Contents

WHEREAS:

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

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

(C) The Secretary of State has granted to each of the operators listed in the Schedule, a licence under section 7 of the Act for the running of telecommunications systems specified in that Licence;

(D) Regulation 6(6) of the Telecommunications (Interconnection) Regulations 1997 ("the Regulations") provides that where there is a dispute concerning interconnection between organisations, the Director General of Telecommunications ("the Director") shall, at the request of either party, take steps to resolve the dispute within six months of the date of the request. The Direction which the Director makes to resolve the dispute must represent a fair balance between the legitimate interests of the parties, and must be notified to the parties in accordance with Regulation 8(3). The parties are entitled to a full statement of the reasons on which the Direction is based;

(E) The operators listed in the Schedule have entered into a Standard Interconnect Agreement with BT on the dates shown in the Schedule;

(F) BT charges operators for BT originated calls for Number Translation Services ("NTS"). Following a direction of November 1999 entitled Direction concerning BT’s NTS Conveyance these charges are calculated using the concept of Network Charge Differentials ("NCD");

(G) On 7 November 2000 BT issued an Operator Charge Change Notice ("OCCN") proposing that, from 3 January 2001, the charges for BT originated calls to other operators’ NTS, using the Caller Line Identity ("CLI"), will be obtained from the call records made by BT’s billing system called Inter-Network Call Accounting ("INCA");

(H) The operators listed in the Schedule have been unable to agree BT’s OCCN of 7 November 2000 and are in dispute;

(I) On 2 January 2001, in accordance with the provisions of Regulation 6(6) of the Regulations, BT referred this dispute to the Director for resolution;

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

(K) The Director issued a draft of this Direction and the Explanatory Memorandum which contains the Director’s reasons on 15 November 2001 and responses were invited by 14 December 2001;

(L) Comments were received from BT and a number of operators as summarised in Chapter 3 of the explanatory memorandum published with this Direction. These comments have been taken into consideration by the Director in making this Direction;

THEREFORE:

Pursuant to Regulation 6(6) of the Regulations, and having considered the views of the parties and those matters set out in Regulation 6(8) of the Regulations, the Director makes the following Direction to resolve the dispute between BT and the operators listed in the Schedule:

1. The operators listed in the Schedule to this Direction are not required to accept the proposals contained in BT’s OCCN issued on 7 November 2000 and may continue to use the NCD billing methodology for BT originated calls to other operators’ NTS until such time as the parties agree otherwise or the Director directs otherwise.

2. For the purposes of this direction references to "NCD" shall have the same meaning as in the November 1999 Direction concerning BT’s NTS Conveyance until such time as the parties agree otherwise or the Director determines otherwise.

3. The other terms defined or described in the recitals to this Direction shall have the meaning so defined or described. All other words or expressions used in this direction shall have the same meaning as in the Regulations, the Act, the BT licence or the interconnect agreement as appropriate.

4. The parties shall modify their interconnect agreements to give effect to this Direction.

Keith Long

Director of Compliance

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

20 December 2001

Explanatory Memorandum

Chapter one

Summary

1.1 The Director General of Telecommunications ("the Director") has issued a final direction, in accordance with the provisions of Regulation 6(6) of the Telecommunications (Interconnection) Regulations 1997 ("the Regulations"), to resolve a dispute over BT’s proposal to introduce its automated Inter-Network Call Accounting ("INCA") wholesale billing system for calls to other operators’ Number Translation Services ("NTS") from 3 January 2001.

1.2 On 7 November 2000 BT issued an Operator Charge Change Notice ("OCCN") proposing that charges for BT originated calls to other operators’ NTS using the Caller Line Identity ("CLI") will be obtained from INCA call records, with effect from 3 January 2001. A number of operators, listed in the Schedule to this direction, either rejected or did not respond to BT’s proposal and are therefore in dispute with BT. Following the end of the specified negotiation period, BT referred the dispute to the Director on 2 January 2001.

1.3 At the time of BT’s proposal the method used by BT to calculate its NTS charges was that directed by Oftel in November 1999 in the Direction concerning BT’s NTS Conveyance. This direction introduced the concept of a Network Charge Differential ("NCD") which consists of a sliding scale giving a percentage uplift above single tandem charging according to the number of points of connection ("POCs") an operator has with BT.

1.4 Following BT’s referral, Oftel sought operators’ reasons for rejecting BT’s proposals both in writing and via the NTS Focus Group. Oftel also sought BT’s comments on the responses received. One of the key reasons for rejecting BT’s proposals was INCA’s inability to flag calls which transit BT’s network from other originating operators or calls from numbers which have been ported from BT. BT subsequently offered proposals for short, medium and long term upgrades to INCA aimed at addressing these problems but these require feasibility studies and costings before they can be considered for introduction.

1.5 A number of operators also claimed that the output provided by INCA is in a format that cannot be used by their billing systems (of which there are a variety) to compile accurate invoices. In light of these issues some operators considered it unreasonable for BT to mandate the use of INCA for interconnection billing of NTS calls which originate on BT’s network.

1.6 On 15 November 2001 The Director issued his draft direction in relation to this dispute. This proposed that, until the functionality of INCA is improved, operators should be able to choose whether their NTS invoices are compiled using INCA or NCDs. Oftel also recognised the need to review NCDs so that, as near as possible, charges from either system are aligned. This work is already underway in recognition of the fact that NCDs will continue to be used for non-BT originated traffic for an extended period.

1.7 The comments received in response to Oftel’s proposals have been considered in making this final direction. A summary of these together with Oftel’s responses are contained at Chapter 3.

1.8 The Director’s final decision is detailed in Chapter 4. In summary he has decided that the proposals contained in the draft direction should be confirmed. Operators may therefore opt to use INCA or NCD data to compile their invoices for NTS outpayments. The Director believes, however, that the use of an automated billing system is essential and that work to improve the functionality of INCA should be given the highest priority by BT working with the industry through the NTS Focus Group.

1.9 Oftel intends to review this direction after six months to assess whether the interoperability problems with INCA, voiced by operators, for BT originated NTS traffic have been resolved and whether the NCD methodology can then be withdrawn for these calls.

Chapter two

Background to the Dispute

NTS

2.1 In previous determinations of NTS charges Oftel has given a detailed description of the NTS revenue sharing arrangements and how they were arrived at. Most operators are now familiar with this narrative and consequently only a brief description is given in this section. Anyone wishing to read the detailed description can refer to Oftel’s earlier NTS directions many of which are contained on Oftel’s website. The internet addresses of some examples of these are given in the References at the end of this document.

2.2 Oftel conducted a lengthy consultation in 1995 over the revenue sharing arrangements and charges that should apply to ‘non-geographic’ calls to services hosted by BT and other terminating operators. The industry believed that the payment arrangements which applied for person to person geographic calls provided little incentive for the development of value added, usually telemarketing, services. These arrangements provide only for a cost based charge to be paid by the originating operator for call termination and for any retail benefit from the calls to be retained by the originating operator.

2.3 Terminating operators held that, as owners of the value added services, they should receive a greater share of the retail price for the calls to cover both their own network costs and to help fund the services. As a result of that consultation Oftel published what has become known as "the NTS Determination" made in January 1996.

2.4 The NTS Determination set the charges that BT and operators should pay for access to BT’s own services. It also established the basis for the calculation of the payments BT should make to operators for terminating calls destined for their (or their service providers’) services. These payments are calculated by taking the retail price paid by customers less BT’s regulated retention for originating these calls. BT’s retention, in turn, is the sum of the element based charge for call origination and conveyance across its network to the point of handover to the operator’s network, plus an allowance for the costs of relevant retail activities undertaken by BT.

BT’s Charge for Call Origination and Conveyance

2.5 At the time of the NTS Determination it was acknowledged that BT’s origination and conveyance charges to different operators would vary according to the amount of its network that was used. However, BT was unable to provide a detailed breakdown of those charges on a call-by-call basis. The NTS Determination stated that all operators would be charged at the same single tandem rate until such time as BT could provide evidence of the charge that should apply in each case.

2.6 As it had no automated means of measuring its actual conveyance costs, BT subsequently sampled a proportion of calls terminated on each operator’s network and used this to set ‘route factors’ which gave the average of single and double tandem conveyance used in carrying an operator’s traffic. It then proposed to revise each operator’s conveyance charges using this "route factor" methodology.

2.7 A number of operators rejected BT’s proposals on the grounds that the sample sizes used were unrepresentative and relied on measurements of the actual routing of calls taking no account of least cost routing. This is the measurement of the shortest path to an operator’s POCs rather than measuring calls that have had to be re-routed across BT’s network to avoid congestion or other problems.

2.8 Oftel, meanwhile, recognised that the continued use of a single tandem average conveyance charge removed any incentive for operators to interconnect efficiently with BT. Operators found they could rely on very few points of presence and still be charged at the same rate. This meant that as the number of interconnecting operators grew the likelihood of BT failing to recover its costs of NTS conveyance increased since, in general, only established operators had built networks that could interconnect efficiently with BT.

2.9 In the summer of 1998 Oftel, through the Operator Policy Forum (OPF), established the NTS Focus Group to address the growing number of issues that were being identified with the NTS arrangements. This group was used to advise Oftel in a number of disputes that had arisen from BT’s proposals to refine the assumptions that had been built into the original 1996 NTS determination. One of the issues was the dispute that had arisen from BT’s proposals to de-average its NTS conveyance charges using route factors produced from its sampling of calls.

2.10 After having discussed and proposed a number of complementary and alternative methods to BT’s ‘route factors’, the NTS focus group finally agreed to apply a sliding scale which gave a percentage increase above the single tandem charge which decreased with the number of POCs an operator had with BT. The ‘uplift’ in the single tandem charge produced by the sliding scale was known as the Network Charge Differential or NCD. Details of the direction which introduced this new methodology can be found in Oftel’s Direction concerning BT’s NTS Conveyance ("the NTS Conveyance Direction") in November 1999.

2.11 The level of uplift used in the NCD sliding scale was set so that those operators with few POCs would not suddenly face unreasonably large increases in their charges. Were it not for the NCD sliding scale an operator with only one POC could find that the majority of their calls used two BT tandem switching stages resulting in a near 100% increase in their charges.

2.12 Whilst work on the NTS Conveyance Direction was underway BT announced that it was developing its INCA billing system which, using the caller’s CLI, would be able to operate for NTS traffic. BT estimated INCA would be ready for use by April 2000.

2.13 INCA is BT’s automatic interconnection billing system used to derive its charges and payments to other network operators for call origination, conveyance and termination. Charges are compiled using the EBC (Element Based Charges) matrix of components of BT’s network. INCA measures how much of BT’s network has been used and the duration of calls enabling BT to invoice operators for its costs and to provide information to operators enabling them to invoice BT for call termination payments.

2.14 The CLI is the signal generated by every exchange line when originating calls, enabling terminating networks to identify the source of calls for caller display and interconnection billing purposes. The combination of INCA and CLI information is designed to enable interconnecting networks to assess charges and payments between each other.

2.15 The NTS Conveyance Direction was made in November 1999 and Oftel believed that the period leading to INCA’s introduction would allow operators time to optimise the interconnection of their networks with BT. This meant that, when INCA was introduced, operators would not face large increases in their conveyance charges. The use of NCDs in the interim would also enable operators, accustomed only to single tandem charges, to become used to paying for what they actually used.

2.16 However, two factors served to upset these assumptions. First, INCA was delayed for several months and, when ready for launch, BT announced it could only be used for BT originated traffic. Second, BT announced its proposals to reverse the ownership of NTS traffic terminating on operators’ networks. This led to Oftel’s Determination of a dispute between BT and a number of operators regarding a proposal to charge for NTS links from January 1 2001 made on 28 June 2001, known as the "NTS Links Direction".

2.17 BT announced that it would be ready to conduct a trial of INCA from 1 November 2000 with a view to full introduction in January 2001. BT sought volunteers to take part in the trial and a small number of operators agreed. BT was unable to provide any output from INCA during the trial period but proceeded with its plan to introduce INCA in any event. BT issued OCCNs to 137 operators on 7 November 2000 proposing to introduce INCA with effect from 3 January 2001. A total of 89 operators (as listed in the Schedule to the direction) rejected BT’s proposal leading to the dispute which is the subject of this direction.

Reasons for rejecting INCA

2.18 Oftel notified the dispute to the operators referred by BT and sought comments on why they had rejected BT’s offer. Relatively few comments were received but those that were are summarised as follows:

• Core Telecommunications said that it was concerned that, despite having increased their number of POCs, it was not confident BT was delivering NTS traffic to the nearest point of handover owing to datafill errors and delays. It added that, at the time, NTS traffic was still considered as BT’s responsibility and the routing often used second and third choices. BT’s charges were unlikely therefore, to be based on least cost routing principles.
• Rateflame said that it was unable to accept BT’s INCA based charging proposals because they included BT’s proposed increase of 16.8% for the NTS Discount which was, at that time, also in dispute. The dispute over the NTS discounts has now been determined by Oftel in its Determination relating to BT's proposal to increase NTS discounts made on 5 September 2001.
• Easynet said that it had understood that INCA was to be introduced from April 2000. However, it submits that it was not ready even for trial until November 2000 and that by January 2001 had still failed to produce any data owing, according to BT, to technical difficulties. Easynet believed early implementation of INCA was essential as it considered that it was being unfairly charged under NCD principles. However, in the absence of any verifiable data it could not accept BT’s proposal. Furthermore, as BT was proposing to continue to use NCD for transit traffic, Easynet considered that this perpetuated the unfair charges that it was receiving.
• World Online also objected to BT’s inclusion of its disputed discount in the proposed INCA charges. It welcomed the implementation of billing by INCA but not until BT had guaranteed that the system will work accurately and explained what needed to be done to develop World Online’s billing system to interface with INCA.
• London Digital objected to INCA owing to the amount of computer processing and human time needed to use INCA data. It was submitted that this represented too great an overhead for an operator with NTS traffic minutes below a threshold of, say, one million per month.
• Thus echoed the comments about BT’s inclusion of its disputed NTS discounts. It also objected strongly to BT’s use of NCD for transit billing especially as it considered that it took no account of how the originating operator interconnected with BT. It was submitted that most operators interconnect at single tandem yet BT was paying POLOs (Payments to other Licensed Operators or NTS outpayments) based on the terminating operator’s NCD before invoicing its transit charge.
• Energis did not dispute the introduction of INCA to replace NCDs but, like Thus, it objected to the continued use of NCDs for transit especially as BT was relating the originating operator’s call origination charge to the terminating operator’s network architecture.

2.19 Oftel subsequently received other representations regarding INCA both directly and via the NTS Focus Group. These are summarised below.

2.20 Some operators expressed concern that BT’s disputed NTS Links proposals had prevented any action being taken to optimise their networks in order to minimise their INCA charges. It was submitted that uncertainty about the likely outcome of that dispute meant that operators were unwilling to risk further investment in network infrastructure until they knew what Oftel’s eventual decision would cost them.

2.21 The NTS Links direction was made in June 2001 by which time INCA had been in operation for several months. Operators’ charges were, in the case of the parties to the dispute, continuing to be calculated using the NCD process.

2.22 Oftel has continued to receive comments on the operability of INCA at NTS focus group meetings. The belief that INCA call records were not widely usable was being confirmed in practice. In addition concerns were voiced at the inability of INCA to distinguish non-BT originated calls. These include calls from cable and indirect access operators, including those using Carrier Pre-Selection, and from numbers that had been ported from BT to other operators. One operator also complained that, in overcoming this failing in INCA, BT had incorrectly applied NCDs as a manual alternative.

Transit Issues

2.23 In practice, BT makes the same POLO payment to terminating operators regardless of where calls originate. It then invoices the terminating operator for its transit charges. Where the terminating operator has an NCD greater than single tandem, this arrangement takes no account of the likelihood that the originating operator’s origination costs may only be single tandem on its network. This has led some terminating operators to believe they may be receiving less than they should for non-BT originated calls, assuming the originating operator’s retail prices are the same as BT’s.

2.24 Oftel believes the best solution to this problem may be for originating and terminating operators to establish their own billing and payment arrangements leaving BT to collect only its transit charge.

2.25 It must be recalled that BT receives no additional payment for invoicing and passing revenue between other operators and it may not be reasonable for BT to be expected to work out another originating operator’s charges and then adjust the corresponding terminating operator’s payments.

2.26 Despite having rejected INCA the operators party to this dispute have still been supplied with data from INCA by BT. Initially the output was inconsistent and it took several months for the issues with INCA to be fully identified. As a consequence it was not until September 2001 that Oftel was able to put the issues raised by operators to BT for comment. BT’s response included a description of the data provided by INCA, guidance on how least cost routeing is achieved and proposals for a series of upgrades to INCA designed to address the issues surrounding non-BT originated traffic over the short, medium and longer terms. BT’s proposals were attached at Annex A of the draft direction which was issued for consultation.

2.27 Oftel’s initial view is that BT’s response appeared to offer a positive way forward to resolving the transit related issues but made no mention of operators’ inability to use INCA data in general. Oftel copied BT’s response to the NTS focus group and sought operators’ views. These have been considered by Oftel in reaching this decision and will be considered further in the context of work to follow this direction.

2.28 Operators have advised Oftel that the information produced by INCA is not in a format that many of the varied industry billing systems can use. The data may be entirely accurate but are meaningless if they can not be processed by the operator to produce the billing invoices or check call records against BT’s. Oftel recommends that the industry needs to resolve interconnection billing interoperability as a matter of urgency. It may also be that the NICC could be asked to extend its remit to look at this issue.

2.29 In summary, however, the consensus from the representations made to Oftel is that BT attempted to introduce INCA without any proper testing of its abilities or regard to its compatibility with operators’ billing systems. This applies equally to both BT and non-BT originated traffic and the general conclusion is that INCA is not ready for use.

Chapter three

Summary of Operator’s comments on the Director’s draft proposals and Oftel’s response

Copies of non-confidential responses to the draft direction can be found on Oftel’s website at: www.oftel.gov.uk/publications/responses/2001/inca1101/index.htm

BT

3.1 BT made no direct comment on the draft decision but sought to clarify what it perceived as misconceptions over the potential of BT’s accounting systems and the billing issues regarding non-BT originated and ported NTS calls.

3.2 BT described the difficulties caused by the absence of adequate information within call signalling data. The enhancement of signalling protocols may need to be addressed by the industry as a whole, including equipment manufacturers, although this may take some considerable time to achieve. In the meantime BT and operators will need to work together to achieve an acceptable means of accounting for network usage.

3.3 BT said it is currently reviewing the methodology for NCDs and stressed how these can fail to take account of when calls terminate via different POCs and can therefore lead to inaccurate charges. BT also pointed out an error regarding transit billing in the diagram at the end of its letter to Oftel which formed Annex A to the draft direction and which gave possible solutions for the problems with non-BT originated traffic. BT added that since writing its letter it has continued to explore further possibilities for addressing these issues.

Oftel’s response

3.4 The work to address the INCA signalling issues will be initiated by Oftel at the NTS Focus Group in January 2002. This will include discussions as to processes, timescales and how costs should be met.

3.5 With regard to the review of the NCD methodology, this has been initiated by Oftel using data from BT and will be pursued in discussions at the NTS Focus Group in January 2002. In light of this direction retaining NCDs and thus, the need to review NCDs, Oftel currently intends to consider issuing a further direction on this if the industry and BT can not agree quickly to a revision themselves.

WorldCom

3.6 WorldCom indicated its broad support for Oftel’s draft proposals and expressed its interest in how the INCA issues will be addressed. In particular, if any costs in upgrading INCA are likely to be borne by operators WorldCom would expect to have an input into the chosen solution.

3.7 WorldCom also requested some clarification on Oftel’s description of how transit billing currently occurs, in paragraph 2.24 of the explanatory memorandum to the draft direction, as this did not to conform to its understanding of what currently happens.

Oftel’s response

3.8 As previously stated the work to address weaknesses with INCA will be conducted via the NTS Focus Group with full operator participation. In regard to Oftel’s description of the transit billing process, Oftel has confirmed that Worldcom’s understanding of the process is correct as described in paragraph 2.23. As a consequence the original paragraph 2.24 of the draft explanatory memorandum has been withdrawn. Discussion of the transit billing process will be included with Oftel’s review of the NCD methodology, at the NTS Focus Group in January 2002 (paragraph 4.6 refers).

Your Communications

3.9 Your Communications generally welcomed the draft direction’s recognition that INCA, in its current state, is inadequate as a basis for correct NTS billing by terminating operators. INCA would have advantages if were to work as intended but the substantial amount of time and money that might need to be spent by BT and operators in achieving this is a cause for concern.

3.10 Whist noting Oftel’s comment that the industry needs to resolve interconnection billing interoperability issues Your Communications states that it is not clear how Oftel considers this should be achieved. It requested that Oftel could set out the parameters for negotiations including who should initiate these and any time limits.

3.11 Your Communications believed it would unreasonable for any amended INCA/CLI system to have retrospective effect as it would be impossible for operators to compile accurate invoices on a retrospective basis. It would therefore be helpful if Oftel were to make this clear regardless of whether Oftel had to intervene in any negotiations.

3.12 Your Communications noted Oftel’s intention to review the NCD sliding scale but believed this work should be in co-ordination with any upgrading of INCA.

Oftel’s response

3.13 This document describes how a review of INCA interoperability will be undertaken. The NTS Focus Group will be used as the vehicle to progress the work that needs to be done including full discussion of Oftel’s review of NCDs. While the Director can not fetter his discretion as to future decisions, he currently sees no justification for any retrospective implementation of INCA charges.

Easynet

3.14 Easynet agreed with Oftel’s draft proposals as it believes BT’s NTS (CLI) methodology is not an appropriate implementation of INCA. The existing NCD regime must be maintained until BT has developed the appropriate INCA system. However, the current NCD sliding scale is inaccurate as it underestimates the true theoretical level of single tandem coverage for each POC count.

3.15 Easynet commented on Oftel’s use of a ‘3 month buffer’ period in the NTS Links direction to allow operators time to adjust their networks before paying for their links. Using this principle Easynet says that the NCD sliding scale should have been revised in February 2000 (3 months after the November 1999 NTS Conveyance determination) to remove the bias to operators with lower connectivity.

3.16 Despite resistance from BT, Easynet had adjusted its network to achieve near single tandem billing in the expectation that INCA would have been introduced from April 2000. As a consequence it says it has been overcharged by BT for call origination since that time. Oftel should, in Easynet’s view, back date any review of NCDs to February or April 2000 to enable Easynet to recover its over payments.

3.17 Easynet also warned of the difficulty in taking a true account of BT’s true network topology with the NCD methodology. Depending on how operators interconnect it is equally possible for single tandem to be achieved with less that 30 and more than 50 POCs.

Oftel’s response

3.18 The ‘buffer period’ referred to by Easynet applied specifically to the NTS Links direction and does not imply any standard practice for future Oftel directions. As the industry is well aware, each matter referred to the Director must be considered on its own merits.

3.19 While the Director does not fetter any future decision as to the review of NCDs, he does not consider that any revised NCD methodology should apply retrospectively. He does consider that NCDs should be revised as quickly as possible and seeks industry co-operation in achieving this. Whilst accepting that some operators may benefit from revised NCDs others equally may not. Oftel is not in favour of placing operators in the position of having to refund overpayments to BT whilst being potentially unable to recover any overpayments they may have made to their retail customers. Once completed the direction confirming the new NCD arrangements will have ongoing effect from a date to be determined by Oftel.

Tiscali

3.20 Tiscali said that BT’s proposed introduction of INCA using CLI should have been a positive move. In the event, however, there is little point in doing so when INCA is not fully fit for purpose. Tiscali has no objection to INCA in principle and would support it when it can be shown to be fully functional and sufficiently accurate. However, advice would be required from BT about how Tiscali can update its own billing system to interact properly with INCA at its time of introduction.

3.21 Tiscali agrees with Oftel’s proposal to review the NCD charging method and would be keen to take part in the discussions.

Oftel’s response

3.22 Tiscali’s comments are noted and Oftel agrees that operators should be actively involved in the review of NCDs.

Thus

3.23 Thus welcomed Oftel’s decision to give operators the choice of accounting methodology and whilst not objecting to INCA, felt that BT’s current automated billing arrangements are not fit for purpose. Terminating operators are responsible for invoicing BT for calls to their NTS but are unable to do so properly owing to the absence of information relating to non-BT originated NTS traffic. As a result NCDs should remain in place until BT has made all the necessary modifications to enable accurate EBC based NTS billing.

3.24 Thus also welcomes any effort by BT to address the issues and looks forward to working with the industry to agree the way forward to achieve the ability to raise accurate invoices. Any developments must be subject to proper consultation to enable operators to adapt their billing systems.

3.25 Thus believes that where operators have elected to use INCA for BT originated traffic, the interconnect rates for non-BT traffic should be set at single tandem and not calculated using NCDs. Oftel’s November 1999 NTS Conveyance determination applied only to BT originated calls and made no provision for NCDs to be used for transit billing.

Oftel’s response

3.26 Oftel concurs with Thus’s view over the continued use of NCDs until INCA issues are addressed. Thus’s concerns over transit billing using NCDs are noted and these will be addressed during Oftel’s review of the NCD methodology.

COLT

3.27 COLT indicated its support for Oftel’s draft proposals and for the proposed review of the NCD methodology.

Oftel’s response

3.28 COLT’s comments have been taken into account.

Chapter four

The Director’s Final Decision

4.1 In reaching his draft decision, which was issued for consultation, the Director had considered the two available options and their advantages and disadvantages. These were:

• to uphold BT’s proposal to require the use of INCA for BT originated traffic whilst embarking on a programme of defined upgrades to improve its functionality for all call types or;
• to allow operators to continue to invoice BT for NTS POLOs using NCD principles until agreement could be reached on how compatibility between INCA data and operator billing systems can be achieved:

The detailed advantages and disadvantages of each are not repeated in this document but can be viewed in Chapter 3 of the draft direction - see References at the end of this document.

4.2 As stated in the draft direction, the Director is concerned that any decision for or against the use of INCA may have an unacceptable impact on some operators. Therefore, having considered the options and the matters set out in Regulation 6(8) of the Telecommunications (Interconnection) Regulations 1997 the Director directs that this dispute should be resolved so that the operators in dispute with BT should not be required to use BT’s INCA billing system for NTS, but should be able to choose to continue to use NCDs until INCA billing system compatibility issues have been addressed or the Director directs otherwise. However, the Director also considers that those Operators who do not wish to continue to use NCDs may, at any time as a matter of commercial negotiation with BT, agree to use INCA data.

Future action outside this direction

4.3 It is important, however, that the reasons for choosing to use either NCDs or INCA are not solely driven by the ability to obtain lower charges with consequential higher outpayments. NCDs were originally designed to ‘ease the shock’ of de-averaged charges on operators with limited numbers of POCs. These operators would have noticed significant increases in their charges if INCA had been introduced ‘overnight’ whilst operators with more extensive networks may have only noticed relatively marginal increases.

4.4 At the time of the NTS Conveyance Direction which introduced NCDs (November 1999) BT estimated that INCA would be available from April 2000. This meant that NCDs should only have been required as a short term expedient since there was no indication at the time that INCA would not be able to separately identify non-BT originated calls. When INCA was introduced it was expected that all operators would be charged accurately for BT’s conveyance.

4.5 In the event, NCDs have now been in use for two years and will continue to be used, at least, until INCA can be upgraded for non-BT traffic. Additionally, as a consequence of the prospect of INCA and the recent NTS Links direction many operators will have sought to optimise their networks to increase their connectivity. It is vital therefore that NCDs, as near as possible, represent actual charges in relation to operators’ existing connectivity.

4.6 Accordingly, a review of NCDs has been initiated by Oftel and BT has been requested to provide up to date information concerning operators’ connectivity with BT and the charges BT raises for NTS calls to operators’ services. The proposals for changing the NCD methodology and the issues with transit billing using NCDs, identified in paragraphs 2.23 to 2.25 will be discussed with the NTS Focus Group before any formal consultation is undertaken. If this can not be commercially agreed Oftel will consider a further direction following consultation.

4.7 It is the Director’s belief that an automated wholesale billing system for NTS is essential to guarantee accuracy and consistency of BT’s charges. The continued use of NCDs must be viewed as an extended expedient that should be withdrawn at the earliest opportunity.

4.8 However, it is clear the issues surrounding billing of non-BT originated calls may take some time to completely resolve. BT is currently reviewing its proposals and these will be discussed fully with operators via the NTS Focus Group. The focus group will, in turn, look to establish the processes for conducting feasibility studies, introducing upgrades and meeting any exceptional costs BT and operators may incur.

4.9 The NTS Focus Group will also look into the problems, voiced by some operators, concerning their ability to use INCA data for compiling outpayment invoices for BT originated traffic. Once these have been clearly identified and resolved BT should conduct a further trial of the INCA system. When this is successfully completed Oftel may, in the absence of commercial agreement, direct that the use of the NCD methodology should be withdrawn for calls which originate from BT’s own customers.

4.10 Oftel believes the necessary work and the subsequent trial should be completed within 6 months. As a consequence this direction will be reviewed at the end of June 2002 to examine progress and to decide whether usage of NCDs should continue.

4.11 In order to ensure that the industry can make a prompt start to addressing all of the ongoing work identified in this direction an NTS Focus Group meeting has been called for 2pm on Friday 11 January 2002 and all operators are urged to attend to express their views.

Oftel

December 2001

References to earlier directions and determinations

Direction concerning BT’s NTS Conveyance made on 13 November 1999: www.oftel.gov.uk/publications/1999/pricing/nts1199.htm

Determination relating to BT's proposal to increase NTS discounts made on 3 September 2001: www.oftel.gov.uk/publications/pricing/ntsd0901.htm

Draft Direction of a dispute over BT's proposal to charge for NTS call origination using INCA and CLI: www.oftel.gov.uk/publications/pricing/inca1101.htm

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