Contents

Determination

Explanatory Guide

Schedule 1

Schedule 2

DETERMINATION

WHEREAS

1.    On 2 December 1999, the Director General of Telecommunications ("the Director") determined that the parties should reach agreement, including agreement on charges, by 10 April 2000 for the provision of indirect access by INMS to BTCellnet’s post-pay subscribers (and to BTCellnet’s pre-pay subscribers by a date to be the subject of a further determination by the Director).

2.    Since, by 10 April 2000 the parties had not reached agreement, and in particular had not reached agreement on charges, the Director intends, as indicated in the Explanatory Memorandum to the 2 December 1999 Determination, to set interim charges for the provision of indirect access services by BTCellnet to INMS.

3.    Both parties were sent a draft Determination and Explanatory Memorandum, which contains the Director’s reasons, and were invited to comment. Comments were received from INMS (28 April 2000) and BTCellnet (27 April 2000).

4.    The Director has taken account of the comments received from the parties including the statement by BTCellnet that it will be able to provide IA services for pre-pay customers connected to its IN Platform ("IN pre-pay customers").

5.    The Director has notified the parties of the further changes he intends to make in order to extend this Interim Charges Determination to cover IA services to BTCellnet’s IN pre-payment customers.

NOW THEREFORE THE DIRECTOR PURSUANT TO REGULATION 6(6) OF THE REGULATIONS, AND HAVING CONSIDERED THE VIEWS OF THE PARTIES AND THOSE MATTERS SET OUT IN REGULATION 6(8) OF THE REGULATIONS, HEREBY MAKES THE FOLLOWING DETERMINATION:

i.    The Director has determined that the charges to be paid by INMS to BTCellnet for the provision to INMS of IA services for the benefit of BTCellnet customers on the BTCellnet 30 ("BTC30") tariff shall be as set out in the attached Schedule 1 of this Determination.

ii.    The Director has also determined that the charges to be paid by INMS to BTCellnet for the provision of IA services to INMS for the benefit of BTCellnet customers on other post-pay tariffs and of BTCellnet’s IN pre-pay customers shall be derived by the same process as has been used in setting the charges for customers on the BTC30 tariff; the process is set out in Schedule 2 of this Determination and is further explained in the Explanatory Memorandum. (There are separate calculations for pre-pay and post-pay customers’ IA services)

iii.    This Determination shall have effect from 18 May 2000.

18 May 2000

David Edmonds
Director General of Telecommunications

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DETERMINATION UNDER PROVISIONS OF REGULATION 6(6) OF THE TELECOMMUNICATIONS (INTERCONNECTION) REGULATIONS 1997 (THE "REGULATIONS") TO SET INTERIM CHARGES FOR THE PROVISION OF INDIRECT ACCESS ("IA") SERVICES BY TELECOM SECURICOR CELLULAR RADIO LIMITED ("BTCELLNET") TO INTELLIGENT NETWORK MANAGEMENT SERVICES ("INMS")

Explanatory Memorandum

Background.

1.    INMS, an International Simple Voice Resale (ISVR) operator is in dispute with BTCellnet concerning the provision of Indirect Access (IA) services by BTCellnet to INMS. BTCellnet is a holder of licences under Section 7 of the Telecommunications Act 1984 and under the Wireless Telegraphy Act 1949. It has also been notified to the EU Commission as having Significant Market Power (SMP) in the mobile market under the Interconnection Directive (ICD).

2.    INMS asked the Director to resolve the dispute under Article 9(5) of the ICD.

3.    After public consultation (consultation document: Customer choice: Oftel’s review of indirect access for mobile networks issued in February 1999 in conjunction with Oftel’s parallel consultation document: Competition in the Mobile Market), the Director issued his Statement in July 1999: Oftel’s review of the mobile market announcing his conclusion, having taken account of the view expressed in the consultation, that BTCellnet should be required to provide IA services to INMS.

4.    After discussion with the parties, and having taken into account their representations, the Director on 2 December 2000 made his Determination on the manner in which, and the timetables by which, IA should be provided.

5.    As part of the timetable, the Director set the 10 April 2000 as the date when the parties should reach agreement on the terms, including the charges, under which IA should be provided to BTCellnet’s post–pay customers.

6.    In that Determination, the Director provided for the event where the parties are unable to reach agreement on the charges. In such circumstances, the Determination provided for the Director to make an interim Determination of the charges – followed by a final Determination of the charges after two months for a more detailed consideration of the calculation.

7.    The timetable for the provision of IA services to BTCellnet’s pre-pay customers was to be set by a separate Determination, since it depended on the upgrading of BTCellnet systems.

Position reached by the parties on 10 April 2000

8.    The parties did not reach agreement on 10 April 2000.

9.    The Director in this Determination, bearing in mind that other organisations and end user customers are interested in the outcome of the dispute, is setting (a) the IA charges to correspond with BTCellnet’s BTC30 retail tariff (which is expected to be adopted by a significant proportion of BTCellnet’s post-pay customers); (b) the basis on which IA charges should be set, to correspond with other post-pay retail tariffs, and for IA services to BTCellnet’s pre-pay customers connected to its IN Platform ("IN pre-pay customers").

Development of IA facilities for BTCellnet Pre-pay customers

10.    In May 2000, BTCellnet notified Oftel that it was now possible for IA services to be provided to those of its pre-pay customers who were served by its IN platform.

11.    Oftel concluded that customers’ interests would be best served, and the implementation of IA services simplified, if the present Interim Charge Determination were expanded to provide determined charges for IA calls made by BTCellnet’s IN pre-pay customers. This may make it unnecessary to make the separate Determination on the timetable for the provision of IA services to BTCellnet pre-pay customers envisaged by the 2 December 2000 Determination.

Next stages required for the implementation of indirect access.

12.    The 2 December 1999 Determination provided for the Director to determine charges on an interim basis if there is no agreement. The Explanatory Memorandum to that Determination states that: "Oftel intends to make this Determination [of interim charges] within one week of the parties’ failing to reach agreement". Thereafter, the Determination provides for the parties to incorporate the interim charges in the agreement within two weeks and for the agreement to be implemented (that is, for systems to be in place for the handling of indirect access traffic) within a month of the date of the agreement.

13.    The objective in providing for interim charges is to minimise any further delay in the availability of indirect access services for customers: since to make a definitive calculation will require the provision of detailed information by BTCellnet to Oftel and will require extensive use of Oftel’s resources in probing and applying the information to arrive at reliable charges. The interim charges are designed to provide approximate charges whilst Oftel completes the work required to set definitive ("final") charges. The 2 December 1999 Determination requires the replacement of the interim charges by final charges when available, and for adjustments to past payments (if any) so that the final charges are applied from the start of the indirect access services.

Basis of the Interim Charges

14.    Oftel set out the basis on which it would determine IA charges for mobile networks in its Consultation Document ( Customer choice: Oftel’s review of indirect access for mobile networks - February 1999) and Statement (Oftel’s Review of the Mobile Market – July 1999). These documents set out the arguments why Oftel considers that the appropriate basis for charges for indirect access on mobile networks should be retail minus. That is: the interconnection indirect access charge to be paid by the indirect access operator to the network operator will be the retail price (which the mobile network would charge the customer, if the customer had not chosen to use the indirect access operator for the call) but after deduction of the costs of those elements of the service which, on an indirect access call, will not be supplied by the network operator because they will be supplied by the indirect access operator, or not required at all.

15.    There are two principle elements of the service that will no longer be supplied by the network operator when a call is handled by an indirect access operator. The first element, and most easily identified and valued, is the conveyance and termination of the call once it has left the mobile network. These costs are called "outpayments" since in general they are payments made by the host mobile network to other carriers for conveying the calls to their destinations and for paying the terminating operators to deliver the calls. The second element covers all the customer service aspects of the service. These range from marketing and selling, through customer support (maintenance, service enquiries) to billing (for post-pay calls) or pre-pay vouchers (for pre-pay customers). For IA calls, these costs will be the responsibility of the indirect access operator, or not relevant to an indirect access call. Hence, the IA operator should not be required to make any contribution through the IA charge to costs of this kind incurred by BTCellnet on calls which remain with BTCellnet and are not passed to the IA operator. Otherwise, the IA operator would not only be paying for its own costs but also contributing to the costs of the network operator (or its service providers) when neither the IA operator nor its customers derives any benefit from the expenditure. The costs for this second element are generally referred to as "retail" costs.

16.    There may be some elements of additional cost incurred by the network in dealing with indirect access traffic (for instance, billing the IA operator) which it may be appropriate to add to the retail minus calculation.

17.    For outpayments, the basic data should be comparatively easy to obtain. Calls will be to specific destinations and charged on some well-established basis. However, in some cases (particularly for international calls), grouping of routes and averaging of outpayments may be necessary to avoid over-proliferation of charges. This averaging should, however, be restrained to avoid encouraging inefficient competition where true costs are in excess of the average or discouraging efficient competition where they are less.

18.    For the retail costs, some of the costs will be directly associated with particular types of call. This is particularly true of the costs of the voucher system which is provided for pre- pay customers (whereas for contract customers revenue is collected through a billing system). For costs which are shared between several types of call or other services there may be a need to spread the costs across the types of call and services with which they are related. For this interim determination, Oftel has only limited information on which to make this finer attribution.

19.    The total of deductible retail costs has been expressed as a percentage of the total revenues and this percentage is then applied to each recommended retail price to establish the deduction for retail costs.

Application of the approach.

20.    For this Interim Charge Determination and to establish a methodology, Oftel has taken the BTCellnet 30 tariff (which is expected to be used by a significant proportion of BTCellnet’s post pay customers) as an example. For each of the main types of call that might be made under this tariff, Oftel has deducted from the recommended retail price the percentage for retail costs established above. The relevant outpayment is then deducted from the result to set the indirect access charge.

21.    For the time being, these determined charges have to be interim charges since there is not sufficient time for Oftel to check the data on costs supplied by the network operator or to review attributions in depth. The results for the BTCellnet 30 tariff are set out in Schedule 1 of this Determination.

22.    The process described above is set out in summary form in Schedule 2 to this Determination. Oftel’s intention is that BTCellnet should apply the same process to each of its retail post-pay tariffs to arrive at the appropriate IA charge: using the same outpayments as used for the same type of call for the BTCellnet 30 IA tariffs and, for post-pay customers’ tariffs, applying the same percentage deduction for retail costs that has been established by the process set out above.

23.    The same process should be applied to establish the IA charges for calls transferred to the IA operators by BTCellnet’s IN pre-pay customers. For these calls, however, the percentage deduction for retail costs may vary depending on the relationship between the costs to the mobile network of revenue collection by billing and by the voucher system.

24.    Over the next two months, leading up to the Final Charge Determination, Oftel will be refining its understanding of the costs that BTCellnet has presented and how they are allocated, and how any refined calculations can be applied to the BTCellnet 30 tariff and other tariffs.

Other outstanding issues in the agreement between INMS and BTCellnet on IA services

25.    There are some other aspects of the draft agreement for provision of IA, other than charges, that are still not agreed between the parties. Oftel has considered these difficulties and, where appropriate, has indicated to the parties how officials might advise the Director if the issues were brought to him for resolution. It is hoped that these indications will help the parties resolve the issues themselves by the end of the two weeks by which they are to complete the agreement following this Interim Charge Determination.

Effects on the timetable for implementation

26.    The 2 December 1999 Determination provides for the implementation of IA services (ie when live IA traffic is to be carried) within one month of the signing of the agreement following a Determination of interim charges by the Director. Oftel is aware that there may be logistical difficulties in setting up the physical arrangements for conveying INMS’s indirect access calls from the BTCellnet network to INMS’s facilities. Oftel is reviewing the issues and their possible impact on the date of implementation. The 2 December 1999 Determination makes provision for the Director (after appropriate consideration of representations) to consent to some later date than is presently set by the Determination.

Parallel dispute – INMS/Vodafone

27.    At the same time as his 2 December 1999 INMS/BTCellnet Determination, the Director also issued a Determination on the parallel dispute between INMS and Vodafone. The consultation on indirect access for mobile networks covered both disputes – as did the Director’s July 1999 Statement. The principles of the two Determinations are the same.

28.    INMS and Vodafone did not reach agreement by the date set in the Determination.

29.    In a parallel Determination to this present Interim Charges Determination, the Director has today determined the interim IA charges to be paid by INMS to Vodafone for IA calls made by subscribers to the Vodafone 30 tariff and has set out the basis on which IA charges for IA calls made by Vodafone customers using other Vodafone retail tariffs should be established.

30.    In the 2 December 1999 Determination of the dispute between INMS and Vodafone, there are the same provisions as in the BTCellnet Determination of the same day for the Interim Indirect Access Charges to be incorporated within two weeks into the agreement between the parties and for the adoption of final charges, after a further Determination, which will be applied retrospectively.

31.    Implementation of IA by Vodafone (when the system should be capable of handling live traffic) was set in the 2 December 1999 Determination in the same terms as for the INMS/BTCellnet dispute (see above, paragraph 26).

Oftel

May 2000

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Schedule 1

*  This information is confidential - refer to BTCellnet

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Schedule 2

Application of Oftel calculations of interim charges for indirect access on BTCellnet network (as used for the BTCellnet 30 tariff and set out in Schedule 1) to other tariffs.

A. For any given retail post-pay tariff, the corresponding IA charge should be calculated by applying the following formula:

C= (0.8*RRP) –OP

Where

C is the charge to be made to the IA operator
RRP is the recommended retail price (exclusive of VAT)
OP is the outpayment made to the terminating operator (and any transit operator) for that call at that time of day.

B. For any given pre-pay tariff, the corresponding IA charge should be calculated by applying the following formula:

C= (0.8*RP) –OP

Where

C is the charge to be made to the IA operatoR
RP is the retail price (exclusive of VAT)
OP is the outpayment made to the terminating operator (and any transit operator) for that call at that time of day.

Oftel
May 2000