QUALITY OF SERVICE STANDARDS FOR
BT’S CALLS & ACCESS PRODUCT
12th JULY 2000
The Calls & Access Interest Group (CAIG) was established in March 1999 as an informal forum for potential and actual Calls & Access (C&A) Service Providers to meet with BT on a monthly basis1. A number of meetings were held with BT during March to June 1999. Overshadowing all of our discussions were the extensive, and subsequently well-documented, problems with the delivery and service surround of the Calls & Access product. By June 1999, it had become clear that no progress on these key issues was possible at the monthly CAIG/BT meetings. No further meetings took place until 17 December 2000.
At that, and subsequent meetings, CAIG and BT started meeting again with the specific aim of moving forward on quality of service and pricing issues. This followed Oftel’s announcement on 23 December 1999 of their intended use of the Revised Voice Telephony Directive to impose quality of service standards on BT and Oftel’s review of Calls & Access pricing, as outlined in their BT announcement of 7 December 1999. The CAIG was formally constituted as an industry body on June 5 2000.
Although significant progress has been made on the quality of service issues, progress has been frustratingly slow in other areas, for example:-
Throughout our discussions with BT, it has become apparent that there is a fundamental paradox at the heart of BT that must be resolved one way or another. The paradox revolves around the fact that Calls & Access is a retail product, offered under Condition 40 of BT’s licence. Its pricing is based upon BT’s retail prices2 and is designed to ensure that only those costs that BT does not incur are removed from BT’s retail prices . However, in practice BT treats Calls & Access Service Providers as akin to any other source of competition (e.g. cable operators), which is reflected in:-
This inconsistency results in C&A service providers operating in regulatory limbo, without the protection afforded either retail customers (e.g. through unrebalanced line rentals) or Annex II operators. The existence of service providers in the market should serve to further the development of competition for residential customers, yet in the case of C&A this development is compromised by the existing treatment of service providers by BT. The situation is compounded by the integrated nature of BT’s businesses; C&A service providers are simultaneously a major customer and a major competitor of BT. The experience of C&A service providers is that in practice BT addresses only the latter position. This has contributed significantly to the historic and current problems with the C&A product and to the fact that, almost two years after launch, C&A is still only being used by a relatively small number of service providers.
CAIG notes that in its review of BT’s price controls Oftel is considering changes to the regulatory framework that may help to overcome some of these problems, namely the extension of interconnection rights to service providers and the provision of a cost-based access product. While CAIG welcomes these draft proposals, we urge Oftel to take more immediate action to resolve the regulatory inconsistency in respect of the Calls and Access product, and thus to improve the conditions under which C&A service providers supply services to their customers.
CAIG recognises the significant progress that has been made by BT since the significant problems experienced by service providers during 1999. However, the level of service provided by BT is still not up to acceptable commercial standards. Since February 2000, CAIG together with BT have been looking at level of service provided and identifying both areas for improvement and areas where the definition of the service provided is ambiguous or contradictory.
The level of service and technical support provided by BT has been a cause for concern for all service providers. This is because of the impact of this support on the service provider’s business, increasing both operational and management costs as well as impacting the level of service provided to our customers. This is a significant barrier to competition, both by deterring new entrants as well as impacting current service providers. Indeed, the impact of these problems has been so great that several service providers are considering exiting from the Calls and Access product. For example, Ecosse Telecommunications is seriously considering exiting this part of the market and focusing on providing telecommunications services via other means.
We have reviewed the recent documentation provided by BT and identified many areas that require further clarification from BT. Some points are purely due to ambiguous wording or inconsistency between documents but others appear to be more fundamental points of difference. Many of these points of difference are individually of a minor nature but taken together provide a significant disincentive to investment in this area and consequently may have the effect of reducing competition and choice for consumers. There is evidence that several new entrants have not entered the market, and some existing service providers reconsidering their future involvement because of the low quality service provided and the difficulty of working with BT.
We hope that these issues can be resolved through a BT/CAIG dialogue. We would also look for a more rapid review cycle as opposed to the extensive rework times taken by BT in the past. CAIG hopes that Oftel will encourage BT to improve the level of service given to C&A service providers and to direct BT where improvements are not made.
Notwithstanding the progress outlined above, there are significant issues that have been raised with BT over a protracted period that have received either no response or an inadequate response. It would appear that BT is either unable or unwilling to address these issues; these issues that impact the ability of a service provider to provide a quality service to its customers.
CAIG has identified 8 key issues:-
For example, BT’s databases are not consistent in their use of the postal address file, resulting in the most up to date postcodes not being used by BT. This problem has been found in Stornoway and several other places and leads to significant Gateway errors. Although BT does not now insist on postcode being part of its validation criteria for service providers’ orders, this lack of data integrity on the part of BT’s systems has a financial impact on service providers, who are consequently forced either to accept the extra fraud risk or to incur additional costs through verification by other means. BT was unable to support a reasonable request to use the latest (or at least a known) version of the postal address file with controlled changeover dates.
Given that CDR files are delivered six days a week and most types of calls are now automated, CAIG believes that BT should commit to delivery of 98% of CDRs within 36 hours with a firm plan to improve to 98% within 24 hours. BT has consistently achieved this level of service until recently. We are therefore disappointed by the move by BT to relax the standard of service to 90% of calls in 72 hours.
CAIG would like to see a transparent invoicing process that allows easy reconciliation of calls and rental based charges. Several SPs have discussed reverse billing as a way to overcome the BT system constraints, but BT has been unwilling to consider making any significant changes over the past year.
Many service providers sell services from other telecommunications providers, including mobile and indirect services. If BT provided support to the standard given by most other providers of telecommunications services, many of the problems experienced by CAIG members would be removed. This is another example of a non-price barrier to competition erected by BT in respect of which we urge Oftel to take action.
BT has a dismal record in this area. CAIG is still waiting for a formal development plan from BT. Information on future plans is either non existent or released once BT Retail have a product announced. Any developments that are identified are then rarely delivered or implemented on time, e.g. the provision of a multiline version of C&A will be almost two years’ late if BT’s currently indicated timescales are maintained.
CAIG has no confidence that BT will improve in this area without intervention from Oftel. We believe, from past experience, that BT will attempt to delay and frustrate this process and provide incomplete data on developments. Unfortunately, we feel that without visibility of interest from Oftel, BT will not provide proactive support and actively work with service providers to develop the Calls and Access service.
Without a view of developments, regularly updated, with a reasonable level of confidence of delivery coupled with the difficulties of working with BT, CAIG believes that many potential new entrants will be discouraged from entering the market.
For example, service providers without the correct BT account number for the line being transferred cannot place orders. Although this appears to be a reasonable request, in practice BT has used this quality check to form a transfer barrier. This is achieved by refusing to give customers their account numbers over the phone but insisting on sending the number in writing. Many customers who do not keep their bills are forced through this process, only to find several weeks later that BT still has not confirmed their account number. In contrast CAIG notes that BT does not plan to require the service provider’s account number for customers being transferred from the service provider to BT retail.
The transfer process should be a rapid and painless process for a customer. CAIG would argue that the existing seven working days timeline does not meet this test and this artificial timescale is driven more from BT’s desire to conduct "Save" activity than any customer benefit3. CAIG believes that a seven day window where the existing provider (BT retail or Calls and Access service provider) has time to inform the customer of the impending change is sufficient to allow customers to respond in the event of a new provider attempting to "slam" the customer.
While CAIG sees that BT Retail must be able to respond to marketing initiatives if the benefits of competition are to be brought to telecoms customers, CAIG believes that BT is attempting to optimise the transfer process to minimise the loss of customers to BT Retail. We would urge Oftel to review this process with BT and the service providers to define a customer centric transfer process.
Summary
CAIG recognises the improvements made to the C&A service over the past year. However, if the service is to provide a viable competitive alternative for telephony customers, significant improvements to the service are still required. In addition, the approach taken by BT in developing the service and the way BT responds to C&A service providers needs to be improved. CAIG hopes that Oftel will encourage BT to improve its level of service and to direct BT where improvements are not made.
3. BT ‘Save’ and ‘Winback’ Activities
Introduction
The CAIG welcomes OFTEL’s consideration of the issues surrounding BT’s ‘Save’ and ‘Winback’ activities under Section 4.b) of the consultation paper. The scope and acceptability of ‘Save’ and ‘Winback’ activity by the incumbent is a significant issue, not just for C&A service providers, but also more widely for the competitive market in telecoms generally. CAIG fundamentally disagrees with Oftel’s initial conclusions in respect of ‘Save’ and ‘Winback’ activities, and urges Oftel to reconsider its position, for the benefit of all telecoms consumers.
CAIG and individual C&A service providers have previously expressed their concerns over BT’s activity with respect to ‘Save’ and ‘Winback’. In May 1999, NextCall Telecom wrote to Oftel, outlining the fact that BT undertook the same type of marketing activity against customers of C&A service providers (C&A being a service provided under Condition 1 of BT’s licence – old licence condition numbering), as it did in respect of operators (i.e. Condition 13 operators – old numbering). Although Oftel acknowledged that this regulatory inconsistency existed in its August 1999 response to NextCall, no further action was taken subsequently by the regulator in respect of BT’s ‘Save’ and ‘Winback’ activities.
Given that BT does still not pursue ‘Save’ and ‘Winback’ activity in respect of the customers of indirect access operators, CAIG would like Oftel to clarify the position with respect to any possible breach of BT’s fair trading condition or the Competition Act 1998 that might result from BT’s continued activities in this area. Besides clarification of the precise regulatory position that allows BT to conduct ‘Save’ and ‘Winback’ activity in respect of the customers of C&A service providers, CAIG has more deep rooted concerns about BT’s ‘Save’ activity. These are explored in the following section.
Definition of ‘Save’ Activity and ’Winback’ Activity
In setting out CAIG’s position, it is useful to highlight the distinction between ‘Save’ activity and ‘Winback’ activity, as outlined by Oftel in paragraph 4.15. As the regulator confirms, ‘Save’ activity takes place before the transfer is effected, i.e. after the end user has taken the decision to switch provider, but before BT/industry processes to transfer that end user’s service, in technical terms, have been completed. After an end user has transferred to another provider, and is being supplied by that provider, any marketing activity undertaken is referred to as ‘Winback’ activity.
‘Save‘ Activity
(a) Abuse of Market Position and Abuse of Transfer Process
CAIG believes that it is fundamentally wrong for a dominant provider, in this case BT, to undertake any explicit save activity aimed at persuading the end user not to switch to an alternative provider during the transfer period. This belief applies irrespective of the new provider. The development of effective competition is automatically undermined if this type of pre-emptive behaviour is sanctioned. Indeed, it is CAIG’s contention that this behaviour may constitute an abuse of a dominant position under the Competition Act 1998.
In many markets, a customer may transfer his business from one provider to another instantaneously. In the insurance market for example, a customer may decide to change provider, and will be able to enjoy insurance cover from his new provider from the day the contractual arrangement is made.
In utility markets such as gas, electricity and telecoms, this is not possible for a variety of reasons, primarily because of technical changes and the batch processing of suppliers’ change requests. Instead, industry processes have been developed that result in an actual transfer that occurs at some date after the customer enters into the appropriate contractual arrangements.
Any ‘Save’ activity undertaken by the outgoing provider during this transfer period, and in particular during that part of the transfer process covering any cooling-off period, undermines the robustness of the transfer process itself. At the same time, it is likely to lead to customer confusion, thereby undermining the credibility of the competitive market. In cases where the outgoing provider is also a dominant incumbent, such activity constitutes an abuse of its position, as well as an abuse of the transfer process.
(b) Exit Letters
As Oftel outlines, BT makes two attempts to persuade the end user not to move to the new provider. One of these contacts is via letter, one is via the telephone. CAIG believes that only a single communication with the customer should be necessary, and that this should be in the form of an ‘exit’ letter, which may be sent only after the customer’s statutory cooling-off period has expired. Any such letter must make no attempt to persuade the customer to return to BT.
Such an approach would be consistent with that adopted in the domestic energy market, where new entrants are competing with former monopoly (and still dominant) incumbents. In both the gas and electricity markets explicit save activity during the transfer period is not permitted. Outgoing suppliers are permitted to send an “exit letter” to the departing customer. Typically, such letters remind the customer that they are about to transfer supplier and reassure the customer about the process involved. However, the letters do not contain any explicit attempt to persuade the customer to return to the old supplier. Most importantly, this letter can only be sent after the end of any statutory cooling-off period to which the customer is entitled.
(c) Slamming
CAIG understands that BT maintains that contact with the customer during the transfer period is necessary in order to avoid “slamming”, i.e. a change of service without customer knowledge or consent . While CAIG would not wish to encourage inappropriate behaviour by suppliers, it seems to us that this is insufficient justification for the nature, degree and timing of contact that BT believes is necessary. The use of contract cancellation forms, completed and signed by the customer when signing with a new provider, and forwarded to BT on the customer’s behalf, may serve to render the slamming issue largely irrelevant.
‘Winback’ Activity
CAIG has no issue with ‘Winback’ activity, as defined by Oftel in the consultation paper. The essence of a competitive market is that competing suppliers of a service work to win customers and develop their market share. The fixed line telecoms market is no different. Provided an end user has completed the transfer to another provider, and is being supplied by that provider, then marketing activity aimed at winning that end user’s business is a legitimate part of the competitive process. Naturally, marketing activity of this nature must not result in a breach of BT’s licence or the Competition Act.
It may also be appropriate for market participants to avoid ‘Winback’ activity for some minimum period after the customer’s transfer has been completed. In gas and electricity ‘Winback’ activity is deemed acceptable if it takes place more than one month after the customer’s transfer date. CAIG would urge Oftel to consider asking BT to give an undertaking to operate its ‘Winback’ activity on this basis.
Benefits to Customers
In paragraph 4.20, Oftel asserts that
“…it would not be beneficial to the interests of consumers or the promotion of effective competition if Service Provider End User customers were prevented from receiving marketing information on BT’s products and services”.
In terms of benefits to consumers, it seems to us that these will be best served by having in place a level playing field that prevents pre-emptive ‘Save’ activity by the incumbent, but allows marketing, i.e. ‘Winback’, activity by the outgoing provider, once the end user has switched. This will ensure that any potential for pre-emption in this area is avoided, and that telecoms consumers face a range of competing offers from providers who are confident that their efforts to win business will not be compromised by anti-competitive behaviour on the part of the incumbent. Creating appropriate market conditions that allow new entrants to bring choice and innovation to end users, while allowing incumbents to respond to the market, is the best way to bring the benefits of competition to telecoms consumers, i.e. widespread choice, lower prices, and high levels of service.
Summary
CAIG believes that a level playing field for competition means allowing all competing providers of telecommunications services, including C&A service providers, the proper opportunity to secure the custom of end users and to develop market share. The freedom that BT currently enjoys in relation to ‘Save’ activity is inconsistent with this approach and constitutes an abuse of both the transfer process and BT’s dominant incumbent position in the market.
CAIG urges Oftel to secure agreement from BT that it will not undertake any explicit ‘Save’ activity during the transfer period, except for the sending of an exit letter that reminds the end user that he is about to switch, and that reaffirms the process. Such letters should not contain any attempt to persuade the end user to return to BT.
We further urge Oftel to issue guidance to BT (and to all other providers of telecommunications services) setting out when exit letters may be sent, and advising on the scope of their content . CAIG would be happy to work with Oftel and other providers (e.g. cable companies) to develop such guidance.
Provided an end user has switched providers, marketing activity by BT, i.e. ‘Winback’ activity is a legitimate part of the competitive process, and should continue to be allowed, but should be avoided for a minimum period following the completion of the customer’s transfer, this period to be defined by Oftel.
4. Conditions for Calls & Access Service
Previously, CAIG has refused to provide comments on BT’s proposed ‘Conditions for Calls & Access Service’ unless and until BT agreed to remove its right to unilaterally change the contract at any time (clause 20.2). Consequently, it is impossible for C&A service providers to say what contractual issues may be agreed with BT since no negotiations have taken place. Oftel’s assertion in 4.2 (a) of the consultation document, i.e. that there are areas that are capable of agreement is, therefore, untested. CAIG's position in relation to this matter has been stated in writing both to Oftel and to BT, the latter on several occasions. It is CAIG's position that:-
We understand that BT has legal and regulatory obligations to uphold over and above those that CAIG members are required to uphold. However, it is our contention that the solution which BT proposes, i.e. a right to vary the contract at any time, is not the only mechanism available and that others exist and could be explored. Examples are-
If there is uncertainty as to the contractual relationship between service providers and BT, it will clearly be difficult to ensure high quality of service standards. Indeed, such a clause could be potentially regarded as a breach of Condition 40 in that it is an obstacle to BT being able to satisfy reasonable demand. CAIG is confident that a mechanism can be found which enables BT to adhere to its legal and regulatory obligations. In view of the need to progress issues as quickly as possible, CAIG favours the first of the two methods outlined above. We believe it is much more likely to result in the successful exercise of Oftel's powers to ensure quality of service standards for C&A service providers and their customers.
5. Pricing
CAIG has continued to press BT on several pricing issues related to the C&A service. These are or will be addressed separately with BT, and if necessary, Oftel. We would like however, to make a particular point with regard to quality of service and pricing.
In October 1999, CAIG raised the issue of the ineffectiveness of the current Call Commitment Option (CCO) with BT. Since that time BT has received numerous written requests and suggestions from CAIG with respect to changes to the CCO, but we have made no progress at all. To date the issue has not been resolved to the satisfaction of CAIG.
Our most recent request is for a change to the package that is revenue neutral to BT, and reduces dramatically the associated administration for both Service Providers and BT. Indeed, it would remove in excess of 100,000 manual data entry tasks for BT every month.
While we recognise that this Consultation process is not specifically about C&A pricing issues, we believe it is worth raising the CCO situation in the context of quality of service, i.e. what is a reasonable timeframe for BT to respond to a “reasonable request” where there is “demonstrable market demand”.
CAIG believes that BT treats C&A Service Providers as competitors, and is unnecessarily slow in making changes that would benefit C&A SPs. We request that a formal timeline should be introduced into the contract for BT to respond to a request for a price or service change.
We recognise that the telecoms market in the UK is moving at a very fast pace, and the current annual price review is no longer appropriate. In the last 12 months the market has changed completely. For example, at the last C&A price review (October 1999), BT Together had not been launched, Unmetered Internet Access was a pipe dream and the RVTD was still in the early stages of consultation. These have all had a dramatic impact on the UK telecoms market, yet C&A service providers will have to wait until October 2000 to be able to benefit from their impact. This damages the interests of consumers significantly.
CAIG requests that the Annual price review in October be changed to a quarterly activity, in order that market developments can be incorporated into the C&A product without potentially commercially damaging time lags.
Response to Oftel Questions
Given the time and resources employed to date by C&A service providers in trying to resolve these issues, CAIG does not believe that the issues in paragraphs 4.3 to 4.11 can now be resolved without formal Oftel intervention.
In view of CAIG’s response to the previous question, CAIG does not believe that a deadline of 6 September would enable resolution of all the outstanding quality of service issues.
CAIG does not believe that BT has a legitimate right to attempt ‘Save’ activity during the transfer process, particularly given BT’s status as the dominant incumbent. This represents an abuse of the transfer process. "Exit" letters, that do not incorporate any marketing messages, should be permitted, but subject to Oftel approval to ensure appropriate wording.
CAIG believes that ‘Winback’ activity is a legitimate part of the competitive process. All providers should be allowed to conduct ‘Winback’ activity, although consideration should be given to placing a time limit on how soon after the customer’s transfer such activity can start.
As Section 3 outlined, it is important to distinguish between ‘Save’ and ‘Winback’ activity. The marketing by BT of its services to the customers of C&A service providers should not be permitted during the transfer process. In contrast, ‘Winback’ activity is a proper part of the competitive process, and should be permitted, subject to the caveats outlined above.
CAIG agrees with Oftel’s assertion, and believes that Oftel should use its powers to amend the Section 20.2 of the C&A contract to state specifically all the circumstances in which BT may unilaterally amend the contract.
BT’s rights to unilaterally vary the C&A contract must be restricted to a set of specifically defined circumstances covering legal, regulatory and statutory obligations. These circumstances would be defined in relation to BT's statutory obligations under the Telecommunications Act (1984), its licence or any order made by Oftel.
Calls and Access Interest Group July 12th 2000