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NGCS Commercial Working Group – 29 September 2011, 2.00pm Ofcom

Meeting notes & Actions

Attendance

  • Sean Hartley, BT Wholesale (Chair)
  • Justin Hornby, Cable&Wireless Worldwide
  • Elizabeth Gannon, Ofcom
  • Laurent Pariat, C&W
  • Carol Topley, Gamma
  • Kim Hilton, Everything Everywhere
  • Andy Martin, IV Response
  • Kath Embleton, BT Wholesale
  • Don Wilson, Vodafone
  • Louise Lancaster, Magrathea
  • Grant Forsyth, Sky
  • Nicola Robbins, BT Retail
  • Kath Embleton, BT Wholesale
  • Yulia Kossykh, Three
  • Steve McGeary, Via-Vox
  • Martyn King, Zimo
  • Lesa Green, Kcom (on the phone)
  • Emma, 118118 (on the phone)

Agenda

  • Draft minutes of 15 September
  • PP+ regulation of SCs (presentation by Justin Hornby, C&W)
  • Ofcom summary document of CWG discussions
  • Ofcom proposal for number of price points
  • AOB

Draft Minutes of 15 September meeting

Elizabeth Gannon (Ofcom) noted that she had circulated the draft minutes. Kath Embleton (BT) noted her comments on page 3 of the minutes should have referred to a commercial decision by the TCP not the SP. Elizabeth noted she would correct the minutes.

PP+ Regulation of SCs

Justin Hornby (C&W) presented slides on PP+ regulation of service charges. He noted that the slides did not represent C&W views but were intended as a summary of the existing regulation and a list of the potential options for regulation of SC advertising under unbundling. He noted that the PP+ regulation distinguished between network operators at level 1 and level 2, which allowed them to regulate the service provider community and to ensure that consumers were protected from scams. He noted that in relation to 0871, areas of concern that were cited were undue delay, the proximity and prominence of pricing, monitoring and risk control and the cost of regulation. He also highlighted that in the new PP+ code all pricing was exclusive of VAT. He said that a recent presentation by PP+ had seemed to suggest that this was how it should be presented to the consumers as well, although it was not clear. Elizabeth Gannon (Ofcom) agreed that she would follow up with PP+ to confirm whether that was the case.

In terms of the options for regulation, Justin noted this could include PP+ regulation of 084 as well as 087, 087 being removed from PP+ and a replacement mechanism for regulating the publication of the SC (e.g. the ASA), or a requirement to publish SC prices centrally enforced by a GC on terminating operators. Justin also noted that the refocusing of PP+s activities had only recently been completed.

Justin said that PP+ regulation of 084 would provide the highest level of consumer protection, but he noted that it would extend regulation to smaller companies that would not necessarily be familiar with PP+s role. He noted that PP+ could adopt a light-touch approach but he had concerns about whether that would be maintained. He noted that originally a separate levy for 09 and 0871 had been proposed, but they had now been merged. He also highlighted that the majority of complaints to PP+ were around premium SMS. Kath Embleton (BT) noted that the higher level of complaints on those services supported the arguments for a separate levy on those ranges. Nicola Robbins (BT) noted that SPs were often put off using 0871 numbers because of the potential damage to the brand of being associated with premium rate services, and the additional work involved in demonstrating due diligence etc. She suggested that if PP+ regulation was extended to all non-geo ranges, it could put SPs off using those numbers at all.

The group questioned what the rationale was behind including 0871 in PP+ regulation in the first place. Justin Hornby (C&W) suggested that it was primarily because it offered a way to improve customer transparency. Kath Embleton (BT) suggested that if a new system was designed (e.g. unbundling) which addressed that concern then there might be a case for removing 0871 from that regulation. Nicola Robbins (BT) noted that after 0871 was included within PP+ remit, many SPs migrated to 0844.

Andy Martin (IV Response) considered that it would be overkill to include 084 numbers within PP+ remit, especially when on 0845 for example, the SC could be as low as 1p or 2p. He questioned whether it would really be necessary for SPs to include that SC in their advertising, given that geo or mobile calls could have significantly higher charges but did not have any publication obligations attached to them. Lesa Green (KCom) noted that there was an underlying assumption with PP+ regulation that there was some element of revenue sharing.

Elizabeth Gannon (Ofcom) noted that there seemed to be a broad majority of the group that was against PP+ regulation of 084 and 0871. She questioned what the groups views were on the alternative options presented.

Justin Hornby (C&W) noted that the ASA had seemed to be ineffectual in trying to stop providers using the terms local rate and national rate and he was not clear on what enforcement powers they had. Lesa Green (KCom) noted that whilst PP+ might have those enforcement powers, it had not actually used them on 0871. Don Wilson (Vodafone) noted that placing an obligation on TCPs was not a direct enforcement mechanism either and would be difficult to implement. The group did not indicate much support for this option.

Don Wilson (Vodafone) suggested that the discussion indicated that a one size fits all policy was not necessarily appropriate. It was clear that 09 needed an additional level of consumer protection, but what was appropriate for 08 was much less clear. He noted that the dilemma was that if Ofcom wanted the SC included in all advertising then it did not have a direct enforcement mechanism on SPs to achieve that.

Nicola Robbins (BT) questioned whether the principal should be that every SC had to be advertised. She noted that if there wasnt any SC information in the advertising then there was still a danger that consumers would overestimate the cost of the call and would be put off making the call. Andy Martin (IV Response) queried whether that was really necessarily if the SC was only 1p or 2p. He also noted that it should not be required for when advertising was aimed at businesses.

The group questioned whether there needed to be a distinction between SCs for 08 ranges being advertised in every ad, or just appearing in a central source that could be accessed. There was a question about where advertising stopped and started. Don Wilson (Vodafone) suggested that it could be linked to the number of price points, it was likely that there would be some kind of demarcation between 08 and 09 ranges and if there was a maximum SC then consumers could be aware of that maximum but would not necessarily need to know the exact price. Martyn King (Zimo) noted that in his view the consumer needed to get back an understanding of the different number ranges, and having a maximum cap would help achieve that.

Don Wilson (Vodafone) noted that if there was a database of SCs, as had been discussed in previous Commercial Group meetings, and that database was public, consumers would be able to check the SC and look up any number range. Martyn King (Zimo) noted that SPs could just include a link to that database in their ads. Don Wilson noted that PP+ already offered that service and suggested it could be updated to include all numbers. Andy Martin (IV Response) noted that the PP+ database was very expensive and not very user friendly.

Elizabeth Gannon (Ofcom) noted that she would include a summary of the discussion on this issue in the Ofcom summary document.

Ofcom Summary of CWG discussions

Elizabeth Gannon (Ofcom) noted that following the discussion at the meeting on 15 September, she had drafted an Ofcom summary of each of the issues discussed at the CWG meeting since June. She noted that she had tried to indicate whether there appeared to be a broad consensus on particular issues, or where it was clear that the group was divided. She noted she had also indicated in the document what Ofcom intended to do with the output from the group on each of the issues, as well as stating what the remit of the next consultation would be.

The group went through each of the issues and highlighted any corrections/additions. Following the discussion, Elizabeth noted she would circulate an updated version of the document which reflected all the comments made and suggested that the next NGCS Focus Group meeting could be used to finalise the document.

Migration to SCs

Louise Lancaster (Magrathea) noted that SPs would want the right to be able to continue to advertise their existing price point and they should have an opportunity to do that. Lesa Green (Kcom) agreed and noted that there should be price points which allowed SPs to stay at their existing price point. Don Wilson (Vodafone) noted that once it was clear what the price points were, TCPs could negotiate with the SP to agree on the new SC price point. He noted this was a commercial discussion between the TCP and SP. Martyn King (Zimo) noted Ofcom would need to consider IPX services, where they were hosting a number range, and were the number range holder. Laurent Pariat (C&W) suggested that in that case, BT would make the decision because as far as the other operators were concerned BT was the terminator. Don Wilson (Vodafone) noted that the summary therefore needed to reflect that there was a question for Ofcom about how to frame the regulation, did it apply to the number range holder or the terminator?

Publication of SCs

Kim Hilton (EE) noted that the summary gave the impression that the majority of the group were in favour of BT taking the role of handling the database of SCs but she did not consider that was an accurate reflection of the discussion, only some group members had indicated support for that option.

Process for notifying SC changes

Kim Hilton (EE) noted that she understood that there was a consensus from the group that OCPs should not be obligated to inform customers of SC price changes, and that there was also a consensus that there should be adequate lead-time for implementation. She also suggested that the standardised process was not just useful but necessary.

Time of Day

The group noted it was not certain that there was a majority consensus that there should not be TOD variation on the SC. Nicola Robbins (BT) noted that BT could only bill one specific TOD charge and therefore its main concern was that the TOD should be consistent. Louise Lancaster (Magrathea) noted that Magrathea believed strongly that TOD should be allowed on the SC, because they might have different costs at different times of the day. Martyn King (Zimo) noted that TOD should be allowed on the SC but not on the AC.

AHP and Transit

Elizabeth Gannon (Ofcom) explained why Ofcom had presented a preferred option on this point. She noted that, on transit, it seemed clear to Ofcom that there was a broad desire for a single system and they appreciated that there were arguments on both sides as to who should pay but Ofcom would welcome more clarity on the pros and cons of both options. She noted that in the absence of clear evidence favouring either side, Ofcom had a preference based on what appeared to be the competition impacts of the current situation, i.e. that when the originator did not pay for transit there was no incentive for it to select the optimal transit route. She noted this led to higher net costs of transit.

On the AHP Elizabeth noted it was important to be clear that the AHP was exactly that, an assumed handover point, and it did not necessarily relate to how the call was actually routed. The AHP was the point at which the termination rate equalled the SC. She presented a slide which showed an illustrative diagram that showed the analytical framework Ofcom had been using to think about these issues and suggested that this was an example of what would be useful to Ofcom when stakeholders were making comments on this point. Elizabeth noted that this was a complex area and Ofcom was not claiming to know the answer and therefore welcomed any further feedback on the pros and cons.

Kim Hilton (EE) noted that EE did not necessarily agree with the view that changes to the current system for transit were necessary, questioning what the advantage would be if the current process was working. Kath Embleton (BT) agreed that the status quo was an option, and there was a question about whether change was essential.

Several members of the group questioned the rationale for having far-end handover, given that non-geographic had always followed a process of near-end handover, because the originator did not know the final destination of the call. Some members noted that far-end handover would remove any incentives on the TCPs to build out their networks, and would result in stranded assets for those that had already invested in building out.

Louise Lancaster (Magrathea) questioned the approach of incentivising non-geo providers to build out to DLEs which might not be there in three years time.
Kim Hilton (EE) suggested that the summary document should be amended to make clear that Ofcom would consult on both options, but that its own preference (separate from the group discussions) was for OCP pays transit and far-end handover.

Don Wilson (Vodafone) suggested that Ofcom needed to consider practical evidence about where, in reality, calls were being picked-up.

Access Charge

Kim Hilton (EE) noted that the summary did not include any mention of whether there should be more than one access charge, e.g. a premium rate and business rate. Elizabeth Gannon (Ofcom) noted that this issue had not been directly discussed as part of the commercial working groups, but that a number of stakeholders, particularly OCPs had indicated support for more than one AC in their consultation responses. The group agreed that a reference to that could be included in the summary document.

Martyn King (Zimo) questioned whether there had been any discussion around wholesale ACs when resellers were involved. He noted there would need to be some guidance for resellers to enable them to still be able to make a margin and questioned whether Ofcom would be involved in the regulation of this.

Maximum Prices

Louise Lancaster (Magrathea) questioned whether the maximum price model should be dismissed out of hand. She noted it could be left to commercial arrangements, using the dispute process and fair and reasonable guidelines, which worked for geo calls. Nicola Robbins (BT) noted that if the call origination condition was removed then they would need to negotiate with every single provider again. Kim Hilton (EE) noted that there was SMP in the geo market and a cost orientation condition, the same did not apply to non-geo.

Price Point proposal from Ofcom

Elizabeth Gannon (Ofcom) presented a slide which set out a potential range of price points, including 25 ppm charges, 10 ppc and 5 ppm plus ppc, leading to a total of 40. She noted that these price points did not include DQ or any higher rate PRS tariffs and were presented as including VAT. She noted that in Ofcoms preference would be for even fewer price points than this if possible, and questioned whether 30 price points was possible, and what price points might be able to be removed from the proposal.

Lesa Green (KCom) questioned whether these represented a fixed set of price points, or whether SPs would then be able to request further price points after these had been set. She noted that if they were able to request further price points, there would need to be some mechanism to control that.

Don Wilson (Vodafone) noted that from an implementation perspective 40 price points seemed quite a lot, especially if it did not include DQ. He questioned whether 1p price points were really needed between 1p and 10p. Andy Martin (IV Response) and Louise Lancaster (Magrathea) both agreed that services could compete on a difference of 1p, for example international services would advertise different penny prices for different countries. Andy Martin suggested that 40 price points was therefore a minimum rather than a maximum.

Lesa Green (Kcom) noted that there would not be a similar restriction on the number of price points for shortcodes so there was a potential competition issue. Martyn King (Zimo) noted that the damage to SPs in restricting price points could be significant, and had competitive implications that needed to be considered by Ofcom.

Nicola Robbins (BT) suggested that this 40 price points could just be a starting point, as it was better to simplify from the beginning and SPs could add to the price points afterwards if they needed. Sean Hartley (BT) noted that under unbundling the OCP would have to bill every price point and therefore the cost of building a new price point would fall on the OCP. Grant Forsyth suggested that Ofcoms position should be driven by the SP view, from an OCPs perspective fewer price points was obviously better.

Don Wilson (Vodafone) noted that Ofcoms proposal did not make clear where the 09 PRS range came in. He noted that there seemed to be a consensus that there should be some form of separation between the 08 and 09 ranges and therefore that should be reflected in the price points.

Andy Martin (IV Response) noted that there were some chat services which had very low price points, e.g. 6/7/8p but were required to use 09 ranges because of the nature of the service they provided. Don Wilson (Vodafone) noted that there could be a cap on 08 numbers which did not prevent price points on 09 that were lower than the 08 ranges.

Don Wilson (Vodafone) questioned what would happen with DQ. He noted that although there were 125 price points, the volume of calls were heavily concentrated with just a few services. He noted that that if OCPs had to bill to all these price points it would require them to build out price points that would not necessarily be used. Grant Forsyth (Sky) suggested that DQ should have its own set of unique rules. For example he suggested that at any one time there should only be 20 price points for DQ services, and the providers could chose to change these but could not exceed 20 overall. Don Wilson (Vodafone) questioned whether there should be a different set of price points for DQ or whether they could just pick from the price points for other ranges. Justin Hornby (C&W) noted that OCPs could have the option not to build the price point and not open up that number range. Don Wilson (Vodafone) suggested that OCPs were unlikely to want to be in the position where they could not provide a service because they didnt have enough price points.

Kim Hilton (EE) noted that there needed to be clarity on what the maximum number of price points would be and how long they would be in place for, because costs would depend on how many price points there would be in the future as well as from the beginning.

Elizabeth Gannon (Ofcom) noted that Ofcom would take account of the points raised today and consider how best to decide on the appropriate number of price points. She noted that this would be one of the issues that would be covered in the next consultation document.

Date of NGCS Focus Group Meeting:13 October 2.00pm, Ofcom

Action points

  • Elizabeth Gannon (Ofcom) to confirm PP+ rules around advertising of ex-VAT prices.
  • Elizabeth Gannon (Ofcom) to circulate an updated version of the Ofcom summary document reflecting the comments in the meeting.

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