Contents

Summary

Chapter 1 Introduction
Chapter 2 WLR2 product description
Chapter 3 ISDN products
Chapter 4 WLR2 process issues
Chapter 5 Capacity of BT’s electronic gateway and forecasting
Chapter 6 WLR consumer issues
Chapter 7 Cost recovery
Chapter 8 Assessment criteria
Chapter 9 Implementation phase
Chapter 10 Consultation details

Annex A Select services
Annex B WLR & CPS: Time-line diagrams and order scenarios
Annex C Letters from gaining and losing providers
Annex D Guidance on sales and marketing codes of practice
Annex E WLR1 consumer guide
Annex F List of questions

  Summary

S1 In August 2002 Oftel required BT to provide a Wholesale Line Rental (WLR) product. WLR is intended to stimulate competition by allowing alternative suppliers to provide an integrated service comprising calls and access, renting the exchange line from BT, and sending customers a single bill.

S2 BT introduced a WLR product in September. Oftel believes that this basic product needs to be enhanced in order for it to be an effective mass-market product that is commercially attractive to service providers and to end users.

S3 Oftel is now setting out proposals on the nature of the enhancements required. These proposals reflect extensive discussions and work in industry groups set up by Oftel since June.

S4 WLR service providers should have the same opportunity to compete in the marketplace as BT. This means that BT’s retail activities should not benefit from privileged access to select services and line features supplied by BT at the wholesale level if they are material to competition and BT has market power in these areas. These existing services and features should be made available to WLR providers. This will require developments to BT electronic ‘gateway’ through which orders are placed by the service providers

S5 BT also needs to develop and make available to service providers new features which will allow calls by WLR customers to be routed directly to the providers’ service centres when they dial codes such as 151 and 154 for residential and business support. BT will also need to ensure that WLR providers have access to fault management and reporting facilities that BT provides to itself. To promote innovative tariffing, Oftel believes that WLR providers should also be able to choose to prevent their customers dialling Indirect Access (IA) codes.

S6 The transfer of customers to their new provider should be carried out as efficiently and as seamlessly as possible with the number of rejected orders kept to an absolute minimum. When the WLR calls are to be provided using Carrier Pre-Selection (CPS) routing, this should be activated by BT simultaneously with or in the shortest possible time after the line is transferred. Oftel recognises that for the enhanced product a short delay between the activation of WLR and the activation of CPS may be unavoidable initially to ensure early delivery of the enhanced product but should not exceed one day. Further work by the industry is required to reduce or eliminate this delay.

S7 Oftel has looked at the competitiveness of the ISDN market to assess whether this product should be incorporated into WLR. Oftel’s view is that to address BT’s dominance in the provision of ISDN, BT should be obliged to supply wholesale versions of ISDN on non-discriminatory terms and to provide 90 days’ notice of price changes. Prices for the ISDN product should be at a level which will encourage competition into the retail markets.

S8 Some of the proposals that Oftel is making for the enhanced WLR product will require BT to develop its network and systems. Oftel has to decide how the costs of these developments should be met. Some of the developments required to BT’s electronic gateway have already been reflected in the WLR line rental charge set in August by Oftel. Over £14M of development costs were allowed for in the line rental charge to be paid by the service providers to BT and represent £0.39 of the quarterly rental of £28.00. Oftel believes that, to provide certainty to the service providers and to incentivise BT to minimise the costs of developments, this line rental charge and the approach to allocation of gateway development costs, as set by Oftel in August, should remain in place.

S9 Other developments such as the introduction of optional barring of IA calls and routing calls to customer support require changes to BT’s switches. These are required on competition grounds and to provide service providers with equivalence with BT. Oftel is therefore proposing that the set-up costs for these services should be recovered from both BT and WLR providers.

S10 The introduction of enhanced WLR is expected to increase competition between providers and change the way services are marketed. Experiences in other sectors, such as the energy market, and with other telecoms products indicate that there is a need to protect customers from misselling and from unauthorised transfers and to provide independent information. All WLR providers will be required to have a code of practice on sales and marketing, which Oftel will approve. Oftel will issue guidance on the key elements of that code. Oftel is also proposing that there should be a period of ten working days between the placing of a new order by the provider and the transfer of service by BT. During the ten days the losing and gaining providers will send letters to the customer advising them of the change to their service. In addition, Oftel is developing a Consumer Guide to the new product.

S11 Oftel will relax the controls on BT’s retail prices once Oftel is satisfied that the enhanced WLR product has been introduced in a form that is fit-for-purpose and is being used actively by alternative providers. This relaxtion will reflect the increase in competition WLR is bringing and provide BT with an incentive to introduce the enhanced WLR product swiftly and fully.

S12 To test whether the relaxation is appropriate Oftel will assess the enhanced product and processes. Oftel will consider whether the product allows a service provider to offer a similar range and quality of services to that offered by BT Retail. The processes should provide a means to ensure that customers can transfer service seamlessly and that WLR can be implemented in an efficient manner that minimises transaction costs. Oftel will also consider evidence about the impact of the product on the market.

S13 Oftel intends to publish a Statement in January 2003 with its conclusions from this consultation. BT and service providers will then be in a position to finalise their implementation project plans and report on them to industry groups.

Chapter 1

Introduction

1.1 Background

1.1.1 Oftel’s 2001-2 review of the fixed telephony market concluded that BT has market power in the provision of access and calls. BT continues to have a large share of both the lines and calls markets, and makes very high returns on calls, well in excess of the level necessary to maintain a sustainable business. In August 2002 Oftel modified BT’s licence to require it to provide a new ‘Wholesale Line Rental’ (WLR) product. The purpose of this product is to stimulate competition by enabling alternative suppliers to provide a single bill that covers both line rental and telephone calls.

1.1.2 In order to provide BT with an incentive to introduce WLR as quickly and fully as possible, Oftel indicated that it would relax the controls on BT’s prices (from RPI-RPI to RPI-0%) when it is satisfied that a ‘fit-for-purpose’ WLR product has been made available by BT and is being actively used by competitors. A relaxation of price controls is appropriate if the market for these services becomes more competitive, as competition should itself put downward pressure on prices,

1.1.3 BT introduced a basic WLR product (WLR1) at the beginning of September 2002. BT branded this product as ‘Wholesale Access’. It adopted similar functionality to the existing Calls and Access product though with cost-based prices set by Oftel. To operate as a mass-market and ‘fit-for-purpose’ product, Oftel recognised that the basic WLR will need to be developed further by BT.

1.1.4 Oftel identified in June some essential features of an enhanced WLR product (WLR2). These included a highly automated ordering process capable of handling significant volumes and seamless interworking with Carrier Pre-Selection (CPS) from a customer’s perspective with minimal delay in transfer times.

1.1.5 Since June Oftel has been working intensively with the industry and consumer representatives to develop a detailed set of requirements for WLR2. This process has been carried out in working groups: Steering, Operations and Consumer Issues groups chaired by Oftel and a Process Group chaired by the industry.

1.2 Consultation document

1.2.1 This document sets out – in chapters 2 and 4 – proposals, based on the work of these groups, for a description of the WLR2 product and processes that Oftel would expect BT to implement. In addition, in chapter 3 Oftel sets out an analysis to explain why Oftel believes it is appropriate for ISDN to be included in the product specification for WLR2.

1.2.2 To assist BT to meet all reasonable demand for WLR in a timely manner, Oftel proposes to specify what order volume the BT’s systems should be designed to handle. The results of Oftel’s commissioned analysis of the potential WLR market, which indicates up to 2.8 million lines after two years, are set out in chapter 5. Chapter 5 also sets out proposals for how the system might be rationed between different SPs on those occasions when the system capacity is exceeded.

1.2.3 There will be costs associated with the developments BT has to make to its system to introduce WLR2. Chapter 7 sets out the options and recommendations for how those costs should be recovered.

1.2.4 The establishment of a fit-for-purpose WLR product will encourage competition and is likely to bring significant changes in the way services are marketed and delivered to consumers. Oftel believes that appropriate safeguards should be provided to protect consumers as well as the reputation of the industry itself. In chapter 6 Oftel sets out proposals for guidelines on sales and marketing codes of practices and a Consumer Guide. Oftel also makes proposals for a minimum time period between the WLR provider placing the order with BT and the implementation of the new service. This period is to allow the losing and gaining providers to write to the customer which will help prevent customers being switched without their knowledge or consent. Oftel also makes proposals for the content of those letters.

1.2.5 In chapter 8 Oftel invites comments on the form the assessment of whether BT has introduced a ‘fit-for-purpose’ product should take. Finally, in chapter 9 Oftel identifies key implementation milestones.

1.3 Consultation details

1.3.1 Responses to this consultation are invited by 13 December. Oftel will consider all submissions and set out its conclusions in January 2003.

Chapter 2

WLR2 product description

2.1 Introduction

2.1.1 BT Retail offers its customers a wide variety of different types of access line. In order to be able to compete effectively in the same market, an independent service provider (SP) must be able to offer the same range and quality of services.

2.1.2 This does not mean that WLR2 should simply provide SPs with the wholesale equivalent of the same set of products offered by BT Retail to its customers. What it does mean is that the wholesale inputs available to SPs under WLR must create an equivalent opportunity, not just to duplicate the services offered by BT Retail, but to bundle those inputs in different ways in order to create new products.

2.1.3 These wholesale inputs can be divided into two parts. Firstly, the set of basic line types to be provided under WLR2; secondly, the set of supplementary services that can be applied to each line type, in order to provide different retail services.

2.1.4 This chapter reviews the range of line types and supplementary services used by BT Retail, and then discusses which of these should be included in the WLR2 product. The principles adopted by Oftel in deciding whether a particular wholesale input should be provided are set out in general terms in the Access Guidelines ("Imposing access obligations under the new EU Directives", Oftel, September 2002). In deciding whether a particular wholesale input should be included within the WLR2 product specification, Oftel proposes to apply the following more specific tests. These tests will be applied both to the existing sets of line types and line features, and to any new line types or features introduced by BT:

• Is the wholesale input necessary to allow an SP to compete fairly with BT Retail in the residential and business retail markets for telephone calls and access services?
• Does the wholesale input represent a basic capability of BT’s access network, so that BT is effectively the dominant? Or is this an add-on, which SPs can reasonably be expected to obtain elsewhere?
• Is BT likely to incur significant cost in making available this wholesale input, and if so, does the level of demand from SPs justify this cost?

Oftel invites comments on the tests to be used for assessing whether features and line types should be included in the WLR2 product and subsequently for new products

2.2 Line types

2.2.1 The access line types supported by BT’s network can be grouped into three categories: analogue lines, basic rate ISDN, and primary rate ISDN. In what follows Oftel summarises in more detail the different line types within each of these categories, and then discusses which of these should be included within WLR2.

Analogue lines

2.2.2 BT currently provides three different types of analogue line:

• Single analogue PSTN line. This is the most common type of exchange line, installed in most residential and many small business premises.
• Multiple single analogue PSTN lines. These are multiple individual lines installed on the same site at the same time. The lines are not linked together in any other way, and each line has its own directory number. The lines terminate either on a PBX or on an individual telephone.
• Multiple main plus auxiliary analogue PSTN lines. These are also multiple individual lines serving the same site, but in this case the auxiliary lines are configured so that they share the same directory number as the main line. This allows a business PBX with multiple access lines to be accessed via a single number.

Digital lines

2.2.3 Basic rate ISDN provides a means to deploy digital PSTN services over a standard exchange line. A single basic rate ISDN line supports two 64kbit/s B channels, plus a 16 kbit/s D channel for signalling. BT has deployed a number of variants of this technology:

• BT Highway. This is the entry-level form of ISDN offered by BT, providing analogue PSTN and basic rate ISDN services to the end-user over the same network connection. Two analogue PSTN lines are provided, each with their own number. Basic rate ISDN is also provided, also with its own number. There are two variants of this service, known as Home Highway and Business Highway. These differ primarily in the range of select services that is available. More details can be found in BT’s Suppliers Information Note 275.
• ISDN 2/2e. This is the standard form of basic rate ISDN offered by BT. Two variants have been deployed, commonly referred to as ISDN 2 and ISDN 2e. ISDN 2 uses the limited ETSI call control platform, implemented prior to the completion of the ETSI ISDN standards, whilst ISDN 2e uses the full ETSI call control platform. More details can be found in BT’s Suppliers Information Notes 171, 261 and 312.
• BT ISDNconnect. This is a low-speed data service providing a virtual permanent connection over the D-Channel to a host Value Added Service Supplier. The service allows bursts of data throughput up to a maximum rate of 2.4kbit/s (typically X25 or TCP/IP). It is intended for applications such as credit card validation. BT currently only offers ISDNconnect over the D channel of an ISDN2e or a Business Highway line. More details can be found in BT’s Suppliers Information Note 225.

2.2.4 Primary rate ISDN provides a means to deploy digital PSTN services over a 2Mbit/s line. A single primary rate ISDN line supports thirty 64kbit/s B channels for voice and data calls, plus a 64 kbit/s D channel for signalling (30B+D). BT has deployed three variants of primary ISDN, supporting different signalling standards. These variants are ISDN 30 (DASS 2), ISDN 30 (I 421) and ISDN 30e (I 421). More details can be found in BT’s Suppliers Information Notes 222, 232, 261 and 312.

2.2.5 Oftel believes that the inclusion of ISDN products within WLR is likely to be essential to achieving effective competition in the retail market. This issue is discussed further in Chapter 3.

Special line types

2.2.6 In addition to the basic line types discussed above, BT Retail offer a variety of special line types targeted at specific market segments. These are summarised below.

2.2.7 Private payphone lines, as specified in section 1.3 of the BT Retail price list, are included in the WLR1 product, and are charged at the standard tariff. Payphone lines provided to managed payphones and public call offices are excluded from WLR1. Oftel proposes that the approach adopted for WLR1 should remain for WLR2

2.2.8 NHS lines are a retail service provided to end-users in the health service, supporting a high level of fault management, equivalent to BT Total Care. SPs will have access to the same range of SLAs as BT Retail, including Total Care, and this will allow them to offer an equivalent service to NHS line.

2.2.9 Site or temporary lines are access lines provided on a temporary basis. A higher than normal line rental is charged, in order to ensure that BT recovers its costs associated with providing the line. Demand for these lines has been reduced by the arrival of mobile phones. They are currently excluded from the WLR1 product. Oftel proposes that this position should remain under WLR2. SPs wishing to include them would need to demonstrate that significant demand exists.

2.2.10 Out of area lines provide a means for a business moving premises, from one exchange coverage area to another, to keep their number. This essentially involves the provision of a leased line to the new premises, and so the line rental for out of area lines is much higher than for a standard line. Out of area lines are currently excluded from the WLR1 product. Oftel proposes that this position should remain under WLR2. SPs wishing to include them would need to demonstrate that significant demand exists.

2.2.11 Low loss exchange lines are exchange lines which provide the customer with a higher signal strength. This is achieved by providing amplifiers at the serving exchange. Low loss exchange lines are currently excluded from the WLR1 product. Oftel proposes that this position should remain under WLR2. SPs wishing to include them would need to demonstrate that significant demand exists.

2.2.12 Non-served premises are sites which do not have specific postal addresses and/or are not for normal business or dwelling purposes. They tend to be sited in a street or footway or at a roadside and are normally unmanned. Examples include OLOs’ payphone sites, roadside locations, and traffic control system sites. Lines to non-served premises are currently excluded from the WLR1 product. Oftel proposes that this position should remain under WLR2. SPs wishing to include them would need to demonstrate that significant demand exists.

2.2.13 Ships-in-dock is a service that provides exchange lines to ships in dock, charged at standard levels, but on temporary terms and conditions. The ships-in-dock service is currently excluded from the WLR1 product. Oftel proposes that this position should remain under WLR2. SPs wishing to include it would need to demonstrate that significant demand exists.

2.2.14 FeatureNet is a family of Virtual Private Network (VPN) services offered by BT Retail. The service is based on standard access lines. The value added VPN services are provided by a dedicated set of switches, known as Advanced Services Units (based on Nortel DMS100 switches). It should be possible for an OLO to provide a similar service to FeatureNet, using standard access lines to link customers to their own VPN platform. Oftel does not therefore propose to include FeatureNet within the WLR2 product.

2.2.15 FeatureLine is a Centrex service, providing similar functionality to that offered by FeatureNet, but directly from BT's local exchanges. This means that only BT is in a position to provide FeatureLine services. There is therefore a stronger case for including FeatureLine within WLR than for including FeatureNet. An SP wishing to include FeatureLine within WLR1 would need to demonstrate that significant demand exists. Oftel proposes that this position should remain under WLR2.

Oftel invites comments on the proposals on Special Line Types.

2.3 Select and other services

Introduction

• The service might be included within WLR2, and covered by the basic line rental. No additional charge from BT to the WLR service provider would be made for this service.
• The service might be included within WLR2, but not covered by the basic line rental. BT would make an additional charge to the WLR service provider for this service, either on a per-line basis or on a per-user basis.
• The service might be excluded from WLR2, but be compatible with it. An SP would be able to use WLR2 to take over the line, without affecting the status of the supplementary service. In this situation the customer might continue to pay another party for the service.
• The service might be incompatible with WLR2, but with WLR2 taking priority. In such cases the other service would be stripped off a WLR line before the line is taken over by an SP.
• The service might be incompatible with WLR2, and take priority over it. A WLR2 order for a line providing such a service would be rejected.

Select services and digital select services

2.3.2 A particularly well-known group of services are the Select Services, provided to allow end-users to manage their calls. Capabilities provided to the end-user include the ability to identify who is making a particular call, prevent unwanted calls, and ensure that calls that are wanted get through.

2.3.3 The standard set of Select Services applies to analogue lines. There is a distinct set of Digital Select Services that apply to ISDN lines, providing an enhanced set of capabilities.

2.3.4 The Select Services and Digital Select Services have high profiles in both the residential and business markets. They form the basis of much of BT Retail’s product differentiation, especially between residential and business variants of the same line type (eg between Home Highway and Business Highway). Oftel is therefore of the view that an SP attempting to compete with BT Retail must have available the full range of Select Services and Digital Select Services.

2.3.5 Most of the Select Services and Digital Select Services can only be provided by BT, due to the degree of dependence on BT’s access network. Oftel proposes these services should therefore be included within the WLR2 product.

2.3.6 The only Select Services and Digital Select Services that it might be reasonable to exclude from WLR2 are those that can be provided by an SP independently of BT as a call termination service. For example, although Oftel is of the view that a core set of voice messaging services should be included within WLR2, this does not necessarily have to include the full range of voice messaging services provided by BT Retail. This is because an SP can use the Call Mapping service provided by BT (see paras 2.3.22) in conjunction with their own voice messaging platform in order to provide their own range of voice messaging services.

2.3.7 The Select Services and Digital Select Services provided by BT are listed at Annex A in Tables A1 and A2. In each case, the tables show whether Oftel expects the service to be included within WLR, and whether the service is expected to be chargeable.

Oftel invites comments on the proposals on Select Services set out in the table contained in Annex A

Other end-user services

2.3.8 In addition to the core set of Select Services and Digital Select Services described above, BT offers a number of related services over PSTN lines. The status of those services of which Oftel is aware is summarised below.

2.3.9 There are a number of PSTN lines on which BT Retail provides rented Customer Premises Equipment (CPE). This can range from single line telephones to PBXs rented to business customers. They may include some legacy hard-wired apparatus including magneto bell telephones. Under the existing Calls and Access product, the presence of rented CPE on a line would result in an order for Calls and Access being rejected. BT has proposed that such lines could be transferred to an SP, and that BT Retail will continue to rent the CPE to the end-user, but via a separate retail contract. Oftel is of the view that this is an appropriate solution for WLR2 where the CPE has significant value, as in the case of a rented PBX. However, where the CPE is a residential telephone, Oftel proposes that BT should bill the SP for the rental of the handset, so that the end-user does not have a continued billing relationship with BT Retail.

2.3.10 Direct Dialling In (DDI) is a service which allows individual extensions on a PBX to be directly contacted via their own number. DDI can be supported by multiple analogue lines, as well as by basic and primary rate ISDN. Oftel is of the view that the DDI service is essential in order to allow SPs to compete in the business market, and proposes that it should be included within the WLR2 product.

2.3.11 Number Portability allows an end-user transferring between SPs, whether using BT’s network or not, to retain their number. The provision of number portability is a regulatory requirement and so remains part of WLR2.

2.3.12 SPs have requested that BT Retail might be able to use a ‘golden numbers’ service as a means to attract new customers, by allowing end-users to select a favoured number from a list of available numbers. Oftel proposes that, if BT Retail provides this service to its customers, SPs should in principle be able to do the same to ensure that they are not at a competitive disadvantage.

2.3.13 BT Direct Connect allows for the immediate automatic routing of calls to a pre-programmed telephone number as soon as the handset is lifted. This service is currently excluded from the WLR1 product. Oftel proposes that this position should remain under WLR2. SPs wishing to include it would need to demonstrate that significant demand exists

2.3.14 Network Call Performance provides detailed information on all calls made on analogue and digital lines, including the volume of calls receiving the engaged tone, the number of calls going unanswered and the time taken to answer successful calls. Oftel has been informed that the data for this service is not collected by BTs local exchanges, but by the CPE on a business site. Oftel therefore does not expect this service to be included within WLR2.

2.3.15 BT provides a charge advice service, under which customers are contacted on completion of each call, and provided with a voice annoucement indication of the call cost. It would clearly be inappropriate for BT to advise end-users on the call charges being made by a WLR SP, and Oftel does not expect this service to be included within WLR2.

2.3.16 BT offers a temporary transfer and call interception service. This is used to for example handle malicious calls. Oftel proposes that this does not need to be included within the WLR product, since an SP wishing to provide a similar service should be in a position to use the standard call diversion facility, with their own call interception service.

2.3.17 Night-busying provides an end-user with the ability to set chosen exchange lines so that incoming calls receive a ‘busy’ tone. This service is currently excluded from the WLR1 product. Oftel proposes that this position should remain under WLR2. SPs wishing to include it would need to demonstrate that significant demand exists

2.3.18 BT Retail offers end-users a bypass number facility. This will be included within WLR, bundled where appropriate with other select services.

Oftel invites comments on the proposals for end-user services set out in paras 2.3.8-2.3.18.

2.3.19 The BT Retail price list includes several legacy services (eg Remote Call Forwarding, Call Transfer). It is believed that the functions provided by these are now provided by more modern Select Services such as Smart Divert, and Oftel does not currently expect that these should be included within WLR2.

Comments are invited on whether there are any legacy services for which significant demand does exists, and which should therefore be included within WLR2.

Network services

2.3.21 Oftel proposes that BT Wholesale should offer a variety of services as part of the WLR2 product in order to allow SPs to manage their network, and their customer base. These are summarised below. Oftel’s proposals for the recovery of the costs of these facilities are set out in section 7.3

2.3.22 BT call mapping enables third party service providers to offer a Voice Messaging service to BT fixed single line end-users with network features equivalent to those of the BT Call Minder service. This includes a special Proceed Indication, and control of ringing duration prior to diversion. For more detail, see BT Suppliers Information Note 287.

2.3.23 Outgoing call barring is a service that prevents outgoing calls from a specified line. This prevents end-users who have not paid their bills increasing their level of debt, but is not as extreme as disconnecting them.

2.3.24 Indirect Access (IA) call barring is a service that will allow SPs to prevent end-users making IA calls (including the use of the 1280 CPS over-ride code). Oftel believes that the requirement to provide indirect access services should be applied only to operators that have Significant Market Power in the relevant market. In the national markets for access and calls, this is BT. Oftel’s view is therefore that service providers using the WLR service should not be obliged to allow their retail customers to choose to route their calls via an alternative IA operator.

2.3.25 Oftel views optional IA Call Barring as an essential element of the additional competitive offering that WLR2 should provide. Oftel is aware that some service providers would prefer not to allow their customers to have a choice to route calls via alternative operators. They argue that they need to guarantee that they will receive the customer’s call income if they are going to be able to offer innovative tariffs, such as lower fixed elements being subsidised by higher price variable elements.

2.3.26 Nevertheless Oftel believes it is important that customers who will not to have the ability to make IA calls should be made aware of this when they choose a new SP. Oftel is proposing that when a WLR SP sends a welcome letter to the customer during the switchover period the SP must make clear if IA is not to be provided. In addition, Oftel’s Consumer Guide to WLR2 will make clear that the availability of IA is an issue that a prospective WLR customer should consider. These proposals are discussed further in chapter 6.

2.3.27 The calls affected will be all calls that are made to "Type B" IA codes on a list maintained by Oftel. Calls made to any number on this list will result in a generic recorded announcement provided by BT. IA Call-barring will be optional: SPs will be able to determine on a per-line basis whether this capability is enabled. There will also need to be an option for SPs to add IA call-barring to, or remove it from, a line that is already subject to WLR.

2.3.28 ‘Route 15X to service provider’ is a service which diverts customer service calls to the relevant department of the SP. BT Retail has well-recognised numbers for residential customer service (150), business customer service (152), residential fault reporting (151) and business fault reporting (154). Under WLR, BT will translate these numbers to an appropriate number provided by the SP, and route calls accordingly. Oftel believes this is an important customer service facility given the potential impact on WLR SPs’ ability to offer a customer experience that is competitive with BT. Oftel therefore believes that this service should be made available to SPs by BT.

2.3.29 ‘Route to credit control’ is a service which allows SPs to manage end-users who have not paid their bills. A line on which this service is activated will continue to receive incoming calls. It would also be possible to continue making calls to an allowed set of numbers (112, 999, 1471, 0800, 0500, 0808, 15x). However, calls to all other number (including CPS calls) would be routed to the credit control department of the SP. Oftel believes this is an important customer service and debt management facility which BT should provide in order to provide equivalence with the facility provided to BT Retail.

2.3.30 The implementation of Optional IA Barring, route 15x calls to SP and route to credit control will require alterations to BT’s network. BT’s initial estimates suggest these will cost around £3M in total to set up. Chapter 7 considers how these set-up costs should be recovered.

Oftel invites comments on the range of services listed in paras 2.3.21 to 2.3.30

Service incompatibilities

2.3.31 There are a number of services which Oftel does not expect to be provided as part of WLR2, but which are provided over the same line. In such cases it is necessary to understand whether these services are compatible with the WLR product, and if not, how this incompatibility is handled.

2.3.32 One important category of services are those which are provided over the same copper loop used by analogue PSTN telephony, but in a different frequency band. Obvious examples are BT’s Wholesale DSL service, and the Redcare alarm monitoring service. Oftel proposes that analogue WLR2 should be able to co-exist with these services. Oftel is aware that ISDN2 is incompatible with DSL as implemented by BT

2.3.33 ISDNconnect is in a somewhat similar position, in that it utilises spare capacity in the signalling channel of a basic rate ISDN line. Oftel proposes that if ISDNconnect is not included within the WLR2 product, then BT must ensure that the two services are compatible.

2.3.34 There will be some BT lines which have been taken over by an OLO under the terms of Local Loop Unbundling. Such lines clearly cannot be made available under WLR. Oftel notes however that trials of line-sharing are currently underway, and this is intended to allow an OLO to take over only the high frequency portion of a copper loop. If these trials result in a line-sharing variant of the LLU product being made available, then Oftel proposes it should be compatible with WLR2.

2.3.35 BT Chargecard allows end-users to make direct-dialled calls from any BT phone, using an account number and PIN number. The call is then charged to the users’s own directory number. Use of BT Chargecard is likely to be incompatible with WLR, and Oftel believes this service should be automatically stripped off any line transferred to WLR.

2.3.36 BT Ring Me Free allows end-users to pay for selected incoming calls, End-users are allocated a 12-digit code, which they can provide to their friends and relatives. The person placing a call dials a 5 digit access code, followed by the personal code, and the call is then routed to the correct destination. Use of BT Ring Me Free is likely to be incompatible with WLR, and Oftel believes this service should be automatically stripped off any line transferred to WLR2.

2.3.37 BT Retail provides a variety of other retail bundles which combine an access line with appropriate call handling services. Examples include the Surftime internet access product, and the NetChat VOIP service. End-users transferring to a WLR SP cannot continue to receive these retail services, and Oftel proposes that they will automatically be stripped off any line transferred to WLR2.

Oftel invites comments on the proposals on service incompatibilities set out in paras 2.2.31 to 2.2.37

2.3.38 BT Retail does provide some retail packages which are designed to meet social objectives in relation to vulnerable parts of the community. Examples include the Low User Scheme, In Contact, the Chronically Sick and Disabled Scheme, and the Schools for Internet service. Because of the nature of the end-users for these services, Oftel believes it may be inappropriate for these lines to be transferred from BT to a WLR SP without a positive confirmation from the end-user that they wish cease to the social telephony product. One method of ensuring this would be to specify that a WLR order submitted by the SP for a line on which these services are provided be rejected, but with a reject code which specifies precisely what service is causing the rejection. The WLR SP would then be able to go back to the end-user, and ask them to cease the service with BT, in order to allow the transfer to go ahead. Oftel’s view is that this approach should be adopted initially but be subject to review in the light of experience

Oftel invites views on whether customers using BT social telephony products should have an increased form of protection during transfer and, if so, on the form that protection should take.

2.3.39 The meter pulse facility uses auxiliary equipment in the BT exchange to transmit a series of pulses at a rate related to the pence per minute retail charge rate. The pulses can be detected by suitable CPE. It is possible that the charge could be misleading if a WLR SP used this service, since the pulse rate relates to the BT Retail tariff.

Oftel invites comments on whether there is a need for WLR2 to include the meter pulse facility.

2.4 WLR and directory enquiries

Liberalisation of the directory enquiries market

2.4.1 In September 2001, Oftel published a Statement (Access codes for directory enquiry services) setting out Oftel’s decision to introduce competition into the market for directory enquiries calls, by allocating a new range of short access codes starting with 118 to DQ service providers. In this Statement, Oftel concluded that a model of service-based competition, with all operators and service providers on an equal footing would provide the best deal for consumers in terms of price, quality and choice of service.

2.4.2 In this statement, Oftel also made it clear that it expected "the industry to come to equitable arrangements that will allow access to all DQ services on all networks" (emphasis added). Oftel also made it clear that this expectation applied to both fixed and mobile networks.

2.4.3 Consumers will be able to dial these new numbers from December 2002. There will be a parallel running period between the new 118 numbers and the existing DQ numbers such as 192 and 153 until August 2003, after which time the existing numbers will no longer connect to the legacy DQ services.

Carrier pre-selection and directory enquiries

2.4.4 In October 2002, Oftel published a Statement (Directory Enquiries and Carrier Pre-selection) in which Oftel concluded that the new 118 DQ numbers should be part of the CPS ‘all calls’ option. (The existing DQ numbers such as 192 are not included in the CPS ‘all calls’ option, as Oftel considered that the remaining lifetime of these numbers was too short to make any change worthwhile.)

2.4.5 However, concerns were expressed by DQ service providers during the consultation process that CPS operators might restrict the range of 118 DQ services available to CPS ‘all calls’ customers, and hence limit the benefits of 118 DQ service competition. On the other hand, CPS operators stated in their joint response to Oftel’s consultation that they believed that there were strong commercial incentives on CPS operators to carry a range of DQ 118 services.

2.4.6 Oftel recognised the concerns of DQ service providers, and undertook to review its decision to include 118 DQ calls in the CPS ‘all calls’ option 12 months after it is implemented. In this review, Oftel would assess whether there had been any significant negative impacts on 118 DQ competition (for example because CPS operators do not offer access to a range of DQ services other than their own, or impose excessive retail prices for doing so) and take remedial action at that stage if necessary.

2.4.7 In its October 2001 Statement on DQ and CPS, Oftel explained that it did not plan to require all 118XXX codes onto CPS networks at this time. Oftel also noted the existence of the ‘1280’ over-ride code (by means of which a customer can over-ride CPS routing and force any given call onto the BT network) as a possible means by which consumers could access specific 118 numbers not available on their CPS network if they had a particular need to do so.

WLR and 118 DQ services

2.4.8 As explained in paragraph 2.3.24 one of the facilities in the WLR product may be the barring of indirect access calls for WLR customers, which would include barring of the ‘1280’ CPS over-ride code.

2.4.9 This will mean that (when the existing codes for directory enquiries such as 192 and 153 are withdrawn) a WLR customer will only be able to use those 118 DQ services to which its WLR supplier has chosen to provide access.

2.4.10 WLR service providers, as providers of electronic communications services, will be obliged under the terms of the draft General Conditions of Entitlement, to make (at least) one DQ service available.

2.4.11 The question arises as to whether WLR service providers should be expected to provide access to the full range of DQ 118 numbers (which in practice would mean those 118 numbers where the DQ SP wishes to have access to the WLR SP's customers). Oftel believes that this should not be onerous to WLR SPs due to the ability to transit calls to 118 DQ numbers via a transit operator (ie direct interconnection with the terminating operator is not required) and the fact that WLR SPs will have retail pricing freedom (within reason) for these services. Oftel notes that WLR service providers may choose to use CPS from alternative operators for call conveyance. If WLR SPs are expected to provide access to the full range of DQ 118 numbers, consideration needs to be given to whether this would restrict WLR SP’s choice of CPS operators to only those that themselves provided access to the full range of DQ 118 numbers.

2.4.12 An alternative approach would be similar to that adopted for CPS. WLR service providers would be expected to provide access to a range of 118 DQ services other than their own (or their wholesale carrier’s), but would not be expected to offer access to the entire range of 118 DQ services. In this scenario, the possible impact on competition in the DQ market would need to be considered, as customers of WLR service providers would not necessarily be able to benefit from a full choice of DQ services (if for example the WLR SP restricted the choice of DQ services available, or charged unreasonably high retail prices for access to these services).

Views are invited on the two options set out above for the treatment of 118 DQ calls in the WLR product, namely:

a) should WLR service providers be expected to provide access to the full range of DQ 118 numbers; or

b) should WLR service providers be expected only to provide access to a range of DQ 118 numbers other than their own (or their wholesale carrier’s)?

Chapter 3

ISDN products

3.1 Introduction

3.1.1 This chapter considers whether the specification of WLR2 should include wholesale versions of BT’s ISDN products. The objective of WLR2 is to achieve effective competition in the retail markets for business and residential end-users. As discussed in chapters 2 and 4, in order to achieve this goal, WLR2 needs to allow alternative SPs an opportunity to compete fairly with BT Retail. BT’s retail activities should not be able to benefit from privileged access to key services, processes or features supplied by BT at the wholesale level, if BT has market power in supplying these inputs and they are material to retail competition.

3.1.2 The first key questions in relation to ISDN products are therefore:

• Are these products significant in the retail markets for business and residential end-users?
• Is BT dominant in the supply of these products, and is that dominance likely to be enduring?

If the answer to both these questions is ‘yes’ then it is reasonable to conclude that wholesale versions of these products need to be available from BT in order to achieve the goals of WLR 2. Consistent with the approach taken by Oftel in Chapter 2, these wholesale versions would need to be functionally equivalent in all material respects with the products that are supplied to BT Retail.

3.1.3 The first two parts of this chapter consider these two questions in turn. The third part considers the options for the basis on which wholesale ISDN products might be supplied to SPs by BT.

3.2 The significance of ISDN products

3.2.1 ISDN lines are a means of delivering a variety of telecommunication services through a common means of access to a digital switched network. ISDN lines provide an end-to-end digital link, thus making accessible a fully digital, switched wideband network and the ability to offer voice, data, image and text services over the same network connection. Chapter 2 includes a discussion of the variety of individual products based on ISDN. These are divided into two broad groups: one based on ISDN 2 lines, and one based on ISDN 30.

3.2.2 ISDN products tend to be used by individuals and businesses with larger and more complex communications needs. ISDN 2 has historically been aimed at both residential and small business end-users. ISDN 2 offers important additional functionality compared to a pair of analogue lines, notably:

• Higher data speeds for dial-up Internet (up to 128kbit/s in place of up to 56kbit/s) and faster connection.
• Multiple subscriber numbering.
• Direct dialling into PBXs.

3.2.3 Some of these functions are also available in principle over multiple analogue lines. However, the technological superiority of ISDN is reflected in a wider availability of customer premises equipment suited to ISDN, which constrains customers’ ability to substitute analogue lines for ISDN. From its discussions with market participants, Oftel understands that ISDN 2 is sometimes supplied in bundles comprising up to 6 or 8 channels in total. This allows ISDN 2 to be the basis for meeting the voice and data needs for a wide variety of small businesses. In the residential market, the higher data speed is a key advantage of ISDN 2. This is particularly relevant in areas not currently served by DSL technology.

3.2.4 ISDN 30 products have historically been aimed solely at the business market, with larger and more complex telecommunications needs than can typically be met with ISDN 2. At one extreme, ISDN 30 products are available with as few as 8 channels, at the other they can be sold in multiples of 30 channels to meet the needs of a single, very large site. The point at which ISDN 30 starts to make commercial sense depends on the type of business (whether it is more or less telecommunication-intensive) but might typically be a site with 20 or so employees in finance or business services, or 100 employees in manufacturing. ISDN 30 is therefore predominantly relevant to larger business sites. These might be occupied by individual SMEs or by large businesses, or might comprise a site such as a business park, where there is a concentration of smaller businesses and the landlord has a co-ordinating role in installing capacity.

3.2.5 ISDN 30 offers similar functionality to ISDN 2 but on a more extended scale, and always in combination with PBX CPE. Direct dialing-in is a common feature as is multiple subscriber numbering, and the use of a variety of applications in addition to voice, including fax and data.

3.2.6 In Oftel’s view, the importance and variety of the functions that can be supported by ISDN products strongly suggest that these are significant products in the retail market for business customers. Indeed, our analysis suggests that these are standard products for meeting the telecommunications needs of large numbers of SMEs and larger customers. ISDN2 products also play an important role in parts of the residential market, particularly for consumers with more complex needs and as a means of gaining faster access to the Internet where DSL is not available. The ability of SPs to compete within the business and residential markets will therefore be adversely affected unless suitable wholesale versions of these products are available.

3.2.7 This conclusion is supported by the evidence available on ISDN 2 and ISDN 30 as a share of the total access market. Oftel collects data on the number of access lines supplied by operators in each of the two ISDN groups, and on the number of analogue access lines. The latest available data are set out in the table below for the business and residential markets. The data in the table have been adjusted to allow for underreporting of ISDN30 provision by some operators (for details of the adjustment see paragraph 3.4.3 below).

3.2.8 ISDN 2 channels therefore account for around 14% of all access lines serving businesses, and ISDN 30 for around 30%. Within the residential market, ISDN 2 plays a small but significant role, while ISDN 30 is not relevant. Oftel considers that these shares again imply that ISDN products are certainly significant within the business market, and also likely to be significant within the residential market.

3.2.9 Oftel does not distinguish, in the data it collects, between calls made over ISDN lines and calls made over analogue lines. If the volume of calls over ISDN lines were significantly less than over analogue lines, this might imply that the products actually played a much lesser role within these markets than the access line data. However, Oftel does not consider that this is a likely scenario or probable conclusion. The evidence that exists in relation to the typical characteristics of ISDN 2 and ISDN 30 customers suggest that these will tend to be higher users of telecommunications at the aggregate level, with high call volumes.

3.2.10 Oftel’s view is that ISDN 2 products and ISDN 30 products are both significant products in the retail business market. Oftel believes that the same is also true of ISDN 2 products in the residential market. This means that if SPs are not able to supply these products to end-users then they will be at a material competitive disadvantage, and this will have an adverse effect on competition in these retail markets.

Oftel invites comments on its conclusions on the significance of ISDN products and the implications for competition.

3.3 Competition analysis

3.3.1 The next question that needs to be addressed is whether BT is dominant in supplying these products. If BT is not dominant, and sufficient alternative sources of supply exist to provide effective competition with BT, there is unlikely to be any justification for requiring BT to supply wholesale versions of these products. The analysis of dominance also needs to consider whether any existing dominance is enduring, or whether it is likely to be eroded quickly.

3.3.2 Dominance can only be assessed on the basis of a market definition. The obligation on BT to supply WLR 1, and the proposals for WLR 2, flow from the last review BT’s retail price control. The results of this review were reported in Competition in the Provision of Fixed Telephony Services (July 2001), and subsequently updated with new information in "Protecting consumers by promoting competition – Consultation on Oftels’ review of the fixed telephony market" (January 2002) and "Protecting consumers by promoting competition: Oftel’s conclusions" (June 2002).

3.3.3 The Price Control Review defined separate markets for business and residential access and calls. ISDN access was included in almost all of the data alongside other types of access. Oftel concluded in this review that BT was dominant in all markets except for certain business international calls markets.

3.3.4 The conclusions of the Price Control Review imply that there is no need to consider further the question of whether BT is dominant in the supply of ISDN: BT is dominant, and the dominance has recently been confirmed. However, for the purposes of this document, Oftel considers that it would be appropriate to apply a more stringent test before deciding whether BT should have to supply a wholesale version of ISDN. This more stringent test assumes that ISDN access markets constitute separate access markets from analogue lines, and considers whether BT has dominance in the ISDN access markets alone.

3.3.5 Under the new EU regulations, Significant Market Power (SMP) is identified with the competition law concept of dominance. In principle this includes both the concepts of single firm and joint dominance. The former is the relevant concept in this case.

3.3.6 The main criteria that Oftel will consider when assessing dominance in market reviews are listed below. For a fuller discussion see Oftel's market review guidelines: criteria for the assessment of significant market power (August 2002). A dominant position can derive from any combination of the criteria, which taken separately may not be sufficient to determine whether or not there is dominance.

3.3.7 The single dominance criteria listed in the European Commission Guidelines and in Oftel’s Market Review Guidelines are:

Market shares
Overall size of the undertaking
Control of infrastructure not easily duplicated
Technological advantages or superiority
Absence of or low countervailing buyer power
Easy or privileged access to capital markets/financial resources
Product/services diversification (e.g. bundled products or services)
Economies of scale
Economies of scope
Vertical integration
A highly developed distribution and sales network
Absence of potential competition
Barriers to expansion
Ease of market entry

3.3.8 Oftel has also set out in its Market Review Guidelines a number of other criteria for use in assessing dominance, in addition to those in the European Commission’s Guidelines:

Excess pricing and profitability
Active competition on non-price factors
Barriers to switching
Customers’ ability to access & use information
Benchmarking of the deal received by UK consumers against that received by consumers in similar economies;
Consumer satisfaction with their service;
Evidence of previous anti-competitive behaviour or collusion.

3.3.9 In the sections that follow, ISDN markets are reviewed against the most relevant of these criteria.

3.4 Market shares

3.4.1 According to case law a market share over 50% would lead to a presumption of dominance. However, there may still be concerns about dominance where an undertaking has less than 40%, according to the size of that undertaking’s market share relative to its competitors. The persistence of a high market share over time is also an important factor. Where a firm has a higher share by value than by volume it may indicate that it can price above rivals due to market power.

3.4.2 Oftel collects data on analogue and ISDN access lines by operator. However, as already discussed, a problem with the data collected for Market Information is that some operators do not distinguish between analogue and ISDN lines. It is also possible that leased lines being used for ISDN30 may go unreported.

3.4.3 This means that in the Market Information figures BT's market share of ISDN30 will be overstated and its share of PSTN understated. Estimates from C&W suggest that about 78% of the lines it reports as PSTN lines are in fact ISDN30 lines. Oftel believes that approximately all other operators' lines are likely to be ISDN30 lines. Given this, BT's share of ISDN30 falls to around 60%, still well above the threshold for dominance. Even making the extreme assumption that all C&W and other operator's PSTN lines were ISDN30 channels would give BT about a 58% share of the latter. Oftel therefore believes that BT has a dominant share of both the ISDN2 and ISDN30 markets.

3.4.4 The adjusted data are shown in the table below:

Business Lines 000s

3.4.4 Oftel is seeking further data on the breakdown between other operators' analogue and ISDN lines over a reasonable time period for this review.

3.4.5 Oftel does not publish separate data on shares of call minutes from ISDN lines. Indeed, Oftel believes that these calls should be regarded as part of the same market as the equivalent call from an analogue line. BT's standard prices are the same, the network components used (beyond the concentrator) are the same and IA operators can offer calls over ISDN as well as analogue lines. Data on BT's share of calls (analogue and ISDN) were published in Oftel's June 2002 price control review statement. The following table is an updated version of table 2.3 of that document. In addition to the new data for 2001/02Q4, there are some differences in the earlier data. This is due to revisions to the cable operators' figures as a result of more accurate data becoming available since the publication of the statement.

Market shares (calls)

Source: Oftel Market Information. Market shares have been adjusted to allow for the fact that some operators do not provide separate data for business and residential customers. In addition, Worldcom’s submitted national minutes and revenues have been apportioned among local calls, national calls and calls to mobile. BT market shares include Concert market shares for these purposes.

3.5 Countervailing power

3.5.1 The existence of customers with a strong negotiating position, which is exercised to produce a significant impact on competition, will tend to restrict the ability of providers to act independently of their customers.

3.5.2 Such countervailing power is more likely where a customer accounts for a large proportion of the producer’s total output, is well-informed about alternative sources of supply, is able to switch to other suppliers readily at little cost to itself, and where it may even be able to begin producing the relevant product itself. This is perhaps most likely to be the case for large businesses whereas small and medium-sized businesses and residential customers are less likely to be able to exercise countervailing power.

3.5.3 The extent of countervailing power in ISDN markets therefore reflects the nature of the customer base for ISDN. As discussed above, this is likely to differ between ISDN2 and ISDN30. ISDN 2 products have historically been aimed at both the residential and small business markets. ISDN 30 is aimed at the business market – and predominantly at larger sites.

3.5.4 ISDN 30 is not, however, exclusively a large (ie 250+ employee), as opposed to small (up to 50 employees) and medium (50-249 employee) business product. Indeed, at least in terms of customer numbers, SMEs are likely to be the main market for ISDN. This means that the extent of countervailing power is likely to be limited, though it is likely to be more significant in the ISDN30 market than the ISDN2 market.

Oftel invites comments on and evidence of firms' ability to exercise countervailing power in ISDN markets.

3.6 Entry barriers

3.6.1 The threat of potential entry may prevent incumbent firms from raising prices above competitive levels. However, if there are significant barriers to entry, this threat may be weak or absent. Incumbent operators may then be able to raise prices and make persistent excess profits without attracting additional competition that would reduce them again.

3.6.2 Sunk costs can be an important barrier to entry. These are costs which are needed to enter an industry but which cannot be recovered on exit – for example investment to set up a production plant or to build a network. A potential entrant will only incur the sunk costs of investment in an industry if it expects to cover these sunk costs as well as the avoidable costs of production from revenues earned. The incumbent on the other hand, has already made its sunk investments and so will stay in the market as long as it can cover its avoidable costs. The incumbent may then be able to exploit this asymmetry by signalling to the entrant that, if it were to enter the market, prices would be too low to cover sunk costs. Entry would then be deterred.

3.6.3 Sunk costs are particularly relevant to telecommunications because a very large investment is needed to create an efficient telecommunications network and it is likely that little of this could be recovered if the entrant later decided to leave the market. This is likely to be exacerbated by the significant economies of scale and density which characterise telecommunications access networks including ISDN. These mean that a large access network is likely to have lower costs than a smaller one, with the result that an entrant would need to take a large share of the market if it was to be able to compete. But in order to gain such a large market share, it is likely to have to price well below the incumbent, which would make it more difficult to recover sunk costs. Therefore barriers to entry by competing ISDN network operators are likely to be high. They are likely to be easier to overcome in the larger business segment and therefore less significant in the ISDN30 market than in the ISDN2 market.

3.6.4 In addition, it may be possible to enter the ISDN30 market by using a partial private circuit (PPC). Oftel believes that PPCs may be a viable alternative means of delivering ISDN 30 where a number of conditions are met, including:

• operators other than BT have significant network infrastructure, so that distances between the nearest point of connection to the network and the customer are not too great;
• the alternative operators can spread recovery of PPC connection costs over multiple years;
• customers offer at least a moderate level of demand; the minimum level of demand will depend on distance to customer, but is unlikely to be less than 10 or 15 channels.

3.6.5 These conditions suggest that, over time, PPCs may become a viable means of delivering ISDN 30 for some alternative providers serving some parts of the business customer base. It is not, however, clear that PPCs will provide a basis for achieving effective competition at the retail level across all relevant parts of the market. A PPC will also not be a viable option for service providers without their own networks. An ISDN WLR product would enable such service providers to enter at the retail level without having to incur large sunk costs and so should encourage entry. But it is important that the terms of availability of any WLR ISDN product should not undermine the use of PPCs to compete.

3.7 Excess pricing and profitability

3.7.1 The ability to price at a level that keeps profits persistently and significantly above the competitive level is an important indicator of market power. In a competitive market, individual firms should not be able persistently to raise prices above costs and sustain excess profits. However, it should be borne in mind that, in the short term, high profit rates can be explained by factors such as innovation and unexpected changes in demand. Conversely, low profits may be more an indicator of the inefficiency of the firm than of effective competition.

3.7.2 ISDN is a product that has historically been regarded as innovative, and this is a major reason why it has been subject to very little regulation. The product has been in existence for around 15 years. It may now be appropriate to consider whether BT’s dominance in ISDN markets is enduring and, if so, to consider whether additional regulation should be imposed.

3.7.3 As part of the review, Oftel has asked BT for data on BT's costs of providing ISDN lines and a comparison with BT's prices. Competing operators have alleged that prices are well above costs.

3.7.4 BT has provided Oftel with data on the profitability of its ISDN access line business. The data suggest that the profitability of ISDN access has been increasing and that the average ROCE on ISDN access was of the order of 50% (The full methods of attribution, accounting and valuation for this data have not been disclosed to Oftel.)in 2000/01, well above BT's cost of capital

3.7.5 Oftel also does not have recent data on the profitability of ISDN calls on an end-to-end basis, that is including the profits earned in BT Network as well as BT Retail. However, as noted above, ISDN calls were included in some of the profitability figures published in the price control review documents which relate to calls made from analogue and ISDN lines combined. The end-to-end profitability (on a fully-allocated cost basis) of ISDN calls is likely to have been comparable to that of calls made from analogue lines since standard prices are the same and the same network components are used. The profitability of ISDN calls on an AS basis (that is, including only the profits of BT Retail) on which Oftel has data is comparable to that of analogue calls on the same basis. As pointed out in Oftel's June 2002 price control review statement, BT's rates of profits on calls remain extremely high.

3.7.6 The profitability data are consistent with the view that BT has market power in ISDN access and calls markets.

3.8 Barriers to switching

3.8.1 Competition may be impeded if it is difficult for customers to change operators in response to price differences. A market is less likely to be effectively competitive, therefore, if there are significant barriers to customer switching.

3.8.2 It is possible to identify ISDN users amongst the businesses included in Oftel's regular surveys. However, the replies do not relate to switching of ISDN supplier per se. Oftel is gathering survey data on switching of ISDN supplier and will publish the results in the December statement concluding the ISDN market review.

3.8.3 Oftel's latest survey of business users found that 19 per cent of business ISDN users had switched supplier in the last year. This was significantly higher than the 6.8% of analogue line users. Similarly, some 22% of ISDN users had switched more than one year ago compared to 12% of analogue line users. A greater proportion of ISDN users also reported it was "very easy" to switch supplier (72.5% compared to 52.8%). Generally speaking the reasons for not switching given by ISDN users were very similar to those given by analogue line users. The most important were satisfaction with current supplier or hassle/inertia. Interestingly, 2.7% said that the reason they had not switched was because they had ISDN lines, suggesting that some operators perceive competition to be more limited for ISDN than for analogue line provision.

3.9 Customer Awareness

3.9.1 Customers must know of alternatives to their main supplier of telecommunications if competition is to be effective. Respondents to the Oftel surveys are asked to indicate their awareness of alternative telecommunications providers, particularly IA operators. Again it is possible to identify ISDN users from the survey replies but the questions do not relate specifically to awareness or use of alternative ISDN providers. Oftel is carrying out a further survey to address this and the results will be published in the December statement on the ISDN review.

3.9.2 Amongst ISDN users, 96.1% of respondents were aware of indirect access operators, significantly higher than the 86.7% for analogue line users. Usage of IA was also slightly higher at 35.4% compared to 31.0%.

3.9.3 Of those who were aware of but not using IA, the main reason for this was happiness with current supplier for both ISDN and analogue line users. Interestingly, 7.9% of ISDN users referred to complicated billing or the need to pay two bills as the reason for not using IA compared to only 2.5% for analogue users. Poor quality of service was also much more important for ISDN users, 18.8% giving this as the reason compared to only 5.4% for analogue users, as was poor reputation (quoted by 14.1% of ISDN users as against 6.9% of analogue users). All these are issues which could be addressed by WLR bringing firms with established brands into the market. One respondent believed that IA was not feasible for ISDN lines and gave this as the reason for not switching.

3.10 Benchmarking

3.10.1 One source of evidence on whether prices in the UK are as low as they would be in competitive markets is by comparing them to prices for the equivalent services in overseas markets. If UK fixed telephony markets are competitive, one would expect UK consumers to be getting a deal which is as good as or better than that available to customers in similar economies overseas. For this reason, Oftel has undertaken a series of surveys to compare UK prices and trends with those in other comparable countries.

3.10.2 The results of the latest (June 2002) study show that:

• on average prices in the UK for business ISDN services are higher than elsewhere;
• prices in Sweden in particular are significantly cheaper than in the UK;
• prices for the small business baskets (using basic access services) are, however, more expensive in France; and
• the spread of prices between countries for business ISDN is larger than for residential ISDN.

The UK's position relative to other countries is slightly worse than that in the June 2001 study. UK prices have remained static while prices have fallen elsewhere.

3.10.3 Given that, to the extent that overseas markets are themselves not competitive, prices in other countries are also likely to be above cost, this is consistent with the view that the UK ISDN market is not competitive.

3.11 Consumer satisfaction

3.11.1 In general one would expect high levels of satisfaction if markets are competitive. Evidence of widespread dissatisfaction could therefore be a sign that markets are not effectively competitive, although high levels of satisfaction would not necessarily indicate the reverse. The fact that markets are regulated, with some services subject to price control and with BT required to publish quality of service statistics, together with the possibility that customers are unaware of what competitive prices and quality levels would be, needs to be borne in mind.

3.11.2 The following results are from Oftel's May/ August 2002 survey and show satisfaction with ISDN as a means of Internet access.

Business satisfaction with ...

1. overall Internet service (May / Aug 2002 data):

ISDN - 90%

analogue - 90%

Other - 89%

2. Speed of Internet service (May / Aug 2002 data):

ISDN - 81%

analogue - 69%

Other - 87%

3.11.3 This suggests that satisfaction with ISDN is high and, understandably, higher than with analogue lines for speed of access.

3.11.4 It is possible to identify satisfaction amongst ISDN users separately from analogue users, although the replies do not relate specifically to ISDN service. These suggest that satisfaction is relatively low amongst ISDN users (86.7% satisfied against 96.6% for analogue users). As with other survey questions, the lack of data on satisfaction with ISDN service is to be addressed by a new survey, the results of which will be published in the December statement on the ISDN review.

3.12 Conclusions of competition analysis

Oftel believes that BT is dominant in the provision of ISDN2 and ISDN30 lines. However, it is clearly more strongly dominant in ISDN2 than in ISDN30. BT's share of the latter market is already lower and entry is now possible using PPCs. Oftel believes that ISDN calls are part of the same market as calls from analogue lines and that BT remains dominant in the provision of local, national, IDD and operator assisted calls and calls to mobiles with the exception of those business IDD markets designated as competitive by Oftel.

3.13 Options for requirements on BT

3.13.1 Oftel believes that, given the significance of ISDN products in the retail markets for business and residential customers, and given BT’s dominance in supplying these products, wholesale versions of these products need to be made available by BT if competition is to be effective at the retail level. These wholesale versions need to be functionally equivalent to the products supplied to BT Retail so that SPs are at no material disadvantage in competing with BT.

3.13.2 There are, however, various options for the nature of the requirements that could be set in relation to the supply of these products. Oftel believes that the key options are:

A: Put no formal requirement on BT as part of the specification for WLR 2, but rely on BT’s willingness to supply wholesale products under its Calls & Access range.

3.13.3 This option would reflect the fact that BT has already made a wholesale version of ISDN 2 available as part of its Calls & Access product range, and that BT has indicated that it intends to make a wholesale version of ISDN 30 available under Calls & Access in 2003. Oftel understands that these products are, or will be, functionally equivalent with those supplied to BT Retail.

3.13.4 The key advantage of this option is that, in regulatory terms, it is the least intrusive. It would be consistent with giving weight to the argument that, if BT is planning to supply a product anyway, there should be no need to require its supply.

3.13.5 This option does, however, also have a number of disadvantages. In particular:

• There would be no security that BT would continue supplying wholesale versions of these products if it changed corporate policy.
• There would also be no protection for SPs in relation to the terms on which these products were supplied (including price, quality of service, and functional specification).
• There would be no restriction ex ante on BT discriminating in favour of supplying itself in preference to third parties (though general competition law can provide protection ex post).

3.13.6 Oftel considers that these disadvantages would be likely to act as a material disincentive to SPs investing in the resources required to bring these wholesale products to market. This could adversely affect the effectiveness of competition at the retail level.

3.13.7 Oftel also considers that this option is not consistent with the approach to incentive regulation that underlies WLR 2. Incentive regulation can only work effectively if there is sufficient clarity about the conditions that need to be met for the incentive to be earned, and if there is certainty that these conditions will continue to be met afterwards. In Oftel’s view, these requirements could not be satisfied by reliance on BT supplying wholesale versions of ISDN products on a purely voluntary basis. This would open up the possibility that Oftel might find that all conditions for the incentive had been met, relax the retail price control, only to find that wholesale versions of these products were subsequently withdrawn.

3.13.8 Oftel’s view is that Option A is not an appropriate way forward.

Oftel invites views on its proposal not to proceed with Option A.

B: Require BT to make wholesale versions of either ISDN 2, or ISDN 30, or both, on the same basis as analogue lines, with cost-based prices.

3.13.9 This option would be most consistent with the treatment of analogue lines. In this context, it makes sense to consider ISDN 30 and ISDN 2 separately.

ISDN 30

3.13.10 n relation to ISDN 30, Oftel sees significant disadvantages in any early move to cost-based pricing by regulatory intervention:

• This is likely to undermine the incentives to use PPCs as an alternative means of providing ISDN 30. This is not likely to be in the long-term interests of consumers, given that alternative infrastructure provision via PPCs is likely to provide competition across a higher proportion of the value chain than a service-based model using WLR.

• It would be a significant extension of regulation, given that ISDN 30 has historically been subject to little regulation and has been regarded as an innovative product. A rapid move to require cost-based pricing could have adverse effects for perceptions of regulatory risk generally, and for innovative products in particular.

• BT’s market share is already less than in ISDN 2 and other access products. A move to full cost-based price regulation therefore risks being disproportionate to the problem.

3.13.11 The main argument in favour of this approach in relation to ISDN 30 is that:

• It would bring significant short-term benefits to business end-users – though these could be outweighed if the incentives for future innovation were adversely affected.

ISDN 2

3.13.12 Oftel considers that the case for cost-based pricing of ISDN 2 is stronger, given a number of factors including:

• BT’s high market share, and the lack of evidence of competition.

• PPCs do not offer a prospect of new entry.

3.13.13 However, Oftel considers that weight also needs to be given to some factors that are common to ISDN 2 and ISDN 30, notably:

• Cost-based pricing would be a significant extension of regulation. This could have implications for perceptions of risk in relation to other innovative, added-value products.

• This would be a major change in policy towards ISDN. It is arguable that such a change should be considered in a comprehensive market review, rather than through setting the specification for a new wholesale product.

3.13.14 The rental charge for analogue lines in WLR is cost based but does not provide a strong precedent for ISDN 2. This is, first, because of the absence of any element of innovation, and second because the retail residential analogue line rental is below cost.

3.13.15 Oftel’s view is that option B would not be proportionate for ISDN 30. The case for ISDN 2 is more finely balanced, but Oftel’s view is that it would not be appropriate to seek to move to cost-based pricing for ISDN 2 at this time.

Oftel invites comments on its conclusion that cost-based pricing for ISDN products would not be a proportionate response

C: Require BT to make wholesale versions of either ISDN 2, or ISDN 30, or both, available within WLR 2 but with less onerous obligations than analogue lines.

3.13.16 Under this option, BT would be under a requirement to make wholesale versions of ISDN 2 and ISDN 30 available as part of the product specification for WLR 2, but the obligations would be less extensive than for analogue lines. WLR 2 would, in effect, comprise a ‘family’ of products, subject to levels of regulation that might vary.

3.13.17 The key regulatory obligations that might be set for BT could be:

• An obligation to supply wholesale versions of ISDN 2 and 30. The functional specification of these products needs to be equivalent in all material respects to what is supplied to BT Retail.

• Non-discrimination between supplying BT Retail and supplying third parties. This would require BT to ensure that there is no discrimination between the price charged to third parties and to BT’s own Retail Systems Business, that there is no discrimination in the quality of service for activities such as installation and repairs, or in the handling of information about product enhancements and innovation.

• Price publication, on standard wholesale terms (90 days notice).

3.13.18 Oftel would not prescribe directly the price to be charged by BT for the wholesale products, but the non-discrimination condition would require BT to maintain an adequate margin between its retail prices and the wholesale charges.

3.13.19 The principal advantages of this approach are that:

• It will ensure that providing wholesale versions of ISDN products is an explicit requirement of BT as part of WLR 2, and that BT is required to continue providing these products after gaining the incentive.

• SPs will benefit from the existence of a regulatory framework for the products, including non-discrimination and price publication requirements.

• The downsides of option B, in terms of increased regulatory risk for innovative products, are largely or wholly avoided.

3.13.20 The principal disadvantage of this approach is, first, that wholesale and retail prices may remain significantly above cost. As discussed above, this is a concern particularly in relation to ISDN 2, where the potential for new entry is less. Second, past experience suggests that in general it is difficult for regulators to ensure that retail margins remain adequate.

3.13.21 On balance, Oftel considers that option C is the most proportionate approach to setting requirements for the product specification for WLR 2.

3.13.22 Oftel recognises, however, that under option C there remain some significant potential regulatory issues in relation to ISDN:

• There is first a risk that BT may set retail and wholesale prices at a level that does not allow for effective retail competition, as the retail margins available to third parties may be too thin, even taking into account both calls and access. This issue arises in relation to both ISDN 2 and ISDN 30.
• Second, there remains an issue about whether Oftel should require the pricing for ISDN 2 to move closer to being cost-based.

3.13.23 Oftel considers that, if Option C is adopted, the most appropriate way of dealing with both these points is to monitor BT’s behaviour closely during 2003 and the early life of WLR 2. Oftel will in particular be looking for any evidence that the retail margins available for these products are insufficient to support effective competition at the retail level. Oftel expects to take both these points into account in its 2004 review of retail markets.

Oftel invites comments on the conclusion that option C offers the most appropriate approach but that there should be close monitoring of BT’s behaviour ahead of the 2004 market review.

Chapter 4

WLR process issues

4.1 Introduction

4.1.1 This chapter discusses the process issues arising out of the introduction of WLR2. These issues affect a number of areas, but the greatest impact and complexity is in the area of service interfaces, provisioning, and ordering. This will be considered first. Other areas affected, such as Faults and Repairs, Billing and Debt Management, Security and Fraud, etc, are considered later in the chapter.

4.1.2 The objective that Oftel has sought to pursue in this area, as in others, is to ensure that WLR creates the basis for fully effective competition in the retail markets for residential and business customers. This means that the regulatory framework should allow SPs the opportunity to compete fairly with BT Retail. BT’s retail activities should not be able to benefit from privileged access to key services, processes or features supplied by BT at the wholesale level, if BT has market power in supplying these inputs and they are material to retail competition.

4.1.3 If we apply this principle consistently, an SP should have the same opportunity to compete in the marketplace as BT Retail. SPs should be able to offer end-users a customer experience that is fully competitive with BT Retail’s. This does not mean that service should be the same across all competitors: service diversity is indeed to be encouraged. But differences between BT Retail and SPs, and among SPs, should reflect normal commercial factors – different branding and positioning in the market, differences in the quality of management, and so on – not the leverage of market power from areas where one operator has dominance.

4.1.4 An example of end-users’ experience is what happens when a customer changes address. A BT Retail (BTR) end user who changes address can have all its services and features (except CPS) transferred seamlessly to the new location. A similar treatment is required if an end user transfers to another service provider (SP), or changes address with a SP. Similarly the time and complexity (number of interactions) taken to complete a transaction for an end user with a SP should be the same as an equivalent transaction for a BTR end user

4.2 Background: variety of service offerings, providers, and interfaces

4.2.1 At premises serviced (or serviceable) by BTR, end users today have a number of options available for the provision of analogue or digital lines, basic voice calls and associated supplementary services:

4.2.3 Depending on the option, the end user may have a retail billing relationship with one or more of BTR, a SP, one or more IA Operators, or one or two CPSOs. In parallel, wholesale billing relationships may exist between BT Wholesale (BTW) and an SP or CPSOs.

4.2.4 For provisioning, an SP orders or changes lines and services on C&A and WLR1 via BT’s web-based Service Provider Gateway (SPG). And where the end user requests CPS, the CPSO orders or changes the required CPS configuration via BT’s CPS Gateway which is an FTP (file transfer protocol) interface.

4.3 Combining WLR1 and CPS

4.31 WLR combines access and calls into a service offering where the end user is able to have a ‘single bill’ retail relationship with one SP providing the line rental, voice calls, and supplementary services, and where the services provided by BTW to the SP are charged on a wholesale basis. For the routing of the calls, the SP retains the option of using BT but in most cases is expected to use one or more CPSOs with whom it has a wholesale relationship. See Diagram 1.

4.3.2 Oftel’s June 2002 Statement on the Retail Market identified as a principal objective of WLR2 the seamless inter-working with CPS from customer’s perspective and minimal delay between the transfer of the line and CPS routing.

Current provision by BT of WLR1

4.3.3 Diagram 2 sets out a typical situation under WLR1 where an end user has its line rental with BTR and routes its calls via a CPSO. Today, in order to migrate to the combined WLR1 and CPS structure in Diagram 1, a two-stage process is required. In summary, this is as follows (see the time-line Diagram B.1 Annex B):

4.3.4 This process is sequential and takes a minimum of 18 days to complete (eight days for WLR1 and ten for CPS). Oftel believes that this would not be fit for purpose for WLR2:

Optimum: single integrated WLR and CPS process and gateway

4.3.5 The optimum solution is to combine WLR and CPS ordering on a single gateway in an integrated process. See Diagram 3. The principal benefits of such a structure would be:

4.3.5 The following concerns arise with this optimum solution:

4.3.6 Oftel believes that these timescales and costs, combined with today’s arrangements being not fit for purpose, make the optimum solution unrealistic for implementation as part of WLR2. An alternative approach is required which may be sub optimum but still fit for purpose and offers greater security of being available sooner.

4.3.7 However, Oftel believes that the implementation of the optimum solution should formally remain a longer-term plan and remains committed to working with the Industry to ensure that this plan is delivered.

Proposed WLR2 requirement: separate but closely aligned WLR and CPS processes and gateways

4.3.8 Oftel believes that the approach pictured in Diagram 4 represents the best interests of end users, service providers, and competition in offering a timely first implementation of WLR2. The main features are the following:

4.3.9 Oftel believes that these features of this solution translate to the following specific high level requirements:

Oftel invites views on i) the proposal that simultaneous delivery of WLR and CPS would be acceptable for a fit-for-purpose product and ii) the high-level requirements identified above.

4.3.10 A number of other requirements and issues arise from a more detailed examination of these high level requirements and the associated processes. These are now considered individually in the following sections.

4.4 Validation of end user identity (the ‘postcode problem’)

4.4.1 Oftel’s June 2002 Statement identified a highly automated system with little manual intervention, except where a manual method is more cost effective, as an essential requirement of a fit-for-purpose product. As part of this automation, it is essential that the end user, whose service is about to be changed or transferred to another SP by submitting an order electronically to the SPG or CPS Gateway, be correctly identified so that systems and processes can operate without manual intervention.

4.4.3 The preferred means for identification of the end user is the network Calling Line Identification, CLI, (or primary network CLI where there is more than one). However, if for some reason (for example error in keying) the CLI in an order is incorrect, then without a second data element to validate the idenfitity of the intended end user the wrong end user risks appearing to be ‘slammed’, ie having an attempt made to have its service changed or transferred without its knowledge or approval.

4.4.4 For this reason, it is essential that a second data element be used for validation of the end user’s identity. This data element also needs to be one which is present on all SPs’ systems, to account for service transfers which in future will happen not just from BT to SP or SP back to BT but also SP to SP.

4.4.5 The existing CPS ordering processes have recently started using the BT billing postcode as this second validation data item. A number of problems have resulted when attempting to match the actual BT billing postcode (as recorded on BT’s databases) and the postcodes submitted by CPS operators. This causes order failures and significant manual intervention. The problems in CPS are still being analysed and resolved. Similar issues have been faced with DSL. The installation postcode was used as the second validation data item. Although there were also initial problems with this, these have since reduced sufficiently for the process to fulfil its purpose and work effectively.

4.4.6 With the expected high future order volumes for WLR and CPS, it is essential that a robust solution is found. The postcode as it appears in the Royal Mail’s most up-to-date Postcode Address File (PAF) data has the benefits of being a universally recognised entity. However, postcodes do change and need to be kept up to date. Some SP databases may contain incomplete or erroneous

postcodes and may require cleansing. Also, when asked to provide its postcode, a residential or business end user may understand differently the distinction between billing and installation postcode and may give the wrong one.

4.4.7 There appear to be no easy alternatives to using the postcode. A possibility is to create a completely new data element just for this end user identification purpose, but this has major cost and implementation implications for SPs’ systems and processes.

4.4.8 After review of this issue, Oftel proposes to retain the postcode as the preferred second data element but suggests the following solution to increase the robustness of the process, to be introduced for WLR2:

Oftel invites views on the proposals that BT should base its validation of orders on one of either the billing or installation postcode (as they appear in BT’s databases) combined with the CLI, and that BT should take reasonable steps to ensure that its postcode data is kept up-to-date.

4.5 Pre-ordering visibility of end user information and services

4.5.1 When a SP is in discussion with an end user about transferring its service, a number of practicality issues can arise regarding the knowledge of the end user’s current service details. With the existing processes in C&A and WA on the SPG, the SP has to complete an initially blank order form and tick or specify all the services which the end user wants to transfer.

4.5.2 In most cases, the end user will simply want to transfer all the existing services as they are, but in some cases it may wish to cancel or add a service. This might depend for example on how much the new SP charges for a service. Equally, the SP needs to know what is being transferred in order to bill the end user correctly.

4.5.3 In practice, it is not unusual for the end user not to know whether it currently has Three-Way Calling, what its second Home Highway ISDN number is, etc. As a result, it is not unusual for a service transfer to take place and subsequently the end user notices something is missing or different. The SP then has to submit further orders to restore the service to its previous state.

4.5.4 Similarly, the end user’s existing service may include rented equipment or special packages (eg BT Chargecard) which are not transferable. Even if the end user is aware of this, these are incompatibilities which cause a transfer order to fail and require subsequent manual intervention to resolve.

4.5.5 In rare cases, it is possible that the end user was not aware that the line is not able to be transferred (eg because it is a cable line), and a lot of resource can be spent before discovering that the transfer order fails for this reason.

4.5.6 Oftel has identified two approaches to improving this situation. One would be the availability of some sort of ‘electronic account viewing’ facility which would allow the SP, after it has obtained the relevant authorisation from the end user, to view the end user’s account and service details. This could help with CLI and postcode validation, but particularly enable identical service transfers or transfers with some adjustments to be correct. It would also allow a more automated handling of incompatibilities.

4.5.7 A second approach which BTW is already introducing to the SPG is the introduction of the ‘like for like’ transfer. Its characteristics are:

4.5.8 Oftel believes that the ‘like for like’ transfer order resolves a lot of these issues. There may still be a case for an ‘electronic account viewing’ facility but the extra development timescales and costs risks would not be justified for WLR2. Such a facility is perhaps best included for consideration in the future plans for an optimum single integrated WLR and CPS process and gateway.

Oftel invites views on the proposal that a like-for-like transfer set out above would meet the requirements of a fit-for-purpose product.

4.6 WLR order types

4.6.1 This section applies to all of the allowed types of analogue and digital lines.

4.6.2 As with the existing C&A and WLR1 products, four basic types of WLR order can be submitted by SPs over the SPG: New, Transfer, Change, Cease.

4.6.3 The WLR ‘New’ order is a request for a new account for one or more lines at the end user’s premises. In addition to the physical lines, a range of attributes and services can also be ordered. One or more physical lines may already exist on the premises (but de-activated), so the SP is able to distinguish between::

4.6.4 The WLR ‘Transfer’ order is a request for an end user’s existing account (comprising one or more lines and associated services) to be transferred from one SP (the losing SP) to another (the gaining SP). At a high level, there are two types of ‘Transfer’ order:

4.6.5 The WLR ‘Change’ order is a request for any one or more attributes of an end user’s existing account (comprising one or more lines and associated services) to be changed. At a high level, there are two types of ‘Change’ order:

4.6.6 In practice, some orders can be a mixture of two or more of ‘New’, ‘Transfer’, and ‘Change’. For example, an end user transfers a single analogue line to a new SP, orders a new physical line, and changes some of the attributes or services, all at the same time. In this type of situation, the requirements are:

4.6.7 The WLR ‘Cease’ order is a request for an end user’s existing account (comprising one or more lines and associated services) to be cancelled. Only the end user identification is needed in the order. In practical terms, the line(s) are stripped of all attributes and services, the physical termination(s) are de-activated, and remain so until future re-activation and use by a BTR or other SP end user.

4.6.8 The WLR ‘New’, ‘Transfer’, and ‘Change’ orders all have in common the same categories of attributes and services that can be individually selected and specified in an order. Within a category, the details remain similar but may vary according to the type of line or the type of order. In broad terms, these categories are:

4.6.9 The following characteristics and requirements should be highlighted for some of the elements in the previous paragraph:

4.6.10 Consideration should be given to having another WLR order type ‘Cancel’ available for use by SPs on the SPG. The purpose of the ‘Cancel’ order would be the same as currently in CPS, ie to allow orders which have not yet been completed (eg a Transfer order) to be cancelled, for example because the end user has changed its mind. Such an electronic order would be more efficient than the more manual method currently used in C&A and WLR1, but there would need to be protection against the potentially improper use of the ‘Cancel’ order. In CPS, the ‘Cancel’ order exists in two forms. ‘Cancel own’ is used when a CPSO wishes to cancel a CPS set-up order that has not yet been completed (ie the customer has not yet been switched). ‘Cancel other’ is only available to BT, and is used by BT to cancel a CPS set-up order that has not yet been completed. Currently BT uses ‘Cancel other’ either if BT persuades the customer to remain with BT Retail before the switchover date, or if it appears to BT that the customer has been slammed. The appropriateness of BT using ‘cancel other’ in situations where BT has persuaded the customer to remain with BT Retail prior to switchover is being reviewed currently by the Industry in CPS.

Oftel invites views on whether:

• the four types of order used in WLR1 and CPS , with enhancements as described above, should be taken forward into WLR2, with the possible addition of ‘Cancel Own’?
• the addition of a ‘Cancel Other’ for use by all SPs in cases of slamming would be useful?

4.7 CPS orders

4.71 For WLR2, with the proposal for a separate but linked WLR and CPS processes and gateways, the purpose of the CPS interface is to add, modify, and remove CPS to and from a WLR analogue or digital line. The functionality required over the CPS Gateway is exactly the same as that which exists today where CPS is added, modified, and removed to and from BT analogue or digital lines (or Calls and Access lines).

4.7.2 Therefore, Oftel believes that the same set of CPS order types (Setup, Remove, Reselect, Change, Renumber, Cease, Cancel) with same data elements and processes is required for WLR2 (with the provisos set out above in relation to on-going work on ‘Cancel Other’ orders). However, there are the following additional constraints:

4.7.3 Oftel believes that WLR2 therefore requires an enhanced set of CPS order types:

4.7.4 A corollary requirement is that any CPS order containing a CLI that belongs to a WLR account must be rejected by the Gateway unless the order contains that valid extra data element. This means that it is not possible for an end user to switch from a WLR SP directly back to an independent CPSO (via a CPS order on the CPS Gateway) without the WLR SP first transferring the end user’s account (via a WLR order on the SPG). This is a consequence of working with two gateways.

Oftel invites views on its proposal that the fit-for-purpose WLR2 product should operate with the current set of CPS order types but with constraints identified in 4.7.2 and with the additional features identified in 4.7.3.

4.8 Combined WLR and CPS order scenarios

4.8.1 There are a number of different service provisioning scenarios involving WLR and CPS orders over the SPG and CPS Gateways, arising from:

4.8.2 These scenarios are categorised and listed in detail in Annex B.

4.8.3 A time-line diagram helps to understand the timing and sequencing of transactions in a combined WLR + CPS scenario. For illustration, refer to Diagram B.2. This shows a scenario where the end user transfers from BT with CPS provided by CPSO1 to a WLR SP with CPS provided by a different CPSO2.

Oftel invites views on whether the list of scenarios identified in Annex B is complete.

4.9 WLR order validation

4.9.1 The validation of WLR orders must ensure that the overall WLR order handling is efficient and smooth. Oftel believes that validation should be:

4.9.2 For illustration, refer to the time-line Diagram B.2 in Annex B.

4.9.3 Where an error in the order requires rejection, Oftel believes the rejection code must be sufficiently explicit for the cause of the rejection to be easily understood and for the order to be efficiently corrected and re-submitted. For example:

Oftel invites views on the high level requirements for validation and rejection codes

4.10 CPS order pre-validation

4.10.1 For illustration, refer to the time-line Diagram B.2 in Annex B.

4.10.2 CPS orders must continue to be validated as in the existing CPS process, with the same general objective of maximising efficiency and automation within the overall WLR+CPS order handling process. Rejection codes should again be clear and explicit.

4.10.3 It is also very desirable to prevent a sequence where the WLR order is successfully activated only for the CPS order to then fail. The resulting delay in correcting and re-submitting the CPS order is disadvantageous to the WLR SP (although transparent to the end user). This problem would not occur in a single integrated gateway solution, but is part of the compromise of using two gateways.

4.10.4 A first approach to overcoming this problem is to pre-validate the CPS order. This involves submitting the relevant CPS information (ie the LOPID and CPS option(s) for the CPSO(s)) early with the WLR order and for this information to be validated at the same time as the WLR order so that the subsequent CPS order proceeds smoothly and without error.

4.10.5 A second approach is for the CPSO to take specific measures to avoid the most common causes of error in the CPS order, specifically:

4.10.6 Oftel’s view is that the first approach of early CPS pre-validation is preferred in principle, and one which will be delivered as part of the future single integrated gateway solution. However, for the same reasons as for that solution, Oftel believes that the costs and timescales risks are excessive and make this approach unrealistic for WLR2.

4.10.7 Although the second approach places a further onus on SPs and CPSOs to avoid the known CPS order problems, these are very small in number and largely limited to Call Diversion (the demand for Meter Pulse is very low). While not ideal, Oftel believes that this approach is an acceptable pragmatic compromise.

Oftel invites views on proposals that for WLR2 CPS order pre-validation should be based on the CPSO taking specific measures to avoid the most common causes of error in the CPS order.

4.11 Consumer protection period duration

4.11.1 A key consumer protection measure is the setting of the length of the period between the placing of the order for WLR by the SP and implementation by BT. This "switchover" period has to be adequate to enable the losing and gaining providers to send letters to the new customers notifying them of the transfer and giving them adequate opportunity to consider and act on them appropriately.. Oftel makes proposals in section 6.2. The switchover period set would apply to all transfers

4.12 Simultaneous WLR and CPS activation

4.12.1 For illustration, refer to the time-line Diagram B.2 in Annex B, which shows the CPS order initiated and activated after the activation of the WLR order. Ideally, WLR and CPS activation should be simultaneous.

4.12.2 Oftel has explored with BT its systems features and constraints which affect the timing of the WLR and CPS orders and their activation. Oftel is satisfied that simultaneous activation would require changes to BT’s systems on a significant scale and would create risks of excessive development costs and timescales.

4.12.3 As a result, a compromise discussed and agreed in the WLR Operations Group is for the CPS order to follow the WLR order (as shown in Diagram B.2) but be completed and activated in the shortest time possible. Oftel believes that the gap period between the WLR activation and CPS activation is acceptable for WLR2 but must be no more than 1 day (made possible since consumer protection is disabled in the CPS order). This ‘gap period’ would not be apparent to the SP’s customer: from the transfer to the WLR, access and calls would be supplied by the WLR provider. However, the implementation should specifically aim to achieve better than 1 day.

4.12.4 Whatever its duration, the existence of the gap means that:

4.12.5 Oftel recognises that the proposal does increase the complexity of the process for provisioning WLR plus CPS. There are likely to be significant operational benefits from a closer integration of the electronic gateways used to process WLR and CPS orders. There may be further benefits associated with a wider integration of the various electronic gateways used by BT, to include for example the e.Co-based fault management system being proposed for WLR, as well as the ordering systems used for other related products. These developments are unlikely to be practicable on the timescales associated with the WLR2 product launch, but Oftel believes it is important that they are accepted as longer-tem objectives. Oftel has agreed to facilitate industry discussions on this issue, and an initial industry workshop is expected to be held in December.

Oftel invites confirmation that:

• a gap of no more than one day between WLR and CPS activation is acceptable for WLR2 in order to achieve early implementation of WLR2 in a form that is seamless to the customer; and
• a longer-term objective for the industry should be to eliminate the delay through integration of the electronic gateways

4.13 Seamless transfer of existing CPS

4.13.1 One of the more frequent WLR transactions expected is one where an existing BTR end user with CPS transfers to a WLR SP while retaining exactly the same CPS configuration. The CPSO involved loses its retail relationship with the end user but continues to carry the end user’s same calls via its new wholesale relationship with the SP.

4.13.2 Since the CPS configuration does not change, ideally this transaction would be carried out with no transaction on the CPS Gateway (and hence without incurring CPS transaction charges). One way of achieving this would be to submit a CPS ‘retain’ flag with the WLR order submitted on the SPG. The process and time-line is illustrated in Diagram B.3 in Annex B. One consequence of this mechanism is that there is no consumer protection with respect to the CPSO.

4.13.3 BT is researching the feasibility of such an implementation of seamless CPS transfer for WLR2. It has not yet identified a workable solution and will confirm its position formally as part of this consultation.

4.13.4 In case a workable solution is not found, a fallback option illustrated in Diagram B.4 (in Annex B) is proposed. This proposal has the following characteristics:

Oftel invites views on Oftel’s proposal for the preferred and fallback solutions for seamless transfer of existing CPS.

4.14 New connection and change of address

4.14.1 A New Connection arises when an end user with a WLR SP requires BT to provision a new line at an existing address or a new address. The new line, and any additional services required, is ordered via a ‘New’ WLR order on the SPG. Some additional services, including CPS in particular, cannot be configured until the new telephone number is activated, which in turn only occurs on the day the new line is activated. As a result, a time gap between the activation of the line and the activation of these services (including CPS) is unavoidable.

4.14.2 Oftel believes that this time gap is acceptable for the ‘fit-for-purpose’ WLR2 product provided it is made as small as possible and is no more than 1 day (as with the time gap associated with simultaneous WLR and CPS activation). Again, Oftel will faciltate industry work to eliminate the gap for the longer term.

4.14.3 Similar considerations apply in the case of a Change of Address (ordered via a ‘Change’ order on the SPG) where the end user with a WLR SP is moving to a new address in a different exchange area and requires a new number. That new number is either a completely new number allocated from the pool of available numbers for that exchange area, or it might be a number associated with a line already installed (in use, or de-activated) at the new address. In both cases, the end user’s new number is not activated until the line is activated on the day of the move, with a resulting time gap before services including CPS can be activated.

4.14.4 Oftel again believes that this time gap is acceptable provided it is made as small as possible and is no more than 1 day.

4.14.5 In the case of a Change of Address where the new address is within the same exchange area as the old address, the following requirements apply:

4.14.6 On other matters relating to New Connection and Change of Address, the following requirements apply:

Oftel invites views on:

• the proposal that a gap of up to one day between WLR and CPS activation for new connections and change of address is acceptable for WLR2;
• the requirements that should apply for a change of address in the same exchange area and for a new connection and change of address generally

4.15 Changes required to SPG and CPS Gateways

4.15.1 This is a summary of points raised in previous sections so that all respondents can assess at a glance the implications (costs, timescales) to systems and processes for WLR2 implementation.

4.15.2 The changes required to the SPG are:

4.15.3 The changes required to the CPS Gateway are:

4.16 End user appointments

4.16.1 It may be necessary for BT Retail engineers to visit end users in the following circumstances: fault repair, line maintenance or line change, new connection. There are two issues to consider: booking appointments, and engineers’ activities at the end user’s premises.

4.16.2 Regarding the booking of appointments, a BTR end user is currently able in real time in the same phone call to give a preferred date and time, be offered the choice between a number of free appointment slots which are closest to that preferred date and time, select one of those free slots, and have the appointment formally booked and confirmed.

4.16.3 In contrast, several phone calls are required today for an end user with a WLR SP to achieve the same outcome. The SP first obtains three possible dates from the end user, then talks with BTW to identify free slots close to those dates, then presents those slots to the end user for selection, and finally formally books and confirms with BTW.

4.16.4 BTW is currently developing functionality for wholesale appointment booking as part of its web based e.Co Broadband interface (used for ADSL). This is planned for launch in early 2003 and allows a SP to offer its end user effectively the same experience as a BTR end user (as above), with real time choice and appointment booking in one phone call. This functionality is highly desirable and BTW is proposing to make it available at costs and in timescales which Oftel believes are appropriate for WLR2 implementation.

4.16.5 Regarding the activities of BTR engineers at the end user’s premises, these are the principles and requirements:

Oftel invites views on:

• the proposal that BT should provide functionality which offers real time choice and appointment booking in one phone call for WLR 2;
• the proposed principles and requirements for BTR engineers

4.17 Faults and repairs

4.17.1 In addition to the previous issue of appointments, there are two main issues on Faults and Repairs which currently make the experience of a BTR end user much better than that of an end user with a WLR SP:

4.17.2 In contrast, the BTR end user can in one phone call report the fault, wait briefly for a real-time diagnostics test to be carried out which will establish whether an appointment for a visit is required, and if so select and book that appointment. Subsequently, one call provides an update on the fault status.

4.17.3 For digital lines, a real-time on-line diagnostics test called RIFETS already exists and recent data from BTW shows that this significantly reduces the cost and increases the efficiency of operational resources.

4.17.4 BTW already has functionality for wholesale fault and repair management as part of its web based e.Co Repair interface (used for Private Circuits). This functionality is in the process of being adapted and tested for single analogue lines with current WLR SPs, and provides the following features:

4.17.5 BTW also plans to subsequently extend the functionality to multiple analogue lines. This functionality is highly desirable and BTW is proposing to make it available at costs and in timescales which Oftel believes are appropriate for WLR2 implementation.

4.17.6 The following additional requirements apply to ensure that the handling of a WLR SP’s end user’s fault is at the same level as that of a BTR end user:

Oftel invites views on the proposal that for WLR2 BT should provide the functionality identified in para 4.17.4 and meet the additional requirements set out in para 4.17.6

4.18 Billing and debt management

4.18.1 The requirements for information exchange on Billing between BTW and WLR SPs follow from the SP’s requirements in producing retail and wholesale bills for its end users and wholesale partners. The components of a bill are line rental, calls, additional services, and a number of irregular or one-off events such as the provisioning of a new line, changes to the service, site visits, etc. These latter events may attract transaction charges (to order the activity) as well as charges for the execution of the activity.

4.18.2 The main requirement in producing a bill is that it should ideally include all billable events occurring in the period of the bill and up to the date of the bill. In view of the strict billable quality data requirements (BABT or other certification of billing systems) and the technology limitations of some network equipment in delivering data on frequent billable events (principally calls), it is accepted that a small time gap can exist between the last billable event included in a bill and the date of the bill. However, this gap should be no more than a small number of days and be equivalent to that provided to BTR by BTW.

4.18.3 Different SPs will produce bills at different intervals (eg monthly, quarterly) and will spread the actual production of the bills over its end user base and its chosen billing interval. In addition, end users can request one-off bills at any time. To ensure the content of any bill is adequately up to date, the provision of information on billable events must therefore be sufficiently frequent:

4.18.4 For wholesale bills, there should also be a calls (CDRs) bill produced on a less frequent basis (eg monthly) from which it must be possible to reconcile the daily CDRs. Other billable events must also be reconcilable with data from other operational systems (gateways, faults and repairs, etc).

4.18.5 The details of the frequency of data transfer, the data and file formats for the different types of billable events, how they are packaged (eg in one file or separately), and the medium for the transfer of data (eg FTP) are to be agreed by the Industry. The transfer of the data must be electronic, secure, and reproducible.

4.18.6 For debt management, the priority requirement for a SP is to be able to act quickly with respect to an end user who is continuing to incur call charges while having not paid overdue bills. A set of escalating restrictions must be able to be applied to the end user’s line by submitting WLR ‘Change’ orders on the SPG:

4.18.7 The orders for all these restrictions must have highest priority on the SPG and be activated within a very small number of hours of being submitted. Likewise, orders to lift the restrictions when appropriate must also be executed with the same speed and priority.

Oftel invites views on the proposed requirements for billing and debt management set out in section 4.18

4.19 Fraud and security

4.19.1 A potential fraud situation exists when an individual or group of individuals uses or attempts to use a service with the intention of not paying for it. The individual(s) may or may not be the end user. The most obvious evidence of fraud is making unusually frequent, long, expensive calls, and such call patterns can be monitored and detected.

4.19.2 It is the responsibility of the network carrying the calls to apply monitoring. Where WLR SPs offer CPS this should be done by the CPSOs, but where certain types of calls are carried over the BT network, or all calls are carried over the BT network for limited periods (eg between WLR and CPS activation), then the monitoring should be done by BTW.

4.19.3 For these situations, BTW should be able to offer two options to SPs:

4.19.4 The required response to suspected fraud is to be able to apply and escalate the debt management measures described in the previous section, with the same high speed and priority. Prompt investigation of physical security of systems may also be required.

4.19.5 Security refers to establishing and maintaining the state of the physical network, line, and terminations such that (amongst other things) the risk of external fraud and abuse is minimised. It is reasonable to expect that, on transfer to the SPs, the line being should be in an acceptable state of security.

4.19.6 Where a situation of fraud or abuse actually occurs, the issue of responsibility and any compensation should be considered on a case by case basis. Circumstances will vary according to where the fraud or abuse occurred (eg within the end user premises, in the access network, etc), whether procedures have been followed (eg accessible cabinets left unlocked), etc.

Oftel invites views on fraud and security requirements set out in 4.19.

4.20 Malicious calls

4.20.1 An SP should be able to ask for and obtain support from BTW in dealing with end users who are subject to nuisance or malicious calls. This could range from tracing the origination of the calls, monitoring incoming calls, to using specialist equipment to identify the responsible party. It should be possible to change an affected end user’s telephone number(s) by submitting the relevant Change and Renumber orders on the SPG and CPS Gateways and for this to be executed as quickly and seamlessly as possible.

Oftel invites views on the requirements for handling of malicious calls

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