length of number, and any legacy DQ numbers used by the incumbent have been removed. Spain is currently in the process of doing so.

C.2 The approaches taken in these countries to the treatment of the legacy DQ numbers when they were no longer available for DQ services varied. In some countries (eg the Republic of Ireland), incumbents provided their own network messages on the legacy DQ numbers. In at least one country (Norway), a randomised network announcement of the new numbers was adopted.

C.3 Oftel has sought more details from the National Regulatory Authorities (NRAs) in these countries about the policies adopted in relation to the legacy DQ numbers when they were no longer available for DQ services, and the impact of these policies on consumers and competition. Only two NRAs provided market share data, and in one case, the information provided was confidential. A summary of the information received is set out below.

  Annex D

Consumer awareness statistics

Oftel's consumer research

D.1 These statistics come from Oftel’s quarterly market research into residential and business consumers’ use of fixed telecommunications services. Detailed reports of the findings of this research can be found on Oftel’s web site at www.oftel.gov.uk/publications/research/index.htm. Each report contains a chapter describing the awareness of changes to DQ services, from which the figures below are taken.

Annex E

Assessment of options against Oftel’s six principles of cost recovery

Introduction

E.1 Oftel developed six guiding principles for cost recovery in the context of number portability. The Monopolies and Mergers Commission (MMC) endorsed these principles in its report on geographic number portability in November 1995. Since then, Oftel has used the same principles in a number of other contexts (eg carrier pre-selection, local-loop unbundling, wholesale line rental) to help decide how costs should be recovered.

E.2 The six principles of cost recovery are:

• cost causation – costs should be recovered from those whose actions cause the costs to be incurred at the margin;
• distribution of benefits – costs should be recovered from the beneficiaries especially where there are externalities;
• effective competition – the mechanism for cost recovery should not undermine or weaken the pressures for effective competition;
• reciprocity – where services are provided reciprocally, charges should also be reciprocal;
• cost minimisation – the mechanism for cost recovery should ensure that there are strong incentives to minimise costs; and
• practicability – the mechanism for cost recovery needs to be practicable and relatively easy to implement.

E.3 When applying these principles, it is generally sound to start with, and where possible apply most weight to, cost causation on the grounds that economic efficiency is enhanced by requiring parties to pay for costs that they directly cause to be incurred. The other principles are then considered, to see the extent to which this starting point may require modification.

Application to legacy DQ numbers

E.4 The way in which costs are to be recovered under each of Options A to E was set out in the Consultation Document. Oftel did not consult on alternative means of cost recovery for each option. Instead, the premise under each option was that the parties incurring the costs would bear the costs, as there was no mechanism for Oftel to prescribe how the costs should otherwise be recovered. Oftel has, in the past, tended to use the six principles to guide the structure of cost recovery. However, in this case, Oftel has used in the six principles to assess the extent to which cost recovery under each option is in accordance with the principles, given that that there is no mechanism for Oftel to prescribe other arrangements for cost recovery.

E.5 The relevant costs that will be incurred following the selection of a future arrangement for the use of legacy DQ codes are listed in the table below Originating network operators (ONOs) are BT, Kingston Communications and the other direct fixed or mobile access operators (and indirect access operators where relevant).

Table E1 – The costs of providing network messages on the legacy DQ numbers under Oftel’s proposed options

E.6 Oftel considers that none of the above costs are likely to be particularly large in the context of the size and value of the UK’s DQ market (estimated to be worth about £280 million per annum). This suggests that any option appraisal should primarily be informed by the other criteria established by Oftel, rather than the precise means of cost recovery.

E.7 Each of Oftel’s principles of cost recovery is discussed in this context below.

Cost causation

E.8 The application of this principle to legacy DQ numbers is not altogether straightforward. What does seem clear is that any relevant costs will be incurred due to the need to provide some sort of network message on the legacy DQ numbers in general following the liberalisation of the market and the entry of new DQ service providers ie not using Option A. Some sort of network message is required because, following the end of the parallel running period, there is a need to give information to consumers by providing a (free of charge) service on the legacy DQ numbers advising consumers of the changes to DQ services. It could be argued that set-up costs are caused by a regulatory obligation flowing from the lack of competition in DQ services, and that the per call costs are caused by the consumers calling the legacy DQ numbers and (for some options) the requirements of the DQ service providers.

Table E2 – The application of Oftel’s cost causation principle to the proposed options

E.9 As outlined above, the cost causation principle does not provide a clear pointer as to which of the proposed options is characterised by the most efficient cost recovery.

E.10 Most costs are borne entirely by originating network operators in Options A to D (except for the costs of providing the freephone service under Option B(iii) which are borne by DQ service providers). It is clear that this position may not be entirely in accordance with the principle of cost orientation, since it is not clear that the most significant costs, namely those of originating calls to legacy numbers, are entirely caused by the activities of the originating network operators. It could however be argued (under one interpretation of the cost causation principle) that to the extent that set-up costs for the 192 message are ‘caused’ by a regulatory obligation flowing from the lack of DQ service competition, then it is appropriate for originating network operators to bear the set-up costs. Whilst noting these points, Oftel has not attached a very significant amount of weight to them in its analysis, since the exact drivers of cost are not altogether clear, and, more significantly, issues of promoting competition are more important in this context.

Distribution of benefits

E.11 The table below assess the benefits resulting from the continuation of the legacy DQ numbers under the various proposed options. Note that this table assumes the originating network operators would have their details -amongst others - on the freephone numbers or rotating messages that would be available. The "benefits" considered are those enjoyed by customers, DQ service providers and originating network operators.

Table E3 – The application of Oftel’s distribution of benefits principle to the proposed options

E.12 Originating network operators bear the majority of relevant costs under all options (except Option E), and the benefits are distributed to users of DQ services, callers to legacy DQ numbers, the originating operators themselves and/or the DQ service providers, depending on the option chosen. It therefore appears that none of the proposed options is fully consistent with the distribution of benefits principle, although Options A, C and E rank a bit better than Option B, which in turn ranks better than Option D.

Effective competition (neutrality)

E.13 The key question is whether the distribution of costs under the various options gives one group of companies an advantage over another group, and whether the different options do so to a different extent. However, Oftel considers that any such advantage will be small compared to the advantage conferred by the ability to promote specific 118 DQ services on the legacy DQ numbers. It therefore seems unlikely that a particular cost recovery mechanism applied to the costs of providing network messages on the legacy DQ numbers is a particularly effective way to ensure competitive neutrality between originating network operators and DQ service providers when the wider pressures on competition for DQ services are considered. Hence the more general discussion about competition and the extent to which each of Oftel’s proposed options might unfairly advantage or disadvantage DQ service providers and originating network operators in the body of this Statement is more relevant.

Reciprocity

E.14 The provision of access to legacy directory enquiries numbers will not in general be provided on a reciprocal basis ie most DQ service providers will clearly not be in a position to provide access to originating network operators’ numbers or to play messages explaining the discontinuation of the legacy codes.

E.15 Issues relating to the extent to which all network operators are affected by Oftel’s proposals for legacy DQ numbers are discussed in the Consultation Document (eg see paragraph 3.66).

Cost minimisation

E.16 Table E1 demonstrates the extent to which costs are borne by the parties by which they incurred. It shows that, under most options, costs will be recovered by the party that incurs them. All such proposed options score equally highly under this criterion.

E.17 The exceptions to this would appear to be Option E, under which certain costs are incurred by originating network operators but borne by DQ service providers – in this case, the incentives for cost minimisation by originating network operators are limited. Similarly, under Option B, the cost of originating freephone calls is incurred by originating network operators and borne by DQ service providers. It is worth noting that in the case of BT, the charge for freephone origination is subject to regulatory control.

E.18 It should also be noted that the costs of Option E may differ somewhat from those of the other options. This is because DQ service providers rather than only the originating network operators will incur network costs, and this should be balanced against the other criteria.

E.19 Another factor to note is that Option A is the "lowest cost" option, notwithstanding a possible extra burden on originating network operators’ customer service numbers caused by confused consumers.

Practicability

E.20 All of these solutions seem relatively straightforward in terms of how costs are recovered, and would therefore appear to score equally highly under this criterion.

Conclusions

E.21 Table E4 below summarises the arguments developed in this Annex. It evaluates each of the five proposed options against Oftel’s six principles of efficient cost recovery.

Table E4 – The application of Oftel’s six principles of optimal cost recovery to the proposed options

E.22 In summary, Table E4 indicates that Oftel’s principles of cost recovery suggest that there is little to choose between the proposed options on the basis of efficiency of cost recovery. There are two main material differences between the options. Firstly, under Options B and D, significant per call costs are borne solely by originating network operators whilst benefits are distributed among all DQ service providers (unlike Options A, C and E). Also, incentives for cost minimisation will be lowest under Option E.

  Glossary

Access Code

A short Non-Geographic Telephone Number, usually beginning with ‘1’, that allows End-Users to access a wide range of services. There are three types of Access Code:

1. Type A Access Codes are available for adoption by all providers of a Public Telephone Network and are adopted in such a way as to enable End-Users to access designated services across all Public Telephone Networks;
2. Type B Access Codes are allocated individually by the Director and are adopted in such a way as to either (i) enable End-Users to access services provided by their Communications Provider or (ii) enable End-users to access services provided by other Communications Providers (eg, Indirect Access and Directory Enquiry Facilities); and
3. Type C Access Codes are available for adoption for service provision within a communications provider’s own network.

The adoption of Type A and Type C Access Codes is restricted through the Numbering Condition;

Access Directive

Directive 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities.

Adoption

As defined in Clause 53(6) of the Communications Bill, references to adoption of a telephone number by a communications provider are references to his doing any of the following in relation to a number allocated (whether or not to that provider) by Oftel/OFCOM –

1. allocating or transferring that number to a particular customer or piece of apparatus;
2. using that number for identifying a service or route used by that provider or by any of his customers;
3. using that number for identifying a communication as one to be transmitted by that provider;
4. designating that number for use in selecting a service or the required elements or characteristics of a service;
5. authorising the use of the number by others for any of the purposes mentioned in Clause 53(5) of the Communications Bill.

Authorisation Directive

Directive 2002/20/EC on the authorisation of electronic communications networks and services.

Communications Bill

The Communications Bill which was introduced into the House of Commons on 19 November 2002 and is available at www.communicationsbill.gov.uk. The latest version of the Communications Bill is the print of 5 March 2003 which was introduced into the House of Lords on that day. It can be found at that website.

Communications Provider

A person that provides an electronic communications network or service as defined by Clauses 29(1) and 29(2) of the Communications Bill.

Directory Enquiry Implementation Working Group (DQ-IWG)

An Industry group open to all communications providers and potential providers of DQ services set up by Oftel to work on the detailed arrangements for the introduction of the new DQ service arrangements.

Directory Enquiry Facility

A facility which provides information by means of a Public Telephone Network on telephone numbers of subscribers who have not withheld their consent to being included in such a service, and is otherwise in conformance with Data Protection requirements.

The Director General of Telecommunications

The head of Oftel, a non ministerial government department created by the Telecommunications Act, 1984.

Framework Directive

Directive 2002/21/EC on a common regulatory framework for electronic communications networks and services.

General Conditions of Entitlement

Conditions, including one that specifically covers the Adoption and Allocation of Numbers, that will be set under the Communications Bill or Statutory Instruments to regulate the provision of electronic communication networks and services.

Independent Committee for the Supervision of Standards of Telephone Information Services (ICSTIS)

The industry-funded regulatory body for all premium rate charged telecommunications services including DQ services. ICSTIS regulates the content and promotion of such services via its Code of Practice.

International Directory Enquiry Service

A Directory Enquiry Service which provides information to UK subscribers on allocations of numbers from the numbering scheme(s) of at least one, probably several major non-UK countries, covering the same range of numbers as commonly available DQ services in that country. In the Communications Bill Directory Enquiry Services are referred to as Directory Enquiry Facilities.

National Code and Number Change

The changes to the UK National Numbering Scheme that occurred from 1997-2001 and affected area codes, mobile, pager, special tariff and premium rate numbers.

National Directory Enquiry Service

A Directory Enquiry Service which provides information on allocations of numbers to subscribers from the United Kingdom numbering scheme to callers located in the United Kingdom. In the Communications Bill Directory Enquiry Services are referred to as Directory Enquiry Facilities.

National Telephone Numbering Plan

A document to be published by 25 July 2003 (which has recently been subject to consultation) setting out the numbers that the Director has determined to be available for allocation to Communications Providers for allocation as telephone numbers and such restrictions as the Director considers appropriate on the adoption of those numbers.

Privacy Directive

Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector.

Public Telephone Network (‘PTN’)

An Electronic Communications Network which is used to provide Publicly Available Telephone Services; it supports the transfer between Network Termination Points of speech communications, and also other forms of communication, such as facsimile and data;

Telephone Number

Any number that is used (whether or not in connection with telephony) for any one or more of the following purposes:

1. Identifying the destination for, or recipient of, an electronic communication;
2. Identifying the origin, or sender, of an electronic communication;
3. Identifying the route for any electronic communication;
4. Identifying the source from which any electronic communication or electronic communication service may be obtained or accessed;
5. Selecting the service that is to be obtained or accessed, or any required elements or characteristics of that service; or
6. Identifying the Communications Provider by means of whose network or service any electronic communication is to be transmitted, or treated as transmitted.

Universal Service Directive

Directive 2002/22/EC on universal service and users' rights relating to electronic communications networks and services.