This determination sets out Ofcom's proposals for resolving the dispute brought by British Telecommunications plc ('BT') against 1RT Group Limited ('1RT Group'), Bestway Communications Limited ('Bestway Communications'), CFL Communications Limited ('CFL Communications'), Callagenix Limited ('Callagenix'), Flextel Limited ('Flextel'), Mars Communications Limited ('Mars Communications'), Starcomm Limited ('Starcomm') and Telxl Limited ('Telxl').
The dispute concerns changes which BT wishes to make to some of the terms and conditions in the standard contract that it has in place with each of the communications providers ('CPs') which interconnect with BT in order to pass traffic across BT's network. This contract is known as the Standard Interconnect Agreement ('SIA'). BT is in dispute with each of the CPs listed above (the 'referred CPs') because each has chosen not to agree the changes which BT proposes.
BT signs a separate SIA with each CP (the 'CP signatories'), although the terms and conditions of each SIA are identical. Throughout this document Ofcom therefore refers to the SIA as a single document, as it applies to all CP signatories in the same way. The fact that the SIA is a standard document helps to ensure that processes which involve signatories to the SIA are consistent and uniform. Therefore one important feature of the SIA is that, in order to change any of the terms or conditions, all CP signatories must agree and sign up to any revised terms before they can be implemented.
The changes that BT is proposing, which are the subject of this dispute, relate to the part of the SIA which sets out the process for identifying and dealing with Artificial Inflation of Traffic ('AIT'). AIT is essentially telephony traffic which is fraudulent or has no legitimate commercial purpose. The current process for dealing with AIT (the 'current AIT process') is contained primarily in Annex E of the SIA.
1Since midway through 2002, BT has been working to develop a new version of the current AIT process by re-drafting the provisions in Annex E of the SIA. This has led to the formation of a new Annex E (the 'revised Annex E'), which BT now wishes to implement as part of the SIA.
The revised Annex E would change the current AIT process in a number of ways. These changes are set out and considered in Section 2. The changes relate to various aspects of the current AIT process including the definition of AIT, the process for retaining revenue where AIT is suspected, BT's involvement in the process and the way in which disputes in relation to AIT may be resolved.
In May 2008, in order to implement the revised Annex E, BT issued the 2008 AIT Supplemental Agreement (the 'Supplemental Agreement') to all CP signatories. As indicated in paragraph 1.3, all CP signatories must agree (by signing the Supplemental Agreement) in order for the changes to take effect.
By March 2009, 110 of the CP signatories had signed the Supplemental Agreement. However, despite BT continuing to negotiate, 12 CPs had formally rejected or chosen not to sign the terms of the Supplemental Agreement. This meant that BT was unable to implement the revised Annex E as part of its SIA.
This failure to agree led to BT's submission of a dispute to Ofcom on 6 March 2009. In that submission, BT cited the 12 CPs, namely 1RT Group, Bestway Communications, CFL Communications, Callagenix, Flextel, Mars Communications, Starcomm, Telxl, Tiscali UK Limited ('Tiscali'), Tele-Lynx UK Limited ('Tele-Lynx'), Prodigy Internet Limited ('Prodigy') and Vectone Network Limited ('Vectone').
In its dispute BT requested that Ofcom:
- determine that the changes outlined in the Supplemental Agreement are appropriate and applicable to the CPs which had not signed; and
- direct that the terms and conditions of the SIA between BT and each of the CPs which had not signed shall include the terms of the Supplemental Agreement.
Our powers and duties to resolve certain disputes are set out at sections 185-191 of the Communications Act 2003 (the 'Act'). In accordance with section 186(4) of the Act, on 30 March we decided that it was appropriate to resolve this dispute, informed the parties to the dispute of our decision and published a Competition and Consumer Enforcement Bulletin entry setting out the scope of the dispute.
In the early stages of the investigation, BT informed Ofcom that Tiscali, Tele-Lynx and Vectone had signed the Supplemental Agreement (on 25 March 2009, 27 March 2009 and 17 April 2009 respectively), and that BT therefore no longer considered itself in dispute with these CPs. On 29 April 2009, BT informed Ofcom that it was also content for Prodigy to be removed from the dispute. Ofcom has therefore resolved the dispute in relation to the eight remaining CPs, which are the 'referred CPs'.
In resolving the dispute, Ofcom had regard in particular to sections 3 and 4 of the Act. Sections 3 and 4 set out, respectively, the general statutory duties of Ofcom and Ofcom's duties for the purpose of fulfilling Community obligations with respect to, among other things, Ofcom's dispute resolution function under Chapter 3 of Part 2 of the Act.
Following acceptance of BT's dispute for resolution, Ofcom met or held conversations with all the referred CPs and BT. Ofcom also requested information from each of the parties to the dispute using its formal powers under section 191 of the Act. In response to issues raised in the course of meetings with parties, Ofcom also held a meeting with PhonepayPlus.
It was evident from the information which Ofcom received that the referred CPs have concerns which relate not just to the changes proposed in the revised Annex E, but also, if not more so, to underlying aspects of the AIT process, including the rationale for allowing retentions (which the revised Annex E does not seek to change).
In deciding how to approach the resolution of the dispute, we noted the range of views expressed by the parties and the fact that many of the concerns about the AIT process were shared by some or all of the referred CPs. It therefore became clear that it was possible to consider individual CP concerns as falling under a number of common categories. We therefore collated the issues and used them to form the basis of the analysis which is set out in Section 5.
On 22 June 2009, we issued to each of the parties in dispute a non-confidential version of a draft determination and explanatory statement (referred to in this document as the 'Consultation'). The Consultation set out our provisional conclusions for the resolution of the dispute and was published on our website on 23 June 2009. We asked for comments on the Consultation to reach Ofcom by 5pm on 6 July 2009.
We received four responses to the Consultation. The parties which responded were Mars Communications, [%], BT and Flextel. Mars Communications, BT and Flextel each gave consent for their response to be made public and we therefore published each of these responses on our website on 10 July 2009.