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| Review of certain voice Number Translation Services | |
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Review of certain voice Number Translation Services Statement issued by the Director General of Telecommunications December 2000 Chapter 1 Introduction and background Chapter 2 Oftel’s review of certain Number Translation Services Chapter 3 Measuring effective competition and consumer benefit Annex A Indicators of effective competition Introduction 1.1 Oftel’s strategy statement published January 2000 (Achieving the best deal for consumers) sets out Oftel’s ‘competition plus’ strategy. Oftel’s goal of achieving the best deal for consumers by means of its competition plus strategy is supported by the following four outcome objectives: effective competition; well informed consumers able to take advantage of choice; adequately protected consumers and prevention of all significant anti-competitive practices. 1.2 A key element of Oftel’s strategy is to ensure appropriate regulation so as to take account of developing competition in a given market. Where there is no, or only limited, evidence of developing competition, Oftel will continue to protect the interests of consumers by use of its regulatory powers. 1.3 Oftel’s intention to carry out a series of market reviews was set out in Proposals for implementing Oftel’s Strategy (April 2000). A review of certain Number Translation Services (NTS) was not anticipated at that time but has now arisen and will be undertaken. The methodology for assessing the level of competition in the markets set out in the April 2000 Strategy document will be adopted for the this review of certain NTS services. In August 2000, Oftel published guidelines (Implementing Oftel’s Strategy: Effective Competition Review Guidelines) which set out how Oftel will conduct effective competition reviews. 1.4 Oftel is conducting this market review of certain NTS services (which services BT term as ‘inbound services’) following a request from BT, that the Director General of Telecommunications (‘the Director’) makes a determination under Condition 43 of its licence that BT is not obliged to provide certain non-voice telephony services on request (Condition 43). In relation to those services, if such a determination were made, this would have the effect of removing the obligations on BT not to unduly discriminate (Condition 57) and to notify prices (Condition 58) in relation to those NTS services. 1.5 BT has requested that Oftel review its licence obligations in relation to the provision of certain voice NTS services only. Oftel is conducting a separate Review of the dial-up Internet access market and a Statement announcing that review was issued in October 2000. 1.6 Depending on the outcome of this review, Oftel will set out its proposals for withdrawing, amending or continuing with regulation in relation to BT in respect of NTS services, however defined. 1.7 This Statement is the formal start of Oftel’s proposed market review of certain NTS services. It sets out the objectives, timetable and scope of the review and outlines the way that Oftel will measure the extent of competition in the NTS market. This Statement invites all stakeholders to comment and input into the review. Background 1.8 In general terms and for the purposes of this proposed review, NTS describes services which use non-geographic numbers over which those services are provided to callers at a variable charge, depending on the particular service being used. The caller of the service is aware of the charging method by reason of the number dialled. For example a helpline (such as Childline) will be provided on a freephone basis whereas an Internet Service Provider may provide its helpline on a premium rate basis. 1.9 In October 1998, Oftel published its Statement – Tariffing Issues: Bundling of Inbound and Outbound Services (‘the 1998 Statement’) in which it concluded that BT does not appear to have a dominant position in the provision of …inbound services…for business customers (summary, paragraph 4). That Statement was assessing inbound services as freephone (0800/0500 type) and Lo-call (0345/0845 type) services only. This review examines whether the inbound services market should be defined more widely so as to include both national rate (0870 / 0900 type) and Premium Rate (09XXtype) services as well as freephone and Lo-call. It is BT’s contention that it should be and it is therefore these four services that will be assessed in this review. 1.10 In the 1998 Statement, it was accepted by Oftel that, taking account of supply side factors the relevant (product) market could be extended to include national call services. However, at that time Oftel believed that the demand-side characteristics of premium rate services tended to imply that they would not be close demand side substitutes for freephone or Lo-call (although Oftel advised at that time that it was prepared to reconsider this issue). 1.11 More detailed explanation of the nature of freephone, Lo-call, national rate and premium rate services is in the glossary at Annex B. Oftel’s market review of certain NTS products Objectives 2.1 The objectives of the 2000-01 NTS review are:
Scope 2.2 As part of this review Oftel will analyse competitiveness in the broad market segment which covers NTS services, which is also known as inbound services. A key element of the review will involve defining the relevant economic market which may exclude some of the NTS services covered in the broad market segment. 2.3 The market review will:
Proposed timetable Table one: NTS market review timetable
Measuring effective competition and consumer benefits 3.1 Oftel’s effective competition reviews are concerned primarily with consumer outcomes. This is because a competitive market will deliver high quality of service, competitive prices, innovative services and greater choice. Therefore, the measure of the benefits flowing from competition to consumers are key factors in Oftel’s assessment of effective competition. In the case of voice NTS services, the consumers will almost without exception be business users, who then provide NTS services to end-users. 3.2 Oftel will assess consumer benefits using benchmarking of NTS services based on the UK over time, in terms of price, the degree of choice and the degree of consumer satisfaction. Market analysis 3.3 For the purpose of the market analysis, the review will define relevant economic markets. These market definitions will be explored as part of the consultation document. Oftel’s approach to market definitions follows that used by the UK competition authorities and focuses on the existence of constraints on firms’ ability to set prices. These constraints will be considered by examining the possibility of demand-side substitution (that is, the ability of customers to respond to a price increase by switching to products which are good alternatives from their point of view) and supply-side substitution (which occurs when firms supplying other products switch resources into a product whose price has increased). 3.4 It is anticipated that a market analysis will be carried out on the relevant economic market, following an assessment of market definitions. Indicators of effective competition 3.5 Oftel’s Effective Competition Review guidelines of August 2000 set out four broad groups of the indicators of effective competition. These are:
The detailed criteria in each group are set out in Annex A to this Statement. Conclusions of the review 3.6 As set out in Oftel’s Strategy Statement, the outcome of an effective competition review will be one of the following three conclusions:
3.7 A key implication of a finding of effective competition is the absence of market power in that market which is the subject of the review. Existing regulation 4.1 BT is currently subject to a licence obligation (Condition 43) which requires it to supply telecommunication services (including NTS services) to any person who reasonably requests such services. NTS services typically involve the use of non-geographic numbers which allow callers access to a variety of services at varying charges depending upon the service being used: freephone, Lo-call, national rate, etc. As BT originates in excess of 70 per cent of calls to NTS services, its interconnection retention continues to be regulated. All other operators are free to set their origination and /or termination charges and, through these, the retail prices for calls to their services. In relation to Condition 58, the Director may issue a written consent which excepts BT from the obligation to notify prices in respect of those services to which the consent relates. 4.2 Linked to the Condition 43 obligation is the prohibition on undue preference and undue discrimination (Condition 57) together with the requirement to notify prices (Publication of charges, terms and conditions, Condition 58). In contrast, other PTO licensees (with the exception of Kingston Communications in the Hull area) are only required to supply these services when the Director so determines and they are similarly not subject to undue preference or price notification requirements in relation to the provision of inbound services. 4.3 The obligation in Condition 43 requires BT to provide services on reasonable request except to the extent that the Director determines. In making such a determination the Director is required to have regard to the factors set out in Condition 43.4 of BT’s licence (and any other relevant considerations). 4.4 The request by BT relates solely to the four NTS services which they have identified and which are set out in paragraph 1.5 above. Stakeholder input 5.1 Reliable data is critical to Oftel’s market reviews. Oftel will collect and use data from a number of sources to inform the market definition and market analysis. Oftel routinely collects and publishes some limited data on the broad NTS segment, namely terminating revenues for all NTS services. 5.2 The data which Oftel currently collects is at an aggregate level only. It is therefore not possible to determine from that data the proportion of revenues derived from each individual NTS service nor whether revenues relate to voice or data services. Further data as set out below is therefore required. 5.3 It is also important for Oftel to be in a position to relate revenue data to information about the number of customers for service providers and the traffic volumes generated by these services. Without this information Oftel will find it difficult to reach any firm conclusions regarding market shares and the effectiveness of competition in this market. 5.4 Oftel will be consulting with individual providers of NTS services during this review to request more detailed information but in the meantime asks operators to consider in particular whether data can be provided on:
5.5 Ideally, information on each type of NTS service should be further broken down to allow separate consideration of voice and data services. It would also be helpful if operators would consider providing this information on a time-series basis, although a recent snap-shot would be a useful staring point. Oftel would also welcome any information from service providers on the above. All data will be treated in the strictest confidence. 5.6 Oftel is also interested in gathering information on consumer outcomes such as choice, price and value for money and would welcome the results of any market research or other data which stakeholders may have in this regard. 5.7 In order to assist Oftel, the data should be provided at the earliest opportunity and ideally no later than mid February 2001. Comments on the NTS market review Oftel welcomes input from the industry, and business and residential consumer groups, especially in relation to the data that is being sought from stakeholders. Please note that all written responses will be made publicly available in Oftel’s Research and Intelligence Unit unless they are clearly marked as being confidential. If only part of a response is confidential, respondents are asked to place those confidential parts in a separate annex. Any written comments on this document should be sent to: Nigel Humberston tel: 020 7634 8824 e-mail: nigel.humberston@oftel.gov.uk Effective competition indicators
NTS Glossary Freephone: Services typically use 0800/0808 number range. A toll-free service which enables customers (which means the organisation to which the calls are made) to be called free of charge from anywhere in the UK. The customer (the called party) pays the full cost of the call. Lo-call: Services typically use 0345/0845 number range. Customers can be called from anywhere in the UK at a local call rate. The caller pays the local rate and the customer pays the balance. National call: Typically uses 0870/0990 number range. Customers can be called from anywhere in the UK at the national rate. The caller pays the full national rate and the customer pays nothing. Premium Rate Service (PRS): Use 09XX number range. Caller pays for the cost of the call together with a variable charge for the content of the call. Customers earn revenue from the calls.
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