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ANNEX X - UNITED KINGDOM A. REGULATOR - GENERAL FUNCTIONS

A.1. Speed of process

1. What is the average timeframe for obtaining reservation of numbers?

Under Oftel, the average time was 28 days. Ofcom must now allocate numbers within three weeks of the request, except where a number is auctioned, in which case the maximum timeframe is six weeks.

2. What is the average timeframe for reviewing reference interconnection offers (assessed over the past three years)?

There is no process for reviewing a set of interconnection offers. A review can take place at any time following a complaint or at Ofcom’s initiative. In addition, BT's interconnection charges are subject to an annual RPI-X charge control. BT must pre-notify changes to charges 3 months before they take place and supply Ofcom with details of how these satisfy their charge control obligations. During this period, Ofcom carefully checks the calculations and investigates any discrepancies.

3. In practice, what is the average timeframe for the negotiation of an interconnection agreement for a new entrant which does not yet have an interconnection agreement with the incumbent operator?

The timeframe for the signing of the standard interconnection agreement typically takes 4-6 weeks (without technical discussion, planning or physical interconnection). Technical implementation requires 9 to 10 months (placement of order, testing time, data implementation, etc.).

A.2. Transparency

4. Is your NRA required to make public consultations prior to deciding on issues of general interest?

Yes, in almost all cases. Details of Ofcom’s consultation policy, and a list of issues on which it must consult can be found at the following link: http://www.ofcom.org.uk/consultations/consult_method/consult_guide.pdf.

5. Explain how the decision making process works within the NRA. Does it provide at any or some stage of the procedure, some transparency or visibility on the decision making process?

Oftel had a number of different consultation procedures in place as part of the decision making process, depending on the matter at hand. In the case of access disputes, Oftel published a provisional decision for consultation before making its final decision. Ofcom is expected to continue this procedure.

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6. Is your NRA required to effectively motivate its decisions? If so, is there any possibility of appeal in the event of the NRA's violation of its obligation to motivate its decision? Within what timeframe?

There is no general obligation to explain decisions. However, Oftel has always motivated decisions as part of its best practice on transparency. Ofcom is expected to continue Oftel’s practice.

7. Is your NRA required to publish all its decisions upon their adoption?

The Communications Act requires Ofcom to publish a vast number of decisions, subject to confidentiality, including for example, decisions resolving disputes, the outcome of market reviews etc. In addition, Ofcom is subject to general obligations of transparency and has general powers to publish information for consumers.

8. Does your NRA have a "management plan" disclosing its action plan on an annual basis? If yes, is it public?

Oftel published a very detailed management plan. Ofcom will continue this practice. Ofcom is also obliged to publish an annual report in arrears.

A.3. Effectiveness of sanctions and scale of resources

9. Is your NRA entrusted with the power to impose fines? If so, up to what level? Does it include also the possibility of imposing periodic penalty payments or suspending the commercial launch of services?

Yes, up to 10% of relevant turnover. There is no specific power for periodic penalty payments. General enforcement powers would in principle include suspending launch of service.

It should be noted that the power to impose fines under sector-specific legislation (the Communications Act) can only be exercised where the offending party has first been given an opportunity to correct its behaviour (section 96 (2) of the Act).

10. Are the powers of your NRA clearly defined by law? Yes, throughout the Communications Act.

11. What is the number of employees employed for general regulatory issues (excluding frequency and numbering management)? How many competition economists are included in the staff?

Approximately 880 staff to cover all functions. No breakdown available.

12. What are the specific procedures for selecting NRA's personnel? (Specific exams/ general State recruitment exams)

Positions are awarded on the basis of matching job descriptions to the best applicants available.

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13. Does your NRA have the financial freedom to set levels of remuneration to attract appropriate staff?

Yes, but within bounds of the budget allocated to it. Ofcom has been successful at recruiting from outside government service, suggesting that salary packages are attractive.

14. Can your NRA have recourse to outside expertise such as consultants? Yes. Ofcom is currently establishing a panel of consultants.

A.4. Effectiveness of appeal procedure

15. Does the appeal of a NRA decision suspend the binding effects of the decision in question?

No, an order from an appeal body would be needed.

16. If the appeal does not suspend the binding effects of the decision of the NRA, what is the applicable standard to obtain such suspension and how is it applied in practice?

It is possible to apply to the CAT for a stay of the decision, but Ofcom's decision will remain in place on appeal unless the Tribunal orders otherwise. It is likely that, should the appealing organisation seek to have the decision set aside until the appeal is determined, and should Ofcom oppose this (i.e. argue to keep the decision in place), the Tribunal would decide the issue based on normal legal principles relating to applications for interim relief.

17. What is the percentage of decisions that have been appealed? 2% (between 1995 and 2003).1

18. What is the average time frame for an appeal procedure? 8 months (first instance).2

A.5. Independence

19. Is your NRA subject to any injunctions from political authority (other than through removal), when it grants authorisations (services/networks licences, frequency and number authorisations) or enforces SMP regulations (e.g., ex ante approval of standard interconnection offers, compliance with cost accounting separation)?

No. The Secretary of State may give general or specific directions only for the purposes of national security, foreign relations, international obligations, public safety/health and promptness standards.

1

Information from the BIICL. These figures include both appeals against decisions of the NRA and the dispute settlement body.

2

Information from the BIICL. These figures include both appeals against decisions of the NRA and the dispute settlement body.

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20. What is the duration of office of your NRA's management? Is there a possibility of re-appointment?

There is no fixed term of appointment laid down in law for the Chairman, Chief Executive and Executive or Non-Executive Directors. The Office of Communications Act 2003 only states that the term must be stated in their contracts of employment. The Chairman and Non-Executive Directors are eligible for re-appointment.

21. What are the grounds for removal of your NRA's management?

The Chairman and Non-Executive Directors may only be removed on grounds of undischarged bankruptcy, prejudicial conflicts of interest, misbehaviour or incapacity/unfitness.

22. What are the eligibility requirements for your NRA's management?

There are no specific eligibility requirements laid down in the law. There are, however, ineligibility conditions, specifically that the Chairman and Non-Executive Directors must not have a financial or other interest in any of the companies that is likely to be prejudicial to carrying out their functions.

23. Are clear objectives assigned to the NRA for its long term actions? Are such objectives set in the law or defined by the NRA's?

A detailed set of objectives, duties and functions is set out in the Communications Act 2003. However, they are numerous and complicated. It is not always clear how they are to be reconciled and which take precedence. For example, Section 3 of the Act contains two principle duties of Ofcom in carrying out its functions. The section then specifies seven matters which Ofcom is required to secure in relation to those functions, two different kinds of principles to which Ofcom must have regard in performing the duties, thirteen matters to which Ofcom must have regard (generally), and five matters to which Ofcom must have regard when acting to further the interest of consumers. The section then states that certain other duties in other sections over-ride the principles duties, which are specified in this section (in the event of conflict). In the event of conflict between duties where no duty is specified as over-riding, sub-section 3(7) states that Ofcom must resolve that conflict as it sees fit.

Sub-section 3(8) specifies the procedure to be followed in such case. It has been suggested that this scheme is unnecessarily complicated.

24. What percentage of the incumbent share capital is held by the Government? Does it confer control?

None.

B. REGULATORY DISPUTE SETTLEMENT

B.1. Speed of process

25. What was, over the past two years, the average timeframe for obtaining a decision from your NRA acting in a capacity as a dispute settlement body?

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3-18 months, but depending on the complaint. Ofcom resolved 22 dispute referrals between 1 January 2002 and 28 December 2003. Some further requests were withdrawn after referral at the request of the parties. These 22 cases were resolved in an average of less than 8 months. This included the complex and ground-breaking PPC case, which took 16 months. Under the new procedure, Ofcom will have an obligation to resolve disputes within four months "except in exceptional circumstances". However, the four month deadline runs from the date at which Ofcom has decided that it is appropriate for it to handle the dispute. There is no time limit within which they must decide this latter point. Ofcom's current consultation on disputes and complaints provides that: "Within fifteen working days, Ofcom aims to tell the complainant whether it intends to open an investigation into the complaint or dispute and provide the complainant with contact details for an investigation adviser who will handle the investigation. Ofcom will often need to clarify issues with complainants during the fifteen day period, and where Ofcom needs extra time to decide whether it is appropriate to open an investigation, it will be prepared to explain why".

26. Can your NRA adopt interim measures?

Ofcom's powers in an urgent case to issue an immediate direction only apply in the case of an allegation of a breach of condition where Ofcom considers that, in light of certain factors, it is necessary to act urgently. The powers do not apply to dispute resolution.

B.2. Due process

27. Is the dispute settlement process subject to the principle of contradiction?

Under English public law, both sides must have a fair hearing (which will not necessarily involve oral representations, but will normally be a matter of written submissions). 28. What are the possibilities to appeal a decision of the NRA acting as dispute settlement

body?

Full appeals on the merits of the cases may be made to the Competition Appeals Tribunal against regulatory decisions.

B.3. Effectiveness of sanctions

29. Is your NRA entitled to impose fines or periodic penalty payments?

There is no possibility for Ofcom to impose fines or periodic penalty payments when it acts as dispute settlement body.

30. Does your NRA have the power to enforce its own decision?

Section 190(8) of the 2003 Act merely says that a determination by Ofcom for resolving a dispute binds all parties to the dispute. It does not go further and give Ofcom power to enforce the decision. This is unlike s.95(5) and (6), dealing with enforcement of breaches of condition, which provide that a person who is given an enforcement notification has a duty to comply with it, and specifically empower Ofcom to enforce this duty by civil proceedings.

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B.4. Effectiveness of appeal procedure

31. Does the appeal of a NRA decision suspend the binding effects of the decision in question?

No. However, an application to the CAT for a stay is possible.

32. If the appeal does not suspend the binding effects of the decision of the NRA, what is the applicable standard to obtain such suspension and how is it applied in practice?

It is possible to apply to the CAT for a stay of the decision. As this is new, there is no track record for how the CAT will exercise their powers to order a stay, but it is expected that it will apply the normal legal principles relating to applications for interim relief. 33. What is the percentage of decisions that have been appealed?

2% (between 1995 and 2003).3

34. Average time frame for an appeal procedure 8 months (first instance).4

C. APPLICATION OF ACCESS REGULATION C.1. Cost orientation

35. Is there a detailed model covering each and every or all regulated services for SMP operators?

Yes. See BT's Accounting Document: http://www.groupbt.com/corporateinformation. However, it should be noted that while Oftel has approved a bottom-up cost model for narrowband interconnection, and the Competition Commission’s investigation into calls to mobile phones included a detailed cost model for mobile termination, this type of model has not been done for other services (e.g., Leased Lines, DSL).

36. What is the type of cost accounting methodology used? LRIC.

37. Does the NRA have the power to seek cost orientation of retail tariffs?

Yes, there are powers under Art. 17 of the US Directive and s.91 of the Communications Act.

C.2. Cost accounting separation

38. Are SMP operators subject to effective cost accounting separation obligations?

3

Information from the BIICL. These figures include both appeals against decisions of the NRA and the dispute settlement body.

4

Information from the BIICL. These figures include both appeals against decisions of the NRA and the dispute settlement body.

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The UK accounting separation regime, though very detailed, has not been very successful at assisting in enforcement of non-discrimination. The rules of the new regime are not yet settled, but are likely to be more stringent, at least at the wholesale level. However, there are concerns that accounting separation obligations will apply only to regulated products under the new regime, which will hamper the ability of the regulator to verify e.g., proper attribution of joint and common costs.

C.3. Availability of information

39. Is there any information available (e.g. number of subscribers, key for cost allocation between network components, WACC) enabling competitors/third parties to understand cost models and assess regulated operators' compliance with their cost orientation and accounting separation obligations?

Published information is intended to enable this, but competitors have concerns that the information available is not of sufficient granularity to assess whether BT’s retail businesses are operating on a truly equivalent basis to competing operators.

40. Are the accounts drawn in accordance with cost accounting separation effectively published?

Yes.

C.4. Procedures satisfying access requests in an effective and timely fashion

41. What is the procedure for the negotiation of a reference interconnection agreement or standard interconnection agreement with the incumbent? If there is no standard agreement, please elaborate. What is the timeframe for entering such an agreement - are there any material barriers to entering such an agreement?

There is a standard procedure to be followed. The NCC contract (inter BT and Annex II OLOs - Wholesale interconnection only (any kind of wholesale product - calls or connectivity) states, at paragraph 8, the rights and obligations with regards to 'new services'. In effect, (para. 8.5) the requesting party needs to submit a written statement of its requirements. The receiving party shall (para. 8.6) acknowledge receipt within 5 working days, (para. 8.7) confirm whether the provided details are sufficiently clear and, if sufficiently clear, within 60 days from the acknowledgement (para. 8.8.1) confirm in writing whether it accepts the obligation (including the associated terms) to provide. If not (para. 8.8.2), it has another 15 days (i.e., up to the 75th day from the acknowledgement) to endeavour to agree on outstanding matters.

42. Is there a standard procedure available for operators to negotiate alternative access products/services not explicitly provided for in the standard reference interconnection offers?

Dominant operators in markets where they have SMP are required to meet any reasonable request for access. There is also a “Statements of Requirements” (SoR) process in most markets, under which competitors submit requests for new wholesale product development to the dominant operator(s). Rules relating to the SoR process are in the process of being revised as a result of new conditions imposed under the market reviews.

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C.5. Rights of way

43. Are operators entitled to free rights of way on public land?

Yes, over public land to designated operators. Compensation is usually paid to the land owner.

D. KEY ACCESS PRODUCTS

D.1. Voice interconnection

44. What is the level of interconnection tariffs for call termination with interconnection at the tandem switch level?

Termination single transit: 0,66 Eurocents (9th Implementation Report, Annex 1, p.25). Termination double transit: 1,53 Eurocents (9th Implementation Report, Annex 1, p.25). 45. Do detailed cost models for SMP operators exist?

Yes. Very detailed models in existence. See comment on Question 35.

46. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at the wholesale level? Has your NRA applied this power effectively?

Yes. If ex ante regulation does not allow for it, then Ofcom can use powers under the Competition Act 1998. However, law and practice on price squeeze and non-discrimination is a developing area, and Ofcom's approach is not necessarily easy to understand.

D.2. Leased lines and partial private circuits offer

47. Are there any wholesale private line offers ("ppcs") in your country?

Yes, based on the PPC Phase 2 Direction of 23 December 2002. Oftel is proposing to carry the substance of this Direction forward into the new regime.

48. Comparison of tariffs for wholesale leased lines offers for 2Mbits/s on average distance of 2 km?

EUR 5.427 per year (9th Implementation Report, Annex 1, p.86). 49. Do detailed cost models exist for SMP operators?

Oftel derived the rates in the PPC Phase 2 Direction on the basis of a top-down model, having substantially reduced the cost information originally supplied by BT. However, no bottom-up cost model has yet been produced.

50. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at the wholesale level? Has your NRA applied this power effectively?

Yes, Ofcom has the relevant powers. (See Question 46). The PPC product has substantially mitigated any price squeeze effects. However, there are still concerns about

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whether the potential for price squeeze has been eliminated as a result of the PPC product, evidenced by continuing complaints about BT’s retail offer. In particular, it appears that BT Retail does not purchase PPCs itself from BT wholesale.

51. Are there effective measures to prevent discrimination in the provision of ppcs and leased lines?

The phase 2 Direction introduced a variety of service level guarantees and reporting obligations that should prevent discrimination. However, as noted above, there are concerns about the equivalence of the product purchased by BT Retail, in comparison with PPCs as purchased by its competitors.

D.3. Fixed to mobile

52. Do detailed cost models exist for SMP operators? Yes.

53. What is the average interconnection charge for fixed to mobile calls? 20,08 Eurocents/min. (9th Implementation Report, Annex 1, p. 29).

54. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at the wholesale level? Has your NRA applied this power effectively?

Yes, Ofcom has the appropriate powers. The result of an investigation into margin squeeze by the four UK mobile operators is pending.

D.4. Local loop unbundling

55. Is there a detailed cost oriented model in relation to ULL?

Yes. The ULL prices were determined in 2001. The published prices have a detailed cost model that references these prices. Since ULL did not exist when the published prices were determined, the detailed cost model underlining these prices is based on adjustments to PSTN costs.

56. What is the tariff charged for ULL access?

25,5 EUR/month (9th Implementation Report, Annex 1, p.61). 57. What is the number of unbundled lines as a percentage of total lines?

0,02 % (ECTA Scorecard).

58. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at the wholesale level? Has your NRA applied this power effectively?

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D.5. Wholesale DSL products

59. Is there a detailed cost oriented model in relation to wholesale DSL products?

No. Ofcom's proposed approach to price regulation for wholesale ADSL products is retail minus. This means that the ATM Interconnection must be priced such that there is no margin squeeze in respect of its downstream broadband services, in particular the IPstream services. Ofcom does have a detailed cost model, which enables it to assess whether there is a margin squeeze.

60. Is a wholesale offer published so as to enable launch at the same time as the SMP-operator?

Yes, but the wholesale product was not an ATM product and was an IP-handover product only.

61. Are the terms of the wholesale offer equivalent to the terms benefited by the SMP-operator downstream operating retail arm?

Not entirely. At least in relation to the datastream product, it is clear that BT retail does not purchase this at all.

62. Are there volume order requirements per site? No.

63. Is there an access option at the nearest ATM mode?

Following the synchronous broadband access market review, BT is expected to remain obligated to open up its ATM nodes for interconnection (for conveyance of originating aDSL and sDSL traffic (sDSL is on a trial basis)). Applicable rates to be set on a retail (minus) basis.

64. Is a price squeeze test applied by your NRA? Does your NRA have the power to review the level of retail tariffs on the basis of alleged discriminatory access at wholesale level of SMP-services; and if so does it apply such power in practice?

Yes. See Question 46.

E. IMPLEMENTATION OF THE NEW REGULATORY FRAMEWORK

65. Has the new regulatory framework been transposed in your country? If so, when? Yes (on 17 June 2003).

66. Has the NRA completed the market analysis?

26 registered "Article 7" notifications received by Commission (see http://forum.europa.eu.int/Public/irc/infso/ecctf/home).

References

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