Contents

Summary

Chapter 1 Introduction

Chapter 2 Background and current position

Chapter 3 Corporate numbering: understanding the service

Chapter 4 Outstanding issues: establishing a regulatory framework for corporate numbering

Chapter 5 Consultation

Annex A The allocation of 055 numbers to BT for VoIP/multimedia services for corporate customers

Annex C Summary of questions

Summary

S.1 The purpose of this document is to examine the corporate numbering service – a new option for business consumers – and consult on whether the 05 range, or part of the range, should be used for that service. Due to the timing of the document’s publication with regard to the Communication Bill’s passage through Parliament, proposals for the implementation of the service are primarily based on the current draft of the Communications Bill. References in this document to the Communications Bill are references to the Bill as introduced into the House of Lords on 5^th March 2003, having completed its passage through the Commons on the preceding day. The Bill is posted at: http://www.parliament.the-stationery-office.co.uk/pa/ld200203/ldbills/041/2003041.htm

The Bill may continue to be subject to change as it proceeds through Parliament. However, the regime under the Telecommunications Act 1984 (the ‘Telecommunications Act’) is also relevant, as the consultation is being conducted under its terms.

S.2 One of Oftel’s guiding principles in managing the United Kingdom’s (UK)’s Specified Numbering Scheme (the ‘Scheme’) is to ensure that there are sufficient numbers available to meet all reasonable demands and to anticipate growth and innovative services. Further, on the basis of the current draft of the Communications Bill, Ofcom will have a general duty to secure that what appears to them to be the best use of telephone numbers and to encourage efficiency and innovation for that purpose. The removal of unnecessary regulatory barriers to innovation is fundamental to competition in the telecommunications (‘telecoms’) market. It is the purpose of this consultation to examine the potential of the corporate numbering service, consider whether there is a reasonable prospect that it might be viable and bring benefits to business consumers and establish whether the lack of a dedicated number range would act as a barrier to its development.

S.3 Corporate numbering is a new type of service dedicated primarily to businesses with private telecoms networks. The corporate numbering range would allow businesses to have their own identifiable part of the Scheme to meet their telecoms needs and allow greater flexibility in the use of the numbers. It could also ease the integration of businesses’ public and private numbering schemes. The key elements of the corporate numbering service are:

• initially, allocations would be made to telecoms operators, with the possibility under the current regime of attaching specific conditions to allow businesses additional control over the numbers;

• on the basis of the Communications Bill as currently drafted, it would be possible to allocate numbers directly to non-communications providers, such as businesses, allowing users increased ownership of their numbers. It would also be possible to impose conditions on non-communications providers relating to the allocation, transfer and use of such numbers;

• under both the current and new regulatory regimes there would be specific eligibility criteria associated with the allocation and use of corporate numbers by businesses and other non-communications providers;

• corporate customers could have an increased role in negotiating how calls enter their private (or virtual private) networks, generally resulting in earlier handover of traffic from public to private networks; and

• it is anticipated that a common characteristic of corporate numbering services would be for Voice over Internet Protocol (VoIP)/multimedia services for corporate customers. However, Oftel is not proposing that all corporate numbering services be used for VoIP or to limit VoIP to 05 numbers.

S.4 This consultation document contains important proposals for the regulatory framework for the corporate numbering service. As well as the aforementioned allocation criteria, the main points under consultation are:

• retail pricing: Oftel believes that the corporate numbering range should have a set tariff ceiling to ensure consumers have the confidence to telephone businesses at a reasonable cost. It is considered that the ceiling be set in the region of 10 pence per minute or less;

• interconnection arrangements: the consultation includes four possible options for distribution of profit. At this stage, Oftel has not specified a preferred option and would particularly welcome comments on the options set out;

• routing of calls to corporate numbers: it is envisaged that businesses with allocations of corporate numbers would negotiate an agreement with the service-providing operator(s) of their choice for the delivery of their corporate numbering calls;

• sub-structure of number range: in the interests of good husbandry, Oftel would limit the amount of numbers available in the 05 range for allocation as corporate numbers. Initially, it is proposed to open only the 055 subrange for allocation. Oftel has not proposed a substructure for the corporate numbering range;

• size of number block and allocation: it is proposed to allocate 055 numbers in multiples of 10,000. The size of allocation would take certain principles into account and generally be large enough to accommodate businesses’ internal numbering schemes, whilst ensuring sufficient capacity remains available to satisfy demand; and

• the consultation also explores issues of service application, number length, Calling Line Identification (CLI) and its implications for emergency authorities, Carrier Pre-Selection (CPS) and number portability.

S.5 The corporate numbering service was previously consulted on in the document Numbering for Corporate Networks: Oftel’s proposals to increase choice for large businesses, August 1997 (‘the 1997 corporate numbering consultation’). Following this consultation, Oftel announced in its statement Numbering for Corporate Networks, December 1997 (‘the 1997 corporate numbering statement’) that there appeared to be a latent demand for the service and concluded that the 05 range should be set aside whilst Oftel assessed the level of market demand. The statement included a set of interim guidelines for allocation and parties interested in gaining an allocation were encouraged to approach Oftel and discuss their requirements. Over the past couple of years, Oftel has received a growing number of enquiries which, without predetermining the outcome of this consultation, have resulted in the allocation and reservation of several 055 number blocks for VoIP/multimedia services for corporate customers.

S.6 Oftel is committed to the consultation process and must consider its responsibilities in managing the Scheme as set out in the Numbering Arrangements condition in the standard licences (conditions 26.6 of the standard PTO licence and condition 21.6 of the standard ISVR and TSL class licences), and further reflected in Convention 1.1 of the Numbering Conventions (the ‘Conventions’). Looking forward, given the timing of this consultation, Oftel also needs to bear in mind Ofcom’s general duties relating to numbering as referred to in paragraph S.2 above. Before deciding whether to designate the 055 number range for corporate numbering, Oftel needs to be satisfied that, inter alia, it is the most beneficial use of the capacity and whether the lack of dedicated numbering space would serve as a barrier to the service’s growth. To this end, it has made the consultation as ‘green’ as possible and has evolved the original concept of corporate numbering, as described in the 1997 corporate numbering consultation and statement, to cover additional elements, primarily managed VoIP/multimedia services.

S.7 The consultation will last for 12 weeks. Oftel anticipates much activity during the consultation period, holding workshops to debate outstanding issues with operators and potential users and bringing the consultation to the attention of interested parties. Following the end of the consultation period, Oftel, in consultation with Ofcom, will take all representations into account and publish a statement on the future of corporate numbering, which may, depending on the outcome of the consultation, include draft proposals for any necessary changes to the regulatory regime.

Chapter 1

Introduction

1.1 Oftel is responsible for managing the United Kingdom’s (UK)’s Specified Numbering Scheme (the ‘Scheme’) and developing numbering strategy in the national interest. Under the current Telecommunications Act regime, when Oftel intends to make changes to the Scheme and the Numbering Conventions (the ‘Conventions’), which are the rules and principles that govern the use and management of numbers and codes from the Scheme, it must have regard to the relevant criteria set out in condition 26.6 of the standard PTO licence and conditions 21.6 of the standard International Simple Voice Resale licence (ISVR) and the Telecommunications Services Licence (TSL), which are further reflected in the guiding principles set out in convention 1.1 of the Conventions. Conditions 26.6 and 21.6 provide that:

"In deciding on the details of and any subsequent changes to the Scheme and

(a) the need for sufficient Numbers to be made available, having regard to the anticipated growth in demand for telecommunication services, together with the need for good husbandry of that supply at any time;

(b) the need to ensure Compatibility with the Numbering Plans adopted or to be adopted by other public telecommunications operators;

(c) the convenience and preferences of end-users;

(d) the requirements of effective competition;

(e) the practicability of implementing the Conventions with respect to licensed systems by the date when the Conventions are intended to apply;

(f) any costs or inconvenience imposed on the Licensee, other network operators, end-users and other Interested Parties (including those overseas);

(g) any relevant international agreements, recommendations or standards;

(h) the views of the Licensee and other Interested Parties; and

(i) any other matters he regards as relevant."

1.2 Due to the timing of this document’s publication with regard to the Communication Bill’s passage through Parliament, proposals for the implementation of the service are primarily based on the current draft of the Communications Bill. References in this document to the Communications Bill are references to the Bill as introduced into the House of Lords on 5^th March 2003, having completed its passage through the Commons on the preceding day. The Bill is posted at: http://www.parliament.the-stationery-office.co.uk/pa/ld200203/ldbills/041/2003041.htm

The Bill may continue to be subject to change as it proceeds through Parliament. Therefore, looking forward, Oftel also needs to bear in mind Ofcom’s general duty in relation to numbering as set out in Clause 60(1) of the current draft of the Communications Bill, which provides that:

(b) to encourage efficiency and innovation for that purpose."

Further, Clause 53(1) of the current draft of the Communications Bill also places a duty on Ofcom to publish a document known as the National Telephone Numbering Plan (‘the Numbering Plan’). This will set out the telephone numbers available for allocation by Ofcom and any restrictions considered appropriate on the adoption and use of the numbers. It is intended that a draft of the Numbering Plan will be published for consultation shortly.

1.3 With the above in mind, the purpose of this document is to consult on the use of the 05 number range, or part of the range, for the corporate numbering service. The range has been reserved for corporate numbering since 1997, which means that plans for its intended use have been conceived and numbers made available but the final decision (the ‘designation’ of the range) is subject to demand and further consultation. The aim of this document, therefore, is to conduct that further consultation. The next steps will be a statement setting out Oftel’s conclusions following the consultation, which may, depending on the outcome, include a draft proposal for any necessary changes to the Numbering Plan to put the regulatory framework for corporate numbering into place.

1.4 This consultation has no bearing on the continued use of the 0500 number range for existing freephone services. The current position is that existing 0500 freephone numbers may remain in use and their designation is not under consultation.

1.5 As the 05 range represents over 10 per cent of the Scheme, Oftel needs to ensure that a designation of all or part of the 05 range is both market driven and satisfies that market’s needs. Whereas it is not Oftel’s role to judge whether a corporate numbering service would succeed in today’s telecoms market, it does have a responsibility to judge whether there is a reasonable prospect that it might be a viable product, delivering significant benefits to consumers and be a justified use of the numbering resource. In reaching these judgements, Oftel must consider:

• evidence of demand;
• the benefits that the service could bring to business consumers;
• the resources required – especially the numbering resource – for the service to be put in place; and
• the feasibility of establishing an appropriate framework within which the service could operate.

It is the aim of this consultation to examine the above and if the conclusions suggest that the prospects for the service are positive, then it would be Oftel’s role to facilitate the new service by removing barriers to entry and ensuring the necessary regulatory framework was in place.

1.6 Public consultation plays a central role in Oftel’s process of formulating strategies to achieve its goal of the best deal for consumers in terms of quality, choice and value for money. It is dependent on the information and advice that stakeholders bring to the decision-making process, and is firmly committed to open-minded and transparent consultation. Oftel has deliberately made this consultation as ‘green’ as possible and is particularly keen for it to be wide-reaching, bringing it to the attention of as many interested parties as possible. Much activity is anticipated during the consultation period, debating the issues with potential users, operators and service providers. At its conclusion, it is hoped that Oftel would have received many responses to the questions posed by this document, enabling it, in consultation with Ofcom, to publish a statement on the future of corporate numbering.

Chapter 2

Background and current position

2.1 Oftel’s statement The National Numbering Scheme, January 1997, proposed the designation of the 05 range of numbers for a new type of service dedicated primarily to businesses with large corporate networks. Corporate numbering was intended to allow businesses to have their own identifiable number range to meet their telecoms needs and allow greater flexibility over the use of the numbers. The idea was aimed primarily at large businesses with multi-site private telephone networks of their own or those that subscribed to a virtual private network service. In the statement, Oftel envisaged that the numbers would be allocated directly to the company (or jointly to the company and the telecoms operator of its choice) giving consumers increased ownership of numbers.

2.2 To seek views on the corporate numbering proposal, Oftel published the 1997 corporate numbering consultation. Responses indicated that the proposal was well received, although there were diverging views between operators and users as to the benefits of a specific range for corporate customers. Users saw advantages in having increased ownership and flexibility in the use of their numbers, whilst operators were unsure of demand. The 1997 corporate numbering statement concluded that the 05 range would remain reserved for corporate numbering whilst Oftel assessed its potential.

2.3 The 1997 corporate numbering statement made it clear that Oftel remained ready to allow corporate numbering to be provided from the Scheme and included interim guidelines for the allocation and use of the numbers. Parties interested in gaining an allocation were encouraged to approach Oftel and discuss their requirements. At first, expressions of interest were minimal and did not progress beyond initial discussions. However, in the last couple of years, Oftel has seen an increase in the number of enquiries and has held discussions with a number of operators and businesses that are clearly interested in obtaining an allocation of corporate numbers.

2.4 Further to the approaches made to Oftel, a number of blocks in the 055 range have been allocated and reserved for Voice over Internet Protocol (VoIP)/multimedia services for corporate customers. It is appreciated that the allocation of numbering capacity ahead of this consultation may have raised some concerns for the industry. However, Oftel needed to provide a timely response to a request for numbering for a new and innovative service and made the decision that the 05 range, in line with the characteristics stated at the time of its reservation for corporate numbering, would be the most appropriate part of the Scheme. Further details of Oftel’s thinking behind this initial allocation of 055 numbers to BT are included in Annex A. Since that allocation in November 2000, other requests for allocation and reservation of 055 numbering capacity have been granted. It should be noted that the pre-consultation situation was made clear to the applicants and the allocation and reservation of 055 numbers will not prejudice the outcome of this consultation.

Chapter 3

Corporate numbering: understanding the service

3.1 Oftel’s goal is to get the best deal for the consumer in terms of quality, choice and value for money. One of its high level objectives in accomplishing this goal is the achievement of ‘effective competition - benefiting consumers’. Oftel seeks to do this by promoting competition at all levels, both for networks and services. To facilitate this, Oftel develops frameworks within which competition can flourish by removing barriers to entry and encouraging industry and consumers to work together to develop services which bring consumer benefits.

3.2 Corporate numbering is a new type of service with distinctive elements, particularly with respect to allocation criteria and interconnection arrangements. Oftel needs to understand and evaluate the service and, with the aid of responses to this consultation, will conclude whether it is likely to be an effective service benefiting business consumers. If it is judged that the service has a reasonable expectation of fulfilling its goals, then Oftel’s role is to ensure that a framework is established, within which the service may function.

Characteristics of the corporate numbering service

3.3 The corporate numbering service could provide:

• a new form of service, allowing businesses to simplify the management of their networks;
• a means of integrating and furthering the capabilities of businesses’ voice, data and mobile networks;
• greater freedom for businesses’ in negotiating the routing, billing and handover of calls to their networks with the operator(s) of their choice;
• an opportunity for businesses to be identified with a particular part of the Scheme; and
• a unified means of accessing a new range of multimedia services such as VoIP, document and application sharing, file transfer and video.

3.4 What particularly makes the corporate numbering service distinctive is the proposed combination of:

• increased ownership and control of numbering capacity through the direct allocation of blocks of numbers to non-communications providers (which would be possible on the basis of the current draft of the Communications Bill);
• a relatively low tariff ceiling; and
• a new (or hybrid) interconnection model.

3.5 It may provide an insight into potential corporate numbering services if a summary of some proposals, as discussed by operators with Oftel, is included at this point, although, due to confidentiality requirements, it is not possible to give specific details of intended services. The first allocation and reservation of 05 numbers was made to BT in November 2000. Essentially, BT’s service is a VoIP/multimedia service for corporate customers. It is a managed Internet Protocol (IP) application service, which allows the customer to operate real time multimedia IP applications, including voice and collaborative applications such as file sharing, white boarding and video conferencing, over an existing data infrastructure. BT Ignite manages and maintains a centrally hosted network call manager within the core IP network, which gives users access without the need to deploy an IP Private Branch Exchange (PBX) or call manager. BT can also centrally manage the gateways to the Public Switched Telephone Network (PSTN) within its core network. For further details on the processing of the application, see Annex A. In addition to the BT allocations, numbers from the 055 range have been allocated to Hutchison 3G UK Limited. It is believed that a similar corporate numbering service is to be launched on the 055 numbers, offering fixed and mobile integration and use of VoIP technology.

3.6 A number of other operators have approached Oftel and proposed corporate numbering services, and these discussions have resulted in the reservation of some additional 055 number blocks. Common elements in the intended services are the offering of a managed IP application to the corporate user, incorporating VoIP technology and additional functionality, as well as the integration of mobile, fixed and IP networks on a common telephone number. The plans for some of these services go beyond numbering in the office environment, covering and providing resilience to the full extent of the corporate’s network, including the management of communications to vehicles and the conveyance of data to machines.

Question 1: What do you think would be the main or distinguishing characteristics of a corporate numbering service?

3.7 Inevitably, as corporate numbering is a new service and the framework is only at the consultation stage, service description is somewhat limited. Oftel’s understanding of businesses’ intended use of the service has been gathered via focus groups, who have looked beyond the available products in the marketplace and tried to judge whether corporate numbering is likely to be a viable service. As stated in the introduction, this consultation now needs to look beyond this and examine:

• evidence of demand;
• the benefits that the service could bring for business consumers;
• the resources required – especially the numbering resource - for the service to be put in place; and
• the feasibility of establishing an appropriate framework within which the service could operate.

Assessing the demand for a corporate numbering service

3.8 As mentioned in Chapter 1, Oftel manages the Scheme according to certain guiding principles, including the need to anticipate growth and innovative services. Over the past year or so, a number of businesses and operators have approached Oftel to discuss the type of corporate numbering service they would like to see developed. From such discussions, Oftel has been made aware of the needs of potential users and service providers and reached some conclusions on the demand for a corporate numbering service.

3.9 Oftel has spoken to a number of operators about the corporate services they are considering or intending to launch. To date, 16 blocks of 055 numbers have been allocated and 52 blocks reserved to a total of three operators. Three further operators are in the process of applying for an allocation of 055 numbers.

3.10 Oftel has also spoken to a number of businesses that are keen to make use of the corporate numbering service. These corporate customers believe there is a demand for 055 numbers because they would provide a means of organising telecoms services not possible on existing number ranges. This was either due to inherent restrictions, such as the geographic significance of the 01/02 ranges or the overlay structure of Number Translation Services (NTS) ranges, or the desire to have an increased role in the administration of the numbers. What businesses particularly demanded was increased control of the numbering resource, from the allocation stage through to arrangements for termination of calls. Many were also keen on a single number for contact that could support multimedia applications. Others, with wide geographic presence, welcomed the opportunity to administer numbering for all their sites from the same number block, but without the need for an overlay onto geographic numbers.

The review of demand for corporate numbering

3.11 Over the past year, Oftel has carried out an informal review to understand the level of market demand and the likely prospects of corporate numbering being a service of benefit to consumers. As part of the review, Oftel met individually with some potential users of the range, conducted a workshop and a survey with the members of its Large Business User Panel and commissioned market research into the awareness and potential use of corporate numbering by small to medium sized businesses.

The Large Business User Panel

3.12 The Large Business User Panel is a representative body for large business telecoms users and comprises individuals responsible for purchasing telecoms services for their respective businesses. The Panel’s aim is to promote awareness in large organisations of the opportunities available in the competitive marketplace and to draw to the attention of Oftel’s policy makers and telecoms companies the concerns of large telecoms users. As the Panel members represent exactly the market for which the corporate numbering range was envisaged, their thoughts made a particularly important contribution to the review. The Panel members were asked to complete a questionnaire and take part in a workshop in September 2001.

3.13 The workshop concluded that businesses had a potential need for a corporate numbering service. It was agreed that if the benefits of the service were to be realised, numbers must be:

• allocated direct to businesses - increased ownership was very important;
• non-geographic and should not form an overlay onto existing numbers;
• usable in the VoIP environment to converge networks; and
• inexpensive to call - possibly 5 pence per minute (ppm), and up to 10ppm for multimedia services.

3.14 Overall, the Panel was enthusiastic about increased ownership and control of the numbering resource and saw potential in associating a block of numbers with their companies. Definite benefits were seen in having a new range to develop in line with businesses’ needs. The Panel was keen on the flexibility corporate numbering would offer businesses, particularly when negotiating with a range of operators for different sites. However, although the abilities to rationalise networks and easily manage staff movement were seen as attractive, they were not considered strong enough reasons by themselves to adopt corporate numbering.

3.15 The Panel also expressed some concerns. There was a fear that the retail prices for calls to corporate numbers would be too high and would stifle the market. There was also a feeling that implementation costs might dissuade businesses from adoption, particularly if some of the benefits could be gained through other means, such as call management systems. In conclusion, the Panel felt the corporate numbering range embodied important principles but was concerned about the unresolved issues, particularly technical aspects such as how operators would route and charge for calls between consumers predominately on the PSTN and businesses rapidly moving to VoIP.

Market research

3.16 Oftel imagines that the main advantages of the corporate number range would be the increased ownership and flexibility delivered by the future direct allocation of numbers to businesses. However, there may still be advantages for parties who possibly would or could not receive a direct allocation of numbers from Oftel but who may wish to seek a sub-allocation of corporate numbers from a communications provider. In an effort to appreciate the potential demand for sub-allocation, Oftel commissioned research into awareness and potential use of corporate numbering services in the small to medium business (SMEs) community. The research found that 17 per cent of respondents were already aware of the corporate numbering concept. A quarter of those surveyed would consider using the service now they were aware of its existence, with the larger businesses in the sample more likely to apply for numbers. The average amount of numbers that SMEs were likely to want sub-allocated by communications providers would be nine. The result of the research was published in Business use of fixed telephony: Oftel small and medium business survey Q6, August/September 2001.

The European Dimension

3.17 To aid in the assessment of whether there was likely to be a UK demand for corporate numbering, Oftel undertook a review of its emergence in Europe. There was found to be growing interest in many countries and a few with a corporate numbering range designated and allocations made. A number of countries had set aside specific public network numbers for either corporate numbering, Virtual Private Network (VPN) or International Virtual Private Network (IVPN) services. Although other European countries may have chosen to implement corporate numbering in different ways, it was certainly evident that across Europe there was a growing demand for such a range.

3.18 Switzerland has set aside the 058 range of 9-digit numbers for corporate networks. OFCOM (the Federal office for communications in Switzerland) has allocated over 100 blocks of 10,000 numbers. In Switzerland, numbers are allocated to the telecoms service provider, who then offers customers a corporate network service and numbers from the corporate range. Customers may use the non-geographic numbers in different sites across Switzerland. Calls to such numbers are routed to the appropriate destination numbers, that is, fixed, mobile or international numbers and a tariff ceiling has been set.

3.19 Germany has set aside numbers in the 018X range for corporate numbering. The German regulator has made over 50 allocations of corporate numbers direct to businesses to address their IVPN or closed user group requirements. The telecoms operator nominated at the time of allocation activates and routes the calls.

3.20 Greece has allocated numbers from the 05 range for corporate numbering use and other countries including Austria, Belgium, Denmark, France, Hungary and Luxembourg have also designated numbering space for corporate networks.

3.21 It should also be noted that within the European Telephony Numbering Space (ETNS), numbering has been set aside for corporate services. The ETNS is a European numbering space separate from existing national numbering schemes and is proposed to be used for the provision of services that can be called from at least two European countries. Within the new European code 3883, the digit 5 has been assigned for corporate networks.

Question 2: Do you believe that there is a demand for a corporate numbering service and on what do you base your opinion?

Bringing benefits to business consumers

3.22 As previously stated, one of Oftel’s high level objectives is the promotion of ‘effective competition – benefiting consumers’, and one of the methods of achieving this is through service competition. Therefore, in order to decide if the corporate numbering service warrants the establishment of a regulatory framework, Oftel needs to consider the potential benefits that the service could deliver.

Benefits for business consumers

3.23 Businesses have their own set of telecoms requirements different from other groups of end-users and they place more sophisticated demands on their telecoms suppliers. Oftel envisages that the corporate numbering range could be developed for the express use of businesses and geared towards meeting their particular needs. Through this consultation, potential users have the opportunity to express their requirements and be involved in the formulation of a new and innovative service.

3.24 Businesses have expressed a strong desire for increased ownership of their numbering resource and this could best be achieved by the direct allocation of numbers. In the future, Oftel would like to move to a situation where it could allocate blocks of corporate numbers direct to businesses, representing a move from the current arrangement of allocation to telecoms operators who sub-allocate to businesses. On the basis of the current draft of the Communications Bill this would be possible. Current procedures, however, force businesses to either choose from an operator’s pool of available numbers or to persuade the operator to apply for a particular set of numbers on their behalf. It is recognised that internal network numbering plans and Direct Dial-In (DDI) can be number intensive, especially when extended to numbering equipment as well as users. Businesses may have found operators unwilling to make a sub-allocation of a sufficient quantity of geographic numbers. Direct allocation of numbers would give them the opportunity to plan and negotiate direct with Oftel for the quantity and numbers of their choice.

Question 3: What advantages do you think direct allocation of corporate numbers would bring for business consumers?

3.25 Corporate numbers could be seen as a direct substitute for geographic numbers. Many businesses with a requirement to number multi-site locations are interested in using the same recognisable code to cover all their geographic locations. Corporate numbers would not have geographic significance and numbers from the same block could be used in any part of the UK. Currently, such businesses would need to seek an allocation of numbers in each geographic code area in which it had presence. Businesses using non-geographic NTS numbers would also need to secure geographic numbers as NTS calls need to translate to geographic numbers to terminate. As calls to and from corporate numbers could originate and terminate on the 055 number, there would be no need to translate for delivery and, hence, no need for geographic numbers. However, it should be noted that, whilst on the whole 055 numbers would not need to translate, such method of call delivery may be necessary for smaller business networks.

Question 4: Oftel believes that businesses will use corporate numbering to a significant extent as a direct substitute for geographic numbers. Do you agree that substitution is likely?

3.26 Being able to number all locations from the same 055 number block would make it easier for businesses to manage their numbering arrangements. Allowing ready access to a pool of non-geographic numbers would be particularly helpful for rapidly expanding businesses or those moving offices from one geographic code area to another, preventing the need for a number change. Businesses would also avoid the need to change numbers if the geographic area in which they were located experienced a code change.

3.27 Businesses have requested the opportunity to fully integrate and rationalise internal and public numbering plans. As corporate numbers are taken from the Scheme, and may be dialled by the general public, an allocation of 055 numbers would, therefore, give businesses the freedom to number fixed and mobile telephones, Personal Computers (PCs), VoIP telephones and other user terminals from the same number block. Businesses may see advantages in using 055 numbers as personal identifiers, indicating the called party rather than the type of technology being dialled. This would be reasonable, providing that consumers were aware of the tariff for the call. Corporate numbering would be a particularly attractive option to businesses reviewing their numbering plans. An additional and important benefit of increased internal network management may be expedited disaster recovery.

3.28 Businesses have also requested increased power to negotiate with a range of operators for the delivery of calls to different geographic locations or services. They may find they have a greater opportunity for competitive tendering and may benefit from packages tailored to meet their specific demands. Oftel envisages a lively marketplace emerging, with operators competing for businesses’ contracts. Such activity should stimulate innovation, choice and increased value for money for users.

3.29 Businesses often use a central call server to manage calls crossing between the internal and public networks and look for opportunities to simplify the actions of the call server and the management of internal networks. Businesses would be at liberty to number terminals as required and apply routing tables to meet requirements depending on, for example, time of day or personnel availability. Businesses may choose to number users rather than equipment and route calls depending on where the user logs in, thus bringing an element of mobility. Such flexibility would bring particular advantages for businesses experiencing regular movement of staff and location, for instance hot desking and homeworking. Alternatively, businesses may prefer to have the call server and gateway equipment managed and maintained by the operator on their behalf, allowing the benefits of a converged IP infrastructure for voice, data and multimedia services but without the need to manage the technology. Oftel has found there is a growing demand for managed services, which could reduce the cost of supporting a widely distributed private network whilst increasing effectiveness in the workplace.

3.30 Businesses are increasingly looking for ways to make their telecoms systems more sophisticated, but simpler to manage. IP technology is having an increasing impact on how businesses communicate, resulting in a move from traditional voice and data applications. Corporate numbering may provide a convenient means for converging voice and data infrastructures and would allow businesses to use their own managed IP networks to carry calls. This would avoid the need to run a separate voice and data network and would provide access to the public network through a VoIP gateway. The benefits of an integrated network would include lower maintenance costs and greater organisational effectiveness. Further discussion, focussing on the use of 055 numbers for corporate services using VoIP, can be found at Annex B.

Question 5: What benefits do you believe the corporate numbering service could deliver to businesses?

Operator benefits

3.31 Operators are in the business of offering new and innovative services to meet consumers’ needs and win contracts. Oftel envisages that the introduction of corporate numbering would bring about a dynamic marketplace, with operators competing to be selected as a business’s service providing operator and looking to enhance their reputation in the corporate market. There may be increased scope for operators to offer a range of managed services to businesses not wishing or able to manage the entirety of their network technology. Innovative services could be developed and offered on 055 corporate numbers without the need to match characteristics to those of existing number ranges. Furthermore, as the securing of corporate numbers would be the business’s concern, it may be reassuring for operators to compete on the particular merits of their service rather than on the availability or attractiveness of their numbering resource.

3.32 Oftel believes that the corporate numbering service could make use of IP technology and interconnect VoIP networks. Increased use of the IP network and reduced use of circuit switched networks would be likely to have cost and efficiency incentives for operators.

Question 6: In what ways do you think corporate numbering could bring benefits to operators?

General benefits of corporate numbering

3.33 As well as delivering some specific business consumer and operator benefits, the use of non-geographic numbering for businesses would be likely to relieve pressure on the geographic numbering resource imposed by number intensive organisations using DDI. Although it is unlikely that withdrawal of businesses’ geographic numbers would be compulsory further to allocation of 055 numbers, Oftel believes that over time larger businesses, or those with sophisticated or extensive networks, would fully migrate to the 055 numbers. The return of geographic number blocks to Oftel would have benefits for the Scheme in terms of number conservation. As some businesses use multiples of 10,000 numbers, the return of numbers plus a reduction in new allocations of geographic numbers, may postpone or even prevent the need for a code change in some geographic code areas.

3.34 A further benefit of a corporate number range could be its potential as a recognisable identifier of the called party. Oftel believes there could be advantages for both businesses and consumers in having a recognisable code associated with a particular brand or company. The number would act as a constant advertisement for the business and its familiarity may improve consumers’ experience of communication.

Question 7: What general benefits do you think a corporate numbering service could deliver?

Viability

3.35 Establishing a framework for a new service has resource implications for Oftel and the industry. It is not for Oftel to judge whether a corporate numbering service would succeed commercially, but it does need to consider whether there is a reasonable prospect that such a service could be viable, to justify the resource needed to establish its regulatory framework.

3.36 As will be examined in chapter 4, there are a number of issues that need to be resolved in establishing a framework and this would place a burden on Oftel, operators and the consumer representatives involved. It would also require a commitment to work together to find solutions to the outstanding issues.

3.37 In order to provide a comprehensive corporate numbering service, terminating operators would need to have an extensive network to route calls to agreed entry points to businesses’ private networks. It may be necessary for operators to adapt or enhance their networks, resulting in an investment cost in launching the service. Such investment may be expensive, time consuming and re-direct resource from other priorities. Operators would need to be confident about the prospects of the service before committing the necessary resources to its implementation.

3.38 Changes to numbering and call handling would mean expense and disruption for businesses. There would be upheaval from the re-programming of internal systems and an inherent cost associated with re-educating employees and the customer base to use the new numbers. As with any new service, users might be wary of entering into a new market before the concept was fully defined or appreciated. Businesses may be nervous of staking their reputation on a new number range and service. Clearly, consumer perception of the new range would be low, and businesses may be reluctant to migrate from well-established telephone numbers.

3.39 Businesses with European or Global presence may feel the real advantages of corporate numbering could only be delivered by a European or Global solution. Those with European multi-site locations may choose to consider the ETNS code currently being developed for European corporate services rather than limit the opportunity to a UK solution.

3.40 The direct allocation of numbering resource to businesses would represent operators’ loss of control over the numbering resource. Although portability already allows users increased ‘ownership’ of their numbers, operators may still regard the numbering resource as its commodity.

Question 8: Do you consider that a corporate numbering service is likely to be commercially viable? What is the basis of your judgement?

Question 9: Do you believe that the introduction of a corporate numbering service should be a priority for Oftel?

3.41 The commitment of numbering resource to the corporate numbering service, and the opportunity cost of that resource, needs careful consideration. Currently, the entire 05 range (discounting the existing 0500 freephone range) is reserved for corporate numbering. However, this represents over ten per cent of the Scheme and a third of the remaining undesignated 0X number ranges. Oftel must ensure that the appropriate level of resource is committed to the service, whilst preserving enough flexibility for future development of the Scheme. As established, depending on the outcome of this consultation, what may particularly distinguish this service from others are the proposed characteristics of direct allocation to non-communications providers, a low tariff ceiling and a new (or hybrid) interconnection model. Provided that the number range highlights these distinguishing features at an appropriate level, it may not be necessary to designate the entire 05 range for corporate numbering, particularly not at the launch of the service. Oftel, therefore, proposes to lessen the opportunity costs of putting the framework in place, by initially designating only the 055 range for corporate numbering. The remaining 05X ranges would continue to be reserved for corporate numbering, but the opportunity of using the resource for different or hybrid services would not be forfeited.

Question 10: Oftel proposes initially to restrict the amount of capacity available for corporate numbering to the 055 range. Do you agree with this proposal?

Establishing a regulatory framework for the corporate numbering service

3.42 This consultation has so far examined the characteristics of the corporate numbering service and the level of anticipated demand and consumer benefit. Now consideration needs to be given to the regulatory framework that would need to be put in place for the service to operate. To establish this framework, Oftel needs to consider, with the aid of responses to this consultation, the appropriate means of administering the corporate numbering service, which includes establishing policy on difficult issues such as allocation criteria and retail pricing. These issues form the greater part of the consultation and are explored in chapter 4.

Chapter 4

Outstanding issues: establishing a regulatory framework for corporate numbering

4.1 Oftel’s current view is that there is a reasonable prospect of corporate numbering being a viable service; enough for it to investigate the feasibility of establishing an appropriate regulatory framework within which it could operate. Due to the timing of the document’s publication with regard to the Communication Bill’s passage through Parliament, proposals for the implementation of the service are primarily based on the current draft of the Bill. However, the current Telecommunications Act regime is also relevant, as the consultation is being conducted under its terms. Some of the issues involved in the implementation are complex and further work would need to be undertaken with the industry and interested parties to reach a solution, although it is hoped that many issues could be resolved through responses to this consultation.

Allocation criteria

4.2 The most fundamental change proposed by the introduction of corporate numbering would be the direct allocation of numbers to non-communications providers ie business end-users, which would be possible on the basis of the current draft of the Communications Bill. Over the past year, Oftel has discussed the market’s needs with potential users. It is evident that the eventual success of corporate numbering depends on allowing businesses increased ownership and flexibility in the use of the numbers. It is Oftel’s view that this could best be achieved through direct allocation.

4.3 It is not possible, however, to directly allocate numbers to business end-users under the current regulatory regime, ie the regime under the Telecommunications Act. Therefore, there are two separate scenarios to establish: current procedures under the Telecommunications Act 1984 and future procedures on the basis of the current draft of the Communications Bill. As it will not be long before the regime under the Telecommunications Act comes to an end, this consultation document will only briefly address procedures under the Telecommunications Act.

Current regime

4.4 Currently, only those satisfying the eligibility criteria in Convention 2.1 of the Conventions may apply to Oftel for the direct allocation of numbering capacity. That Convention provides that:

4.5 Most businesses running a private network operate under the Self Provision Licence (SPL), which covers telecoms systems run for self-use and not offered to third parties. The SPL does not include a Numbering Arrangements condition and, therefore, SPL licensees are not eligible to apply for the direct allocation of numbering capacity from Oftel under the current Telecommunications Act regime.

4.6 Under the current regime, therefore, allocations of corporate numbers can only be made to eligible operators. Allocations of blocks of 055 numbers could be made to operators for sub-allocation to a number of businesses or to be used exclusively by a single business. Operators and businesses may work closely together when devising the service and submitting an application to Oftel for corporate numbers, giving businesses an increased role in the process.

4.7 To apply for a block of corporate numbers under the current regime, operators would need to complete a corporate numbering application form (which Oftel would make available on its website) and submit the application in the usual way. The procedure for businesses would be to either approach an operator with an existing 055 number allocation (information on allocations is available on Oftel’s website) and enquire about the availability of service and numbers, or to approach an operator of choice and negotiate the viability of it applying for, and providing service to, corporate numbers.

4.8 Under the current regime of allocation to licensed operators, businesses may be able to gain additional control over the numbering resource through the attachment of specific conditions at the time of allocation to the operator. In circumstances where operators are allocated blocks of 055 numbers for sub-allocation to a single business, Oftel could attach specific conditions relating to the use and management of the numbering capacity, designed to give the business additional control over the resource. Such conditions could ensure that the number block was used exclusively for traffic to and from the specified third party, ie the business.

Question 11: Allocations of 055 numbers to operators could be subject to additional conditions designed to increase end-user control over the numbers. Do you agree that conditions ensuring numbers are used exclusively by a named third party, ie the business, are the best means of businesses achieving additional control ahead of a change to allocation criteria? Alternatively, do you disagree with the placing of additional constraints on the use of the numbering resource?

The Communications Bill

4.9 On the basis of the current draft of the Communications Bill, which is currently going through Parliament, it will be possible to extend eligibility to apply for number allocations to non-communications providers. Clause 56 of the Communications Bill gives the power to set telephone numbering conditions binding non-providers. Clause 56(1) provides that:

(a) the allocation of telephone numbers to such persons;

(b) the transfer of allocations to and from such persons; and

Thus it will be possible on the basis of the Communications Bill as currently drafted to allocate numbers to non-communications providers and control their use of numbers.

End-user criteria

4.10 Consideration needs to be given to the class of persons who may apply for direct allocation or sub-allocation of corporate numbers, that is, the end-user criteria. Oftel believes that there should be a specific set of eligibility criteria established, describing the class of person who may be a corporate numbering user. The criteria should be flexible enough to include all parties that may benefit from the service but ensure that those, for whom the service was not designed, such as individuals and residential customers, are not eligible. Although the service is commonly termed ‘corporate numbering’, it is recognised that there are varied forms of corporate body and other collective groups that might benefit from having access to the new service and numbers, including charities, partnerships, religious, sporting and political organisations. For instance, it may be considered that end-users of 055 numbers should have some or all of the following characteristics:

• run a private network or use an operator managed private or virtual private network;
• operate a call management system; and/or
• function as part of a distinct group with a logical and/or physical linking of their telecoms services.

Oftel does not wish to make the use of corporate numbering more onerous than necessary, but does need to establish a clear set of user criteria. It is, therefore, particularly interested in receiving respondents’ views on the issue of end-user criteria.

Question 12: What characteristics do you think an end-user should have in order to be eligible to use corporate numbers?

Sub-allocation to third parties

4.11 Oftel wants the corporate numbering range to meet as many of its potential users’ needs as possible and to ensure that all required forms of allocation are considered. As well as allocation of numbers to eligible operators and organisations that meet the end-user criteria established through this consultation, Oftel believes that there may be benefits in permitting allocation to third parties, who could manage a corporate numbering service for businesses. It is envisaged that third parties may act as facilitators of corporate numbering services to groups of businesses who together could form a pseudo corporate network. The third party would gain an allocation of corporate numbers from Oftel and then offer services to groups of businesses that may not be able to individually run a corporate numbering service, possibly due to the limitations of their telecoms system. The third party may gather a closed user group of possibly related businesses (either by location or nature of business) that would together form a pseudo corporate network. Provided that the third party offered a legitimate corporate numbering service to businesses, Oftel believes that sub-allocation of numbers to third parties should be permitted.

4.12 It is also envisaged that businesses with allocations of corporate numbers may wish to further sub-allocate some numbers to third parties in their supply chain. For example, a business may have suppliers who store data records of stock and orders. Communication between the business and its suppliers may involve frequent transfer of voice, data and multimedia traffic. It may be advantageous to the business and the suppliers to converge their networks through the shared use of the business’s corporate numbering allocation.

Question 13: Oftel believes that there may be benefits for consumers in allowing allocation of corporate numbers to third parties to provide corporate numbering services and by businesses to third parties. Do you agree with Oftel’s thinking on sub-allocation rights?

Application procedure

4.13 All applicants for corporate numbering, that is, communications providers and non-communications providers, would be required to follow a specified procedure to apply for the allocation of corporate numbers. By the time non-communications providers may apply for numbers, there is likely to be an on-line application procedure. This is the development of a new database to administer the Scheme, which would replace the existing access database. It would provide a paperless process for numbering transactions and a means for numbering applications to made on-line via Oftel’s web site. Comprehensive guidance on procedures would be provided for all applicants.

4.14 The party to whom the corporate number block would be allocated would submit the application. Whilst the business and its service-providing operator would be encouraged to work together to develop the service and apply for the numbers, it should be clear which party is making the application and requesting the allocation of numbers. That party would be responsible for assisting Oftel with any requests for clarification or further information necessary for the processing of the application. If a non-communications provider makes the application, Oftel proposes that the application should include the name of the chosen service-providing operator at the time of submission. This would ensure that the business understood the need to nominate an operator for each block of 055 numbers, so that operators originating and carrying the calls would know where to route those calls. Oftel would forward notification of the approval or rejection of an application to the applicant.

Question 14: Do you agree that non-communications providers should be required to nominate their service providing operator when submitting an application for corporate numbers?

Service application

4.15 Corporate numbering is not just a new number range but is also a new type of service that gives businesses the freedom to negotiate the routing, billing and handover of calls to and from the public network(s) of the operator(s) of their choice. It is imagined that businesses would have a variety of services that they may wish to host on 055 numbers. These services may range from basic voice telephony to innovative multimedia applications using IP networks. Businesses may also welcome the opportunity to organise how the numbers are assigned, whether they be used as personal numbers for each employee, to number the telephone/terminal at the workstation or other pieces of equipment.

4.16 In order for the range to meet the needs of the market, Oftel does not intend to prescribe the type of service that businesses may offer on 055 numbers. Oftel considers that the most effective way would be to designate the 055 range and allow the corporate numbering service to develop in line with the needs of the market.

Question 15: Do you agree that the nature of corporate numbering services should be allowed to develop with the market and should not be prescribed by Oftel? If not, how do you think corporate numbering should be characterised?

Sub-structure of 05 number range

4.17 It is amongst Oftel’s guiding principles to ensure that the Scheme gives a broad indication of different types of service and/or tariff. However, Oftel would not wish to unnecessarily complicate the use of the 05 range with sub-categories unless they were considered to be of benefit to consumers and the industry.

4.18 It is possible that giving significance to the first or second digits following the 05 prefix may benefit the consumer by signalling differences in cost or type of service before the call is made. For example, if responses to the consultation favoured 2-tiered tariffing, it may be considered appropriate to divide the 05 range, or part of the range, accordingly. On the other hand, the division of the number range by tariff band may be considered restrictive if the business’s decision to change the tariff also required a change of number. Alternatively, it may be considered beneficial to the calling party if 05 sub-ranges indicated service characteristics or capabilities. If the calling party wanted to make its call using a range of multimedia applications such as document sharing, it would wish to know that the called party was multimedia capable. If the first few digits of the number indicated this capability, the calling party would be able to plan the medium it wished to employ to make the call. As a future requirement of businesses is likely to be VoIP/multimedia telephony, it could be considered that sub-division of the range according to technology would be advantageous. Clearly, the counter-argument would be the same as for tariff-based divisions, namely, that if the business wished to change technology and have that information transparent in its choice of numbering arrangements, it would again require a number change. Oftel considers that businesses may find more advantage in having one allocation of 055 numbers to meet requirements rather than separate blocks for different services. This would also have benefits for number conservation. It is suspected that consumers derive little beyond the broadest of information from sub-ranges and are unlikely to distinguish much beyond the first or second digit.

Question 16: Oftel has not proposed the division of the 055 range into sub-ranges, but is interested in views on the advantages and disadvantages of doing so. Do you think that the corporate numbering range would benefit from a pre-determined sub-structure? If so, on what basis do you think the range should be divided?

4.19 As previously mentioned, in order to ensure that the 05 numbering resource is used efficiently and effectively, Oftel considers that it would be in the interests of good husbandry to limit the number of sub-ranges initially opened for allocation. Further sub-ranges could be made available for allocation once demand justified the requirement. As with all number ranges in the Scheme, the level of numbering capacity available in each range may exceed the demand for the identified usage. It is therefore proposed to make numbering capacity available in multiples of 100 million numbers in the form 05X, supporting any sub-structure if required, but leaving capacity free for future allocation of corporate numbers or to be given an alternative designation. Initially, it is proposed to designate only the 055 sub-range for corporate numbering.

4.20 Reserving the remaining 05X sub-ranges would ensure capacity was available for various forms of the corporate numbering service. Such services may differ in significant ways from the type of corporate numbering service consulted on in this document. This may be in terms of allocation criteria, tariff rate and interconnection arrangements and these differences may need to be conveyed by means of the 05X sub-structure. For example, services could be developed in the corporate numbering 055 range, which in time, could be evolved for individual or residential users. Unlike services in the 055 range, it is likely that numbering for such services would be allocated to communications providers only and that the end-user criteria would not be limited. Also, services may be developed that bear many similarities to corporate numbering services but would be charged at a retail tariff that exceeded any ceiling imposed on 055. For example, a product that provided mobile video conferencing to businesses might not be viable on a tariff which adhered to the relatively low tariff ceiling proposed for the 055 range. If a demand for such services evolved, then Oftel would consult on the designation of further 05X sub-ranges to meet the requirement.

Question 17: It is possible that further types of corporate numbering service may develop and that the differences may need to be conveyed by means of the 05X sub-structure. Do you agree, and if so, what sort of services and/or distinguishing features do you think may evolve?

Number length

4.21 The Scheme generally follows a 10-digit structure. It is expected that 05 numbers will also be 10-digits long excluding the national prefix code ‘0’. In the 1997 consultation document, some consideration was given to allowing number lengths in excess of 0 + 10-digits in order to accommodate 6-, 7- or 8-digit internal numbering schemes. Some businesses argued that the longer length number would be necessary otherwise allocations of up to 100 million numbers would be required to prevent unacceptable disruption and expense of changing the existing numbering scheme. At the time, Oftel concluded in the 1997 corporate numbering statement that such a proposal required additional consideration by the industry but suspected that the disruption to the networks of putting procedures in place to allow 05 calls to be of longer or varying length to the Scheme structure would be immense. Indeed, this remains Oftel’s view. Particularly, the undesirable result for international recognition of geographic numbers would be an extra post-dial delay of 4-5 seconds on switches programmed to wait for the maximum digit length.

Question 18: Do you agree that an extension to the 10-digit number structure for corporate numbers would result in significant disruption to the networks and should not be permitted?

4.22 The Scheme also allows for some numbers to be shorter in digit length. 7-digit numbers have been allocated in exceptional circumstances: 0800 1111 for Childline and 0845 4647 for NHS Direct services. Oftel occasionally receives requests for short digit numbers from other bodies, but it considers the allocation of such numbers from existing number ranges to be problematic for operators to handle, confusing for consumers accustomed to standard length numbers and extremely wasteful of the numbering resource. Due to the block allocation system, for each 7-digit number allocated, the 9,999 numbers remaining in the block become unusable. For these reasons, Oftel has applied very strict allocation criteria and has only allocated the two numbers mentioned above. However, over the years it has been mentioned that part of the 05 range could be set aside for short digit numbers, for which businesses, non-profit making organisations and public service bodies could apply. If responses to this consultation favoured the setting aside of a sub-range for short digit numbers, a set of allocation criteria would need to be agreed with interested parties to prevent an unworkable number of requests for short digit numbers being made by parties who believe that short digit numbers are more attractive. Moreover, Oftel would need to work with operators to assess whether a short digit sub-range would be practical.

Question 19: Do you think that part of the 05 range should be set aside to allow for the allocation of short digit numbers, and if so, what do you think should be the eligibility criteria?

Size of number block

4.23 Most number ranges are allocated by Oftel in multiples of 10,000 numbers, although due to the particular characteristics of some freephone, Internet and mobile number ranges, those ranges are allocated in multiples of 1,000 and 100,000 numbers. The first few digits of a number provide routing and tariffing information for operators’ use. In most ranges, the fifth digit following the leading ‘0’ provides tariff information, whilst the sixth digit provides routing information. These principles would be applied to 055 numbers. As information necessary for the routing of number blocks to the appropriate number block holder is contained in the initial six digits of a number, Oftel would not propose to allocate blocks of less than 10,000 numbers in the 055 range.

Size of allocation

4.24 As explained in chapter 1, the development and management of numbering arrangements should take into account cost and inconvenience to consumers, operators and service providers. In addition, end-users adopting an internal numbering scheme should be subject to as limited inconvenience as possible. Oftel believes that if businesses were required to renumber their internal schemes it might provide a significant obstacle to the adoption of corporate numbering. Taking these principles into account, Oftel has concluded that the size of number block allocated should, where possible, be large enough to accommodate internal schemes whilst ensuring sufficient capacity remains available to satisfy future demand.

4.25 Oftel has made initial enquiries into the average size of businesses’ internal numbering schemes. Whereas some schemes, such as the Government Telephone Network (GTN), have an internal numbering plan of 8-digits, in general the length appears to be 4- or 5-digits. Such a numbering plan could be accommodated in an allocation of 10,000 or 100,000 numbers in the form 055BC DEXXXX or 055BC DXXXXX. If businesses are to be able to make a smooth transition to corporate numbers, efforts should be made to allow their existing internal numbering scheme to be accommodated within the new 055 number allocation.

4.26 Amongst Oftel’s duties in managing the Scheme is to have regard to the need for sufficient numbers to be made available to meet all reasonable demand. Oftel, therefore, attempts to achieve conservation of the numbering resource as far as possible by, for example, checking that the size of a number allocation is justified. When assessing applications for numbering capacity, Oftel would be looking for justification for the size of number block requested. To prove demand, businesses could cite the total number of terminals to be addressed or the total capacity of the number blocks being used by existing systems, plus a certain percentage for anticipated growth. The allocation request would then be rounded up to the nearest multiple of 10,000 numbers, whilst bearing in mind any restraints posed by existing internal numbering schemes.

4.27 A possible restraint on the amount of numbering capacity a business may wish to acquire is the prospect of charging for numbers. Oftel currently allocates blocks of numbers to operators free of charge. However, with no value placed on the numbering resource, there is little incentive for efficient use and number hoarding may take place. The position in the UK differs from that in most European Union countries, where number charges are made for all or part of the numbering scheme. Over the past few years, Oftel has reviewed ways in which the introduction of charging for numbers could promote greater efficiency for the Scheme. This has included seeking views on the principle of number charging, as well as the level and method of setting the charges. Arrangements for charging for numbers may consist of a one-off allocation fee, an annual rental charge or both. On the basis of the current draft of the Communications Bill it would be possible for Ofcom to charge for number allocations. Clause 55(1)(g) provides that general conditions may require payments of such amounts as may be determined by Ofcom in respect of the allocation of telephone numbers.

4.28 Taking the above into account, Oftel considers it likely that capacity would be allocated in multiples of 10,000 numbers. Such block size allocations would allow 10,000 allocations of 10,000 numbers from the 055 range.

Question 20: Given the constraints imposed by block routing, do you agree that 055 numbers should be allocated in multiples of 10,000 number blocks?

Question 21: What procedures do you think could be employed to ensure businesses justify their level of demand for numbers? Do you agree with the principle of charging for corporate number allocations?

Retail pricing for corporate numbering

4.29 Oftel believes that the corporate numbering range should have a set tariff ceiling to ensure consumers have the confidence to call businesses and are not disadvantaged by the introduction of the corporate numbering service.

4.30 In Oftel’s 1997 statement on corporate numbering it was concluded that the tariff ceiling for the corporate numbering range should be national rate. The decision was based on the principle that corporate numbering should not increase the average cost of telephoning businesses. The average cost concept was based on the general business use of geographic and special service number ranges. It has since been considered that using the relative charging terms ‘national’ and ‘local’ rate links non-geographic numbering to the unrelated geographic market and may be confusing for the consumer. It might give a better indication of the expected cost of the call if fixed price tariff ceilings, such as ‘up to 5p’ and ‘up to 10p’, were used.

4.31 Oftel remains of the opinion that the corporate number range should have a relatively low tariff ceiling. Consumers should not feel that the cost of a call to a corporate number is excessive or unreasonable. Oftel is aware of consumers’ growing dissatisfaction with businesses using national rate numbers and would not wish the introduction of the 055 range to be perceived as a further increase in the cost of calls. Many businesses may also prefer to keep the tariff for a call to their network low and perceived as low by consumers to encourage calls and good consumer relations, although a significant subsidy of calls is not envisaged. It is also imagined that 055 numbers may be used extensively to provide contact numbers for office staff and it may also be unwanted for tariffs to be high for corporate desk-to-desk access outside the private network.

4.32 Whatever ceiling is set, there must be sufficient revenue for the relevant operators to cover the cost of originating, transiting and terminating calls and be attractive enough for operators to make a reasonable return. It is envisaged that a relatively low tariff ceiling would still allow enough revenue to cover costs, particularly as there may be an earlier handover from the PSTN to the private network and greater use of IP networks.

4.33 As corporate numbers would most likely be used as a substitute for geographic numbers, it may be helpful to consider the cost of local and national rate geographic calls from BT’s network when setting the tariff ceiling. BT’s peak time headline rates are approximately 8p for national rate numbers and 4p for local rate numbers and it may be considered appropriate to pitch the ceiling for 055 numbers somewhere close to those tariffs. However, whilst it may seem attractive for consumers if 055 tariffs were in line with national or even local rates, it needs to be borne in mind that the geographic extent of some businesses’ private networks, and other factors such as positioning in the market, could perhaps mean that a tariff as low as local rate would not be feasible, although a ceiling below 10p may be possible.

Question 22: Oftel believes that the 055 range should have a set tariff ceiling. Do you agree, and if so, at what level should the ceiling be fixed?

4.34 It should also be considered that the objective of competition requires that prices are eventually reflective of costs, with the elimination of supernormal profits over time. Therefore, there might be a need for a mechanism that would ensure that a tariff ceiling did not stay superficially high if costs fell. That is, 10ppm may be acceptable initially, but should the wholesale cost of call conveyance fall significantly below its current level, then a lower tariff ceiling may be more appropriate.

Question 23: What are your thoughts on devising a mechanism to assess the appropriateness of the tariff ceiling should the cost of call conveyance fall significantly?

4.35 Within the confines of the range’s tariff ceiling, consideration also needs to be given to the desired level of tariff granularity. Tariffs are already available at 1p intervals in the 0844 (up to 5p) and 0871 (up to 10p) ranges and such granularity could be introduced in the 055 range. This would allow businesses to negotiate with their service providing operator(s) when setting the charge for access to their service and perhaps allow them to differentiate services and compete on the cost of a call. On the other hand, multiple tariffs may dilute the pricing information and reduce flexibility in code allocation. It may be preferable to reduce tariff proliferation and adopt a single or two-tiered tariff option. Responses to the 1997 consultation on corporate numbering indicated general, if not universal, support for two tariff bands. Oftel considers that interested parties may still favour this option.

Question 24: What level of tariff granularity do you think would be appropriate for the 055 range? What are your thoughts on a two-tiered tariff structure, with tariffs set, for example, at 5p and 10p?

4.36 Oftel is particularly interested in the views of respondents on the issue of retail prices for corporate numbering and is deliberately leaving the issue as open as possible. It does, however, believe in the importance of a tariff ceiling and that the retail price should be decided by the business through negotiation with the terminating operator. Many businesses are sensitive to the cost to consumers of telephone calls and are willing to contribute to that expense by using freephone and local rate numbers. It is, therefore, considered that businesses may extend this consideration to consumers calling corporate numbers, as a means of promoting their service and enticing callers. This may be particularly relevant if the cost of the call could easily be promoted to the caller, through advertising and a memorable tariff title, especially if the tariff was free or below the ceiling. It is hoped that businesses’ sensitivity to the cost of consumers’ calls would be the most effective mechanism for promoting competition in the retail price market.

Question 25: In Oftel’s opinion, there is more likely to be constraint on retail tariffs if the decision on call prices resides with the corporate customer. Do you agree?

Question 26: The use of memorable phrases for corporate numbering tariffs could help promote consumer awareness of the relatively low call costs. Do you have any suggestions for tariff descriptions, eg for free, intermediate and maximum prices?

Interconnection arrangements

4.37 In response to the 1997 corporate numbering consultation document, operators, in general, indicated that they thought the industry would be able to negotiate interconnection rates for 05 calls without regulatory intervention. However, they acknowledged that the appropriate model for sharing revenue between interconnecting operators would be difficult to predict ahead of market development. Oftel is conscious of the fact that, in carrying out its duties, regulatory activity should be targeted only at cases in which action is required. Also, in the context of any possible future disputes, it must ensure its actions could in no way fetter the Director General’s discretion. However, Oftel believes that it may be helpful in this document to suggest to the industry some possible options for interconnect arrangements.

4.38 Agreeing the appropriate interconnection framework raises some difficult questions regarding the best means of rewarding the relevant operators and stimulating the market. Oftel’s view is that revenue sharing models should reflect the addition of value and innovation to a call. For example, it is the originating operator that adds value to geographic calls, whereas for NTS calls, it is the terminating operator. The revenue sharing models distribute profit according to the characteristics of the service.

4.39 In the case of the corporate numbering service, Oftel expects that it would generally be used as a substitute for geographic numbering. This could suggest that originating operators’ expectations of profit from the geographic market should be preserved and that a system of revenue sharing based upon the geographic model should apply. However, as with NTS services, it is likely to be the terminating operator that adds value, provides innovation and takes the commercial risk in launching the service, which suggests a NTS system of profit transfer should apply. Given that elements of both arrangements appear valid, the most appropriate interconnection arrangement could be a new model or a hybrid of existing solutions.

4.40 Oftel’s view is that the most suitable model would take account of the following objectives:

• promotion of innovation in the provision of corporate numbering services, delivering more efficient and higher value-added services;
• promotion of competition - benefiting consumers ; and
• promotion of a stable regulatory environment, allowing corporate customers and the industry to plan with confidence.

4.41 To aid in the decision on the most suitable model, Oftel has proposed the following four options:

(A) geographic model;

(B) new Number Translation Service (new NTS) model;

(C1) neutral retention model - retail price set by originating operator; and

(C2) neutral retention model - retail price set by business.

Alternative charging arrangements

Option A: geographic model

4.42 For calls to fixed geographic numbers, the originating operator keeps the retail profit and pays the terminating operator its costs in terminating the call. The originating operator is allowed to keep the retail profit to reflect its investment in getting the customer to take up service and make calls. It is also allowed to set the retail price.

4.43 It is likely that corporate numbers would substitute for geographic numbers. Therefore, originating operators might expect to maintain control over the price they charge for calls to such services and preserve the level of revenue retained on such calls. This suggests that an appropriate model may be one that prevents the originating operator from losing revenue in line with the growth of corporate numbering. This would be consistent with the Price Control Review, as the price cap reflects all revenues for calls to geographic numbers, including those substituted by corporate numbering, and those revenues were expected to increase.

4.44 However, this option would reduce incentives for terminating operators to enter into the market for provision of corporate numbering services, since they would receive only their costs for terminating such calls. It is unlikely that investments incurred in building a network capable of delivering corporate numbering services would be rewarded sufficiently by this framework. Also, incentives to innovate in service provision would be reduced, as terminating operators would not reap the financial benefits of the innovation.

Option B: New Number Translation Service (new NTS) model

4.45 The NTS model rewards the terminating operator with the excess profit. The originating operator only retains the cost of conveyance. This consists of network costs, an allowance for retail costs (known as the retail uplift) and a normal return on capital. The remaining revenue, including the excess profit, is transferred to the terminating operator. This structure, in part, reflects the understanding that NTS calls, particularly Internet calls, are incremental rather than substitutional to geographic calls, and, therefore, originating operators are not losing market share alongside the growth of NTS services. This negates the need for the originating operator to reap the profit.

4.46 The transfer of profit to the terminating operator was designed to provide enough revenue downstream to encourage and stimulate competition and innovation in the retail NTS market, resulting in a benefit to consumers. In particular, the innovation was thought to develop in the service provider market rather than the call termination market, so the sharing of revenue between the terminating operator and the service provider was considered to facilitate and promote this investment. Often terminating operators compete with each other to offer a variety of price/revenue deals to the service providers.

4.47 Further to Oftel’s Statement on the Relationship between Interconnection Charges and Retail Prices for Number Translation Services, December 1999, terminating operators were allowed to set their own retail prices (rather than accept the originating operator’s local and national rate), and consequently have the ability to control their revenues. This would imply that under the NTS framework, businesses, in negotiation with their service providing operator(s), could set the retail price for calls to their corporate numbers.

4.48 Oftel’s view is that the advantage of applying this model to corporate numbering accords with the principle of rewarding terminating operator innovation and provides the maximum incentives to encourage growth in the market for provision of corporate numbering services. This would seem appropriate, particularly as there would be substantial entry barriers in the form of sunk costs in building or extending a network. Therefore, a model, which rewards terminating operators with a share of the supernormal profits, would provide a suitable incentive for service providing operators to enter the market. In addition, this model would encourage service provider innovation, in the form of increased product variety such as advanced call handling features or lead to greater efficiency and cost reduction in the termination of calls on businesses’ private networks.

4.49 The disadvantage of applying the NTS model to corporate numbering may be that originating operators with Significant Market Power (‘SMP’) would only retain the cost of conveyance including a normal return on capital and would not be rewarded with any excess profit. As corporate numbering is likely to be a substitute for geographic calls, originating operators with SMP would be losing revenue in line with the growth of the corporate numbering service. They may not consider this to contribute sufficiently to the cost of maintaining their network and seeking customers. In other words