Contents

S.1 The Director General of Telecommunications (the ‘Director’) proposes to change the framework for number portability in order to ensure that, in the event of the failure of a telecoms operator, end users can transfer to another operator and still keep their original number. This document sets out the Director's proposals and invites comments on them.

S.2 Number Portability is the facility whereby an end user, who so requests, can retain their telephone number when changing their supplier of telephone service. Changing number can be a major inconvenience and a barrier preventing end users from exercising choice and taking advantage of growing competition in the telecommunications market.

S3 The UK has been at the forefront of the provision of number portability in the European Community. Operators began offering number portability for geographic services in 1996 and for other fixed services in 1997. Number portability for mobile services has been available since January 1999. Since 1 January 2000, number portability between suppliers of fixed telecoms services has been subject to regulation at the EC level as a result of the European Numbering Directive. Chapter 1 provides more information on the background to number portability in the UK. The long term aim of the proposals put forward here would cover both fixed and mobile numbers.

S.4 The failure of Atlantic Telecom in November 2001 highlighted two particular issues. First, end users faced a loss of telephone service during the period after Atlantic’s network was switched off and before the installation of a new service. Secondly, even after a replacement service was implemented, end users were told that their telephone numbers would have to change. This consultation document is concerned only with measures on how to rectify the latter issue. Measures to ensure continuity of service fall to be considered by DTI and are the subject of a separate but concurrent consultation.

S.5 The only way to ensure that end users of a failing operator can continue to use their original allocated numbers is for the complete number block (which usually comprises 10,000 numbers) to be taken over by another operator, who will carry out the necessary technical changes to its own network software to enable the numbers to continue to function. Otherwise, end users have to seek alternative service providers, who will allocate them new numbers.

S.6 Under the current arrangements, Oftel does not require any operator to accept responsibility for the number ranges of a failing or failed operator. Other operators will make a strictly commercial decision as to whether or not to take over these number ranges, based on factors such as potential costs and revenues, resource implications and technical complexity. It cannot therefore be guaranteed that another operator will step in.

S.7 The Director takes the view that the current situation is unacceptable from the viewpoints both of consumer protection and effective competition. Accordingly, he believes that the current position cannot be maintained. The proposals put forward in this document comprise both long-term and short-term solutions. Ultimately, solutions which make use of centralised number databases appear most likely to ensure that end users can move freely between operators without losing their numbers. They are also potentially more efficient than the current arrangements, and could lead to lower costs for operators and their end users, as well as being more resilient to failures occurring elsewhere in the networks, thus aiding disaster recovery. However, developing a central number database for the UK is likely to take some time (perhaps some years) and the risk that other operators may fail before such a system could be introduced cannot be ignored. Accordingly, a short-term solution, based on enhancements to the existing system in order to allow for speedy transfer of number blocks, is also proposed.

S.8 Chapter 1 provides a background to the number portability and block transfer arrangements within the UK. It describes the system currently used, known as ‘Onward Routing’ and some of its inherent weaknesses. It sets out two options that would mitigate those weaknesses – improvements to the Onward Routing system; and a central database. Chapters 2 and 3 describe the legal framework and Oftel’s approach, while Chapter 4 and Chapter 5 explain the options in more detail.. Annexes A to C provide a technical analysis

S.9 Annex D provides an analysis of cost allocation principles for both options. For the short-term solution, it describes those costs normally incurred as a result of block transfer. It also explains that the distribution of costs might reasonably be spread over all end users. For the long term solution, the analysis discusses ways in which each type of cost might most efficiently be recovered.

S.10 Costs are likely to be a major issue in respect of the options set out in this consultation document. Therefore, Annex D should be read and considered thoroughly before any comment is made.

Chapter 1

Background

1.1 Number portability is the facility whereby an end user who so requests, can retain their telephone number when changing their supplier of telephone service.

1.2 Number portability was first introduced in the UK in 1996 following a reference to the Monopolies & Mergers Commission during 1995 (Telephone Number Portability: A report on a reference under section 13 of the Telecommunications Act 1984). Subsequently portability has been extended to non-geographic numbers (eg freephone 0800). From 1999 mobile phone numbers have also been portable (Number Portability in the Mobile Telephony Market: Statement by the Director General of Telecommunications, July 1997) .

1.3 Since 1 January 2000, fixed network number portability has been subject to regulation at European Community level as a result of the EC Numbering Directive (Council Directive 96/61/EC amended by 97/33/EC) which gave end users the right to ‘port’ their number to another operator – ie to change operators without changing numbers. Previously, portability had only been available between pairs of operators entering into reciprocal agreements to port each others’ numbers and this is still the case for mobile telephone numbers. However, the new European Directive on Access and Interconnection (Council Directive 2002/19/EC), due to be implemented in 2003, will extend these rights to mobile networks.

1.4 Clearly it is not sufficient merely to retain the right to port a number: it must be possible to make and receive calls using that number on the new network. There are no International or European standards which specify how portability should work, so in practice each National Regulatory Authority (eg Oftel in the UK) has defined how calls to ported numbers should be handled between operators in their respective countries.

1.5 In the UK, the Director took advice from the Network Interoperability Consultative Committee (NICC) on the most appropriate method to be adopted and subsequently published the Number Portability Functional Specification (June 1998) which covers the essential regulatory features of the portability system. The NICC published its own High Level Service Description (GNP Service Description Issue 1 BSI Published Document 6626:2000) for portability and a Process Manual (UK Industry End to End Process Manual: Published by the OPF Option2 Focus Group (O&M Subcommittee) Version 2.4 last updated June 2000), describing in detail how individual porting is to be established and managed between operators.

1.6 The system adopted for portability for geographic, non-geographic and mobile numbers in the UK is known as ‘Onward Routing’. The system used for mobile portability also uses a form of Onward Routing but with a special signalling relay function. This is not primarily the subject of this consultation, though some of the proposals could impact on the mobile operators, as they too originate calls to fixed customers with ported numbers. Were changes to be made to fixed portability, it may prove beneficial to change mobile portability in a similar way.

1.7 Numbers are normally allocated to operators in blocks of 10,000 (10k). Calls route through the network on the basis that operators’ exchanges have to discriminate, where necessary, down as far as the 10k block in order to find the appropriate path through the network.

1.8 Where a number has been ported to another operator, inbound calls continue to route to the original operator hosting the 10k block. This operator, referred to as the ‘donor operator’, recognises that the number has been ported and forwards the call towards the exchange where the ported end user is located within the ‘recipient operator’s’ network. In this way, the donor operator is responsible for both recognising that a number has been ported and initiating the ‘Onward Routing’.

1.9 An overview of how Onward Routing works can be found in Annex A.

1.10 There are different methods of achieving number portability and other countries have adopted different means. At the time of its introduction, the UK industry believed that in the early years, when ported numbers would be a small minority, Onward Routing represented the most economic method and was also relatively easy to implement.

1.11 In recent months a number of actual and potential weaknesses of Onward Routing have become apparent. This raises the question whether the Onward Routing system needs further development or should be replaced by another approach.

1.12 The most significant issue arose from the closure of the fixed radio access network run by Atlantic Telecom. Atlantic’s end users had to move to another operator but found that no operator was prepared to allow them to retain their old Atlantic telephone numbers. This had a very significant effect on many small businesses who had invested heavily in promoting their numbers, eg though directories and publicity material, and who faced loss of business when they were forced, at short notice, to change their numbers. Additionally, they faced the direct costs of reprinting stationery and signage (this issue did not, of course, arise for Atlantic's Indirect Access end users.)

1.13 The reason why portability could not be made available to them is that the system of Onward Routing relies on the donor operator continuing to forward calls to the recipient operator. When the donor operator’s network is closed, Onward Routing cannot continue.

1.14 There are other weaknesses with Onward Routing which have been discussed in the industry in recent months. These include:

Any customers who had already ported from the failing operator to another operator would lose all incoming service when the donor operator’s network ceases.

• Taking over the number ranges of a failing operator is complex and time consuming. The failing operator may already have laid off the staff necessary to carry out such a complex project and there may not be the time to achieve it;

• the present system is optimised for single number ports; there is no effective process for block transfer and porting reconfiguration of end users at one time (by ‘block transfer and porting reconfiguration’ Oftel means the process of rearranging Donor/Recipient rerouting that occurs when the Onward Routing function is moved from the original block owner to another. It is assumed that the actual transfer of customers from one network to another will continue to use existing processes.);

• the present system of Onward Routing adds cost to the conveyance of calls, especially on non-geographic calls, where the donor and recipient operators may not have direct interconnection between their systems;

• as a result of the above, operators providing non-geographic number services have been reluctant and/or slow to put in place porting arrangements with each other;

• establishing a new inter-operator porting arrangement can take several months;

• even where a donor operator continues in business, the capacity of its system may not always keep up with the demands from other networks’ end users who will route ported calls through their network. This can lead to congestion.

1.15 In the non-geographic market, the number of active operators means that it is not practical and reasonable to assume that every combination of operator pairs has set up the necessary technical arrangements for portability in advance. Rather, Oftel has stated (www.oftel.gov.uk/publications/numbering/port0100.htm) that, in order that end users’ porting rights are respected, operators should put in place the necessary arrangements for both geographic and non-geographic numbers before actively seeking to persuade the other operator’s end users to switch.

1.16 As noted above, Onward Routing is dependent on the continued operation of the donor operator’s network. In New York on 11 September 2001, several exchanges were totally destroyed, yet service was rapidly restored to alternative locations. The USA does not use Onward Routing and this event highlights how enhanced porting technology could make a major contribution to the resilience of the UK telecoms network and its ability to recover from major disasters.

1.17 Given the problems highlighted above, as exemplified by the inability of Atlantic end users to port to another operator, Oftel believes there are two broad options to mitigate these problems:

• to improve the Onward Routing system by ensuring that the Onward Routing function is performed by another operator when a network closes, and/or

• to adopt an alternative system, which would additionally remove the other identified difficulties of the present one and give greater network resilience overall.

1.18 If operators could be confident that an operator would be able to perform Onward Routing after a network closes, then they would be able to offer portability, confident in the knowledge that service with that number would be maintained, as long as the necessary changes could be done before the network closed.

1.19 The operator carrying out Onward Routing is, of necessity, the operator ‘owning’ the 10k number block to which other networks direct calls. Oftel has therefore considered whether it would be possible to change the responsibility for 10k block ownership and with it the Onward Routing.

1.20 In fact, such a process is already contained in the Functional Specification, although it was originally included for a somewhat different purpose. It was recognised that, should number portability penetration rise to the point where more numbers were ported than hosted normally, it would be economically efficient to transfer the 10k block ownership and the Onward Routing responsibility to the operator having the most numbers in a block. But such a situation would also arise in the period just before a network closure, assuming that other operators were allowing portability to take place.

1.21 In practice, with both the closures of the Ionica (December 1998) and Atlantic networks, BT declined to agree to such a transfer. The Functional Specification requires the consent of both donor and recipient operators to the process. BT’s action in these cases could not be considered unreasonable. The detailed procedures for such a block transfer were not defined by the industry and do not appear in either the High Level Service Description or the Process Manual. Furthermore, there exists no agreement on how the costs of implementing a block transfer would be allocated amongst industry parties. Finally, in the case of the Atlantic closure, there was very little time to perform such a major process change. The possibility of introducing a block transfer process is explored in Chapter 4.

1.22 An alternative approach, and one that avoids Onward Routing altogether, exploits the use of a central database of ported numbers. Such an approach is used in many other countries, notably the USA and Canada

1.23 Under this approach, all operators would submit details of all ported numbers to a central industry database. Operators would then download information from this database in order to route calls to the appropriate destination. This would not be done on a call by call basis as no single central database would cope with the demand and it would be an unacceptable ‘single point of failure’. Each operator would use the database information to populate the analysis fields in its own exchanges or in its own Intelligent Network (IN) databases. IN databases are frequently employed where different routing requirements are needed for individual numbers. However, essentially the choice of technology within each operator’s network is a matter for that operator. The only requirement would be that ported numbers should be routed through the network based on information obtained from a central database. Such a scheme is explored in Chapter 5.

1.24 The primary reason for this consultation is because of the issues that arose following the failure of Atlantic Telecom. Although improvements to Onward Routing are being proposed with fixed portability in mind, the long term central database proposal could include mobile numbers. The technical solution for mobile number portability (PNO-ISC Service description Number 008 – Mobile Number Portability), which is currently implemented on UK mobile networks, does give rise the inefficient routing of calls to mobile telephones. It might be that the implementation of any short term and long term solutions proposed for fixed telephony, will make the implementation of a more efficient and robust form of mobile number portability easier.

1.26 In conclusion, Oftel believes that, given the continuing risk – inherent in markets in which there is competition – of networks closing, the present situation whereby end users are unable to exercise their right to port their numbers is not acceptable and some changes are therefore necessary. Improvements are needed in the short term as the risks are immediate, but a phased programme of reform may bring the best longer-term outcome.

Chapter 2

2.1 Depending upon the precise nature of, and details on, the implementation of Oftel’s proposed solutions (after taking into account responses to this consultation document), the Director will decide upon which legal powers, if necessary, he intends to take any regulatory action. For instance, in the absence of any industry agreement, he will consider whether amendments to the Functional Specification (and/or the Numbering Conventions) are sufficient to address the short term solution. However, particularly where Oftel requires powers to determine cost allocation issues or otherwise for purposes of implementing the long term solution, it is likely that the Director would need to propose modifications to conditions of licences granted under section 7 of the Telecommunications Act.

2.2 In particular, the Director is empowered under paragraph (a) of section 7(5) to propose such conditions as appear to him to be requisite or expedient having regard to the duties imposed on him by section 3 of that Act, certain provisions of the Licensing Directive (97/13/EC) and the obligations imposed on him in pursuance of the Telecommunications (Interconnection) Regulations 1997, SI 1997/2931, which implements the Interconnection Directive (97/33/EC), (‘ICD Regulations’).

2.3 For instance, the Director may decide to exercise his general duties in order to promote interests of consumers by, inter alia, requiring that in the event of failure of a telecoms business its number blocks should be transferred to another operator so as to ensure that calls to ported numbers continue to be supported, and that costs should be allocated in a certain manner.

2.4 In addition, the Licensing Directive expressly allows the imposition of conditions relating to the effective and efficient use of the numbering capacity. As will be explained in the following Chapters of this document, both proposed solutions encourage and improve a more efficient use of UK numbering capacity .

2.5 Furthermore, the ICD Regulations not only impose obligations on the Director with regard to numbering and number portability (in regulation 11), but also empower him to set ex ante conditions concerning requirements for the provision of number portability. In this context, Oftel takes the view that the proposal for a centralised database of numbers may facilitate not only number block transfers but also the porting of individual numbers, since it will remove the need for inefficient tromboning (see Glossary) and make the provision of service to ported numbers more secure.

2.6 Oftel will also have to ensure that any detailed solution complies with the relevant provisions of the Data Protection Act 1984, including the Telecoms Data Protection Directive (97/66/EC). For instance, as to the long term solution, it needs to be considered whether a process (or system) could be set up whereby a customer consents to his information being disclosed and used by the person managing the centralised database and by operators downloading information from the same.

2.7 Finally, it is to be noted that the position will remain substantially the same with regard to the above-mentioned legal powers under the new Directives. Apart from a new express duty on national regulatory authorities (NRAs), in promoting competition, to encourage efficient use, and to ensure the effective management, of numbering resources in Article 8(2) of the Framework Directive (2002/21/EC), Article 10 of that Directive retains most of the numbering obligations currently set out in the ICD Regulations, as discussed above.

2.8 Likewise, Part C of the Annex to the Authorisation Directive (2002/20/EC) allows conditions to be imposed for purposes of, inter alia, effective and efficient use of numbers and number portability requirements. In addition, Article 30 of the Universal Service Directive (2002/22/EC) imposes obligations on NRAs with regard to number portability similarly to the current EC Numbering Directive (as implemented by the Number Portability Regulations, SI 1999/3449).

Chapter 3

3.1 This chapter sets out Oftel’s objectives and approach to alter the arrangements for transfer of number ranges in the event of the failure of a telecoms operator, in order to ensure continuity of number for end users.

3.2 Effective portability arrangements are relevant to at least two of Oftel’s four high-level objectives as set out in its management plan: effective competition and adequately protected consumers. Competition between suppliers will be unnecessarily muted if end users cannot switch easily between them. But even if changing suppliers is easy, end users will not do so if the risk of losing service, and/or telephone number, should their supplier fail, is perceived as significant. Loss of service when an operator fails is therefore also a matter of potential concern as regards both consumer protection and competition. However, Oftel has concerned itself in this document only with the arrangements for number portability, rather than with continuity of service. Solutions for the latter (eg ways of ensuring that the switches of a failing operator are kept open after the business has become insolvent) are potentially costly, and funding them may require primary legislation which Oftel has no power to introduce. Accordingly, in this consultation Oftel is not seeking views on continuity of service, or security of supply. Instead, those issues are subject to a separate, but concurrent, consultation by the DTI.

3.3 Oftel considers that its proposals will improve the effectiveness of and lead to greater consumer confidence in number portability. The proposals will mean that, should any operator face administration, its current and previous end users will be much more likely to retain their existing telephone numbers. Consumer choice of telecoms services will thereby be further facilitated.

3.4 The potential inefficiency of Onward Routing has always been recognised but it has been accepted that, as long as only a small percentage of calls are to ported numbers, such an approach is reasonable. However, Oftel considers that as this percentage increases, regulatory intervention may be needed in order to ensure the efficient use of network resources. In light of the recent failure of Atlantic and of the issues described in Chapter 1, there now appears to be a stronger case for regulatory intervention than there has been previously. Subject to proportionality, Oftel has a duty to take steps to ensure that users’ number portability rights are delivered irrespective of the technology used for number portability. In addition, a delay in addressing the problems of Onward Routing may lead to a loss of consumer confidence in number portability itself – particularly if another operator failure were to occur.

3.5 Any revised system of number portability must ensure that users’ rights are maintained during and after closure of a network and that efficient processes exist to support portability as customers migrate from closing networks to others.

3.6 While users’ rights are paramount, any options must be subject to an appropriate regulatory option appraisal, taking into account the costs, benefits and impact on consumers and the industry. The block transfer system was part of the original functional specification for portability and therefore was encompassed by the cost-benefit analysis carried out when portability was first introduced. Industry has failed to bear the costs of introduction of this facility and it can be argued that it should now do so without further analysis. The longer-term solution, however, introduces further costs and further benefits than originally analysed, so a full appraisal will be required and this consultation seeks to identify the likely costs of this approach and all the other factors that should be taken into account in the regulatory option appraisal.

3.7 Once it has been determined that action should be taken, because the benefits significantly outweigh the disbenefits, the issue then arises of how the costs incurred by the new system should be borne by the industry and/or consumers. Annex D addresses the issue of cost allocation.

Chapter 4

4.1 Number portability in the UK is implemented using an approach known as Onward Routing (see Chapter 1). This means that calls to ported numbers continue indefinitely to be routed via the network of the donor operator (the operator who holds the block of numbers from which the customer’s number originates).

4.2 As a short-term measure, it is proposed that means are found and implemented which ensure that, before a network closes, another operator is able to perform the closing network’s Onward Routing function. As things stand, unless another operator takes over the number ranges of an operator exiting the market, all end users who ported their numbers from the failing operator, even if many years have elapsed since they did so, will lose service. End users of a failing operator also have no prospect of porting their number to another operator.

4.3 The main benefits of the short term approach are:

• it rectifies the ‘Achilles heel’ of the current portability arrangements where an operator is unable to continue its Onward Routing function;

• it does not require significant changes to the current portability systems and processes; and

• it does not involve very substantial costs, compared to a direct routing solution.

4.4 However, unlike the longer term options described in the following chapter, it does not address many of the other weaknesses with the Onward Routing system which have been observed since its implementation in the mid-1990s and which are described in Chapter 1. In addition to those weaknesses already described, Onward Routing is an inefficient use of network resources, as calls are not routed optimally through the network. The associated costs are covered by a transit charge from the recipient operator to the donor operator and these are ultimately recovered from the end user.

4.5 A more detailed technical appreciation of the issues surrounding the transfer of blocks is set out in Annex B.

4.6 At an industry meeting some months ago, Oftel asked operators for their opinions as to how number blocks might remain intact. In response, operators pointed out a range of technical and commercial problems. In particular, they were unable to come up with a solution that would shorten the time-scales involved in a block transfer, thereby preventing customer disruption. The group could not identify a generic process to transfer the blocks from one operator to another and recommended that operator failures be managed on a case-by-case basis.

4.7 Whilst Oftel recognises that a block transfer presents a range of problems to be overcome, it does not consider that doing nothing is an option acceptable to UK end users. Moreover, as set out in Chapter 1, Oftel does not believe that such a position would satisfy the provisions of the European Numbering Directive which states that subscribers have a right to be able to retain their telephone numbers when switching between operators.

4.9 The primary legal duty of an administrator of a failing operator is to act in the best interests of its creditors. It may well be the case that administrators are unwilling to initiate a block transfer, however small the cost, unless this cost is recovered. Significant costs would also be incurred by recipient operators, so they too are unlikely to be willing to participate in such an initiative. Oftel does not therefore consider that the current rules for block transfer address adequately a scenario where an operator is in the process of closing down its operations.

• that, in the absence of any voluntary transfer of number blocks, Oftel should intervene to require that, in the event of failure of a telecoms business, its number blocks can be transferred to another operator so as to ensure that calls to ported numbers continue to be supported. This should, with the minimum of disruption, enable customers of a failing operator to retain their numbers when switching to an alternative provider;

• whether the recipient of the transferred number blocks to a particular operator should be the operator with the most imported numbers from a block (after transfer of customers from the closing network); or whether transfer should be on some other basis;

• whether in the absence of any industry agreement, the Director determine the allocation of additional costs incurred by the operators involved in the transfer process. Oftel believes that such costs are unlikely to be large although this will be dependent upon the scale of transfer. Costs arise not so much from the transfer of the number blocks themselves as from the reconfiguration of the porting requirements; and

• that industry develops streamlined processes and systems capable of rapid block transfer and porting reconfiguration to support the transfer of blocks. By ‘block transfer and porting reconfiguration' Oftel means the process of rearranging donor/recipient rerouting that occurs when the Onward Routing function is moved from the original block owner to another. It is assumed that the actual transfer of end users from one network to another will continue to use existing processes.

5.2 This proposed solution would work by operators submitting details of numbers or ported numbers to a central industry database. Operators would then use this central database as the master copy for downloading information into their own networks. The objective would be that each operator originating calls into the UK network (including calls from mobile networks and calls incoming from overseas) would be responsible for routing calls to ported numbers directly to the recipient network (but possibly using a transit network), thereby avoiding the problems inherent in Onward Routing caused by routing via the donor network. The routing information downloaded could, in principle, be used to populate individual switches or be used within Intelligent Network (IN) databases which are used by switches on a call by call basis when routing cannot be determined by a simple block analysis. Since Oftel regulates in principle on a technology neutral basis, any method could be employed internal to each network, as long as the interconnection arrangements between donor, recipient and any transit operators were mutually consistent. However, in practice, an IN solution is by far the most likely method to be employed and given that there are several variations and hybrid approaches that can be used with IN; and that such variations would impact both on interconnection arrangements and also on how numbers were downloaded from the database, it is in this instance appropriate to consult on the particular technological implementation to be adopted.

5.3 One overriding concern about an IN solution would be the costs of implementation and operation. One possibility would be that originating operators, whilst having the obligation to route ported calls according to the master database could choose to avoid direct IN costs by contracting with a downstream transit operator to perform the IN function. This would be reflected in the interconnection charges for such calls and would introduce a ‘build or buy’ option into the implementation. This makes economic sense if the IN functionality is not otherwise needed at local exchanges and, in this context, it is noted that in North America, IN interrogation is usually done at the transit network layer. Furthermore, there are several ways in which IN interrogation could work. It could be done either:

• on an ‘All Calls Query’ basis, ie the originating operator accesses this information for every call; or,

• on a ‘Query on Release’ basis, ie the originating operator routes a call as normal and only checks the database when it receives a signal back from another network telling it to do so.

5.4 The Query on Release method would work by the call being routed as normal to the donor network according to the 10k block, but the donor network would signal back that the number was ported. The originating operator would then interrogate the IN database for the appropriate routing. While this avoids routing calls via the donor network and avoids an IN look-up on every call, it does require the donor network to remain in existence for the method to work. To cope with the problem of closing networks, Oftel believes that a hybrid approach is probably needed, whereby most number blocks would work on a Query on Release system, while blocks relating to closing or closed networks move to All Calls Query.

5.5 An alternative approach would be for operators to implement the solution on the Service Switching Points (SSPs) associated with their own networks and then link these to a Service Control Point (SCP) provided by a third party service provider who could operate the SCP on behalf of a number of smaller operators. This would enable smaller operators to benefit from the economies of scale experienced by larger operators and would replace an up front capital investment for setting up an SCP with an ongoing charge for each query.

5.7 In addition to the contribution to the overall resilience of the UK network in terms of disaster recovery, there are a number of specific but significant benefits of this central database approach:

• depending upon the manner of implementation it is either less reliant, or not at all reliant, upon the donor operator, unlike Onward Routing. It is therefore much more robust and able to maintain portability where operators fail and exit the market.

• it provides a relatively straightforward evolution path from Query on Release to All Call Query should the volume of calls to ported numbers require further network efficiency/routing optimisation.

• whilst costs would be incurred by, in particular, originating operators in carrying out such queries, the fact that calls to ported numbers would no longer be conveyed via the donor operator, but direct to the recipient operator (except where transit arrangements are commercially desirable), the costs of ‘tromboning’ (see Glossary) and additional conveyance would be eliminated. Routing is thereby optimised. Such a change in commercial arrangements potentially makes the winning of end users more attractive, strengthening competition and attracting market entry (see Annex C).

• since calls to ported numbers would no longer traverse the donor operator’s network, potential congestion issues and forecasting difficulties should not materialise.

• a central database approach offers better prospects in the long term for increased and efficient utilisation of UK numbering capacity than is currently the case under the existing system of number block allocations. Currently, numbering capacity is allocated in blocks of 10k (or in some cases 1k) and this leads to much wasted capacity. Individual number allocation would allow all numbers to be available for use by all customers, irrespective of the network.

5.8 Oftel recognises that a central database may involve significant set-up costs, but such costs vary substantially depending on the method of implementation. This consultation seeks to encourage a more detailed and informed debate about the sorts of costs involved to facilitate further work on the costs and benefits of a central database arrangements and, in due course, to develop thinking about how such costs might be shared.

5.9 More details about the technical arrangements and options surrounding a central database solution are set out in Annex C. See also Figure 1 on the next page for a high level view of the architecture of such a database.

5.10 In addition to considering who should operate the central database, we must also consider the scope of this operation. There are essentially two models. In the first, the database system acts as a repository for the outcome of porting transactions although the database operator has no role in the transaction itself. The transaction process is agreed bilaterally by the two operators concerned, who then notify the database operator of the outcome. The second model is one where the database operator also provides a clearing house for the transactions required to port a number. The aim is to streamline the porting process by replacing a large number of bilateral processes with a single interface to a central service management system. Each operator, instead of having to link with every other operator, needs only to link to the central database.

Figure 1: A high level view of the architecture of a central database

5.11 A key issue is how the central database would be run. Unlike Oftel’s present numbering database, the central database would be a core part of the network operation and it would not be appropriate for it to be run by Oftel. One option would be to establish a single company to run the database as a commercial operation, regulated by Oftel as a provider of an ‘Associated Facility ‘ (see Article 2(e) of Directive 2002/21/EC)

5.12 Competition in the central database market could be promoted by allowing different parts of the numbering scheme to be run by different companies. This would ease the problems were it decided that, due to performance issues, it was necessary to find another operator for a part of the numbering system.

5.13 Yet another option would be to use a single operator, but to establish it as a ‘not for profit’ company run on behalf of its shareholders who would comprise the operators themselves. This is somewhat similar to the way in which the UK Internet domain name system is run by Nominet. This could promote incentives for both efficiency and cost-minimisation.

5.14 Views are sought on the merits of these or other approaches. Oftel would also welcome comments on issues relating to the inclusion of mobile numbers in the long term central database solution.

Chapter 6

6.1 Oftel seeks the views of industry and others on the proposals outlined in this document. The closing date for submission of comments is 13 September 2002

6.2 Where possible, comments should be made in writing and sent by e-mail to sean.browne@oftel.gov.uk. However, copies may also be posted or faxed to the address below. If any stakeholders are unable to respond in one of these ways, they should discuss alternatives with the Oftel manager named below:

Maeve Gallagher
Competition Casework Manager
Oftel
50 Ludgate Hill
London
EC4M 7JJ

tel: 020 7634 8777
fax: 020 7634 8949 e-mail maeve.gallagher@oftel.gov.uk

6.3 Paper copies of this document and more accessible formats such as large print, Braille, disc and audio cassette can be made available on request. Please contact Oftel’s Research and Information Unit by phoning 020 7634 8761 or by sending an e-mail to infocent@oftel.gov.uk.

6.4 In the interests of transparency, all representations will be published, except where respondents indicate that a response, or part of it, is confidential. Respondents are therefore asked to separate out any confidential material into a confidential annex which is clearly identified as containing confidential material. Oftel will take steps to protect the confidentiality of all such material from the moment that it is received at Oftel’s offices. However, in the interests of transparency, respondents should avoid applying confidential markings wherever possible.

6.5 Non confidential representations can be viewed on Oftel’s website in the Publications section under Responses to Oftel consultations (see www.oftel.gov.uk/publications/responses/index.htm). They can also be viewed at Oftel’s Research and Information Unit. Appointments must be made in advance by phoning 020 7634 8761 or sending an e-mail to infocent@oftel.gov.uk.

Routing of call to ported number

1. Call arrives at BT trunk exchange

2. 10k block code analysed and call forwarded to donor network

3. Donor network exchange recognises number is ported

4. Reroutes call to BT with porting prefix attached

5. BT trunk exchange analyses the porting prefix and forwards call to recipient local exchange

6. Call remains routed via donor exchange. (‘tromboning’)

1. Call arrives at BT trunk exchange

2. 10k block code analysed and call forwarded to BT Local Exchange

3. Local exchange recognises number is ported

4. Local exchange releases call, sending back ‘dropback’ message, which includes the porting prefix

5. BT trunk exchange releases onward part of the call

6. BT trunk exchange analyses porting prefix and forwards call to recipient local exchange

7. Call is held via trunk exchange only, without tromboning.

B.1 As discussed in more detail in Chapter 4 of this consultation document, the key technical feature of Onward Routing is that calls to ported numbers continue indefinitely to be routed via the switches of the donor operator. This has two practical consequences for consumers:

• calls are not routed optimally to the final destination, but are required to transit the network of the donor operator. This represents potentially an inefficient use of network resources and the associated costs are covered by a transit charge from the recipient operator to the donor operator. These will ultimately have to be recovered from the consumer.

• consumers remain dependent on the donor operator for continued service. The failure of that operator will result in consumers losing service, even if many years have elapsed since the number was ported.

B.2 The potential inefficiency of Onward Routing has always been recognised, and has been regarded as acceptable as long as only a small percentage of calls are to ported numbers. However, as this percentage increases, Oftel believes that the technical solution must be modified in order to ensure the efficient use of network resources and UK numbering capacity. One important specific case considered in the Functional Specification for Number Portability is where the majority of numbers within a number block are ported from the owner of that number block to a new operator as a result of the new operator gaining market share on a gradual basis.

B.3 Under such circumstances, the efficiency of Onward Routing is only optimised if number block ownership is transferred to the operator who owns the majority of customers served by that block. The intention is to minimise the number of calls unnecessarily routed via the network of a donor operator, and therefore subject to a transit charge. The Functional Specification for Number Portability states that a number block transfer should be considered where a donor operator loses 60 per cent or more of its customer numbers to any recipient operators, and at least 40 per cent of those customer numbers are handled by one recipient operators.

B.4 The Functional Specification sets out explicitly the technical method to be used for such a transfer, stating that blocks will be transferred using the same technical method – amendments to the routing tables of switches on the donor (and all other) operator’s systems – as would be used if a new 10k number block had been opened up by the recipient operator. It should be noted, however, that transferring a number block will require a slightly more complex process than opening up a new one. The reasons are summarised below, and are independent of the reason for the transfer.

B.5 The recipient operator who is taking ownership of the number block will own most, but not all, of the customer numbers in the block. It will have to make arrangements to port those numbers it does not own, and will do so using Onward Routing from its own network. In particular, customers still on the closing network will form a major group of such numbers. The process for reallocating a number block must take into account the time required to port these numbers. At present, there is only a defined process for individual ports, whereas a process is required to support rapid block transfer and porting reconfiguration.

B.6 The coverage areas of the local exchanges of the donor and recipient operators are unlikely to be coincident. The donor operator will have allocated numbers to subscribers in such a way as to simplify routing to its correct local exchange, by ensuring that each 10k number block is associated with the coverage area of one of its local exchanges. The recipient operatordoes not have this flexibility, so may not be able to route calls to the correct local exchange solely using the 10k number block. There are a variety of solutions to this, and the optimum solution will depend on the degree of overlap between the donor and recipient operators’ local exchange coverage areas. If only a few subscribers are affected, it may be most efficient to use ‘call dropback’ (see Annex A) within the recipient operatorr’s network, as is already used for calls to ported numbers on BT’s network. If a large number of subscribers are affected, an IN query on every call to a number on the reallocated block may be more efficient.

B.7 Clearly, further work is required to develop the detailed process for number block reallocation, and it is expected that this work will be carried out under the auspices of the NICC. One idea would be for a specification to be drawn up of a file format which could be rapidly exported from the closing network and imported to the network to which the 10k block is being transferred. This would allow the rapid establishment of all the porting arrangements necessary on the new network.

B.8 Oftel would welcome comment from industry on any areas of concern related to number block transfer. It is believed that the main issue would be the design and operation of a ‘block transfer and porting reconfiguration’ process.

C1 Under Onward Routing, the information required to route a call to a ported number is stored on the local exchange which ‘owns’ each number block. Oftel maintains records of number block ownership, but there is no equivalent central database recording the ownership of individual ported numbers. As has been described in Chapter 1, this means that the system is highly vulnerable to the failure of an operator. An operator failure will result in all end users served by number blocks belonging to that operator losing service, whether they are customers of that network or had previously ported to another operator.

C.2 The Block Transfer method, as described in Chapter 4 still has a number of disadvantages, which include:

• intensive activity required when an operator fails in order to reconfigure routing of the number block and ported customers within it;
  
• potential congestion and forecasting problems in donor networks remain;
  
• no ability to support rapid re-routing of calls in the event of a major catastrophe;
  
• no capability to support migration to individual number allocation with its superior numbering efficiency.

C.3 Whilst the manner in which calls are routed within operators’ networks is not primarily Oftel's responsibility, number administration and interconnection arrangements are, under the terms of the Interconnection Directive (97/33/EC) and, in the future, of the Framework Directive (2000/21/EC). Oftel is therefore consulting on a proposal to address the problems summarised above by implementation within the UK of a number portability system based on a central database.

C.4 Although the detailed system architecture is still to be defined, the key elements of such a system are likely to comprise:

• systems common to all operators. These comprise a central number allocation database, a means for operators to submit an order to port a number, and a means for operators to download routing information for all ported numbers. These systems must clearly be based on the adoption of common standards;

• systems specific to individual operators. Once operators have downloaded routing information, they will use this to route calls originating within their networks. While these arrangements are primarily a matter for the operators themselves, there needs to be industry-wide agreement on, for example, whether the hybrid All Calls Query/Query on Release system, as proposed by Oftel, is implemented.

C.5 Within this overall framework, a number of detailed system designs are possible, as is illustrated by the wide variety which have been implemented elsewhere in the world. The aim in the UK must be to minimise implementation and operational costs, by adopting a solution which allows as straightforward a migration as possible from the current operational systems, while allowing a migration path to an All Calls Query system should that be justified as part of Oftel’s overall approach to number administration. Some key issues are discussed in more detail below.

C.6 The central number allocation database will contain a data record for each ported number. Each data record might typically include the identity of the current local service provider and a prefix code identifying the switch to which calls must be routed. To support future evolution, the database should be able to support other information, including information about the customer.

C.7 It is assumed that the prefix code stored in the central database will be identical to that currently used for Onward Routing. A variety of alternative approaches to numbering and addressing are possible, as set out in ETSI specification TR 101 122 (Network aspects; Numbering and addressing for number portability). Continued use of the current prefix code should minimise implementation costs for the new system, especially those related to Operational Support Systems (OSS).

C.8 A central aim of the new system is to improve network resilience, and it is therefore essential that the central database does not itself become a single point of failure. Fault tolerant systems must be used, with redundant processors and a replicated database.

C.9 Operators wishing to port a number will need to access the database in order to query its status, and submit an order. For low order volumes, the simplest means of doing so is likely to be via a web interface. As order volumes increase, it is likely that operators will wish to move towards full ‘electronic bonding’, providing a means for their OSS systems directly to access the central database with no manual intervention, and hence reduced transaction costs. Other similar order management systems currently under development in the UK are based on the use of XML.

C.10 Operators will need to access the database in order to download routing information. The simplest means of doing so is by file transfer, but an XML-based interface might also be desirable.

C.11 It is commonly assumed that routing within the networks of individual operators will be carried out using an IN-based solution. The essential elements of such a solution are described here. It is to be noted, however, that this is only to help focus the discussion, and provide a framework for estimating implementation costs. As already noted, it would not be appropriate for Oftel to require operators to adopt a specific technical solution, though Oftel will need to ensure that solutions adopted are mutually consistent.

C.12 The main elements of any IN-based solution are one or more Service Control Points (SCPs), Service Switching Points (SSPs) associated with each exchange responsible for routing calls to ported numbers, and signalling links connecting each SSP to an SCP.

C.13 Operators will maintain a local copy of the number portability database in a database associated with each SCP. This database will be regularly synchronised with the central number portability database. The interface provided to support this synchronisation process is the key interface between the central database and operators’ own networks. The interface specification must clearly be agreed within industry, under the auspices of the appropriate NICC working group.

C.14 Exchanges (local or tandem) which are responsible for routing calls to ported numbers will be associated with an IN SSP (Service Switching Point). Each SSP is connected via SS7 signalling links to an SCP. On receipt of an appropriate trigger, the SSP will query the SCP in order to determine how a call should be routed.

C.15 An important policy issue in relation to the SSPs is determining what constitutes an appropriate trigger. Two different approaches are commonly identified:

• 'Query on Release' (QOR). Under this approach, an exchange routing a call first attempts to route to the destination exchange in the traditional manner, based on number block ownership. The destination exchange either completes the call or, if the call is to a ported number, releases the call. This release triggers an IN query to determine how the call to this ported number should be routed.

• ‘All Calls Query' (ACQ). Under this approach, the exchange routing the call triggers an IN query on every call.

C.16 QOR is more efficient for calls to unported numbers, which are routed without any IN query. ACQ is more efficient for calls to ported numbers, which are routed without first attempting the traditional method of routing. Overall, QOR is therefore more efficient, whilst the percentage of calls to ported numbers is small, but ACQ becomes more efficient as this percentage grows. The initial implementation costs of ACQ are likely to be higher, due to the increased number of signalling links required, and the increased load on exchange processors.

C.17 An important advantage of ACQ is that it does, by definition, treat all calls in the same manner. The use of QOR, however, introduces a significant overhead, and an associated delay, for calls to ported numbers as compared with calls to unported numbers. This can be regarded as discriminatory, and the US FCC ruled out QOR on this basis. Despite this, and in order to minimise implementation costs, Oftel does not initially propose to set performance targets that would rule out QOR. Oftel does, however, reserve the right to do so in future, in order to ensure that systems are designed so as to provide a migration path from QOR to ACQ as the percentage of calls to ported numbers increases.

C.18 QOR can only operate for those number blocks hosted on a specific local exchange. It cannot, therefore, be used for a number block belonging to a failed operator which is not subsequently re-allocated to another operator. For such number blocks it will clearly be necessary to use ACQ, reinforcing the need to build in this functionality from the beginning.

C.19 Finally, it is recognised that it may not be cost-effective for smaller operators to implement a full IN solution themselves. Such operators have two alternatives:

• Operators could implement the solution on the SSPs associated with their own exchanges, but link these to an SCP provided by a third party service provider. This third party could implement and operate the SCP on behalf of several smaller operators, allowing them to benefit from the same economies of scale experienced by larger operators, and replacing an initial capital investment required to set up the SCP with an ongoing charge per query.

• An alternative approach for small operators is not to attempt to route calls themselves, but to pass all calls to the downstream operator with whom they interconnect, typically BT. The routing of calls to ported numbers would then be carried out by the tandem switches of that operator, and the originating operator would pay a charge for this service.

C.20 Figure 2 at the end of this annex shows three possibilities for routing architectures in respect of calls to ported numbers. With non-geographic portability, it is clearly best for the IN interrogation to be done in the originating exchange or the first transit exchange. With geographic portability, it could be just as efficient to do the IN interrogation from the last transit exchange in the call, though this method would have to be able to cope with local calls which do not use the transit network at all. Comments are sought on this.

C.21 Oftel seeks feedback from operators and other interested parties on the issues raised in this annex. Areas where feedback would be particularly welcome include:

• what information should be stored in the central database?

• what interfaces are required for ordering a number port (e.g. web GUI, XML, etc)?

• what interface is required for synchronisation of the central database with operators own routing databases?

• what technical solutions will best ensure that the central database does not represent a single point of failure?

• Is it appropriate to continue to use the current prefix code for routing calls?

• is it reasonable to permit the use of a QOR-based trigger as well as QAC, in order to minimise startup costs? (QAC would be needed anyway to support blocks from closed operators.)

• is it reasonable to ensure that a future migration to QAC is possible, as the percentage of calls to ported numbers increases?

• who should operate the central database?

• are third party service providers interested in providing number portability services to UK operators?

• do operators have estimates for the implementation costs? Oftel particularly welcomes feedback on how these costs break down between different systems (OSS, signalling links, processor upgrades etc), and how they can be minimised. In particular, operators should take account of the ‘build or buy’ concept allowing IN investment in local exchanges to be avoided if appropriate.

Figure 2: Three possibilities for routing architectures for calls to ported numbers

This annex sets out an economic analysis of the cost allocation aspects of the number portability regimes suggested in this consultation. As background, the first section provides a discussion of the current rules for cost sharing under the current number portability regime. Sections 2 and 3 discuss the associated costs and options for cost recovery in the short term and long term solutions.

D.1 The current number portability regime basis of allocating costs associated with portability is cost sharing. While this principle, which is on the basis of incremental costs, is only determined for BT, other donor and recipient operators could either use this as a basis for cost sharing or mutually agree on a different basis. In addition, one or both of the operators may ask the Director to determine the appropriate cost basis. The costs of number portability are classified as:

a. System set-up costs: These are the costs that are incurred by each operator to ensure that its network and management systems can provide portability. These are therefore an essential part of the investment which every operator needs to make. In providing portability, the donor operator is not allowed to make a charge for System Set-Up costs.

b. Per-line costs: These are the costs most directly applicable to those incurred by the donor operator with respect to setting up portability for each number or block of numbers. They are recovered through charges paid by the recipient operator.

c. Additional Conveyance Costs: These are costs of conveyance of each call to a ported number, additional to the costs of non-ported calls. The donor operator cannot charge the recipient operator a specific ‘portability’ charge for such additional conveyance. The costs of additional conveyance are subsumed into the donor operator’s general network costs, spreading the cost over all calls on the networks.

d. Average Porting Conveyance Costs (APCCs): These are costs incurred by a donor operator acting as a transit operator for calls that originate on another operator’s network and are destined for a recipient operator. They are recoverable from the recipient operator.

D.2 The economic analysis of the two approaches set out in this consultation not only identifies the costs that are under each approach but also the manner in which cost recovery should take place.

D.3 Since the new operator would be taking over a block of numbers that are not its own, it must not only make arrangements for any existing ported numbers, but also the non-ported numbers of the failing operator, which now become ‘ported’. The ported numbers would still belong to the same recipient operators and porting arrangements as in the current regime will continue; ie the recipient operators will continue paying the same charges, only this time to the new donor operator. In the short term solution therefore, the cost allocation for the porting arrangements remains the same as in the current regime and is not discussed. The only relevant costs are those associated with taking over the number block of the failed operator and reconfiguring the porting arrangements. These costs involve the preparation of, the loading, and the testing of the exchange data to accommodate the new numbers. These costs are significant, as the new number block has to be added to the new donor operator’s database without any effect on the quality of the service to the customers. The failing operator also has considerable costs exporting the information on its customers (which then become ‘ported-in’ customers) and reconfiguring its exchange data. It may need to be paid by others in order to ensure this is done. There are other smaller costs borne by operators generally to reroute the 10k block(s) to the new donor operator, but Oftel believes that these costs are small and should be borne by each operator as part of its normal data management amendments.

D.4 Therefore the only costs that are particularly relevant for the purpose of the economic analysis here are those costs associated with the block transfer of the numbers and the porting reconfiguration. This is a cost that might be incurred by a new donor operator if it took over the failing operator’s business as part of a commercial decision. These costs will be a fixed one-off cost to accommodate the new numbers. As discussed earlier, an operator would only be incentivised to take on the number block if it was compensated for doing so. The same is probably true for a failing operator that might already be in administration. This consultation document discusses the different options by which the costs can be recovered by the new donor operator and the failing operator. Provided below are two possible options for the recovery of the costs of the block number transfer and the reconfiguration.

Option 1: The costs are borne by the new donor operator and are funded out of retail call revenues.

Option 2: The costs form part of a general cost pool to which all operators contribute.

D.5 The basis of cost sharing through a pool will have to be decided. This could be on the basis of the proportion of gross revenues, proportion of net revenues, the proportion of the volume of calls or the proportion of numbers in use. Further, the practicalities of creating and administering the pool would need to be considered.

D.6 In previous work, Oftel has identified a set of principles that provide a framework within which to analyse cost recovery issues. These are set out below.

• Cost causation: costs should be recovered from those whose actions cause the costs to be incurred at the margin.

• Cost minimisation: the mechanism for cost recovery should ensure that there are strong incentives to minimise costs.

• Distribution of benefits: costs should be recovered from the beneficiaries especially where there are externalities.

• Effect on 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.

• Practicability: the mechanism for cost recovery needs to be practicable and relatively easy to implement.

D.7 The following subsection discusses each of the above options in isolation with respect to the principles identified above.

D.8 Cost causation in this case would be caused by the block transfer of the numbers of the failed operator. Viewed in isolation, cost causation would imply that these costs should be recovered from those who caused them to be incurred at the margin. However it is reasonable to assume that the failing operator will not have the financial strength to meet the costs.

D.9 If the new donor operator had to bear the costs of porting as in Option 1, then there would be an incentive to minimise costs. Under Option 2, if the donor operator had only to contribute a part of the costs to the general pool, then it is possible that the incentives to minimise costs might be weaker. In that case, cost claims made might need to be monitored, or capped, or subject to some other regulatory judgement. However, if the new donor operator contributed significantly to the pool, then the incentives for cost minimisation will be maintained. This might particularly be so in the case of BT, which is likely to be the largest contributor to the pool.

D.10 In the event of the failure of an operator, the parties immediately affected are the failed operator's own customers and those customers who have moved away from the failed operator but whose calls continue to be ported through the failed operator. The beneficiaries of the short-term solution would therefore be those parties who would now be provided service by an active operator rather than being abandoned as is currently the case. In both the options specified above, the Operators concerned would ultimately recover the costs from their customers. However, every prospective number portability customer would benefit from the implementation of this approach since this would ensure that they were always provided with a telephone service and were allowed to keep their ported numbers. Therefore, there is a strong argument that costs should be allocated across all operators (Option 2), who may then choose to recover those costs from the generality of customer charges.

D.11 Under the system currently in place, customers who have their numbers ported through the donor operator are not given the choice of retaining their ported numbers in the event of a failure of the donor operator. This can act as a disincentive for customers and can limit their ability to avail of competitive conditions in the market. Customers therefore cannot obtain the full benefits of competition without incurring some switching costs. The proposed short-term solution will help to remove this distortion in customer choices and will induce more competition in the market. Option 1 however, might create some distortion because it would mean that only customers of the new donor operator would be required to pay the costs of block transfer. To meet this principle therefore, Option 2 seems the better one as the costs can be spread across all operators and cause no distortions in competition.

D.12 Although portability is a reciprocal service amongst operators, the short-term solution can only apply to one operator at any time. This principle does not therefore apply in the short-term solution.

D.13 The method of recovering costs from operators and, ultimately, end users will have to be practical to be implementable. Option 1 of letting the donor operator bear the charge is practical and implementable. Option 2 is practical, but the size of the cost pool and the contributions of the different operators have to be decided before it can be implementable.

D.14 On balance, Oftel's preference is for Option 2 because it reflects the wider distribution of benefits and is consistent with effective competition. Option 1 might impose undue costs on the end users of the new donor operator, although that operator might expect to benefit from the most retail revenues from numbers in the block. Oftel seeks feedback from the industry on the following questions of the sharing of costs in the short-term solution.

D.15 In this approach, the originating operators would probably use an IN function to route ported calls. Calls to ported numbers would no longer need to be routed through the donor operator; instead they could be routed directly to the recipient operator’s network, perhaps via a transit network. This is possible if all operators provide information on the numbers ported to the central database which operators can download to their own networks. The costs that this option would involve would be the costs of rerouting numbers (if IN is the routing mechanism used, the incremental cost of the IN platform used for ported numbers on all originating operators’ platforms) and the costs of setting up and maintaining the central database. However the total costs would also depend on the approach taken for routing. In the ‘Query on Release’ (QOR) approach, only the ported numbers will require an IN dip to route the call. The central database would only contain ported numbers and the operators’ own IN databases would only need to be dimensioned for such calls. In the ‘All Calls Query’ (ACQ) approach however, all calls will require to be routed through the IN and the central database would have to be much larger comprising of all numbers held by all the operators. There would be significant differences in costs in the two approaches both because of the more extensive use of the IN and the need to maintain a larger database.

D.16 The costs of routing numbers would be incurred every time a number was routed and would be incurred on a per call basis. The costs of building the database would be an initial fixed cost, while maintaining the database would involve a relatively smaller ongoing variable cost (which would depend on the frequency of download and enquiries). Three options for cost recovery are discussed here:

Option 1: The costs are borne by the originating operator and are funded out of retail call revenues.

Option 2: The costs incurred by the originating operator and donor operator are charged to the recipient operator

Option 3: The costs form part of a general cost pool to which all operators contribute.

D.17 As earlier, the approaches for cost recovery are examined with respect to the principles elaborated above.

D.18 Costs are caused by the decision to build and maintain the central database and the decision to use QOR or ACQ as the routing method. The QOR/ACQ decision will be determined by Oftel according to the outcome of the Regulatory Option Appraisal. That decision impacts the size and costs of both the central and local databases. If QOR is used, donor operators still have to maintain an analysis capability for ported numbers and arrangements to signal this back to originating operators. While the provision and use of these databases causes costs to be incurred, some conveyance costs are saved. Average Porting Conveyance Costs would be eliminated. For non-geographic calls, this would save costs for terminating operators. For this traffic, Option 2 might seem to be appropriate under the cost causation principle. For geographic traffic, Option 1 might be more appropriate. If the ACQ method is selected, the spread of costs is wider and Option 3 might be more appropriate.

D.19 Option 1 provides good incentives for cost minimisation. In the absence of regulatory intervention, each of the operators in Option 2 may have little incentive to minimise the costs of setting up the database, especially if it is assumed that the costs will be recovered from other parties. If all operators may have to contribute to the database as in Option 3, the competitive constraints to keep the cost low would depend on the basis decided for the contributions. If the central database were owned and run on behalf of the operators, there would be a good incentive for cost-minimisation. On balance, Option 3 seems to offer more incentives for cost minimisation.

D.20 A central database will be able to streamline the process of porting and eliminate inefficiencies associated with Onward Routing. It will also help in improving numbering efficiencies by allowing any operator to use unused numbers from any block. These improved features will be reflected in the lower costs that the routing operators will need to bear and transfer to the recipient operator and subsequently to the recipient operator’s subscribers. Hence there are clear benefits to those subscribers who use number portability. However, such a system would also benefit other subscribers in terms of conserving numbers for future use. It would provide a more resilient system against any major catastrophes. In addition the adoption of such a system would benefit all prospective subscribers who wish to port their numbers. It would encourage operators to offer number portability and by doing so, allow end users the benefits of greater competition in the choice of telephone service providers. It could be argued therefore that all subscribers benefit from the implementation of this approach. In this respect, Option 3 would ensure that the benefits of the central database are distributed among all subscribers.

D.21 By ensuring that all end users contribute to the costs of a central database, competition between operators is likely to be maintained. Indeed every operator may now face lower costs for routing and porting and in a perfectly competitive scenario such savings in costs could be passed on to end users. Option 3 therefore would ensure that operators could compete on the same level. Oftel would need to take account of the effect of competition in choosing between QOR and ACQ.

D.22 In the long term solution, there would be no additional conveyance charges to be charged to the recipient operator. While Option 1 allows the originating operators to fund the costs of routing from their retail call revenues, in some cases, the recipient operators obtain the benefit of retail call revenues. This is especially so for non-geographic (NTS) calls where the terminating operator receives the revenues. This places undue burden on the originating operator and consequently on the end users. It could be argued therefore that in the absence of additional conveyance costs, the costs of routing could be shared between the originating operators and recipient operators according to the proportion of ported non-geographic calls. In this respect Option 2 would be a more competitive outcome.