DETERMINATION
UNDER THE PROVISIONS OF REGULATION 6(6) OF THE TELECOMMUNICATIONS (INTERCONNECTION)
REGULATIONS 1997 OF A DISPUTE BETWEEN BRITISH TELECOMMUNICATIONS PLC
("BT") AND A NUMBER OF OPERATORS REGARDING A PROPOSAL TO CHARGE
FOR NTS LINKS FROM 1 JANUARY 2001
June 28 2001
Contents
The
Direction
Chapter
1 Summary
Chapter
2 Background
Chapter
3 The Reference for Determination by Operators
Chapter
4 The Draft Decision
Chapter
5 Responses to the consultation and the Director’s comments
Chapter
6 The Final Decision
Schedule List
of operators referred to Oftel by BT as in dispute
DETERMINATION
UNDER THE PROVISIONS OF REGULATION 6(6) OF THE TELECOMMUNICATIONS (INTERCONNECTION)
REGULATIONS 1997 OF A DISPUTE BETWEEN BRITISH TELECOMMUNICATIONS PLC
("BT") AND THE OPERATORS LISTED IN THE SCHEDULE TO THIS DETERMINATION
OVER BT’S PROPOSAL TO CHARGE FOR NTS LINKS FROM 1 JANUARY 2001
WHEREAS:
| 1. |
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; |
| 2. |
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"); |
| 3. |
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. |
| 4. |
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 Determination 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 Determination is based. |
| 5. |
The
operators listed in the Schedule have entered into a Standard Interconnect
Agreement with BT on the dates shown in the Schedule. |
| 6. |
BT
currently provides interconnection links, at its own expense, for
terminating Number Translation Service ("NTS") traffic
to operators’ networks, for BT originated traffic and where BT acts
as a transit operator. These interconnection links are known as
"NTS links". |
| 7. |
NTS
links include Customer Sited Interconnection (CSI) circuits and
In span Interconnection (ISI) circuits which provide the handover
capacity from BT’s network to the operators’ points of connection.
The NTS links also include circuits known as NTS Extension Circuits
("NTS ECs") installed by BT for traffic management purposes
where the interconnection capacity sought by operators exceeded
the limits BT had laid down for operator switched traffic through
any one switch. |
| 8. |
On
25 April 2000, BT issued a Contractual Review Notice ("BT’s
proposal") to the operators under the terms of the Standard
Interconnect Agreement which sought to amend that Agreement by transferring
the responsibility for NTS links and interconnection links for non
NTS transit traffic thereby enabling BT to charge operators for
such links with effect from 1 January 2001. BT’s proposal gave operators
a period of three months to negotiate. |
| 9. |
On
4 August 2000, BT’s proposal was notified in two Network Charge
Change Notices (NCCNs) . NCCN 209 proposed that responsibility for
NTS links carrying NTS traffic (including transited traffic) transferred
from BT to the terminating operator from 1 January 2000. NCCN 210
proposed that responsibility for interconnection links for non-NTS
transit traffic also transferred from BT to the terminating operator
from 1 January 2000. |
| 10. |
The
operators listed in the schedule have been unable to agree on BT’s
proposal and are in dispute. |
| 11. |
On
24 August 2000, in accordance with the provisions of Regulation
6(6) of the Regulations, Thus (on behalf of itself and 13 other
operators as set out in the Schedule) referred this dispute to the
Director for determination. BT also referred the dispute to the
Director for determination on 23 October 2000. |
| 12. |
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 Determination. |
| 13. |
The
Director issued a draft of this Determination and the Explanatory
Memorandum which contains the Director’s reasons on 23 March 2001
and responses were invited by 24 April 2001. A further two weeks
was allowed for comments on comments. |
| 14. |
Comments
were received from BT and a number of other operators as summarised
in paragraphs 5.1 to 5.36 of the explanatory memorandum published
with this determination. These comments have been taken into consideration
by the Director in making this Determination. |
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 determination to resolve the dispute between
BT and the operators listed in the schedule:
| 1. |
The
operators may submit Advance Capacity Orders relating to NTS links
to BT by 13 July 2001 which consist of all, or any one, or combination
of, the following: |
|
(a)
the cancellation of existing NTS links; |
|
(b)
the Capacity Rearrangement of existing NTS links; and/or |
|
(c)
the provision of new NTS links. |
| 2. |
Where
an operator has submitted Advance Capacity Orders in accordance
with paragraph 1 above, it may then submit Capacity Orders to BT
by 24 August 2001. |
| 3. |
Subject
to paragraph 4, responsibility for all NTS links shall transfer
to an operator, and BT shall be entitled to charge that operator
for those links: |
| |
(a)
from a date by which BT has met all of its requirements in relation
to all Capacity Orders (with the exception of those which seek new
ISI NTS links) submitted by that operator in accordance with paragraph
2; |
| |
(b)
from 25 August 2001 where an operator has not submitted any Capacity
Orders in accordance with paragraph 2; |
| |
(c)
from 25 August 2001 where an operator has only submitted Capacity
Orders in accordance with paragraph 2 which seek new ISI NTS links. |
| 4. |
Responsibility
for NTS ECs shall not transfer from BT to an operator unless the
operator agrees. |
| 5. |
Responsibility
for interconnection links for non-NTS transit traffic shall not
transfer from BT to operators. |
| 6. |
In
this determination, "CSI", "ISI", "Advance
Capacity Orders", "Capacity Orders" and "Capacity
Re-arrangement" shall have the same meaning as in the Standard
Interconnection Agreement between BT and the operators listed in
the schedule to this determination. |
| 7. |
Except
as otherwise defined in this determination, other words or expressions
used shall have the same meaning as in the Act, the Licence or the
Standard Interconnection Agreement as appropriate. |
| 8. |
BT
shall modify NCCNs 209 and 210 to give effect to this determination. |
| 9. |
The
parties shall modify their Standard Interconnect Agreements to give
effect to this determination. |
| 10. |
This
Determination shall take effect immediately |
Keith Long
Director of Compliance
A person authorised
under paragraph 8 of Schedule 1 of the Telecommunications Act 1984
27
June 2001
Explanatory
Memorandum
Chapter 1
Summary
1.1
The Director General of Telecommunications ("the Director")
has issued a determination in accordance with the provisions of Regulation
6(6) of the Telecommunications (Interconnection) Regulations 1997 for
the resolution of the dispute between BT and the operators listed in
the schedule under the terms of their Standard Interconnect Agreement.
This determination sets out the Director’s decision on BT’s proposals
to reverse the ownership of Number Translation Service ("NTS")
traffic, originated or carried by BT as transit operator, and terminated
onto operators’ networks. BT proposes to charge operators for NTS Links
to the operators’ point of interconnection, with effect from 1 January
2001.
1.2 A dispute was
referred to Oftel by Thus on behalf of itself and 13 other operators
in August 2000. A subsequent reference of this dispute was made by BT.
BT’s reference also referred to a dispute between it and a number of
other operators. In total therefore, this dispute relates to BT and
the operators as set out in the schedule.
1.3 The Director
General of Telecommunications ("the Director") considered
the submissions made by Thus on behalf of itself and 13 other operators
and by BT and issued a draft determination on 23 March 2001 to the industry
as a whole for consultation. Comments were received as requested and
these have been taken into account in making this final determination.
1.4 The details
of the Director’s consideration of the responses to the draft determination
are set out in Section 5 of this document and his decision is detailed
in Section 6. In summary, the Director has determined that BT’s proposal
to charge for interconnection links which terminate BT originated or
BT transit NTS calls is justified. However, operators do need reasonable
time to revise their interconnection arrangements. BT’s proposal to
charge for links terminating BT transit geographic calls has not been
upheld.
1.5 Accordingly,
the Director has decided that charging should commence on a date when
Capacity Orders for cancellation, re-arrangement or provision of interconnection
capacity for NTS links placed by 24 August 2001 have been completed
by BT. These orders will have been initiated by Advanced Capacity Orders
(ACOs) placed by 13 July 2001 and subsequently agreed with BT. This
gives BT the incentive to complete its share of the work quickly without
giving operators the ability to seek to delay paying for NTS links by
failing to test or connect to circuits where work has been completed
by BT. In the opinion of the Director this decision represents a fair
balance between the interests of the parties.
1.6 BT’s capacity
constraints at individual tandem switches should be removed. BT can
choose to provide capacity using NTS Extension Circuits (NTSECs), described
at paragraph 2.2, or other links to alternative tandem switches. Operators
will then have the option of whether or not to pay for any such additional
links. Where the operator does pay for the link the new switch will
count as an additional point of connection. Where BT pays for the link
it will not.
Chapter 2
Background
History
2.1 In establishing
the Network Charge Control (NCC) regime, which took effect on 1 October
1997, Oftel grouped BT’s wholesale charges into three product charging
baskets. These are the general network, call termination and interconnection
specific baskets. Charges relating to NTS related services were not
specifically included in these owing to the special arrangements Oftel
had separately made for NTS call revenue to be apportioned between originating
and terminating operators. As a consequence, the NCC regime does not
provide for BT to recover the costs of providing interconnection links
for terminating NTS traffic to other licensed operators’ networks. This
includes both calls originated by BT and cases where BT acts as transit
operator for calls including NTS that originate on another operator’s
network.
2.2
These interconnection links are commonly known as NTS links. They include
circuits which provide the handover capacity from the BT network to
operator Points of Connection at the DMSU, DLE, WAT etc. They also include
NTS ECs, that is, circuits which BT has installed for traffic management
purposes where interconnection capacity sought by operators exceeded
the limits BT had laid down for operator switched traffic through any
one switch.
2.3 This has meant
that, since October 1997, BT has installed interconnection capacity
to enable operators to terminate traffic from its network at its own
expense. NTS traffic, by its nature, is owned by terminating operators
and their service providers (whose services callers are seeking to access
and use). BT is, therefore, paying for capacity to carry traffic of
which it has no ownership.
2.4 In 1997, NTS
call volumes were relatively small compared to geographic and other
calls. Furthermore, with the exception of established operators such
as Cable and Wireless, most operators interconnected at relatively few
points within BT’s network. The emergence of, and enormous growth in,
internet access using local call fee NTS numbers has resulted in the
expansion of operator networks and large increases in the numbers of
operators seeking to interconnect with BT.
2.5 In November
1999, Oftel enabled BT to de-average its single tandem NTS call origination
charge through the Direction concerning BT’s NTS Conveyance charges.
This, and the impending introduction of INCA based interconnection charging,
has led operators to seek to increase the number of their points of
connection in order to minimise the distance and numbers of switching
stages used to convey their calls. All this has led to large increases
in the numbers of NTS links that BT now supplies to operators and in
turn, to BT’s own costs.
2.6 BT has been
conscious of this increasing cost burden for some time and, at the NTS
Focus Group meetings in the summer of 1999, alerted the industry of
its intention, at a future date, to seek to charge for NTS links. This
advance notice of change was also, according to BT, given at other industry
meetings where Oftel may not have been present.
Timetable of
Events
2.7 On 25 April
2000, BT issued a Contractual Review Notice under the terms of the Standard
Interconnect Agreement. That Notice sought to amend that Agreement to
change the responsibility for the NTS links used for terminating NTS
and transit calls with effect from 1 January 2001. The notice gave a
period of three months for operators to negotiate BT’s proposal and
reach agreement. In the event, no agreement was reached by the end of
that 3 month period
2.8 On 4 August
2000, BT issued Network Charge Change Notices (NCCNs) 209 for NTS and
NTS transit traffic, and 210 for non-NTS transit traffic, relating to
changes of responsibility for In Span Interconnection (ISI) and Customer
Sited Interconnection (CSI) links with effect from 1 January 2001.
2.9 On 11 August
2000, an operator, Telinco (now operating as World Online), wrote to
Oftel to complain about BT’s proposals as contained in its NCCNs. Telinco’s
opposition to the proposals was on the grounds that smaller regionally
based operators, such as Telinco, had established their businesses on
the basis of their ability to interconnect with BT and collect NTS traffic
originating from anywhere in the UK without having to build their network
extensively. It was submitted that having to pay for NTS links, which
had hitherto been free of charge, may seriously jeopardise otherwise
viable business plans. This may make their services unprofitable and
unable to compete with those of larger operators including BT. Telinco
was also not convinced that BT was not already recovering the costs
of providing links through other NTS related charges such as the Retail
Uplift. Telinco is a party to this dispute.
2.10 On 17 August
2000 another operator, Telewest, wrote to Oftel indicating its support
for BT’s proposals in NCCN 209 for NTS and NTS transit traffic. Telewest,
however, did not support BT’s proposal in NCCN 210 with regard to non-NTS
transit traffic on the grounds that links costs should be borne by the
operator which controls the retail revenue for calls. Telewest also
asked Oftel for its views on the responsibility for payment for links
from another originating operator to BT or another network operator
acting as a transit operator for NTS traffic to terminating operators.
Telewest submitted that the originating operator does not control the
retail revenue and should not, therefore, bear the cost of the links.
2.11 Telewest argued
that, in the case of NTS traffic, the originating operator only retained
its network and retail costs (including a return on capital). The remainder
of the retail revenue was passed to the terminating operator. The NTS
regime was created by Oftel to reward terminating operators and service
providers for offering value added services and to encourage the growth
and innovation of new services. With non-NTS calls the cost based payment
was made to the terminating operator, with the originating operator
retaining any retail profits. On this basis, Telewest considered that
responsibility for non-NTS transit links should remain with the originating
operator. Telewest requested that Oftel challenge the validity of NCCN
210. Telewest did not, however, refer the matter to the Director for
determination, nevertheless these points are considered further in Section
5.
2.12 On 24 August
2000 another operator, Thus, wrote to Oftel on behalf of itself and
thirteen other operators (they are listed with the other operators who
are party to this dispute in the Schedule to this determination), including
Telinco (the earlier submissions to Oftel from Telinco are described
in paragraph 2.9 above) , seeking a determination of a dispute between
those operators and BT over the proposals contained in NCCNs 209 and
210. The determination request was referred to the Director pursuant
to Regulation 6(6) of the Telecommunications (Interconnection) Regulations
1997.
2.13 On 4 September
2000, BT issued supplemental agreements embodying the proposed changes
to 174 operators.
2.14 As 160 operators
failed to accept the proposed change to the Standard Interconnect Agreement
within the contractual timescale (28 days) BT, on 23 October 2000, also
referred the same dispute to the Director for determination under Regulation
6(6) of the Telecommunications (Interconnection) Regulations 1997. However,
BT’s referral not only related to a dispute with Thus and the thirteen
other operators. It related to all operators who failed to accept the
proposed change (ie: those listed in the Schedule to the determination).
2.15 On 20 December
2000, Oftel notified the dispute to all the operators regarded as in
dispute by BT and sought any comments by 16 January 2001. The responses
received have been considered in reaching the proposed decision contained
in the draft determination and in this final decision.
Chapter 3
The Reference
for Determination by Operators
Operator Submissions
3.1 The operators
submitted that the issue of cost recovery for NTS links should be dealt
with in the context of the Price Control Review, currently being undertaken
by Oftel. They considered that dealing with the issue outside of this
overall review of charges could lead to over-recovery of costs by BT.
3.2 Under Regulation
6(6) of the Telecommunications (Interconnection) Regulations 1997, the
Director must consider what represents a fair balance between the interests
of the parties to the dispute. Regulation 6(8) sets out issues to be
taken into account. These include the interests of users, the regulatory
constraints on the parties, the relative market position of the parties
and the promotion of competition.
3.3 A number of
arguments were put to Oftel. First, it was claimed that BT’s proposal
had the effect of undermining the confidence of the stable operating
environment created by the NCC regime. It was submitted that this confidence
had been successful in giving operators the stability required to plan
investment decisions.
3.4 Second, it was
argued that the time allowed by BT from the date of the NCCNs, 4 August
2000, until the proposed introduction of charges, on 1 January 2001,
was insufficient for operators to plan to optimise their interconnection
arrangements with BT. The normal time taken to agree, order and for
BT to install new interconnection capacity is six months. BT’s NCCNs
had given only five months notice (which was considered insufficient
time for operators to reconfigure their networks).
3.5 It was also
argued that many interconnection links currently in place had been installed
by BT and not ordered by operators. Where operators had ordered interconnection
capacity which exceeded BT’s imposed limits at any one DMSU BT installed
NTS extension circuits (NTS ECs) from the operator’s point of connection
to other DMSUs to meet the capacity requirements. BT bore the cost of
installation and, for NTS terminating traffic, the rental charges for
NTS ECs. Under BT’s proposals, it was said, operators would become responsible
for NTS ECs they had not asked for. Unless operators have the opportunity
to cancel or re-arrange NTS ECs it was argued that some may face considerable
costs over and above those for the links they had ordered.
3.6 The operators
argued that, whilst BT was paying the charges for NTS Links, there was
little incentive for operators to build their own networks out to more
of BT’s exchanges. Many operators opted for CSI interconnection arrangements
at BT’s expense. With the prospect of having to pay for interconnection
links it was said that some may choose to move to ISI arrangements,
using their own fibre infrastructure to build to BT’s exchanges and
minimise the need for BT provided links. To move from CSI to ISI arrangements
required time to ‘dig and build’ and a period of 12 to 18 months was
not felt by the operators to be unreasonable. The Director was asked
to take this into consideration in reaching his decision and has done
so.
3.7 It is also argued
that BT’s proposals would require operators to split out NTS and non-NTS
(geographic and mobile) traffic owing to the different charging arrangements.
This in turn reduces the efficiency of existing routes achieved through
traffic aggregation. In addition, where traffic is aggregated, the additional
cost to BT of carrying NTS traffic is minimal.
3.8 One further
complaint made in the reference for determination was that, despite
repeated requests, BT was unable to tell operators whether traffic it
terminated on their networks had originated on the BT network or on
another originating operator’s network. Under current payment arrangements
for transit, BT receives the NTS outpayment from the originating operator
and pays it in full to the terminating operator. BT later bills the
terminating operator for its transit charge. It was claimed that BT
is unable to provide details of the transit calls at the time they are
made so that terminating operators can verify the charge.
3.9 BT’s dominance
in call origination (through having over 80% of exchange lines) was
given as a contributing factor towards its ability to force this issue
onto other operators.
3.10 The final argument
put to Oftel by the operators related to BT’s NTS retail uplift, which
itself is under review by Oftel. In recovering retail costs (billing,
operators services and marketing and sales) the operators argued that
BT was effectively retaining at least some ownership of the calls and
that in consequence, it should continue to bear the costs of the links
used to route those calls to other operators.
3.11 In concluding
the referral, Thus re-iterated that this issue should be considered
within the wholesale Price Control Review ("PCR") due to be
implemented at 1 October 2001. Operators would then have sufficient
notice to rearrange their interconnection arrangements to allow for
any changes agreed under the PCR.
BT’s Response
3.12 The reference
from Thus for determination was copied to BT for comment. BT responded
by way of a letter dated 14 September 2000 together with copies of presentations
to, and correspondence with, the industry.
3.13 BT commented
that the Standard Contract Review Notice was the normal mechanism within
the Standard Interconnect Agreement to deal with changes of this nature
where "this Agreement or any part thereof has ceased to be reasonable".
It also commented that BT’s licence provides for the method of notifying
"any proposal to change any charge for a Standard Service"
as via a NCCN. NCCN’s 209 and 210 were issued on 4 August 2000, which
was well in advance of the 90 day period required by BT’s licence.
3.14 Referring to
the argument that this issue should be considered within the PCR, BT
noted that the first mention of this made by the operators was at the
final negotiation meeting on this issue held on 27 July 2000. BT concluded
therefore, that this was a tactic being used simply to introduce delay
and thereby denying BT of rightful payments.
3.15 BT noted that
the stable interconnect environment had been impacted on by the fast
moving world of the internet, now the major source of NTS traffic. Traditional
telecommunications investment cycles, measured in years, were now out
of step with the pace of change of internet technology. Nevertheless,
BT had, it said, recognised the issue of lengthy planning and investment
cycles by advising operators a year in advance of its intention to change
NTS link charging principles, in the early stages of the NTS focus group
discussions.
3.16 BT also claimed
to have attempted to assist operators in the planning of their network
changes by producing a document titled "The network implications
of the change of interconnect link ownership to terminating operator
ownership". This was presented to operators at the last negotiation
meeting on this subject held on 27 July 2000.
3.17 BT rejected
any suggestion that operators would be required to separate NTS and
other traffic leading to route inefficiencies. On the contrary, unlike
ISI rules which disallow route sharing, BT claimed that its proposals
allowed sharing which would increase rather than decrease routing efficiency.
3.18 BT acknowledged
that only five months would have elapsed between the issue of NCCNs
209 and 210 and the date charging was proposed to commence – 1 January
2001. The usual timescale allowed for capacity provision or re-arrangement
is six months. For this reason BT proposed that operators would be billed
from 1 January 2001 based on their actual network configuration at 1
February 2001.
3.19 BT acknowledged
its inability to provide details of transit traffic origination, but
suggested that operators could use the CLI to identify the range holder
of the particular number block. Failing this, any other proposals would
need to be discussed via the appropriate industry forum. This can be
a lengthy process and did not, in BT’s view, justify a delay in the
NTS links charging proposals.
3.20 BT rejected
the accusation that it was leveraging its market dominance in call origination
to impose charges on operators. It said that it was not seeking to increase
charges in a market where dominance exists or to alter charges of an
existing service since no charges currently applied. In the absence
of any mechanism within the current NCC or NTS regimes, it claimed to
be failing to recover costs incurred for conveying traffic from which
it received no retail benefit.
3.21
With reference to the expressed view that link costs may already be
recovered within the NTS retail uplift, BT said that this charge had
nothing to do with network costs. It said it was, in fact, providing
NTS links and NTS ECs to operators at a loss.
Further Comments
received from operators in response to Oftel’s notification letter of
20 December 2000
3.22 A number of
operators supplied comments on this dispute in response to Oftel’s letter
of 20 December 2000. Many of these contained the same general themes
and key points as already summarised in this section.
3.23 A number of
operators commented that the imposition of NTS Links charges would seriously
undermine the economics of business plans that had been built some time
earlier. These had been on the basis of BT’s charging structure which
provided that links carrying terminating NTS traffic were paid for by
BT and if operators had now to absorb these costs some services would
immediately become unprofitable or even loss making.
3.24 Some operators
insisted that BT had not allowed sufficient time for the industry to
debate the question of NTS traffic ownership or for suitable plans to
be drawn up for networks to be re-configured to minimise the impact
of the charges. It was submitted that this is especially true where
operators desire to convert to ISI interconnection (the timescales for
which can exceed 12 months).
3.25 Some operators
considered that BT had not adequately demonstrated the justification
for the change and that the costs of links were already recovered through
other charges.
3.26 There were
comments about the lack of competition in the provision of interconnection
capacity as the only alternative to BT’s links is for operators to build
their own ISI arrangements.
3.27 The final key
comment made in these responses related to BT’s policy of imposing limits
on the amount of capacity that an operator could have directly connected
to any one tandem switch. This had been known as the ‘10xE1 rule’ and
had directly resulted in BT installing large numbers of NTS ECs to convey
operators’ traffic from other DMSU switches. If operators were to become
responsible for links payment it was argued that all such restrictions
must be removed.
Chapter 4
The Draft Decision
4.1 In summary,
the Director proposed the following for links terminating calls to NTS
services and those carrying transit calls to geographic numbers.
Links for NTS
calls
4.2 The Director
concluded that BT was not recovering the costs of providing links terminating
NTS calls from any other NTS related charges. He also concluded that
BT’s proposal was not relevant to be included in the forthcoming Price
Control Review. BT’s proposal was to raise new charges for circuits
that had previously been paid for by BT. The charges themselves however
were the same as BT’s existing regulated charges for non-NTS links.
4.3
The Director was also mindful of the impact of introducing links charges
on the revenues of operators, especially those whose original business
cases had made no allowance for the introduction of the charge. Nevertheless,
BT’s proposal was made to formalise the ownership of the various traffic
types so that costs could be correctly apportioned.
4.4
The principle used was that the costs of NTS links should be borne by
the operator receiving the retail benefit from the calls. BT collects
the retail revenues for NTS calls but only retains its network and retail
costs associated with call origination. The remainder of the retail
revenue, including any profit is passed to the terminating operator.
With geographic calls, however, BT passes only the cost based terminating
charge to the terminating operator and retains its costs plus any retail
profit.
4.5 The Director
also took into account the fact that few operators had made positive
moves to optimise their interconnection arrangements in advance of his
draft decision despite the fact that BT’s proposal had been signalled
for some time beforehand. Accordingly he proposed that a suitable amount
of time should be allowed for network re-arrangements before the charges
should commence.
4.6 The draft determination
proposed that charges should commence when BT had completed any orders
for cessation, re-arrangement or provision of NTS links, arising
from Advanced Capacity
Orders (ACOs) submitted to BT by 1 June 2001. It has since become apparent
that this proposal required greater clarification (because ACOs are
followed by Capacity Orders in accordance with the procedure set out
in BT’s Standard Interconnect Agreement) and will now require a revision
to the effective date. This will be discussed in Section 6. No special
time allowance was proposed for operators seeking to move from CSI to
ISI arrangements.
4.7 It was also
proposed that operators should be able to choose whether or not to retain
links installed by BT to ‘long line’ connections to other DMSU switches
where operators had sought capacity which exceeded that which BT allowed
at any one switch. BT seeks to balance the traffic flowing across its
tandem network in order to maintain resilience and prevent ‘hot spots’
of congestion from arising. One of the means it achieves this is to
restrict operators’ capacity at individual switches and to meet additional
requirements by installing NTSECs to other DMSUs. Under BT’s proposals,
operators now became responsible paying for NTSECs.
4.8 Oftel accepted
the concerns that through its restriction of interconnection capacity
at tandem switches BT could impose unacceptable costs on other operators
by their having to pay for NTSECs, they did not request. Operators should
be able to choose how, and where, to build their networks and BT should
meet all reasonable demands for interconnection at particular locations.
Operators can then choose whether or not to retain and pay for NTSECs
or to build out to other switches via CSI or ISI.
Links for non-NTS
transit calls
4.9 Oftel acknowledged
that ownership of non-NTS traffic should remain with the originating
operator. However, since NTS and non-NTS traffic is carried on the same
links, the difficulties of separating the charges meant it may be the
cleaner solution if the terminating operator bore the costs of the links
for both traffic types.
Chapter 5
Responses to
the consultation and the Director’s comments
|
Operators’
Submissions
BT’s and other
operators submissions on the draft determination, and the Oftel’s
comments are set out below.
BT
5.1 BT generally
welcomed the draft proposals but had some concerns
Charging
process and timescales
5.2 BT submitted
that the potential existed for operators to include ‘controversial’
orders within ACOs in order to create disagreement and further
delay having to pay. This is especially relevant in situations
where new circuits have to be provided before existing capacity
is ceased. This could lead to discrimination and disadvantage
to new entrants who would have no existing capacity to re-arrange.
BT therefore, proposed a specified date for charging for all operators
so that circuits in dispute could be set aside whilst charges
can be raised for agreed circuits.
5.3 BT proposed
the following for all ACO’s placed by 1 June 2001:
- Firm orders
for re-arrangements must be placed by 1 July 2001 and charging
would start three months later on 1 October unless BT is responsible
for any delay;
- New circuits
will be charged from completion date as normal; and
- Where links
are retained unchanged charges should be backdated to 1 January
2001;
Removal
of restrictions on Tandem capacity
5.4 BT rejected any move to allow operators unrestricted access
to any tandem switch they choose. BT’s restrictions were a response
to the rapid growth in NTS/Internet and were designed to prevent
‘focussed’ overload of the tandem network, and ensuring capacity
is available to all operators thereby protecting consumer choice
by not restricting access to established operators.
5.5 BT is
concerned that removal of capacity restrictions for NTS would
result in exhaustion of capacity at certain key switches. BT proposes
that NTS used for access to Internet be treated differently than
other voice NTS services ie similar to Single Tandem FRIACO. BT
planning rules remain in force for Internet NTS, with operators
responsible for payment for NTSECs.
5.6 BT disagrees
that Oftel’s proposals will enable efficient build-buy decisions
rather they will encourage operators to ‘collapse’ connectivity
onto a small number of popular switches.
Links carrying
geographic transit traffic
5.7 As originating
operators retain the retail benefit from geographic calls they
should ideally bear the costs of seeking to transit calls over
BT’s network. Oftel recognised, however, that current charging
arrangements meant that both geographic and NTS traffic were carried
by the same links making it difficult to separate the different
charges. It was therefore proposed that all transit costs should
be borne by terminating operators who could, if required adjust
their NTS outpayments to accommodate the additional costs.
5.8 BT noted
that originating operators should bear the costs of links carrying
geographic transit traffic but that its INCA charging system is
unable to distinguish geographic transit from BT originated calls.
These calls are therefore routed over capacity BT has paid for
rather than over capacity purchased by terminating operators leaving
BT with no opportunity to recover its costs. BT, therefore, proposed
that these transit charges should be charged as an additional
pence-per-minute charge on top of BT’s existing transit charge.
5.9 Orange
also concurred that, ideally, the costs of links carrying geographic
transit should be borne by the originating operator but that Oftel’s
proposal for the charge to be borne by terminating operators by
default had not given adequate consideration to the matter.
Other operators
responses
NB: In some
cases the same or similar responses were made by more than operator.
These have been merged into one single comment to avoid repetition.
5.10 A significant
group of smaller operators disagreed fundamentally with BT’s proposals
and with Oftel’s draft decision which supported the transfer of
traffic responsibility and with it the responsibility for NTS
links charges.
5.11 It was
alleged that BT is exerting its dominance in proposing to change
the Standard Interconnection Agreement in regard to NTS Links
rentals. Oftel was asked to act to prevent this and BT’s continued
moves to control the cost base of its competitors. 160 operators
have rejected BT’s proposal and Oftel must recognise this in its
final determination. The SIA states that BT is responsible for
delivery and handover of NTS traffic at the point of connection
and operators do not want any change to this requirement.
5.12 It was
asserted that BT is over-recovering its costs for Personal Numbering
Services (PNS) as opposed to NTS and may be using this to cross-subsidise
the cost of providing NTS links for all types of service.
5.13 It was
submitted that NTS calls are non-billable until they reach the
operators switch therefore links conveying calls to the operator
should also be non-revenue generating. The NTS operator provides
the necessary intelligence to provide a marketable service to
consumers. BT adds nothing, it simply conveys the ‘bits’.
5.14 It was
ststed that the initial, pre Network Charge Control, (ICAS) cost
attributions allowed for BT’s costs of providing links for NTS
traffic to be recovered from within its retention under the NTS
formula. Therefore, contrary to paragraph 4.1 of the draft determination,
operators are already paying for NTS conveyance.
5.15 Operators
submitted that their business plans were based on the terms of
the SIA and were drafted before BT made its proposal to charge
for NTS links. They stated that any changes would have serious
effects on operators’ businesses and would undermine the credibility
of the authors of those business plans. Oftel was urged to recognise
this in the final determination.
5.16
It was submitted that ISI is not an option for most smaller operators
and CSI links are provided over BT’s legacy network which is more
costly than operators new network architectures. It was also submitted
that there is no competition in links provision through BT’s refusal
to let competing transmission service providers co-locate equipment
in BT exchanges. As a consequence Oftel should make provision
for competition in the provision of NTS links before making a
final determination. Furthermore, it was stated that leasing ISI
is not always a workable option if the ISI operator is not regulated
in the same way as BT for the provision of wholesale transmission
services.
5.17 The operators
consider that the forthcoming Price Control Review is the correct
vehicle for reviewing this issue as a Standard Service provided
under the NCC SIA.
5.18 It was
argued that, had BT been more proactive in introducing DSL and
LLU, much less Internet traffic would be using the PSTN as NTS.
BT’s assertion that Internet NTS is the major reason for providing
NTS links is its own fault. Oftel must recognise this.
5.19 Oftel
was asked to note that BT’s protracted timescales for provision/
rearrangement of NTS capacity leads operators to order more capacity
than necessary as a buffer against unforecast growth in demand.
.
5.20 It was
stated that BT collects the retail revenues from calls for which
the marketing and sales activities are performed by the operator.
It reports these revenues in its Accounts thereby deriving benefits
from revenues beyond that it would achieve on its own.
5.21 Oftel
was asked not to accept BT’s statements at face value without
investigating the cost attribution of outpayments for all NTS
service types. Operators believe the ICAS calculation of the ‘uplift’
allowed for the cost of NTS conveyance plus a contribution to
offset bad debts in retail collections. Operators are not convinced
that Oftel has hard evidence to show that BT is not recovering
costs. Oftel’s investigations should be made public.
5.22 It was
submitted that the Director seems unaware that operators cannot
adjust payments to service providers downwards and remain competitive.
Additional costs have to be met in other ways.
5.23 Operators
stated that they had not taken pro-active action when BT first
signalled its intention to charge for NTS links. It is likely
that operators were not ignoring these signals but rather signalling
their contempt of BT’s proposals to unilaterally charge without
a full and proper consultation. In any case it was submitted that
many smaller operators may not be able to attend Oftel meetings
and industry groups and knew nothing about BT’s proposals until
it issued its supplemental agreements in September 2000.
5.24 With
regard to BT’s concerns about capacity shortages at ‘popular’
switches it was submitted by operators that BT needs to ensure
that there is sufficient capacity to meet retail and wholesale
demand. It was stated that the twelve month rolling ACO process
– updated every four months – gives it sufficient notice to plan
for wholesale demand changes.
.
5.25 In the
event the Director continues to uphold the case against 160 operators,
given BT’s record of slow lead times, an implementation date of
1 November (or 6 months from the date of the final determination)
was submitted to be more appropriate.
5.26 It was
submitted that if Capacity Orders are required to be placed on
a single deadline date rather than over the ‘usual’ 4 month period
after ACOs are agreed, BT may have insufficient resource to meet
the volume of orders. A transition period was proposed to ensure
orders are fulfilled and that service is not jeopardised by the
existing routes being ceased before new circuits associated with
re-arrangements, provision of IECs and moves from CSI to ISI interconnection,
are completed.
5.27 It was
submitted that the determination is worded such as to imply that
the majority of NTS are used for internet access. As BT is encouraging
operators to split out internet from the NTS traffic bundle it
is important Oftel does not make a long term policy decision based
on a short term issue.
5.28 It was
commented that the use of ISI requires operators to split geographic
and NTS traffic into separate route types, decreasing route efficiency
and increasing the number of signalling links required.
5.29 Oftel
was asked to clarify whether the direction applies equally to
ISI and CSI link charges. Both interconnecting parties incur costs
when connecting ISI interconnect circuits to their switches, irrespective
of who is ultimately responsible for the traffic route. Investment
in new technology reduces the operator’s cost of the infrastructure
required for this interconnect. BT should pay for its ISI costs
and operators pay only to build to the agree point of connection.
It was submitted that this would allow operators to take advantage
of their use of more efficient technologies. It would also remove
the administrative burden of invoicing for these charges on a
quarterly basis
5.30 It was
proposed that Oftel’s recognition that operators will need time
to optimise networks did not fully allow for an operator’s decision
to move from CSI to a mixture of CSI and ISI or wholly ISI connections.
Oftel was advised that some operators have drawn up migration
plans and do not wish to be constrained to a timetable dictated
by the change of ownership of NTS traffic. ISI’s may also be subject
to delays in gaining local authority permission. Oftel should
ensure payment for orders does not start until work is completed
even where delays occur that are outside BT or the operator’s
control.
5.31 Since
operators are moving from CSI to ISI purely in reaction to BT’s
proposal it was submitted that they should not pay installation
charges for new routes. They have already paid expensive CSI installation
charges and BT has recently increased connection charges for IBLs
and IECs.
5.32 It was
proposed that where operators take responsibility of NTSECs the
points of connection should count towards the operators conveyance
charge. However, where BT subsequently installs NTSECs to overcome
capacity constraints, operators should be able to choose whether
or not to pay for these and conveyance charges should reflect
this.
5.33 The ‘Virtual
switch location’ option available for voice traffic could be extended
to apply to NTS.
5.34 Under
the Network Charge Differential (NCD) rules, under which Oftel
determined BT’s de-averaged conveyance charges in November 1999,
operators have to interconnect at 68 tandem switches in order
to achieve ‘virtual’ single tandem interconnection. It was considered
that Oftel’s draft links proposals document stated that single
tandem access to all BT DLEs required interconnection at around
30 tandem switches. Has the NCD regime resulted in overpayment
to BT and have operators been forced to invest in unnecessary
network roll-out? There is therefore a need for Oftel to review
the NCD regime to ensure that overcharging is not occurring.
5.35 An operator
noted that Oftel’s proposal made no mention of reciprocal forecasting
by BT for re-arrangement, re-routing or ordering of capacity for
BT originated NTS calls. These are currently not produced by BT
in any format.
5.36 It was
submitted that originating operators appear to be put at a competitive
retail disadvantage by having to pay for links carrying traffic
to BT for transit whereas BT recoups both its transit costs plus
the costs of the terminating links from the terminating operator.
|
The
Director’s Comments
The Director
acknowledges BT’s proposals regarding the effective dates for
charging. The Director believes, however, that operators should
be responsible for charges as soon as capacity is provided otherwise
some may continue to benefit from a ‘free’ service whilst others
are still waiting for capacity to be installed. The Director also
disagrees that links retained as unchanged should be charged from
1 January 2001. Oftel has provided operators the opportunity to
optimise their entire connectivity and believes they should not
have to pay for any of their links until this has been achieved.
Accordingly the Director has determined that ACOs should be provided
to BT by the date given in Chapter 6. There will then be a period
of six weeks for ACOs to be agreed and for Capacity Orders to
be placed with BT. This is to allow for the likely volume of ACOs
that will need to be reviewed and agreed. Charges will then commence
for all operational links when BT has completed its activities
(with the exception of those relating to new ISI links). This
is to remove any incentive on operators to seek to delay having
to pay for their links through non-completion of their own work
or by withholding co-operation with circuit testing etc. In cases
where an operator has not ordered any new or re-arranged capacity
or has only sought new ISI, charges for retained links may be
raised from the deadline date for Capacity Orders. (See Section
6 for more details)
In summary,
The Director acknowledges BT’s concerns over the potential for
creating imbalances in the tandem network and the effort BT applies
in achieving this balance. This determination therefore recognises:
- The advantages
of a balanced network;
- That network
integrity is vital;
- That de-averaged
conveyance leads to commercial incentives to spread rather that
‘collapse’ connectivity;
- Oftel would
therefore expect operators interconnection capacity requirements
to be reasonable and subject to negotiation and agreement
The Director
is conscious that some of BT’s tandem switches are already fully
loaded. The ACO process, however, requires BT and operators to
agree reasonable interconnection. This determination does not
automatically give operators the right to demand unlimited access
to any switch they choose. Rather it enables BT and operators
to agree on the most suitable interconnection arrangements without
artificial restrictions being imposed where these are not necessary.
The Director expects BT and operators to seek workable arrangements
for their mutual benefit but, as with any interconnection matter,
disputes can be referred to Oftel.
Having agreed
on the location and capacity of points of connection, where BT
chooses to provide service through the use of NTSECs to alternative
switches, operators should have the option of whether to pay for
the additional links (see paragraph 6.13). This allows BT freedom
to manage interconnection capacity whilst its tandem network is
being enhanced.
Having considered
these further comments the Director concurs that the root of the
problem lies with BT’s INCA system being unable to properly distinguish
between BT and other operator originated geographic traffic. This
is especially true for traffic from Indirect Access operators.
Ideally, BT should seek to enhance the functionality of INCA but,
given that it only receives its regulated network costs for transit,
it has little incentive to incur potentially extensive additional
costs in doing so.
One possible
solution could be for BT to develop a ‘proper’ Carrier ID system
so that both INCA and terminating operators can identify the origin
of calls. These could then be billed and verified accordingly. The
Director proposes that such a solution should be investigated by
the NICC with any additional costs possibly factored into the transit
charges paid by all operators. This matter should also be discussed
initially at the NTS focus group.
In the shorter
term the Director believes BT’s proposal of a supplemental transit
charge to cover its costs in providing links for terminating geographic
transit calls is worth exploring and invites the NTS focus group
to initiate industry discussions. In the meantime, the responsibility
for interconnection links for non-NTS transit traffic should not
transfer (as proposed in NCCN 210).
The Director
recognises that any proposal which results in operators having
to pay additional charges to receive calls is almost certain to
meet with some opposition. The fact remains that BT’s costs in
providing NTS links have until now be borne by itself when they
are rightly the responsibility of terminating operators. BT is
not required to provide "free" interconnection facilities
and is therefore entitled to take steps to correct an anomaly.
BT must comply with the requirements of its licence on the level
of charges (which is not the subject of this determination).
Calls to Personal
Numbering Services are a substitute for ordinary geographic calls.
PNS interconnect charging is designed to allow BT to retain a
similar amount as it would for equivalent geographic calls. If
anyone believes that the present level of retention is excessive,
this should be investigated on its own merits and is not part
of this dispute.
The Director
considers that BT is entitled to recover all of its costs in conveying
NTS calls from the retail customer to the terminating operator’s
system. These include the costs of terminating links.
The
ICAS determinations of BT’s Standard services established the
principles upon which the current charging regime is based. This
included the establishment of the NTS formula which stated that
outpayments to terminating operators (POLOs) were calculated as
‘D – C’, where ‘D’ is the Deemed Retail price (net of any discounts)
and ‘C’ is BT’s charge for call origination and conveyance across
its network. C consists of BT’s cost based network charge plus
an uplift to meet its retail costs. The network charge is the
same as that charged to Indirect Access operators whilst the retail
uplift is currently under review to produce a more robust method
of calculation. Nowhere in the calculation of BT’s ‘C’ (and hence
POLOs) was a specific allowance made for BT’s costs in providing
terminating links.
The
Director has given serious consideration to this submission. He
asserts that in the competitive environment that is the telecommunications
market, business plans which rely on the principle that nothing
will change are likely to be unsustainable. BT’s SIA provides
for periodic reviews and operators are able to issue their own
review notices at any time giving three months notice. It is undoubtedly
true that the introduction of these charges will have an impact
on companies whose profitability may be marginal. That does not
mean that Oftel should seek to foster inefficient competition
at BT’s expense.
Co-location
of equipment in BT buildings has already been shown, through the
LLU experience, to be expensive. Operators are free to offer competing
terminating services and to derive ‘reasonable’ alternative interconnection
arrangements and seek agreement of these with BT. If there is
a dispute it can be referred to Oftel.
The
Director has no reason to seek to regulate the charges of non-dominant
competing operators. Operators are also free to complain about
BT’s charges if they believe they are excessive.
BT’s
new charging proposal entails the application of existing charges
to links, previously paid for by BT, following the reversal of
responsibility for calls to NTS services. It is not, therefore,
a matter for the Price Control Review. The charges for NTS links
are the same as those already in existence for other links which
in turn are subject to Network Charge Controls.
DSL
and LLU are technologies designed to facilitate broadband services
including high speed internet access. NTS provides purely narrowband
access. Given the costs and resultant charges seen in the UK and
elsewhere for broadband access and the resultant take-up levels
there is little evidence that earlier availability of these would
have had a significant impact on NTS Internet traffic levels over
the PSTN.
The
annual forecasting process supported by the four monthly ACO process
provides operators with ample opportunities to review and amend
their capacity requirements regardless of BT’s provision timescales.
Experience has shown that, rather than ordering too much capacity
to offset provision lead times, operators’ forecasts have been
consistently understated.
BT’s
Accounts are required to report both its revenues and its costs.
It receives no financial benefit from reporting its full retail
revenues and is
fully entitled to seek to recover its legitimate costs.
BT’s
retention is the same for all NTS services regardless of the retail
price for the calls. The calculation of the retention was established
by Oftel in its ICAS determinations and has not changed with the
introduction of the NCC regime in October 1997 or the ‘new NTS’
regime in January 2000. The NTS call origination charge is the
same as that which applies to the origination of Indirect Access
calls uplifted by the allowance for its retail activities. At
present this is calculated by expressing BT’s retail costs for
all types of calls as a percentage of its equivalent network costs.
This percentage
is then applied to the single tandem conveyance charge to produce
the retail uplift. This methodology is currently under review
and Oftel’s new proposals will be published
for industry consultation shortly. Oftel proposes that the new
uplift, when agreed will have retrospective effect from April
2000 as already signalled at the NTS focus group. This pre-dates
the effective date for introduction of charges for NTS links and
will therefore ensure BT is not over-recovering any costs from
within its NTS retail uplift charge.
It is not
true that Oftel does not have ‘hard evidence’ to show that BT
is not already recovering its costs for providing NTS links. The
extent to which any investigations undertaken by Oftel can be
made public is limited by the fact that these frequently entail
scrutiny of BT’s commercially confidential cost, revenue and volume
data. Oftel has attempted to explain as openly as possible in
this document how it has reached its conclusions within this constraint.
The
NTS regime as it currently exists enables terminating operators
to adjust their outpayments and through these, the retail price
for services to meet their revenue requirements. If the introduction
of NTS links charges means that existing service provider commitments
can not be met then operators are free to take the necessary action.
Competition now exists in both service provision and retail prices
and operators should not expect BT to continue to bear costs which
should justifiably fall on the operator.
As
has already been stated it is no surprise to Oftel that many operators
are opposed to BT’s proposal. Nevertheless, BT first signalled
its intention to recover its legitimate costs three years ago
and has given ample formal notice of doing so through the various
industry groups and the SIA review process.
BT’s
network expansion is planned to meet traffic forecasts provided
annually by operators. Operators are able to revise these forecasts
at four month intervals via the ACO process which may not allow
BT sufficient time to meet major revisions especially where new
switch and transmission equipment has to be deployed. It is not,
therefore, reasonable to expect BT to meet all demands under all
circumstances.
The
Director’s proposals detailed in Section 6 allow sufficient time
for BT to complete reasonable orders for the provision and re-arrangement
of capacity. There is no justification
for any further extension of these timescales or for delaying
the inevitable and preventing BT from recovering its justifiable
costs for longer than necessary. The Director’s decision may,
in any event, mean that many operators may not start paying for
their links until after 1 November 2001.
BT
is responsible for its obligations to meet operators’ orders and
to maintain the integrity of existing services. It has not indicated
its inability to do so to Oftel. This determination enables BT
to charge for these links only when it completes its part of the
work and therefore gives BT the incentive to complete orders quickly.
If resource constraints prevent it from doing so within ‘normal’
timescales then it will be unable to
raise charges. The ACO agreement period and the deadline date
for orders are designed to encourage sensible negotiations and
to prevent deliberate prevarication by operators opposed to The
Director’s decision.
The
majority of NTS calls are made to access internet services but
this has no bearing on the basis for the determination. NTS services
of all types are provided by service providers who in turn are
customers of terminating operators. As stated before the retail
benefit is passed to the terminating operator who, as the owner
of the traffic, should pay for the infrastructure used to convey
those calls.
Operators
have the choice of whether to use more expensive CSI links and
mix their traffic or more cost effective ISI links which require
specific route types. This can lead to inefficiencies with smaller
routes but operators can design their connectivity to minimise
these effects. Operators are also free to complain to Oftel if
they believe BT’s ISI requirements are unreasonable.
The
principle upheld in this determination are that BT’s transmission
costs from the customer to the handover switch are recovered from
conveyance charges and anything after that must be met by the
operator. Payments for BT’s ISI costs are likely to be less than
those for equivalent CSI arrangements.
The
Director can not make any special allowance for operators who
choose, at this late stage, to embark on the lengthy process of
changing from CSI to ISI arrangements.
Oftel
proposes that charges for CSI links retained until ISI interconnection
is completed, and for permanently retained CSI links where no
other orders are placed, should commence from immediately after
the deadline date for orders (see paragraph 6.7).
Operators
are choosing to take action in response to BT’s proposals upheld
by this determination. In doing so both they and BT will incur
costs and these must be met. BT’s costs arise as a direct result
of the operator’s decisions relating to traffic for which the
operator is responsible. It is only reasonable, therefore, that
operators should meet the costs they cause.
The
Director agrees.
If
this is practicable, The Director agrees.
According
to BT INCA is being used to charge for NTS and there is, therefore,
no need for any review of the NCD system. NCDs were created as
a short term expedient to bridge the time gap between Oftel’s
determination of BT’s NTS Conveyance and the introduction of INCA
for NTS which, at the time, was forecast for Summer 2000. NCDs
also served to lessen the impact for some operators of moving
from single tandem to fully de-averaged charges and to allow time
for network roll-out.
Providing
the right switches are chosen there is no need to interconnect
at every tandem switch, in a fully meshed network with triple
parented DLEs, in order to achieve single tandem charges. The
figure of 30 switches can be achieved with careful planning but
depending on an operators geographic location and where they require
traffic to be routed by BT, the number can be higher.
The
Director is aware that, owing to limitations with INCA, BT continues
to use NCDs for calculating originating operator payments for
tandem traffic. This arises because BT pays the same POLO for
transit and BT originated calls having invoiced the originating
operator for the corresponding amount. This can only change if
the originating and terminating operator agree on a different
payment.
This
matter is outside the context of the dispute referred to Oftel
by BT. It is up to operators to seek forecasts from BT.
This
matter is, again, outside the context of the dispute referred
to Oftel by BT. ‘New NTS’ arrangements, however, allow originating
operators to recover all of their costs from their unregulated
retention.
|
Chapter 6
The Final Decision
6.1 Having duly
considered all of the comments made in response to the draft determination
and the matters in Regulation 6(8) of the Telecommunications (Interconnection)
Regulations 1997, the Director sees no reason to change the basis for
the draft decision concerning NTS links as contained in the consultation
document. He concludes that ownership of NTS traffic originated by BT
or transited via BT’s network should be transferred to the terminating
operator and with it responsibility for payment for terminating links.
In relation to non-NTS transit links, the Director concludes that responsibility
for traffic should not be transferred.
Recovery of costs
6.2 The Director
has considered whether BT’s costs in providing terminating links are
recovered from other NTS related charges and has concluded that they
are not. Oftel was instrumental in creating the NTS regime of charges
through its ICAS determinations of BT’s standard charges for the period
from April 1995 to September 1997. The basis on which BT’s current charges
are calculated derives directly from the ICAS charges in which no allowance
was made for the costs of providing terminating links.
6.3 BT’s NTS call
origination charge is the same as the equivalent cost based Indirect
Access charge but contains an additional allowance to cover BT’s retail
costs associated with NTS call origination. This allowance, known as
the NTS retail uplift, is currently calculated as BT’s total retail
costs for calls expressed as a percentage of the equivalent network
costs. This percentage figure is multiplied by the current single tandem
call origination charge to produce a pence-per-minute retail uplift.
This supplemental charge is then added to BT’s de-averaged charge for
origination and conveyance of calls across its network to the point
of handover to the terminating operator.
6.4 It has been
recognised for some time that this simplistic methodology may be producing
a charge which does not accurately reflect the real retail costs associated
with NTS call origination. As a consequence Oftel will shortly consult
the industry on a revised method of calculating the retail uplift which
aims to ensure only relevant costs are included and also that an allowance
is made for the enormous growth in NTS call volumes since 1995. It is
also proposed that this new charge, when finally determined, will take
effect retrospectively and therefore well before the first charges for
NTS links are raised by BT. This will ensure that any over-recovery
of costs that may exist within the current retail uplift charge is eliminated
before terminating operators are required to pay for their links.
Timing
6.5 The Director
has noted the concerns of operators over the process for agreeing and
submitting Capacity Orders for provision, re-arrangement or cessation
of links. This determination has necessarily taken longer than planned
to finalise because of the volume and detail of the comments received
to the consultation document. As a consequence the date initially proposed
for submission of ACOs to BT (1 June 2001) has passed. Operators will
also need a short time after the determination is made to finalise their
ACOs and pass these to BT.
6.6 Under normal
circumstances ACOs are submitted to BT every four months and the resultant
Capacity Orders can be submitted at any time within that period. BT
and the operator must agree that capacity requests contained in ACOs
are reasonable and that each switch where interconnection is sought
has sufficient spare capacity. Being mindful that a number of operators
will be submitting ACOs simultaneously the Director is allowing 6 weeks
from the date for submission of ACOs for Capacity Orders to be placed.
This is to allow sufficient time for the extraordinary volume of orders
to be discussed and agreed.
6.7 Accordingly
the deadline date for submission of ACOs by operators to BT will be
close of business on 13 July 2001 and the corresponding deadline for
Capacity Orders will be six weeks later on 24 August 2001. BT may then
commence charging for all new, re-arranged and retained capacity when
it has completed all of its necessary activities except those associated
with the provision of new ISI links (see paragraph 6.10). Operators
are expected to co-operate with BT over the completion of their orders.
Accordingly, where an operator imposes any unreasonable delay in this
work BT may commence charging for that operator’s links from when it
has completed all of its activities which do not rely on the operator’s
co-operation.
6.8 Where no ACO
is submitted by an operator by 13 July 2001 BT will assume the operator
is content with their existing arrangements and may charge for all of
that operator’s capacity from 25 August 2001. Similarly where ACOs are
submitted on time but the operator fails for any reason to submit Capacity
Orders by 24 August 2001, BT may charge for retained capacity from 25
August 2001. This is to forestall any attempts by operators to submit
‘mischievous’ or ‘deliberately unreasonable’ orders in order to delay
payment. Any dispute over what constitutes unreasonable may be referred
to Oftel if necessary.
6.9 Where ACOs are
received after 13 July 2001, retained capacity will attract charges
from 25 August 2001 and new capacity from the date of completion as
normal. Circuits ceased under this process will attract no charges,
however, BT may charge for circuits for which cease orders are received
after 24 August 2001. In these instances charges may be raised from
25 August 2001 until the date of cessation. Any ACOs submitted after
13 July 2001, or Capacity Orders after 24 August 2001 must follow the
process set out in the BT SIA.
6.10 The determination
applies only to orders relating to existing CSI and ISI (or both) arrangements.
It does not apply where an operator submits ACOs and Capacity Orders
to change from CSI to ISI interconnection arrangements or to the provision
of new ISI links. The Director recognises the timescales required for
new ISI provision and considers it unreasonable for BT to have to wait
for payment for any existing capacity that is retained until ISI build
and interconnection work is completed. Accordingly, any links retained
in lieu of or in addition to new ISI completion may become chargeable
from 25 August 2001 (where no other orders are to be completed by BT).
Capacity Constraints
6.11 Currently,
BT sets limits on the interconnection capacity any operator can have
at any one switch as part of its means of ensuring the load carried
by its tandem network is evenly balanced. This policy is aimed at enabling
the network to operate at maximum efficiency and to avoid congestion
at particular locations. As discussed in the Director’s response at
paragraph 5.4, Oftel acknowledges BT’s concerns over the potential for
creating imbalances in the tandem network and the effort BT applies
in achieving this balance.
6.12 In reaching
his decision the Director recognises the advantages of a balanced network
and that network integrity is vital. However he disagrees with BT that
removing limits on interconnection capacity will lead operators to ‘collapse’
their connectivity on to a few popular switches. Rather, de-averaged
conveyance charges have created commercial incentives for operators
to interconnect at a greater number of locations so as to minimise their
charges. There is no reason to suspect that these incentives will disappear
if capacity limits are removed. In any case operators are still required
to agree interconnection capacity requests with BT and for these to
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