A Direction under Regulation 6(6) of the Telecommunications (Interconnection) Regulations 1997

Contents

Direction

Summary

Chapter 1: Background to the dispute

Chapter 2: Responses to the consultation, Director’s views

Chapter 3: Interconnection Regulations

Chapter 4: Conclusion

Annex A: Market analysis

Annex B: List of responses to the consultation document

DIRECTION UNDER REGULATION 6(6) OF THE TELECOMMUNICATIONS (INTERCONNECTION) REGULATIONS 1997 RELATING TO A DISPUTE BETWEEN CABLE AND WIRELESS U.K. ("C&W") AND BRITISH TELECOMMUNICATIONS PLC ("BT") OVER THE PROVISION OF A LOCAL TO TANDEM AND INTER-TANDEM TRANSIT SERVICE FOR INDIRECT ACCESS TRAFFIC.

WHEREAS:

(A) The Secretary of State granted to British Telecommunications on 22 June 1984 a licence (the "BT licence") under section 7 of the Telecommunications Act 1984 (the "Act") for the running of telecommunications systems specified in that Licence;

(B) By virtue of section 109 of and paragraph 20 of Schedule 5 of the Act the BT licence has effect as if granted to British Telecommunications plc ("BT");

(C) The Secretary of State has granted to Cable and Wireless U.K. (formally Cable and Wireless Communications (Mercury) and Mercury Communications Limited) ("C&W") on 5 December 1991 a licence under Section 7 of the Act for the running of telecommunications systems specified in that licence;

(D) On 1 January 1998, the European Parliament and Council Directive 97/33/EC came into force and was implemented in the UK through the Telecommunications (Interconnection) Regulations 1997 (the "Regulations") and conditions in the licences of operators;

(E) Regulations 6(6) of the Regulations provides that where there is a dispute concerning interconnection between organisations, the Director General of Telecommunications (the "Director") shall, at the request of either party, take steps to resolve the dispute within six months of the date of the request. The direction that the Director makes to resolve the dispute must represent a fair balance between the legitimate interests of the parties, and must be notified to the parties in accordance with Regulation 8(3). The parties are entitled to a full statement of the reasons on which the direction is based;

(F) C&W entered into an interconnection agreement with BT on 1 May 1998;

(G) On 11 July 2002, C&W submitted a Statement of Requirements ("SoR") to BT requesting BT to provide a facility that would allow C&W to offer a local to tandem and inter-tandem transit service to indirect access ("IA") operators for IA traffic originating on BT’s network. On 10 September 2002, BT rejected C&W’s SoR. BT and C&W are therefore in dispute;

(J) On 28 January 2003, in accordance with the provisions of Regulation 6(6) of the Regulations, C&W referred this dispute to the Director for determination;

(K) The Director has a duty to encourage and secure adequate interconnection in the interests of all users in a way which provides maximum economic efficiency and gives maximum benefit to end-users;

(L) The Director has considered, inter alia, the information provided by the parties and the matters set out in Regulation 6(8) of the Regulations. The principal points are summarised in the explanatory memorandum, which accompanies, and is published with, this direction;

(M) The Director issued a draft of this direction and the explanatory memorandum that contains the Director’s reasons on 11 June 2003 and responses were invited by 25 June 2003;

NOW, THEREFORE:

PURSUANT TO REGULATION 6(6) OF THE INTERCONNECTION REGULATIONS, AND HAVING CONSIDERED THE VIEWS OF THE PARTIES AND THOSE MATTERS SET OUT IN REGULATION 6(8) OF THOSE REGULATIONS, THE DIRECTOR MAKES THE FOLLOWING DIRECTION TO RESOLVE THE DISPUTE BETWEEN C&W AND BT:

1. BT shall provide a facility to C&W that will allow C&W to offer a local to tandem and inter-tandem transit service to IA operators for IA traffic originating on BT’s network (the "IA Transit Service"). Unless the Director consents otherwise in writing, this IA Transit Service shall be based on the following parameters:

• BT shall route IA traffic originating on BT’s network to C&W switches at selected BT local and tandem exchanges, as required by C&W; and
• The IA operator’s access code shall remain allocated to the IA operator.

2. BT shall carry out an option appraisal relating to the provision of the IA Transit Service mentioned in paragraph 1 above and shall provide a copy of this option appraisal to the Director and to C&W within 6 weeks from the date of publication of this direction. The option appraisal shall include the following:

• A full breakdown of BT’s estimated development, operational and other costs associated with the provision of the IA Transit Service;
• A full description of the technical characteristics of the IA Transit Service; and
• A full description of the billing arrangement of the IA Transit Service.

3. BT shall resume negotiations with C&W relating to the provision of the IA Transit Service as soon as possible after the date of publication of this Direction. Unless the Director consents otherwise in writing, BT shall provide the IA Transit Service to C&W within 90 days from the date of publication of the option appraisal referred to in paragraph 2 above at the latest.

4. The parties shall amend their interconnection agreement to give effect to this direction.

5. Except as otherwise defined in this direction, words or expressions used shall have the same meaning as in the Act, the BT licence or BT’s Standard Interconnect Agreement as appropriate.

6. This direction shall take effect on the date it is published.

Chris Kenny

Director of Compliance

A person authorised under paragraph 8 of Schedule 1 of the Telecommunications Act 1984

14 July 2003

S.1 The Director General of Telecommunications (the "Director") has issued a Direction in accordance with the provisions of Regulation 6(6) of the Telecommunications (Interconnection) Regulations 1997 (the "Regulations") for the resolution of a dispute between Cable and Wireless U.K. ("C&W") and British Telecommunications plc ("BT") regarding Indirect Access services.

S.2 On 28 January 2003, C&W asked Oftel to resolve a dispute with BT regarding Indirect Access ("IA"). This was in response to BT’s rejection of C&W’s Statement of Requirements ("SOR") for this facility. The background to this dispute is set out in Chapter 1.

S.3 The Director has examined the responses to his draft Direction. The Director notes that BT has now agreed to provide C&W with the requested facility. However, there remain a number of issues to be agreed upon between the parties. The Director has therefore concluded that the parties remain in dispute and it is still appropriate to issue a final Direction in order to resolve this dispute. The details of the Director’s views are contained in Chapters 2 and 3 of this document.

S.4 In summary, the Direction requires BT to:

• supply a facility to C&W which would allow C&W to provide a local to tandem and an inter-tandem transit service from selected BT local and tandem exchanges for IA traffic originating on BT’s network;

• carry out a full option appraisal and provide the Director and C&W with a copy of this option appraisal within 6 weeks from the date of publication of this Direction; and

• recommence and complete negotiations with C&W and provide the requested facility within 3 months of publishing the option appraisal.

S.5 Therefore, having considered the facts specific to this dispute and the criteria set out in Regulation 6(8) of the Regulations, the Director believes that the Direction to be issued under Regulation 6(6) of the Regulations represents a fair balance between the interests of the parties in this case. In reaching this view the Director has had regard to his wider duties to promote the development of the telecommunications industry in the UK and to encourage and secure adequate interconnection in the interests of all users in a way that provides maximum economic efficiency and gives the maximum benefit to end users.

S.6 The Director is conscious of the impact on the resolution of this dispute of the new regulatory regime for electronic communications networks and services, which is due to come into effect on or after 25 July 2003. In order to ensure that any obligations imposed under the current regime continue to be enforceable against BT during the transition to, and after the introduction of the new regime, the Director intends to take the following steps:

i. The Director intends to issue a continuation notice under the terms of paragraph 9 of Schedule 18 of the Communications Act 2003 to carry over the obligations imposed under this Direction issued for the period from 25 July 2003 (see note one below), until such time as the new obligations proposed in the Review of the fixed narrowband wholesale exchange line, call origination, conveyance and transit markets (see note two below) come into force.

ii. He will separately consult on the issues raised in this dispute as part of the above mentioned Review, and intends to propose similar obligations to those proposed in this Direction under the new regime. A second consultation document for this Review is due to be issued on or after 25 July 2003. It should be noted that the Director’s conclusions on the outcome of the consultation on his draft Direction will be used to guide the Director’s thinking in setting out his views in the consultation under the new regime

Notes

1. This reference is based on the print of the Communications Bill dated 2 July 2003. It is intended that the Communications Bill will receive Royal Assent by 25 July 2003. However, in the event that the Communications Bill does not receive Royal Assent by 25 July 2003, the government has acknowledged that implementation will need to occur by Statutory Instruments made under the European Communities Act 1972 for an interim period until the Bill enters into force.

2. 17 March 2003, http://www.oftel.gov.uk/publications/eu_directives/2003/eu_narrow/index.htm.

Chapter 1

Background to the dispute

Indirect Access (IA)

1.1 IA is a facility which allows a company other than BT to take voice telephony calls originated on BT lines and convey them onto an alternative network for some, or all, of the journey of the call. By routing calls through networks other than BT, companies are able to choose the most efficient routing and competitive conveyance and transit rates, which possibly allows them to make savings on the cost of calls. These IA operators are then able to offer calls only services to end user consumers in competition with BT.

1.2 On 11 July 2002 C&W submitted a statement of requirements (SOR) to BT. This SOR asked BT to provide functionality that would allow C&W to offer a local-tandem transit (LTT) and an inter-tandem transit (ITT) service to Indirect Access operators (IAOs). LTT is a transit service under which a third party carries calls between the local exchanges of one operator and the tandem exchange of another operator. ITT is a transit service under which a third party carries calls between the tandem exchange of one operator and the tandem exchange of another operator.

1.3 C&W wanted an arrangement where it could pick up traffic for a third party customer at the nominated exchanges where it has a point of interconnection; C&W does not have points of interconnection at all exchanges. This would imply that where C&W did not have an interconnection at the exchange, some of the IA operator’s traffic would have to be routed via BT to the terminating IAO in the normal manner.

1.4 Using this facility, C&W would then be able to offer LTT and ITT services to its customer in order to convey traffic up to a further point of interconnection with that customer’s network.

1.5 This proposed arrangement, in the case where the service being provided by C&W is LTT, is set out below:

Figure 1 C&W proposal 

1.6 BT subsequently rejected the SOR. BT cited three principal reasons for this rejection. These were; contractual complexities; significant impact on operations and maintenance; and significant impact on billing. BT’s overall conclusion was that the SOR would involve substantial costs and present onerous problems for BT to provide the requested facility.

1.7 On 28 January 2003 C&W referred this issue to the Director for resolution as a dispute under Regulation 6 (6) of the Interconnection Regulations. During the course of the Director’s investigation, he held discussions with both parties to the dispute. During the Director’s discussions with BT, the company outlined three options that would possibly meet C&W’s requirements.

1.8 These options were; increasing user maintenance information to identify point of connection ('POC'); automated charging derived from the network routing management system (NMRS); and conveyance IA codes. However, BT further argued that none of these options were feasible. The first option involved continued use of a manual system to input route information. BT believed that this would require a massive increase in manual data collection and maintenance, and associated development costs. The second option would involve changes to the current charging methods to identify 'least cost' routing. BT doubted that a precise mapping of the NMRS system onto a charging system could be made, with consequent problems for data integrity. The third option would involve IAOs having multiple codes depending on call origin. BT stated that this would require OLOs to build and manage extra codes, and there may also be data integrity issues.

1.9 The Director considered BT’s representations, and decided that the third option was not acceptable. He believed that this option, which would involve multiple codes, was a disproportionate response to the requested facility. However, as the arguments put forward against the other two options appeared significantly weaker, the Director’s initial conclusion was that BT should be required to provide the requested facility.

1.10 Therefore, on 11 June 2003, the Director issued a draft Direction for consultation. This proposed that BT should provide C&W with the requested facility. The Director received responses from both parties to the dispute, as well as other interested parties. A summary of these responses and the Director’s comments are set out in the following Chapter.

Chapter 2

Responses to the consultation, Director’s views

BT’s response

Supply of the facility

2.1 In its response to the Director’s draft Direction, BT agreed to supply the facility that C&W requested.

Options

2.2 During the course of the investigation, BT originally outlined three different options for meeting C&W’s requirement, but argued that all of these options were unfeasible. As stated above, the Director has already set out his view that the third option, which would involve the use of multiple access codes, is unreasonable. However, concerning the other two options – increasing user maintenance information to identify exit POC and automated charging derived from network routing management system information - the Director has stated that, in his view, these options are both workable. In its response to the draft Direction, BT further expanded on its proposed approaches to these two options.

Option 1

2.3 BT states that this is essentially a short term, manual solution. This option would use technical account managers to supply the origin and IA carrier data, and utilise the existing mechanism for defining the exit POC. However, BT suggests there is a preferable variant to the one it originally proposed. This variant involves some additional form of system testing. BT terms this variant "Option 1(b)". BT now estimates the cost of introducing either of the Option 1 proposals as between £335k and £375k.

2.4 BT asserts that the Option 1 variants would only benefit C&W, and therefore C&W should shoulder the development costs; the Director proposed in the draft Direction that the costs of any solution should be borne via the Network Charge Control (NCC).

2.5 BT suggests that they develop Option 1(b) as a prelude to developing the more strategic solution of Option 2, which is described below. BT states that Option 1 variants will take 6-9 months to introduce, in addition to one month’s customer testing.

Option 2

2.6 Option 2 is an automated system centred on BT’s network route management system, known as NMRS; this is BT’s preferred option. This option uses the network model to identify the origin and exit POC data. The option also would change the mechanism for defining IA exit POCs over to 'first choice', and would use the cheapest path for charging. BT estimates the costs to be £820k. BT suggests that this option lends itself more closely to the Network Charge Control (NCC) system of cost recovery.

2.7 BT estimates that Option 2 would take it around nine months to deliver, in addition to one month’s customer testing. However, BT claims that for operational reasons it cannot develop Option 1(b) and Option 2 in parallel. So, in theory, Option 2 could take up to 18 months to introduce if BT introduced it directly after Option 1(b). BT suggests that the introduction of Option 2 would require wider consultation with industry, as the requisite changes to BT’s charging systems would impact on a larger constituency.

Service parameters

2.8 For both option types, BT has produced a list of several service parameters. This included the need for the IA code owner to supply a route plan, controls on traffic overflow, provision of performance statistics, and contractual liabilities. BT also states that its various operational systems would require a number of changes to accommodate the new facility. This applies in particular to the Element Based Charging system known as 'EBC'. As stated in 2.7 above, BT has suggested that additional, industry-wide, consultation may be necessary for certain changes.

Director’s views

2.9 The Director welcomes BT’s commitment to supply the requested facility.

2.10 As previously stated in the draft Direction’s Explanatory Memorandum, BT should now proceed to allocate the appropriate resources to ensure it is able to comply with the parameters set out in this Direction. The Director is concerned that there have been considerable delays in introducing this service since C&W made its SOR. This delay was exacerbated by BT’s initial refusal to accept there was a dispute, and its further refusal to provide the product or move ahead with the option appraisal during the course of this investigation. Early action is now therefore essential to prevent further delay to the delivery of the expected benefits to end-users.

2.11 In the absence of more detailed information from BT to explain why it considers that a longer time frame is needed, the Director has decided to keep the timescales originally proposed in his draft Direction. However, the form of the final direction enables any adjustments to be made, with the written consent of the Director, should these prove unavoidable.

2.12 The Director stated his view in the consultation paper that the pricing of this facility should be on the same basis as existing interconnection charges for IA, given that he believes that any development costs for this service can be recovered through the existing NCC and that BT has SMP in the relevant market.

2.13 The Director has considered BT’s latest comments regarding the potential cost recovery for the various options under consideration. The Director believes that, as currently presented, any option to deliver this facility should involve cost recovery via the NCC. The Director notes that BT has commented that Option 1 will only benefit C&W and that this option is not ‘scaleable’. Whilst BT may be designing the Option 1 variants in response to C&W’s request, the Director is of the view that any such services must be available on non discriminatory terms to any undertaking that requests them. The Director believes therefore that, given the potentially wider application of any of the options, it is appropriate that the costs are recovered via the NCC.

2.14 In BT’s response to the consultation, BT made a number of comments regarding product conditions and service parameters. The Director notes simply that the precise details of the facility to be provided to C&W are a matter to be negotiated between BT and C&W. The Director does not therefore propose to comment in this Direction on whether the proposed conditions are reasonable.

Other responses

2.15 In addition to the response from BT, the Director also received responses to the draft Direction from C&W, ntl, and Thus, and one other party. On the whole, these responses simply set out the respondents’ support for the Director’s draft Direction. However, several issues were raised, which the Director discusses below.

The provision of the requested facility and other operational issues

2.16 The response from ntl questioned the scope of the facility to be provided by BT. The response also questioned how billing disputes could be resolved, and whether BT should share the details of the proposed service with the wider industry.

Director’s views

2.17 This Direction confirms the Director’s proposal to require BT to supply C&W with a facility that would allow C&W to provide local to tandem exchange, and inter-tandem exchange transit services. C&W would provide these services from those exchanges where the company has interconnection.

2.18 The Director notes ntl’s comments that the possible billing arrangements for the requested service are potentially more complex than where there are two parties involved, but believes that his proposals adequately address this concern. The Direction requires BT to supply C&W with the proposed service in order to resolve the dispute between them. However, once BT has established the service, it will be obliged to offer the facility to other parties on non-discriminatory terms and will need to bear this in mind in its detailed proposals. The Director believes that the conclusion of the bilateral negotiations is the point at which BT could reasonably be expected to share the details of the new service, including on billing issues, with other companies. Until then, the detailed negotiations are a matter of commercial confidentiality between the two companies. The Director has required BT to include a full report on the proposed billing arrangements for the new service, as part of the option appraisal. It is, of course, open to all operators, where appropriate, to raise a specific dispute with Oftel regarding the nature of the final product offering at any point in the future.

Future negotiations and implementation of the Direction

2.19 At various points, both parties have raised the issue of the Director’s future involvement in this matter, including any future negotiations.

The Director’s view

2.20 The Director has decided that BT should enter into negotiations with C&W regarding provision of the requested service without further delay. The Director believes that these discussions should commence whilst BT is preparing its option appraisal. This should make certain that C&W is appropriately involved in BT’s review process, and thus ensuring there are no further delays once the facility is closer to introduction. The Director believes that this process is the most effective way to introduce the product quickly. He will monitor progress as necessary and in addition will receive a copy of BT’s option appraisal on the implementation of this Direction.

Chapter 3

Interconnection Regulations

3.1 The Director’s view is that BT should be required to provide the IA routing service requested by C&W in its 11 July 2002 SOR. In reaching this view, the Director has taken into account the factors set out in Regulation 6(1) and 6(8) of the Telecommunications (Interconnection) Regulations 1997.

(i) The wider public interest and benefits for end users

3.2 The Director believes that the provision of the requested facility will lead to greater choice for IAOs who will be able to purchase local-tandem and inter-tandem transit services from operators competing with BT. IAOs can currently only use BT to purchase local-tandem conveyance and inter-tandem conveyance services from BT for all of their traffic. The availability of this facility will allow IAOs to purchase such services from alternative providers for a proportion of their traffic and continue purchasing from BT for the rest of their traffic, thereby allowing them to use more competitive conveyance and potentially allowing them to pass on the benefits to end-users. The facility should ensure more efficient use of the two parties’ networks. C&W and other operators will be able to exploit their presence at the local exchange level and allow interconnection at a variety of different points, increasing the flexibility for IAOs. This should have consequent benefits for end users in terms of choice, price and service.

(ii) The availability of alternatives

3.3 The Director does not believe that alternative methods of interconnection allow operators such as C&W to fully exploit their network to the benefit of IAOs and end users. BT’s previously suggested arrangement whereby an IA operator could transfer its IA code entirely to C&W would not be a viable option. This would create a business model that involved additional switching and interconnection. Similarly, BT’s earlier suggestion that Oftel issue multiple access codes to IA operators depending on call origin is also not a viable alternative. The Director believes this is disproportionate, with consumers having to use multiple codes to obtain IAOs’ facilities. Therefore the Director considers the C&W request to be the most practical proposal to provide the requested facility.

(iii) Undue burden and proportionality

3.4 The Director acknowledges that BT will need to address certain technical and operational changes when introducing this facility. This will cover areas such as billing, where BT has indicated there will be changes to its operational processes. However, whilst these issues certainly require attention, the Director has not received any information that indicates that there are major practical obstacles to providing the requested facility in a reasonably rapid timescale. He notes that BT has accepted that it should provide the requested service and it has not suggested that the issues are insoluble. He also does not consider that the costs likely to be incurred by BT are disproportionate.

3.5 Therefore, the Director does not believe, on the basis of the information the parties have provided to him, that the provision of the requested facility will be an undue burden on BT.

(iv) The promotion of competition and relative market positions of the companies

3.6 Pursuant to Regulation 4(1) of the Regulations, BT has been designated as having Significant Market Power (SMP) in the market for fixed public telephone networks and fixed public telephone services. The facility requested by C&W falls within this market.

3.7 The Director notes that C&W’s request will enable C&W to provide direct competition to BT in the provision of a transit service for IA traffic at the local and tandem exchanges. Therefore, the Director is of the view that requiring BT to provide the facility requested by C&W will promote competition in the relevant market.

3.8 Additional market analysis relevant to this case is included at Annex A. This follows that which the Director presented at consultation stage, and was not specifically commented upon by any respondents.

(v) Technical feasibility and commercial viability

3.9 The Director has not received any persuasive evidence to suggest the requested provision is technically unfeasible. He notes BT will have to carry out some changes to its operational processes in areas such as billing and fault detection in order to meet C&W’s request. However, the Director believes the requisite technical and operational changes can be reasonably achieved by contractual negotiations. BT has the technical capacity to provide the requested facility.

3.10 C&W has shared commercial information with the Director regarding preliminary discussions it has conducted with specific potential clients who have expressed an interest in purchasing the IA transit product proposed by C&W. Although C&W is unable to quantify the exact level of demand until the details of the service have been agreed with BT, on the basis of the discussions it has already held with IA operators, C&W has estimated demand for the proposed IA transit service to be approximately [ ] minutes (Please note - this information has been withheld from the document on grounds of confidentiality) per month over a two year period. In the Director’s view this information shows that there is likely to be sufficient demand for the service which C&W wishes to provide for BT’s provision of the facility requested to be commercially viable.

Conclusion

The Direction

4.1 The Director’s conclusion is that BT should provide the facility C&W requested. The parameters for this facility are as follows:

• BT should provide C&W with a facility to route IA traffic to selected switches of C&W rather than the IA access code holder’s switches;

• this facility will be available at selected BT local and tandem exchanges, as required by C&W. ;

• the IAO’s access code (1xxx number) will remain allocated to that operator even though some, or all, of its traffic will be routed via C&W’s network;

These parameters can only be altered with the written consent of the Director.

Timescales for implementation

4.2 The Director proposes that it is reasonable, bearing in mind the elapsed time since C&W’s initial request and the work done in the course of his investigation, for BT to produce a full option appraisal within 6 weeks from the publication of any final direction. This appraisal should cover the following issues:

• a full breakdown of estimated development, operational and ongoing costs;

• a full description of the technical characteristics of the service;

• a full description of the billing arrangements of the service.

A copy of this appraisal should be made available to Oftel and C&W.

4.3 The Director has not changed the three-month deadline for the introduction of this facility, which he outlined in the consultation paper. However, the form of the final direction enables any adjustments to be made, with the written consent of the Director, should these prove unavoidable.

Annex A

Market analysis

The Relevant markets

A.1 IA operators purchasing single and double tandem call origination from BT have to currently purchase local-tandem conveyance and inter-tandem conveyance services from BT. The facility requested by C&W is to be able to use its connections to BT’s local and tandem exchanges to pick up traffic belonging to IA operators and deliver it to those operators for termination. By doing so, it would be able to offer local-tandem and inter-tandem transit services for BT originated traffic to IA operators, in competition with BT.

A.2 It is important to note that BT is willing for such a transit service to be provided, but only if it applies to all originating exchanges. The Director believes that this constraint creates a very substantial entry barrier.

The product

A.3 The facility that C&W is requesting is that for BT to route specified traffic owned by C&W’s IA customer on dedicated C&W routes using the C&W customer’s existing indirect access code.

A.4 The facility therefore requires that BT recognise that a part of the traffic of the IA customer has to be routed on C&W’s network at either local or tandem exchange level, and routed accordingly. In effect therefore, C&W is requesting BT for such a routing service and is additionally requesting that the billing accompanying this routing service (which includes the cost of origination) be made to the IA customer.

A.5 The product relevant for consideration of the market analysis is therefore a routing and accompanying billing service.

The market

A.6 Indirect access operators that have traffic originating on BT’s network need to purchase call origination from BT. This can be local, single tandem or double tandem call origination, depending on where the IA operator has direct connections to BT’s network. In order to be able to pick up traffic at any of the points on which it has connections to BT’s network, the IA operator also depends on BT to route the traffic accordingly to the point of interconnection. The routing of traffic of all interconnecting operators is a facility that is necessarily associated with call origination. Routing can therefore be considered to be an associated facility. Billing of BT originated traffic is a feature of all such traffic irrespective of how and where the traffic is routed. For the purposes of market definition relevant to this direction, the Director does not propose to analyse the billing of routed traffic separately, and would consider it to be part of the relevant market for the routing facility.

A.7 The Director has recently published a consultation on the narrowband wholesale market (http://www.oftel.gov.uk/publications/eu_directives/2003/eu_narrow/index.htm), in which he has defined wholesale call origination of call types to be a relevant market. Although different call types may not be perceived to be substitutes on the demand side, on the supply side, all the services face a common pricing constraint. This is because providers of call origination services will seek to exploit the economies of scale and scope by providing call origination services for a number of different call types. This suggests that competing providers of call origination services compete for customers rather than in relation to particular services. This distinction is important because it reinforces the view that providers of call origination would compete to provide a range or basket of services across a customer’s exchange line rather than offering only limited services across many exchange lines. Such competition means customers choose the provider who can provide the range of services at the lowest price. The fact that call origination services face a common pricing constraint suggests that all call origination services should be treated as part of the same wholesale market.

A.8 In a similar manner, the provider of call origination will provide the associated facilities such as routing, since the functionality of such a facility is a value-added element of the basic call origination service. As argued above, a common pricing constraint operates on the provider of such a facility and therefore this facility would be part of the market for call origination.

A.9 Pursuant to Regulation 4(1) of the Regulations, BT has been determined as having Significant Market Power (SMP) in the market for fixed public telephone networks and fixed public telephone services. The facility requested by C&W falls within this market.

List of responses to the consultation document

B.1 In his consultation document dated 11 June 2003, the Director invited responses to his proposals by 25 June 2003.

B.2 The following parties responded to the Director;

BT;
Cable and Wireless;
NTL;
Thus;
One other party who wished its response to remain confidential.