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NGCS Focus Group – 2nd September 2010 – 2.00 pm Ofcom

Agenda item (1) Introductions and review of minutes:

Attendance:

Justin Hornby

Cable&Wireless Worldwide - Chair

Markham Sivak

Ofcom

Geoff Brighton

Ofcom

Alex Littlemore

PhonepayPlus

Simon Newton

4D Interactive

Sean Hartley

BT

Rickard Granberg

Carphone Warehouse

Laurent Pariat

Cable&Wireless Worldwide

Peter Farmer

Gamma

Colin Scott

Cable&Wireless Worldwide

Alistair Dixon

Colt

Jeff Loan

Ofcom

Kath Embleton

BT

Sandra Reid

VirginMedia

By telephone:

Kulshal Sareen

Three

Lesa Green

Kcom

BT Agilemedia

Agenda (2): PhonepayPlus Code Update.

Alex Littlemore presented an update to the group in relation to PhonepayPlus progress with developments for their next code of practice. The slides used will be distributed with these minutes.

PhonepayPlus intends to publish Guidance Notes in conjunction with the code. The contents of these notes will be consulted upon. Publication of the consultation is expected in the Autumn.

The Code itself requires a few minor changes and then it will be submitted to the European Commission for their approval. It was requested that the version of the code published on the ECs website should be made available to industry by PhonepayPlus and Ofcom.

Alex confirmed that the timescale for the new Code will correspond with the introduction of the registration database and will be in the first part of 2011. A competitive tender for the registration database is being held with the chosen supplier expected to be in place during October. Anticipated annual cost for registration during the first year is expected to be in the region of 100 with costs adjusted in future years.

Andy Martin queried the thinking behind the award of refunds to consumers and said that this would involve the Service Providers refunding more money than they had received. Jeff Loan confirmed that the intention was for this sanction to be punitive and that Service Providers should refund the entire retail cost. It is only likely to be used in the most serious cases of consumer harm.

Alistair Dixon asked how the obligations between Level 1 and Level 2 providers were changing. Alex explained that there was no direct correlation between the current Service Provider / Information Provider designations and the new Level 1 / Level 2. The new Code is based upon guidance rather than strict rules, with a bias towards flexibility rather than stringent obligation. Alistair countered that this was likely to make regulation more awkward to implement.

Agenda (3): Update / progress report on the current 'live' NTS related consultations / investigations:

  • NTS Retail Uplift

Ofcoms agent BDO, is still awaiting receipt of further information from BT. The consultation document is now likely to be published in October with responses by the New Year.

  • 080 Termination Rate Competition Appeals Tribunal (CAT) Appeal

Geoff Brighton announced that Ofcom is to appeal the CAT decision to find BTs economic evidence admissible to the Court of Appeal. Submissions to the court needed to be made by 26th August. At the same time Ofcom is continuing to work towards the CAT deadline of 30th September to submit information for their case to the CAT.

  • 0845 / 0870 Termination Rate Dispute

Geoff confirmed that any company wishing to appeal this decision to the CAT has until 11th October to do so.

Andy questioned whether the Ofcom determination in this case applied to the tiered rates introduced by other companies. Geoff indicated that this was not the case and that the determination did not apply to everyone, although it did contain strong pointers as to how Ofcom would deal with any future dispute. Ofcom will look at individual cases upon their merits and decide at that point whether or not to accept a dispute.

Peter Farmer indicated his belief that it would be presumptuous and premature for any operator to withdraw their tiered pricing at this stage. Operators should accrue for the charges as bad debt until the final 080 CAT decision is made.

Rickard Granberg asked BT whether they continued to invoice the mobile operators directly. Sean confirmed that was the case.

  • NGCS Review

Markham Sivak began his update by saying that changes in personnel within the NGCS Review team meant that publication of the consultation document was now likely to be the end of October. Ofcom is still exploring the possibilities offered by unbundled tariff structures, tariff capping and information remedies. A first draft version of the document is now in existence.

Markham voiced a preference for the unbundled structure i.e. a two-part structure to charges: a service charge (termination rate) and an access charge (origination, retail and transit). Under this plan items such as Bad Debt would be for the OCP to cover in the profit margin of the access charge. Changes would be needed to transit charges where they are currently made in a non-intuitive direction.

Price points for each of the services will also be looked at and whether the current effective caps are at the right levels.

Ofcom view access charging as the key to competition. Their proposal is for a relatively simple structure e.g. a single charge presented at the point of sale - 1.50pm + access charge. The model itself is used in SMS and French PRS at the moment.

Kath Embleton challenged how this improved transparency for consumers as they would now have two prices to consider, whilst for industry it was little different to the current POLO and retail charges.

Markham believed the option provided the minimum level of intervention from Ofcom whilst allowing competition within the market. The main issue Ofcom saw was that it was an after market in that consumers couldnt identify the cost before making a purchase but rather only once the service had been bought. Any new Access charge would allow consumers to more clearly distinguish between the currently hidden charges on top of the service charge.

Pre-call announcements remained a real possibility for some services, although the requirement is likely to move from the originating to the terminating party. Announcements could be used in conjunction with an increase to the current maximum 1.50 tariff.

Ofcom intend s to carry out further working group tests of its proposals. The main issue to date has been fear of the cost of the services rather than the actual cost of the services themselves. Often this is an irrational fear as the costs do not reflect those fears.

The specific example of 0845 was raised. Markham voiced a preference for keeping the range as revenue sharing. Any pricing restrictions would apply to all operators although there could potentially be a fixed / mobile differentiation to cater for origination costs.

An alternative could be a fixed cap across all operators for each number range. However Ofcom foresees this resulting in a number of disputes as operators jockey for their share of the revenues. Price competition would still be possible even though a maximum tariff was set as seen in the DQ market where different services are offered at various price points. Ofcom will still consider price capping if competition within the market fails.

Alistair queried Ofcoms position in terms of a market review. Markham confirmed that there were no plans for Ofcom to conduct one, although it wasnt ruled out if the current plans didnt work. Ofcoms main concern is the consumer experience and in this context the removal of regulation was seen as being neither straightforward nor self-evident.

In response to Rickard, Markham indicated that there were no immediate plans to remove SMP Condition AAA11 from BT ahead of other changes. That was not to say that BT would not have other conditions in place to balance the market, but Ofcom is not intending to remove everything. Markham gave an open invitation to anyone wishing to have a longer discussion on SMP.

Colin Scott raised concerns regarding the need for the Service Charge to reflect differing levels of interconnection in the industry. This is needed to recognise the different levels of network interconnection and build investment across the industry. Conveyance he saw as being an origination cost requirement and that it was possible the changes could lead to higher consumer charges and become inflationary. Markham saw the changes to the EU framework as being significant in this respect and mentioned that a consultation on the changes was expected this month.

Agenda Item (4): Implementation by BT of the 4th January 2010 increase in VAT

Discussion was held on the forthcoming VAT changes and Ofcom announced that a decision had been made not to amend the Numbering Plan in order to allow BT to pass the increase through to consumers rather than impact inpayments to TCPs and Service Providers. Concern was raised by a number of Forum members over this decision and the inevitable disputes it would cause. Members were invited to write to Ofcom with their concerns.

AP SEP 01 - Operators concerned by VAT increase to write to Ofcom expressing issues.

Agenda Item (5): Revised Terms of Reference

Justin suggested a number of minor administrative changes to the current ToR. These were accepted and will be issued with the minutes.

AP SEP 02 - Revised ToR to be issued.

As part of this discussion the nature of the Forums membership was also discussed. It was decided that this should remain as being those Network Operators with an interconnection to BT.

Agenda Item (6): Review of remaining outstanding actions

There were no outstanding actions to review.

Agenda Item (7): AOB

  • 1st October OCCN

Laurent Pariat asked when these changes were to be expected. Sean indicated that the changes would be made and backdated to the date of the OCCN, it was just a question of timing. It was suggested that the changes could be bundled with the VAT changes. The exact timing was complicated by the fact that many operators hadnt signed the PRS Bad Debt OCCN. Colin asked if it could be split into two OCCNs, one for PRS and one for everything else.

Sean agreed to look into this but said that internal advice had been that the OCCNs couldnt be split in this way.

AP SEP 03 - Sean to advise whether it is possible to split PRS OCCN from the other ranges in light of the PRS Bad Debt issue.

Date of Next Meeting: 14th October 2010

Summary of New and Outstanding Actions:

AP SEP 01

Operators concerned by VAT increase to write to Ofcom expressing issues.

AP SEP 02

Revised ToR to be issued.

AP SEP 03

Sean to advise whether it is possible to split PRS OCCN from the other ranges in light of the PRS Bad Debt issue.

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