Downloaded 16 Jan 2002 ISSUES IN RESPECT OF PLANS FOR UMTS LICENCES, ROAMING AND NEW ENTRANTS DEFINITION
SPIG

 

ISSUES IN RESPECT OF PLANS FOR UMTS LICENCES, ROAMING AND NEW ENTRANTS DEFINITION

 

Service Providers Interest Group response to the Oftel consultation: "Access to 2G mobile networks for new entrant 3G mobile operators" and to the UACG paper: "Putting the Policy into Practice: the Regulations and Notice"

 

June 1999

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  1. This document is the SPIG response the Oftel consultation on "Access to 2G mobile networks for new entrant 3G mobile operators" dated May 1999 and Radio Agency Auction Team document UACG(99)13 "Putting the Policy into Practice: the Regulations and Notice" in particular in relation to roaming and new entrant definition. The same response is being sent to both Oftel and the Radio Agency.

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  2. Major areas of concern and for comment are:

    3.

    1. The Oftel statement that mobile service provision lacks certainty because the obligation to supply to service providers is to become conditional on a Market Influence trigger determination in the new licence template. If and when effective competition occurs is the mobile market no one operator will be deemed to have Market Influence (Consultation 1.3).

    2. The bundled nature of services offered today by mobile operators to service providers are inappropriate for roaming 3G users (Consultation 1.4).

    3. The proposed plans for roaming could be seen as discriminatory. Why should a new entrant 3G operator be given preferential treatment?

    4. The definition of a new entrant UMTS operator seems to be incomplete because it allows mobile operators and others that already have access to scarce resources and/or essential infrastructure to appear as new entrant operators for UMTS.

     

  3. No certainty in service provision.For the first time as far as we are aware Oftel has expressly stated, subject to effective competition in the mobile market, that in the future any obligation on mobile operators to supply services to service providers is uncertain. Oftel uses this element of uncertainty as the principal reason for dismissing service provision as a means of mandating roaming between new entrant 3G users and 2G networks. The "uncertainty" is what mobile service providers have been concerned about for the last several years and have sought clarification from Oftel and through the Courts. Oftel officials have gone to some lengths to proffer assurances, in particular in the "Competition in Mobile" consultation and at the Service Provider Forum meeting held at Reuters on 18th March 1999. Oftel's statement following the competition consultation is now expected in late June, it remains to be seen what the official position regarding "certainty of supply" will be. In the meantime SPIG members are receiving contradictory messages.

    In this matter we note that in the judgement handed down by The Hon Mr Justice Lightman on 26th November 1998 in the judicial review hearing1 he said, in respect of the Director General's duty under Section 3(1) of the Telecommunications Act 1984, inter alia -

    "...(3) the requirement is that all reasonable demands for telecommunications services (in general) are met, and not that all reasonable demands for the particular services supplied by any specified network operator are met. Accordingly so long as the Director secures that [mobile] telecommunications services provided by one or more network operators are available to all who reasonably demand [mobile] telecommunications services, the Director has fulfilled his duties under Section 3(1). There can be no obligation upon him to include any mandatory supply obligation in any licence unless the supply by one or more network operators to a person reasonably demanding telecommunications services will not otherwise be available. So long as any network operator is subject under the terms of his licence to a mandatory supply obligation and that operator has the necessary capacity, the requirement under Section 3(1) will be fulfilled, and the requirement may likewise be expected to be fulfilled without any mandatory supply obligation in a fully effective competitive market..."

    and with regard as to whether or not the demands of independent mobile service providers are reasonable in this context he said -

    "(b) The Director submits that the question whether a demand is reasonable is a matter for the subjective judgement of the Director; the Applicants [Cellcom et al] submit that the test is objective and that on this application the Court is entitled to substitute its judgement for that of the Director. On this issue, I uphold the submission of the Applicants..."

    in other words whether or not a demand is reasonable is a matter for the Courts. The emphasis and [enclosed references] have been added to the judge's words for clarity.

    Relying on the judge's rulings reduces the element of certainty of supply from a least one mobile network operator to whether or not there is "a fully effective competitive market". In the competition consultation the Director General said that he "has found evidence that the market is now heading towards effective competition". Without prejudice to the view that there can never be effective competition in market that has an absolute barrier to entry (i. e. lack of available radio spectrum) the DG does not give any indication when he expects the market to have reached the point of effective competition. This is and remains a key to the uncertainty.

    Mobile service providers have argued that a period of regulatory certainty is required. We believe this period must last for at least three years and preferably longer. During this window of regulatory certainty service providers and their shareholders could invest money in systems, services and customers with some certainty of obtaining a reasonable return.

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  4. Bundled services supplied to service providers.Independent mobile service providers have argued that what they would like, as an option, from mobile network operators is a fully unbundled and potentially unbranded wholesale service. It seems strange that Oftel recognises this requirement in respect of 3G roaming but seemingly not in respect of IMSPs. Unbundling could simply mean buying on-net call minutes delivered to a point of interconnection and the ability to deliver calls for termination to mobile handsets without the cost of any of the network operators value added services or service surround included in the price. Equally access to registers (HLR and VLR) within the mobile networks is an essential prerequisite for IMSPs to be able to offer both enhanced services and services that compete with those already offered to mobile customers by the operators own service provision businesses. These services would include international calls and services for international (as opposed national) roamers.

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  5. Is the proposed roaming provision discriminatory?In our view a 2G operator with a mature network (in terms of coverage roll out and capacity, if not in terms of commercial profitability) who is also a 3G operator has market power when compared with any genuine new entrant 3G operator. The four 2G operators all have mature networks, millions of customers and their businesses are each valued at several billion pounds. Consequently in our view each of them should be deemed to have market power in the terms of the new template licences "Market Influence" definition. However, the Director General has signalled that he expects only Cellnet and Vodafone to be deemed to have Market Influence when the new licences are issued in June.

    The questions of discrimination which then arise in respect of the proposed licence modification and the consultation are:

    1. those related to pre-qualification for the 3G auction. We understand that all 2G operators must accept the insertion of the roaming condition into their Telecommunications Act licence as a pre-condition to entry into the 3G spectrum auction however there is to be no reciprocal arrangement whereby the customers of a 2G operator, unsuccessful in obtaining a 3G licence at auction, can roam to a 3G network;

    2. the unbundled services proposed to be provided by 2G operators to a new entrant 3G operator's roaming customers are not available to any other parties, in particular IMSPs, whether the 2G operator is deemed to have Market Influence or not;

    3. the proposed pricing regime (without prejudice to the views of SPIG members on the principal of retail minus wholesale rates) is not available to any other parties, in particular IMSPs; and

    4. there appears to be no basis in EU telecommunications legislation for giving a prospective new entrant preferential treatment to the extent envisaged.

     

  6. What is a new entrant?The definition of a new entrant operator into the 3G auction is actually a definition of who is not a new entrant, in other words the definition is of those who are excluded. Those who are specifically excluded in UACG(99)13 are those who: -

    1. hold a Telecommunications Act licence that authorises the provision of mobile services; and

    2. hold a WT Act licence to operate in any of the frequency bands used for GSM and/or PCN in the UK.

    This means Cellnet, MPCL, Orange and Vodafone. Subject to the auction rules any other organisation would be regarded as a new entrant. In our opinion there are other organisations who should properly be excluded because they have, for example, ownership and/or access to a national network of radio mast sites and/or that they have access to radio spectrum in a different frequency band that enables them to already provide mobile telephony services. One such organisation may be Dolphin Telecommunications another may be NTL.

    Dolphin is the single national Band III (an analogue service operating on frequencies around 200 MHz) Private Access Mobile Radio ("PAMR") operator in the UK. It has a mature network established by several predecessors over the last decade or so. In addition Dolphin has been granted the single and only national licence for the TETRA service (a digital service operating on frequencies around 400 MHz). Using its established infrastructure Dolphin expects to launch the TETRA service with near national population coverage later this year. Amongst the services announced by Dolphin for its TETRA network is a full duplex direct dial mobile telephony service, the same service as is provided by each of the four 2G operators. Whilst not having as much capacity (by virtue of the potential for re-use of the actual frequencies and the number of channels licensed) for mobile telephony as the 2G operators, Dolphin does have a significant entrance advantage when compared with a genuine new entrant.

    NTL has access to radio sites throughout the country by virtue of its origination as the radio infrastructure provider for the independent broadcasters.

    Both of these organisations remain qualified under the Regulations as potential new-entrants as do others. If this is not an oversight by DTI we believe it is wrong. If any such organisations were to bid and one was to be successful in the auction as a new entrant then:

    1. it would exclude a genuine new entrant, something the Government is clearly anxious to encourage and something that would be good for true competition; and

    2. the preferential treatment that the Government is planning to extend to a new entrant coupled with the infrastructure that such organisations already have in place would enable a successful bidder to acquire a significant competitive and ultimately commercial advantage over its four competitors, with lesser licences, in 3G services.

    We believe that it would be fair and equitable to disqualify all Public Telecommunications Operators (as defined in Section 9(3) of the Telecommunications Act 1984) as new entrants for the purpose of the 3G spectrum auction. In these circumstances the Government can be assured of at least one genuine new entrant 3G operator.

     

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    1Application for Judicial Review the Queen and the Director General of Telecommunications ex-parte Cellcom and ten other independent service providers, CO/2088/98.

    Downloaded 16 Jan 2002