July 2000

Contents

Chapter 1      Introduction

Chapter 2    The framework for SNA

Chapter 3     Criteria for resolving disputes in relation to SNA

Chapter 4    Terms and conditions for SNA

Chapter 5     Making a request for SNA

Annex          Flow chart outlining processes for seeking SNA (including dispute resolution and publication of RIO)

Chapter 1

Introduction

1.1 The Revised Voice Telephony Directive (the ‘RVTD’) and Interconnection Directive (the ‘ICD’) provide for access to networks at points other than the network termination points offered to the majority of end users. This is called Special Network Access (‘SNA’).

1.2 The preliminary recitals to the ICD express the view that, to stimulate the development of new types of telecommunications services, it is important to encourage new forms of interconnection and special network access at points other than the network termination points offered to the majority of end users.

1.3 The European Commission Working Document "Access to, and interconnection of, electronic communications networks and associated facilities" published on 27 April 2000, envisages a new regulatory framework for access and interconnection. The document includes a definition of the term "access", and states that national regulatory authorities shall be able to impose obligations on operators to grant access to, and use of, specific facilities and/or associated services, in order to correct or prevent a distortion of competition, inter alia in situations where the national regulatory authority considers that denial of access would hinder the emergence of a sustainable competitive market at the retail level, or would not be in the consumer interest.

1.4 Whilst it is not expected that the new regulatory framework will be implemented for at least two to three years, Oftel believes the general principles contained in the Working Document are not incompatible with Oftel’s current approach to access and interconnection. Oftel’s consultation document "Open access to communications networks", published on 27 April 2000, sets out the tests which Oftel proposes to apply in deciding when an operator of a communication network would be required, for reasons of competition, to supply access to its network to other companies. The Guidelines on Special Network Access should be read in conjunction with the Statement which Oftel expects to publish following evaluation of responses to the April consultation document

1.5 These guidelines are also intended to explain how organisations should seek SNA from network operators, what role Oftel expects to play and what criteria Oftel will apply when it is asked to judge the reasonableness of any disputed request for SNA, including disputes about the charges which an operator proposes to levy.

1.6 The nature of SNA, and the impossibility of envisaging what forms of access might be sought, have caused these Guidelines to be fairly general. In the light of experience and the evolving EU Framework, Oftel will consider whether to devise more specific guidance on pricing and on the technical criteria which should be applied when judging the merits of a disputed request for the provision of SNA

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Chapter 2

The framework for SNA

The legislative and licensing framework

2.1 The RVTD was implemented in the UK through regulations which came into force in July 1998, and the ICD was implemented through regulations which came into force in December 1997. These regulations introduced licence conditions reflecting the SNA provisions of each Directive in licences issued under section 7 of the Telecommunications Act 1984 (the ‘Telecommunications Act’).

2.2 These licence conditions were recently amended by the DTI, as part of an exercise to ensure that the telecommunications licences of Public Telecommunications Operators (‘PTOs’) comply with the EC Licensing Directive (97/13/EC). The SNA provisions of the ICD are now reflected in Conditions 45 and 48 of PTO licences, while the SNA provisions of the RVTD are now reflected in Condition 53 of PTO licences.

2.3 Although the texts used to describe SNA in these two Directives, and in the licence conditions which reflect them, are not identical, Oftel believes they are sufficiently similar that this single set of guidelines may act as a starting point to both.

Who is obliged to provide SNA?

2.4 The RVTD Article 16 imposes an obligation to provide SNA only on operators of fixed networks which have been designated as having Significant Market Power (‘SMP’). These are currently BT and Kingston Communications. However, the ICD Article 4.2 applies to SMP operators of fixed and/or mobile networks and currently includes BTCellnet and Vodafone, as well as BT and Kingston Communications.

Who is entitled to seek SNA?

2.5 Unlike the regime which applies to interconnection of networks by Annex II operators, there are no special prior qualifications for seeking SNA.

2.6 The new PTO licences provide that SNA under the ICD may be requested by anyone running a telecommunication system under a Telecommunications Act licence (either a class licence or individual licence). Operators with Annex II status may request SNA under Condition 45 of PTO licences, whereas organisations without Annex II status may request SNA under Condition 48. To reflect the provisions of the RVTD, the new PTO licences also provide that SNA may be requested from fixed SMP operators under Condition 53 by any organisation providing telecommunications services.

2.7 Oftel envisages that most applications for SNA will be from operators and service providers. However, if a reasonable case can be built, it is conceivable that large end users may also obtain SNA if, for example, they are running a telecommunications system under a licence, such as the Self Provision Licence (the ‘SPL’), and can demonstrate a reasonable demand

What is SNA?

2.8 Neither Directive elaborates on what is meant by ‘access to networks’, though the RVTD does specify the commonly provided network termination points to which SNA would be additional. The meaning of the term continues to be subject to discussion by EU national regulators and, as referred to in paragraph 1.3 of these Guidelines, is also under consideration by the Commission as part of the 1999 Review. Furthermore, the Commission Recommendation on Unbundled Access to the Local Loop", published on 26 April 2000, expresses the view that shared access to the copper loop can be mandated under the SNA provisions of ICD or RVTD (though full unbundling cannot).

Chapter 3

Criteria for resolving disputes in relation to SNA

3.1 In resolving a dispute in relation to the provision of SNA, Oftel is required to consider a number of factors under the ICD and RVTD. These factors include, amongst others, competition and consumer issues, such as the promotion of competition, ensuring interoperability of services, the desirability of stimulating innovative market offerings and the public interest. In addition, Oftel may also consider technical and commercial factors, such as the availability of technically and commercially viable alternatives, the need to maintain the integrity of the public telecommunications network and the nature of the request in relation to the resources available to meet the request.

3.2 While each dispute referred to Oftel will be considered on its merits, these guidelines set out the general approach which Oftel is likely to adopt in considering these factors. At this stage, Oftel does not intend these guidelines to be proscriptive or prescriptive.

Competition / consumer issues

3.3 Oftel’s goal is to achieve the best possible deal for consumers in terms of quality, choice and value for money. Oftel believes that the best way to achieve this is through competitive supply of services. Accordingly, it is Oftel’s intention, as stated in our strategy statement, Oftel Strategy Statement: Achieving the Best Deal for Telecoms Consumers published in January 2000, to withdraw or refrain from sector specific regulation where markets are effectively competitive.

3.4 As explained in paragraph 1.4 of these Guidelines, Oftel is currently consulting on the tests which Oftel would apply in deciding when an operator of a communications network would be required, for reasons of competition, to supply access to its network to other companies (see the Oftel consultation document, Open access to communications networks: Ensuring competition in the provision of services published in April 2000). Oftel will consider whether the lack of access of the type requested is a barrier to effective competition and whether it is likely to benefit consumers. If the requested form of SNA were to be required, Oftel will generally seek to impose the minimum measures necessary to resolve the competition problem. Where the market is not effectively competitive, Oftel will carefully weigh the potential benefits offered to consumers by requiring the form of SNA requested against the costs associated with significant regulatory intervention; in particular, with the risk that if regulatory action is disproportionate, it may deter investment and discourage innovation. In general, intervention will need to be justified on the basis that the form of SNA requested would contribute to the development of competition in the relevant market or bring net benefits to consumers that would not otherwise be achieved.

Technical and commercial factors

(a) Technical and commercial viability

3.5 Under the RVTD, the Director General of Telecommunications (the ‘Director’) may limit the obligation on SMP operators of fixed networks to meet reasonable requests but only on a case by case basis, where in his opinion there are technically and commercially viable alternatives to the SNA requested and if the requested access is inappropriate in relation to the resources available to meet the request.

3.6 In addition, in resolving a dispute under the ICD, the Director is required to take into account the availability of technically and commercially viable alternatives to the access requested.

3.7 In general, when considering disputed requests for SNA to fixed or mobile networks, Oftel would consider whether there is likely to be sufficient demand for the access in relation to the costs and resources needed to deploy and offer the facility; including resources reasonably needed for the protection of Essential Requirements. Against this background, where circumstances allow it, those seeking SNA may find it advantageous to work with other companies and with industry fora to identify common requirements.

(b) Topology

3.8 Oftel would consider whether the topological configuration of the access requested is reasonable in relation to the expected volumes. For example, it is unlikely that Oftel would judge to be reasonable a request for SNA to a major regional switching centre if the applicant is unable to demonstrate that appropriately high levels of traffic would be connected at that point. Conversely, Oftel would be unlikely to consider reasonable a request for SNA to a local switching centre if the SMP operator were able to demonstrate that it would be unable to accommodate the forecast levels of traffic or the facilities required by the applicant and other third parties who may request the same access.

(c) Essential Requirements

3.9 Requests for SNA, and other access and use of fixed public networks, may be restricted on grounds of maintenance of network integrity. However, Oftel is required by the RVTD to ensure that any such restrictions on access are proportionate, non discriminatory and based on objective criteria identified in advance. Similarly, any restrictions on access to fixed networks which are applied on grounds of protection of data may be imposed only in accordance with relevant data protection legislation, and restrictions on grounds of interoperability of services may not be applied to terminal equipment operating in accordance with the Terminal Equipment Regulations. Oftel would expect to apply similar principles when judging a disputed request for SNA to a mobile network.

3.10 Applications for SNA which under normal, or abnormal, conditions could materially compromise the maintenance of network integrity (‘MNI’) would not be supported. MNI requires that all reasonable steps are taken to protect the proper operation of network equipment, software and stored data. Oftel anticipates that particular attention would be paid to the risks posed to network integrity by incorrect signalling or exposure to fraudulent access. It is likely that Oftel would support any reasonable requirements of an operator for SNA interfaces which are intended to protect the physical and functional operation of the network against malfunctions or failure caused by electrical conditions, signalling protocols, or traffic loads, but only to the extent that the operator provides similar levels of protection elsewhere within its network.

(d) Scope of access sought

3.11 Forms of SNA which make possible access to the broadest range of network functionality may pose greater risks to network integrity and may consequently require more extensive testing than other forms of SNA which provide access to a more limited range of functionality. Oftel recommends that, where possible, applicants for SNA should specify interfaces which provide access only to the functionality actually required and should avoid defining broad interfaces which may inadvertently or co-incidentally expose the operator to risks which are disproportionate to the functionality actually required.

(e) Operator testing

3.12 In some instances, and in particular where the SNA requested would involve a C7 interface, it is likely that Oftel would support any reasonable requirements of the SMP operator that the proposed form of access should be tested using a testbed exchange facility such as is maintained by BT at BT Adastral Park (formerly known as BT Martlesham Heath Research and Development Laboratories). Such tests might include a comprehensive range of "provocative tests" to test whether MNI can be demonstrated.

3.13 However, operators should note that Oftel would not generally consider requirements for such tests to be reasonable where an applicant is seeking access via an existing interface used by the operator to provide service providers and end users with access to other functions. An example of such an interface might include the DSS1 based interface specified in BSI document PD 6640:1999, which was defined by the Public Network Operators Interconnect Standards Committee (PNO-ISC) in a document, Recommendations for short term solutions to support a service provider access interface, published in May 1999.

(f) Testing and compatibility with international standards

3.14 The existence of international standards, such as those established by ETSI or CEN/CENELEC, which allow for the provision of a particular form of SNA may make it less likely that a request for this type of access would be judged unreasonable. However in isolation the existence, or absence, of such standards will not decide whether a form of SNA should be granted

Oftel’s power to specify conditions

3.15 Both the RVTD and ICD allow the Director to specify conditions to be included in SNA agreements. These conditions, which must be non- discriminatory, fair and reasonable for both parties and offer the greatest benefit to all users, may require conformance with relevant standards, compliance with Essential Requirements and/or the maintenance of end-to-end quality.

3.16 Both the RVTD and ICD also allow the Director to specify conditions to ensure effective competition and/or interoperability. In the case of SNA, this is most likely to happen where the form of access is heavily dependent on proprietary interfaces available only to a limited community of users. These provisions may apply to SNA to fixed and/or mobile networks and could result in Oftel requiring that SNA is achieved without reliance on particular proprietary interfaces.

Undue preference or undue discrimination

3.17 The licences of SMP operators of fixed and/or mobile networks prohibit undue preference or undue discrimination, particularly where this involves the operator in unfairly favouring to a material extent a business carried on by itself. Where an SMP operator’s Systems Business is already providing to another of its regulatory businesses, or to another company, a form of access which is sought by a third party, Oftel’s presumption will be that this access should be granted to the third party, and any others, on a non-discriminatory basis and at non-discriminatory prices.

Chapter 4

Terms and conditions for SNA

Publication of terms and conditions for SNA

4.1 The ICD requires SMP operators of fixed networks to publish a reference interconnection offer describing the interconnection offerings, broken down into component parts, and the associated terms and conditions including tariffs. At present, SMP operators of mobile networks are not required to provide a reference interconnection offer.

4.2 Oftel recognises that, given the bespoke nature of SNA, it will not be possible to compile a reference interconnection offer in advance of requests for SNA being sought. Oftel anticipates that SMP operators of fixed networks will publish a reference interconnection offer which describes the different forms of SNA which they have agreed to provide and, where relevant, this should be broken down into components parts.

4.3 Where objectively justified, fixed SMP operators may offer different services, terms and conditions to operators with Annex II status and those without such status (see paragraph 4.5 below in relation to pricing). The ICD expressly states that different terms and conditions for interconnection may be set for different categories of organisations authorised to provide networks and services, provided that such differences can be objectively justified on the basis of the interconnection provided and/or the relevant national licensing conditions. As the DTI stated in its consultation document, Implementation of the Licensing Directive: Changes to Existing Licences, published in November 1998, even when a non-Annex II operator requests a technically similar service to that provided to Annex II operators, this will be treated as a request for a service provider product, with relevant retail features and a different price based on both these feature differences and the fact that there are no balancing interconnect obligations placed on such operators.

Pricing of SNA

4.4 Both the RVTD and ICD allow Oftel to specify tariffs. In addition, the new PTO licences require SMP operators of fixed networks to follow the principle of transparency and cost orientation when setting the tariffs for SNA.

4.5 Transparent and cost oriented prices are not necessarily synonymous with cost-plus pricing of the kind which currently applies to BT’s carrier services, and Oftel does not propose to require SMP operators of fixed networks to set tariffs for SNA on that basis. Oftel expects that, where possible, tariffs for SNA should be set by reference to comparable retail services. Where SNA is provided to customers (typically service providers) who are not end-users, the maximum charge would be the equivalent retail price (if one can be identified) minus the costs saved by serving such customers. Oftel’s policy on pricing for service providers is that SMP operators of fixed networks should be given the freedom to offer prices down to interconnection charge levels (though they would not be forced to do so). However, Oftel recognises that, by their nature, many forms of SNA may not be comparable with other existing services.

4.6 In general, where an SMP operator introduces a new interconnect service, Oftel will investigate the price that the SMP operator proposes to charge for the service only in response to a complaint. In the first instance, Oftel will consider whether the proposed charge is between the relevant floor and ceiling (generally, incremental cost and stand-alone cost respectively, where stand-alone cost captures all the costs that an efficient firm would incur in supplying just the service requested on its own).

4.7 Oftel’s policy is that, usually, new services will initially be free of controls in order to preserve incentives for innovation and because existing services will continue to be available. However, Oftel recognises concern that organisations initiating a request for a new SNA service may be disadvantaged relative to others which subsequently seek the same form of service, if the first mover is asked to pay all development and implementation costs. In the event of a complaint that the calculated charge was unreasonable, the criteria outlined below for services with no retail equivalent could be applied.

4.8 As the number of services increases, the incremental costs of introducing an additional one may become very low. However, given the nature of telecommunications, the stand-alone costs may be very high. Consequently, the gap between the incremental cost floor and the stand-alone cost ceiling may be large and the ceiling may provide little constraint on pricing. Oftel may then wish to consider other factors in assessing a complaint of excessive pricing of a new SNA service, where there is no retail equivalent. These could include:

• the degree of risk assumed by the SMP operator in developing the product;
• whether the proposed prices would be likely to prevent new services, which are reliant on the product, being introduced;
• whether there are suitable competitive alternatives;
• the rates of return normally expected on similar products; and
• implications for competition between users of the SNA services (for example, first and subsequent users).

Chapter 5

Making a request for SNA

How should a request for SNA be made?

5.1 Requests for SNA should initially be made direct to the operator of the network concerned. For the avoidance of doubt, the applicant should make plain that the request is a request for SNA and under which Directive the request is made. The applicant should provide the SMP operator with sufficient information to allow the operator to decide whether the request is reasonable. While the information required for this purpose will vary on a case by case basis, it is likely to include a description of the access and facilities required (including where, geographically, the access is required and the proposed points of access), traffic forecasts, a capacity profile and an indication of the proposed technical standards which will apply (where relevant).

5.2 Oftel expects that SMP operators will put in place appropriate arrangements to ensure that the information provided by an applicant in the course of a request for SNA is not misused so as to give the SMP operator a competitive advantage in offering services which are similar to those proposed by the applicant.

5.3 Neither Directive specifies the maximum time allowed to respond to a request for SNA, but under the ICD, Oftel has powers to set time limits within which negotiations for interconnection are to be completed. Oftel does not currently expect formally to set any timescales for negotiation of SNA but, as a guide, Oftel considers that 6 months (from the date of the initial request) is the maximum time that it should take to reach agreement. An SMP operator’s failure to do so without compelling reasons ­ generally beyond its control ­ may be a breach of its licence. In most instances, it should be possible for agreement to be reached in less than 6 months and Oftel will take into account instances of unreasonable contribution to delay consistently whether they occur within or outside 6 months. Such unreasonable behaviour may include:

• failure to respond to the initial request for access within a reasonable time;

• insistence upon terms which no applicant would agree to if they had a choice;

• refusal of terms which any reasonable company would accept; or

• unjustified failure to come to a decision on the terms offered within a reasonable period.

5.4 Both Directives require the relevant operator to meet all reasonable requests for SNA and Oftel would expect operators to provide applicants with detailed explanations of their reasons for rejecting any request for SNA.

5.5 If the request is rejected or the terms are considered unreasonable, either party may ask Oftel to intervene. In addition, under the RVTD, SMP operators of fixed networks are required to allow the applicant to put their case to Oftel before a final decision is made to restrict or deny access in response to a particular request. In practice, Oftel envisages that the same procedures will be used by Oftel to handle disputes, whether they arise before or after a final decision has been taken by the SMP operator.

Enforcement action by Oftel

5.6 Where an applicant has requested SNA from an SMP operator and, after a reasonable period of negotiation, the request is refused or the terms and conditions cannot be agreed upon, then the matters in dispute may be referred to the Director for resolution.

5.7 Oftel proposes to deal with such requests in accordance with the considerations set out in the ICD and RVTD using the same processes that it uses for dealing with standard interconnection complaints and disputes. When seeking the intervention of the Director, the representations should include an explanation of why the refusal to allow SNA or agree certain terms and conditions is unreasonable and any potential effects on competition in the relevant market. The full procedure is set out in Oftel’s Guidelines on the Operation of Network Charge Controls.

5.8 At any time, but most usually where the parties have failed to reach agreement, the applicant or the operator may ask the Director to specify the issues to be covered in the agreement or to lay down specific conditions to be observed by either or both parties. Under the provisions of the ICD, Oftel would be obliged to take steps to resolve the dispute within 6 months. The service would then be available on a non-discriminatory basis to other parties, not merely to the original applicant. The operator concerned would be required to apply similar conditions in similar circumstances to organisations providing similar services, and to provide SNA facilities and information to others under the same conditions and of the same quality as they provide for their own services, or those of their subsidiaries or partners.

Annex

Flow chart outlining processes for seeking SNA (including dispute resolution and publication of RIO)

As slightly different processes and obligations apply where a request for SNA is sought from operators of fixed networks and from operators of mobile networks, the following chart may serve to clarify the key stages: