Request to resolve a dispute between Vodafone and BT regarding Geographic Number Portability rangeholder porting conveyance charges

Transcription

1 Request to resolve a dispute between Vodafone and BT regarding Geographic Number Portability rangeholder porting conveyance charges Contact: Paul Rosbotham Paul.rosbotham@vodafone.com Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 1 of 20

2 Summary It is requested that Ofcom resolves a dispute between Vodafone Limited ( Vodafone ) and British Telecommunications plc ( BT ) regarding the level of porting conveyance charges. The proposed scope of the dispute is: To determine whether the Average Portability Conveyance Charges (APCCs) that BT has charged Vodafone for the period from 29 th September 2014 to the date of the determination were set in accordance with the regulatory guidance established by Ofcom for compliance with General Condition 18.5(a). If they were not, to determine what the APCCs should have been for that period and what payments (if any) that BT should make to Vodafone as a result. In Annex A of this submission we provide justification of why Vodafone considers it is within Ofcom s duties to resolve the dispute. Annex B provides a summary of the efforts made by Vodafone to reach a negotiated solution. In this submission we provide detailed explanations of why Vodafone considers the APCCs proposed by BT to be in excess of the guidance provided by Ofcom. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 2 of 20

3 1. Introduction The established mechanism for providing geographic number portability in the UK is onward routeing, whereby calls are routed to the rangeholder network, have a prefix applied, and then are onward routed using that prefix to the recipient network. The rangeholder network 1 is entitled under General Condition 18 to make a charge for the incremental costs of transiting calls which are originated on networks other than itself. This charge, known as the Average Portability Conveyance Charge (APCC), is levied on all minutes to ported numbers received by the recipient network from the rangeholder, but recovers only those costs associated with minutes which were originated off net from the rangeholder. In September 2014, following a consultation process, Ofcom concluded that such charges would be reasonable if they were to be set according to the Long Run Incremental Cost (LRIC) of the rangeholder network, i.e. recovering solely the costs of providing this portability function and not any common costs of operating the rangeholder network (the Guidance ). Following this guidance, in January 2015 BT wrote to Vodafone notifying it of an updated APCC of ppm (daytime) 2. Vodafone sought clarification of the methodology for calculating the APCC, and has been in prolonged negotiations with BT since then about the assumptions used. After six months, it has become clear that there is little prospect of BT and Vodafone agreeing the methodology and cost assumptions, and therefore Vodafone is requesting that Ofcom resolves whether BT s approach is in line with the recommendations laid down for compliance with GC18.5a. 2. Basis for requesting that Ofcom resolve the Dispute Vodafone considers that the dispute falls to be decided by Ofcom under section 185(1A) and/or section 185(2) of the Communications act We present arguments to justify this position in Annex A to this document. 1 The regulation actually refers to the donor network, which for the purposes of this dispute is an interchangeable term with rangeholder. 2 Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 3 of 20

4 3. Evidence that Vodafone has sought to resolve the dispute via negotiation. Vodafone has undertaken extensive discussions with BT in an attempt to reach agreement on the level of APCCs. Annex B sets out the principal communications between Vodafone and BT since January 2015, demonstrating that there is little realistic prospect of reaching a common view on the correct approach for setting APCCs according to Ofcom s September 2014 Guidance. 4. Dispute to be resolved It is requested that Ofcom resolves a dispute between Vodafone and BT regarding the level of porting conveyance charges. The proposed scope of the dispute is: To determine whether the Average Portability Conveyance Charges (APCCs) that BT has charged Vodafone for the period from 29 th September 2014 to the date of the determination were set in accordance with the regulatory guidance established by Ofcom for compliance with General Condition 18.5(a). If they were not, to determine what the APCCs should have been for that period and what payments (if any) that BT should make to Vodafone as a result. Vodafone seeks the following remedies: A finding that BT has breached GC18 in setting charges for conveyance (APCCs) that is in excess of the Ofcom Guidance that they be based upon an LRIC methodology, A finding as to the appropriate level of APCC that BT should charge Vodafone, and A finding that BT should repay any excess APCC charges collected during the period from 29 th September 2014 to the date of determination. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 4 of 20

5 5. Details of dispute 5.1 Background General Condition 18.5 sets out that porting charges should be reasonable and cost oriented 3 : Any charges for the provision of such Portability shall be made in accordance with the following principles: (a) subject always to the requirement of reasonableness, charges shall be cost oriented and based on the incremental costs of providing Portability unless: (i) the Donor Provider and the Recipient Provider have agreed another basis for the charges, or (ii) the Office of Communications67 has directed that another basis for charges should be used; The regulatory Guidance 4 established by Ofcom to interpret this condition sets out that APCCs will be considered to be reasonable if they are calculated according to the Long Run Incremental Costs (LRIC) of providing portability conveyance in the rangeholder network. In this context, the LRIC should be calculated with portability as the final increment, i.e. the LRIC is the difference between a) the cost of provision of a rangeholder/terminating network which provides all services including the conveyance of calls to ported numbers towards the recipient network, and b) the cost of provision of a rangeholder/terminating network which provides all services excluding the conveyance of calls to ported numbers towards the recipient network. Para of the Guidance confirms that LRIC should not include any common costs of network operation: LRIC: LRIC takes the service in question as the relevant increment of output over which to measure costs. 46 LRIC does not include a contribution to the DCP s network and non-network common costs. LRIC estimates are thus lower than those under LRIC+ when measured on a consistent basis (i.e. same volume increment, time period, network technology and so on). 46 This definition is consistent with the concept of LRIC as used in the Commission Recommendation of 7 May 2009 on the regulatory treatment of fixed and mobile termination rates in the EU (2009/396/EC). With regard 3 _AT_28_MAY_2015.pdf 4 sep14/summary/statement_on_porting_charges_under_gc18.pdf Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 5 of 20

6 to our consideration of porting conveyance costs, the increment would be the donor conveyance of incoming voice calls to ported numbers which originate from CPs other than the DCP. Whilst the Guidance is clear that the rangeholder may set APCCs according to the technology used in their network, it is equally clear that where the conveyance is using assets which have been depreciated, the charges should reflect this. For example para of the Guidance states (Vodafone emphasis): for the fixed sector, both Time Division Multiplex (TDM) networks (based on depreciated asset values) and Next Generation Networks (NGNs) could be an efficient choice, and that it would be reasonable for fixed CPs to charge for porting conveyance based on the costs of the technology of their own network (whether that be TDM or NGN); After a number of months in which it considered Ofcom s Guidance, BT reduced the APCC payable by Vodafone to ppm (daytime). Whereas the move to from LRIC+ to LRIC resulted in a reduction in a 58% in mobile termination rates, an 85% reduction in fixed termination rates and a 50% reduction in MNP Donor Conveyance Charges 5, BT s proposals to Vodafone resulted in only an approximate reduction in APCCs, still leaving us at a net loss for terminating calls to ported numbers. Prima Facie, Vodafone was unconvinced that the APCC proposed by BT represented the LRIC charge of conveying ported calls across its network because the transition represented a lower reduction to a fee that, not having been subject to regulatory scrutiny in sometime, may have already been excessive. 5.2 BT s approach to deriving APCCs BT sets APCCs for individual recipient communication providers (RCPs) according to the number of elements used in its network. A spreadsheet model is used, which is attached as Annex C to this submission. Vodafone does not disagree in principle with the methodology used by BT, i.e. setting a series of call cases, determining how much of a given RCP s traffic uses each of the call cases, and setting an APCC which covers these costs. We do, however, consider that BT has erred in the methodology used for establishing the costs associated with each of the call cases: Vodafone asserts that the costs used by BT are not reflective of LRIC methodology, hence the costs are significantly above what can be considered reasonable under Ofcom s Guidance. 5 It is also likely that the pre-transition LRIC+ charges for DCCs were far more likely to represent a true cost orientation than APCCs, as they had previously been determined by Ofcom following a regulatory dispute, in contrast to APCCs which have always been the cost as asserted by the CP concerned. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 6 of 20

7 In Sections 5.3 to 5.7 below, we consider each of the BT call cases ( Groups ) and identify the flaws in the calculations. The spreadsheet model published by BT does not provide a ppm rate for each call Group, instead only providing a total of minutes and total of cost. Where the text below sets out such a rate, this has been reversed-engineered by Vodafone by dividing the charges by minutes. The spreadsheet model published by BT does provide a component rate table, which purports to set out the component costs used in deriving the rates charged for each call Group (on a 24hr basis). However, Vodafone has been unable to correlate the reversed-engineered ppm rates with the component rate table. 5.3 Group One calls received by BT from the Originating Communications Provider (OCP) on a Tandem node that is a parent of the Donor DLE, delivered to the RCP directly from that Tandem This call scenario is depicted in Figure 5.3. In this scenario, the call is received from the OCP at a tandem node. The voicepath is not routed via the donor DLE (i.e. the switch on which the number was originally terminated in the BT network), instead there is a signalling interchange between the donor DLE and parent tandem that determines that the call is to a ported number 6. A prefix is then added, which is used to route the call to Vodafone as the RCP. OCP Tandem To Vodafone as recipient Signalling interchange Donor DLE Figure 5.3 This scenario represents % of off-net originated traffic to Vodafone s imported numbers, and BT s model implies a LRIC of ppm daytime, based upon the elements used being the transit of calls across the tandem node. 6 This functionality was originally mandated by the Monopolies and Mergers Commission when portability was introduced in Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 7 of 20

8 Vodafone has the following issues with BT s cost calculation methodology for Group One calls: BT has presented no evidence of why it considers ppm to be the daytime LRIC of transiting calls across a tandem switch. We assert that, since the tandem unit is a piece of legacy equipment which should be largely if not totally depreciated, the stated cost is excessive. Calculation of the LRIC necessitates that the incremental cost of conveyance is determined. The incremental cost in this case will be the cost of the network with rangeholder conveyance incorporated, minus the cost of the network absent portability. By simply charging Vodafone for conveying the call across the tandem node, BT has neglected to take into account the costs avoided were the number not to have been ported, i.e. the minus part of the calculation. Absent portability, BT would have conveyed the call to the [donor] DLE for termination, but this cost element is no longer incurred. As such, the incremental cost of conveyance is {transit across the tandem} minus {conveyance to the DLE}. It is Vodafone s belief that once this is taken into account, there is minimal, if any, incremental cost of conveyance 7. During our negotiations, BT has continually sought to depict Vodafone s position in this area as seeking to recover the porting differential, i.e. the difference in termination rates received by BT (single-tandem-termination) as rangeholder and paid out to Vodafone (DLE termination) as recipient. As part of a previous Dispute, Ofcom has ruled that porting differentials cannot be recovered via the APCC. However, as repeatedly stated to BT, Vodafone is not seeking any recovery of porting differentials it is a matter for BT and the OCP and of no interest to us what termination charge it levies we are merely stating that the APCC charged to Vodafone must reflect the incremental cost of conveyance, not the total cost. 5.4 Groups Two/Three/Four/Ten calls received by BT from the OCP on a Tandem node that is a parent of the Donor DLE, delivered to the RCP from a Tandem that is not the same one This call scenario is depicted in Figure 5.4. As with Group One, the call is received at BT tandem node and in this scenario, the voicepath is not routed via the donor DLE, instead there is a signalling interchange between the donor DLE and parent tandem that determines that the call is to a ported number. A prefix is then added, which is used to route the call to Vodafone as the RCP, but as the route to Vodafone is not on the same tandem, it is necessary to route the call to the tandem hosting the interconnect. The only difference 7 BT is receiving a fee for terminating the call from the OCP, and in all probability the costs incurred in transiting the call to Vodafone are less than the costs it would have incurred in terminating the call. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 8 of 20

9 between the Groups is the distance between the tandem nodes and hence the input components used in deriving the cost: Group Two, Ten (see text below for distinction between these) Three Four Distance between tandems Short, <100km Medium, km Long, >200km To Vodafone as recipient OCP Tandem Tandem Signalling interchange Donor DLE Figure 5.4 Group Two represents the scenario where the ingress and egress tandem are separated by a short distance. This scenario represents % of off-net originated traffic to Vodafone s imported numbers, and BT s model implies a LRIC of ppm daytime. Group Three represents the scenario where the ingress and egress tandem are separated by a medium distance. This scenario represents % of off-net originated traffic to Vodafone s imported numbers, and BT s model implies a LRIC of ppm daytime. Group Four, included in this analysis for completeness, represents the scenario where the ingress and egress tandem are separated by a long distance. Vodafone has virtually no traffic falling into this Group so is unable to derive the LRIC cost assumed by BT. Group Ten is the same as Group Two, with the distinction that both tandem units are parents of the donor DLE. This scenario represents % of off-net originated traffic to Vodafone s imported numbers, and BT s model implies a LRIC of ppm daytime.. The matter arises because the complexity of BT s network means that OCPs only need to connect to a subset of tandems in order to secure single-tandem-termination. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 9 of 20

10 If every CP makes such selections, it is a natural outcome that each CP will be connected to a subset of BT tandem units, which may or may not be the same subset used by other CPs. As such, it is largely random and out of the RCP s control whether a given call will fall into Group One (if their choices align with the OCP) or Group Ten (if they do not). Vodafone has the following issues with BT s cost calculation methodology for these calls: BT has presented no evidence of why it considers the above rates to be the daytime LRIC of conveying calls between tandem switches. As far as we can see, the cost components are based upon those in the Carrier Price List, which broadly reflect legacy charges from when inter-tandem conveyance was last regulated almost a decade ago: however since that would have been on a FAC- CCA basis, the cost components are above that envisaged by the LRIC mechanism. An indication of the excessiveness of the charges can be gleaned by taking a hypothetical approach of the calls being routed via the donor-dle to get between the two tandem units, rather than routeing direct this would incur two local-tandem-conveyance (LTC) legs, but because the charges for LTC reflect more recent regulation (albeit still LRIC+ rather than LRIC), they would still be less than the inter-tandem conveyance charge that BT would have us believe is the LRIC cost. It is notable that BT s assertion of the LRIC for this call case is between 8 and 9 times the cost that Ofcom has assessed as BT s LRIC cost of call termination while the figures are not directly comparable, it illustrates that at the least BT s cost assertions are questionable. Further, as the tandem units are legacy equipment which should be largely if not totally depreciated, the cost is grossly excessive. As with Group One, by simply charging the cost of inter-tandem conveyance, BT has failed to take account of the network elements that it will no longer use (i.e. conveyance from the tandem to donor DLE), and therefore is seeking to recover the total rather than incremental cost. 8 Groups One and Ten 9 Group Four Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 10 of 20

11 5.5 Group Five calls received by BT from the OCP directly to the donor DLE, and routed directly to the RCP This call scenario is depicted in Figure 5.5 and applies where the OCP routes the call directly to the Donor DLE, and the call is routed to the RCP directly from that DLE. OCP Donor DLE To Vodafone as recipient Figure 5.5 Vodafone does not have any traffic falling under this Group. BT introduced the capability to directly egress calls from Donor DLEs in approximately 2010 following a regulatory dispute with Opal Telecom 10. Unfortunately the capability was narrowly scoped to address the requirements of Ofcom s determination and was unsuitable for usage by Vodafone (and indeed, as far as we are aware, has not been adopted by any CP other than Opal/TalkTalk): It required a dedicated route from the DLE for ported traffic.. The use of Virtual Interconnect Capacity (VIC) routes was precluded. Vodafone considered that the capability was not fit-for-purpose Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 11 of 20

12 5.6 Group Six calls received by BT from the OCP directly to the donor DLE, and routed via the parent tandem node This call scenario is depicted in Figure 5.6. In this scenario, the OCP delivers the call to the donor DLE. A prefix is then added, which is used to route the call to Vodafone as the RCP, via the parent tandem node. Tandem To Vodafone as recipient OCP Donor DLE Figure 5.6 This scenario represents % of off-net originated traffic to Vodafone s imported numbers. BT s model initially implied a LRIC of ppm daytime, based upon the elements used being local tandem conveyance (LTC) to the tandem node.. Vodafone is therefore not satisfied that the rate charged by BT for this call path is based on a LRIC assessment of the costs. Indeed, given the only reason we are compelled to use the Group Six call service is to overcome the shortcomings of BT s direct routeing from DLE capability for Group Five calls as set out in Section 5.5, there is a case for Vodafone to be charged the Group Five rate in any case. 5.7 Groups Seven/Eight/Nine calls received by BT from the OCP directly to the donor DLE, and routed to a tandem node that is not a parent of the donor DLE for egress These final Groups represent the case where a call is delivered directly to the donor DLE but the egress to the RCP is on a node which is not the parent of that donor DLE. Collectively they comprise only % of Vodafone s traffic, and we acknowledge that it is within the gift of RCPs to optimise their routeings to ensure that such call cases don t occur. Vodafone is far from convinced that BT is charging LRIC-based costs for these Groups, but they have not formed the core of our analysis as the materiality for us is limited. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 12 of 20

13 5.8 Summary of concerns BT s model for setting APCCs is complex, and BT has not provided a full breakdown of the cost components used in each call Group. However, in cases where calls are delivered to a tandem node by the OCP, BT has failed to use cost components relating to incremental cost of routeing the call (compared to the counterfactual of a nonported number), instead using cost components relating to the full cost of routeing the call. Further, it is clear that BT has presented no evidence that its claimed costs for any of the Groups are calculated on a LRIC basis. In comparison to both the absolute level of LRIC-based call termination charges, and the relative difference between LRIC+ and LRIC rates on a variety of regulated charges, the rates that BT claim as LRIC-based are excessive. 6. Conclusion Vodafone asserts that BT is not compliant with the regulatory Guidance on the application of GC18.5(a). It is our position that BT s costs are well in excess of the LRIC cost of provision of portability conveyance, both in terms of the assumptions on element costs, and also in charging for all elements, regardless of whether they are incremental to the non-porting call case or in fact substitutional for network usage which is no longer incurred. Vodafone has sought to negotiate with BT, but there is no realistic prospect of agreement. We have presented arguments in this submission of why it is within Ofcom s duties to resolve this dispute. Vodafone therefore requests that Ofcom exercises its dispute resolution duties to determine whether BT s APCCs are in compliance with the regulatory Guidance provided by Ofcom in its September 2014 statement. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 13 of 20

14 Annex A Justification of why Ofcom should resolve the dispute 1. This dispute falls to be decided by Ofcom under section 185(1A) and/or section 185(2) 11 of the Communications Act Accordingly, Ofcom must handle the dispute; there are no more appropriate means to resolve it. 2. Section 185(1A) grants Ofcom the power to resolve disputes: a. which are between a communications provider and a person who is identified, or is a member of a class identified, in a condition imposed on the communications provider under section 45; and b. where the dispute relates to entitlements to network access that the communications provider is required to provide to that person by or under that condition. 3. Section 185(2) grants Ofcom the power to resolve a dispute if: a. it relates to rights or obligations conferred or imposed by or under [ a condition set under section 45, or any of the enactments relating to the management of the radio spectrum ] 3 ; b. it is a dispute between different communications providers; and c. it is not an excluded dispute. The relevant section 45 condition 4. To fall within section 185(1A) or (2), a dispute must relate to an entitlement to network access or, (under subsection 2), rights and obligations, required to be provided pursuant to ao condition set under section 45. By way of context, section 185(1A) was added to the Communications Act to reflect amendments made to the Framework Directive by the Better Regulation Directive. The Better Regulation Directive expanded the scope of dispute resolution to include not only disputes between undertakings providing electronic communications networks or services in an EU member state but specifically: between such undertakings and other undertakings in the Member State benefiting from obligations of access and/or interconnection arising under this Directive or the Specific Directives Much of the analysis as to whether a dispute falls within section 185(1A) or 185(2) is effectively common; for ease of reference, we have generally referred to 185(1A) where that is the case. This should be read, mutatis mutandis, as a reference to both sub-sections where appropriate. The requirements which relate only to 185(2) are dealt with at paragraph [15] below. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 14 of 20

15 5. This is a dispute which falls squarely within the intended scope of section 185(1A) and 185(2) because it deals directly with the terms on which Vodafone is able to acquire portability services from BT. Portability (and the provisions in the Communications Act and the General Conditions of Entitlement ( GCs ) relevant to portability) reflect requirements imposed by the Universal Service Directive specifically related to access and interconnection. 13 Specifically, the Universal Service Directive provides that: National regulatory authorities shall ensure that pricing between operators and/or service providers related to the provision of number portability is cost-oriented In the terms of section 185(1A), the relevant condition is General Condition of Entitlement ( GC ) 18, which imposes obligations on both BT and Vodafone. In particular, GC18.5 requires that: The Communications Provider shall, pursuant to a request from another Communications Provider, provide Portability as soon as is reasonably practicable in relation to that request on reasonable terms. Any charges for the provision of such Portability shall be made in accordance with the following principles: 7. Portability is defined as: (a) subject always to the requirement of reasonableness, charges shall be cost oriented and based on the incremental costs of providing Portability unless: (i) the Donor Provider and the Recipient Provider have agreed another basis for the charges, or (ii) the Office of Communications has directed that another basis for charges should be used any facility which may be provided by a Communications Provider to another Communications Provider enabling any Subscriber who requests Number Portability to continue to be provided with any Public Electronic Communications Service by reference to the same Telephone Number irrespective of the identity of the person providing such a service. 8. The service provided by BT to Vodafone which is the subject of this dispute, and for which APCCs are charged, is clearly a Portability facility. Indeed, this has been expressly recognised by Ofcom, which noted 12 See art 20(1) of the Framework Directive (as amended), 13 We explain in paragraphs 18 et seq below why a portability service falls within the scope of access and/or interconnection. 14 Directive 20002/22/EC of the European Parliament and of the Council of 7 March 2002 on Universal Service and End Users Rights Relating to Electronic Communications Networks and Services, art 30(2). Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 15 of 20

16 in its statement of 26 September 2013, Review of the Fixed Narrowband Services Markets, 15 that GC18 applies to the level of APCCs: APCCs are currently commercially negotiated between CPs, but must be set on terms compliant with GC18. We continue to consider that this remains the most appropriate way for CPs to set APCCs. 9. Ofcom similarly accepted in its guidance of 29 September 2014, Porting Charges under General Condition 18, that APCCs are set by commercial agreement between CPs but are still subject to the requirements of GC Finally, on 3 April 2007, H3G submitted disputes to Ofcom about the DCCs charged to it by each of T- Mobile (UK) Ltd, Telefónica and Orange Personal Communications Services Ltd. In its determination of that dispute, Ofcom found that: the DCC amounts to a charge for the provision of Portability on the basis that it is a charge levied by the Donor Provider for providing Portability in respect of a number ported out of the network of the Donor Provider. That charge must therefore be reasonable, cost oriented and based on the incremental costs of providing Portability unless otherwise agreed between the parties or otherwise determined by Ofcom The dispute in that case related to mobile number portability and the level of donor conveyance charges (DCCs). However, there is no relevant difference between DCCs (which apply in relation to mobile number portability) and ACPPs (which apply in relation to fixed number portability) for the purposes of determining whether either charge falls within the scope of Portability as defined in GC18. The principles of technology neutrality and regulatory consistency therefore firmly militate towards the conclusion that ACPPs are relevant terms and conditions for dispute. There is a dispute and the relevant parties fall within the scope of section 185(1A) and (2) 12. The relevant parties are Vodafone and BT. 13. These parties are covered by section 185(1A) and (2) because both Vodafone and BT are: 15 at para sep14/summary/statement_on_porting_charges_under_gc18.pdf at para Ofcom, Determinations to resolve disputes between Hutchison 3G and each of O2, Orange and T-Mobile concerning donor conveyance charges (17 August 2007) at para 2.9. Although the dispute was appealed and Ofcom chose not to contest the appeal, the appeal was not related to Ofcom s finding that GC 18 governed the level of the charge. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 16 of 20

17 a. communications providers; and b. members of a class identified in GC18, since GC18.5 applies to all persons who are communications providers and who request, or are subject to a request, for Portability to be provided. 14. Specifically, this matter relates to requests by Vodafone to BT for Portability facilities to be provided. 15. The parties are both communications providers (see section 185(2)(b) and this is not an excluded dispute (see section 185(2)(c)) because it does not relate to an SMP apparatus condition. 16. The parties are clearly in dispute. Vodafone has requested that BT reduce the amount of its APCCs and BT has refused that request. Ofcom s dispute resolution guidelines indicate that it expects evidence that the parties are in dispute and have made reasonable efforts to resolve their dispute, 18 and in this respect evidence has been provided within this dispute submission 17. In the Orange v Ofcom [2007] CAT 36 Judgment on the Preliminary Issues, the CAT emphasised that dispute was a broad term encompassing different types of disagreement. In particular, it determined that a dispute could arise within the framework of an on-going agreement and despite any dispute resolution procedure within that agreement, and regardless of whether there was any risk to ongoing interconnection. 19 The dispute relates to entitlements to network access and/or rights or entitlements pursuant to a section 45 Condition 18. The dispute relates to entitlements to network access required to be provided under that condition. By virtue of section 185(8)(a), a dispute relating to entitlements to network access is to be read as including any dispute as to the terms or conditions on which network access is or may be provided in a particular case. 19. Network access is defined in section 151(3) 20 to include both interconnection and any services, facilities or arrangements which (i) are not comprised in interconnection; but (ii) are services, facilities or arrangements by means of which a person is able, for the purposes of the provision of an electronic communications service (whether by him or by another), to make use of [any electronic communications service provided by another communications provider]; and references to providing network access include references to providing any such services, making available any such facilities or entering into any such arrangements. 18 Ofcom, Dispute Resolution Guidelines (7 June 2011) para Orange v Ofcom [2007] CAT 36 Judgment on the Preliminary Issues, para The definition applies to references to network access in section 185 by virtue of section 197(1). Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 17 of 20

18 20. This dispute relates to the terms on which Porting is provided. The Porting service provided by BT clearly falls within the definition of network access : a. First, it comprises interconnection (logically linking Vodafone s and BT s networks such that persons on the Vodafone network may use BT s electronic communications services to reach a user that has ported from BT). Ofcom has implicitly accepted that APCCs are a charge for interconnection: it has recognised that the APCC should be set on a costorientated basis in accordance with GC18 as required by Article 30 of the Universal Service Directive. 21 Article 30 requires cost orientation in relation to pricing for interconnection related to the provision of number portability. 22 b. Second, even if it is not interconnection, it is nevertheless a service that enables Vodafone for the purposes of providing its own electronic communications services to use a BT electronic communications service, so as to deliver calls from Vodafone s customers to end users that have ported from BT to another communications provider. In particular, it relates to the level of average porting conveyance charges BT may levy for the Portability facility in light of the express obligation in General Condition 18.5 that: Accordingly, Ofcom must handle the dispute Any charges for the provision of such Portability shall be made in accordance with the following principles: (a) subject always to the requirement of reasonableness, charges shall be cost oriented and based on the incremental costs of providing Portability unless: (i) the Donor Provider and the Recipient Provider have agreed another basis for the charges, or (ii) the Office of Communications has directed that another basis for charges should be used 21. Accordingly, Vodafone s position is that section 186(1A) applies, and therefore Ofcom must handle the dispute pursuant to section 186(3) unless there are alternative means available to resolve the dispute; resolution in such a way is consistent with Community requirements; and a prompt and satisfactory resolution is likely using such alternative means. 21 Ofcom, 26 September 2013, Review of the Fixed Narrowband Services Markets, para Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 on universal service and users' rights relating to electronic communications networks and services (Universal Service Directive) art 30(2). Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 18 of 20

19 22. In relation to section 186(3) of the Communications Act, Vodafone submits that there is no more appropriate alternative means to resolve this dispute: a. Vodafone acknowledges Ofcom s expectation that the parties to a dispute take reasonable endeavours to enter into good faith negotiations in order to resolve their differences themselves, before referring a dispute to Ofcom. 23 Vodafone has engaged in extensive negotiations in relation to the level of the APCCs and has exhausted every available means of attempting to resolve the dispute itself. Despite those efforts, the parties have been unable to resolve the dispute. In these circumstances, there is no reason to consider that any other form of further negotiation or mediation would resolve the dispute; b. although the level of APCCs is not determined by SMP conditions, and therefore Ofcom has not needed to formally identify a market in which porting is provided and APCC charges are payable, BT clearly has a significant market share in fixed local access. 24 This market share is dropping, indicating a significant population of users migrating (and, likely, porting) to other communications providers. Accordingly, other communications providers like Vodafone are most reliant on BT to negotiate APCCs. Given BT s market position, it is unlikely that commercial negotiation would be an appropriate alternative means to resolve the dispute. As Ofcom s dispute resolution guidelines recognise, the success of alternative dispute resolution depends on the motives and incentives of the Parties involved to reach a commercial solution, 25 and based on BT s market position and negotiating posture to date, there is no evidence that BT has the motive or incentive to agree a reasonable commercial outcome with Vodafone; and c. Ofcom s ability to decline to resolve the dispute under section 186(3) of the Communications Act arises from article 20(2) of the Framework Directive, which provides that Member States may make provision for national regulatory authorities to decline to resolve a dispute through a binding decision where other mechanisms, including mediation, exist and would better contribute to resolution of the dispute in a timely manner in accordance with the provisions of Article 8. Accordingly, there is a high threshold for declining to resolve the dispute because of the availability of another dispute resolution mechanism: not only must the mechanism be more appropriate, but it must better contribute to resolution of the dispute. Vodafone submits that, given the failure of negotiations to date, there is no means that can better contribute to resolving the dispute. 23 Ofcom, Dispute Resolution Guidelines (7 June 2011) para In Q1 2012, BT s residential voice call volume share was 39%: at para Ofcom, Dispute Resolution Guidelines (7 June 2011) para Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 19 of 20

20 Annex B: Evidence that negotiation has failed to reach agreement Annex C : BT APCC Spreadsheet model See Vodafone Workings.xls in the accompanying zip file. Vodafone Limited, Vodafone House, The Connection, Newbury, Berkshire, RG14 2FN, England. Registered in England No Page 20 of 20