WVMR Part 4 – BT’s unchecked monopoly in porting

Simon Woodhead

Simon Woodhead

9th September 2020

By Peter Farmer

We discussed recently what we’d like to see from the Narrowband Review. Less than 24 hours later Ofcom published its Wholesale Voice Markets Review 2021-2026. This is important and going to govern our industry for the next 5 years, and arguably reshape it forever.

Rather than brain-dump all our reactions (there are many) here, or indeed simply share our response, which by nature will be somewhat legalistic, we wanted instead to serialise a few points in plain English. 

Our response will obviously feature these, so if they resonate with you and you think they matter, we would encourage you to respond to the consultation. You are very welcome to cite Simwood, this blog, or our formal response if it helps.

If you missed them, see Part 1 – Huawei bad for Internet; Huawei good for Voice over Internet, Part 2 – CP Status – we need a new one!, Part 3 – What the hell is IPX? and Part 5 – A prime opportunity to improve porting.

According to the Wholesale Voice Markets Review, the range holder is a monopolist. This is not breaking news; only the range holder can provide (or, in theory, notwithstanding our previous blog, procure) conveyance of a call from its network boundary to the end user’s equipment.

While the review has a whole chapter on the subject of porting conveyance in mobile (granted, it just says it is sufficiently competitive or whatnot to do without requiring regulatory intervention), it is mostly silent on fixed telephony. As an aside, of course, our mobile friends have to have another name for the same thing – they call the porting conveyance charge a donor conveyance charge. Anyway, I digress…

There is one pertinent paragraph;

Calls to ported numbers are usually first routed to the provider that originally held the number (the donor provider) before being routed to the provider to which the number has been ported (the recipient provider), as the originating provider does not know the number has been ported. As a result, while Wholesale Call Termination (WCT) to these numbers is ultimately provided by the recipient provider, the originating provider has no option but to purchase WCT from the donor provider. We therefore consider that the donor provider as well as the recipient provider should be considered as providing a termination service.

OK, if we get this straight, the market power of the range holder (cough hosting network cough) and recipient communications provider is so strong, it requires the most invasive of regulatory interventions; we have both a Significant Market Power Condition and a charge-control.

So far, so good, it makes sense. But there is an egregious error of omission here; if the originating provider has no option but to purchase WCT from the donor provider, who else  do Ofcom think the recipient provider can buy porting conveyance from, exactly?

WCT and porting conveyance go hand in hand in the UK’s onward routing world; the donor provider charges the recipient for the privilege of tromboning a ported call over its network. Ofcom’s analysis got halfway there and stopped. If the donor has no choice but to deal with the recipient, then the recipient has no choice but to deal with the donor.

These are two sides of the same monopoly coin, and Ofcom appears to be blind to it.

So, for the conveyance of ported calls, a monopoly recognised by Ofcom, we have no Significant Market Power condition and no charge control. There is regulation, which requires “fair and reasonable terms” which have later been defined by Ofcom in guidance, dispute resolution (and upheld by the courts) as the Long Run Incremental Cost (LRIC) for charges. Incidentally, that’s all charges, including port order charges which BT appear to have overlooked – more on that another day.

However, it does not state what happens when BT starts to rearrange its network and trombones calls every which way but loose so it can achieve its April 2025 target. If BT starts consuming a bunch of double tandem segments as a result of its network redesign, we might expect to see porting conveyance charges creep upwards, perhaps above the Fixed Termination Rate (FTR). For those on the default APCC from BT, this is a multiple in excess of FTR already – rendering every call to every number ported from BT loss making and providing a windfall to BT, something we warned would happen back in 2013 and have repeated at every opportunity since. It’s like the situation Ofcom grappled with to correct that for some in 2014 is occurring again.

Which takes us to the second non-sequitur in the consultation; Ofcom are proposing to mandate that BT offer FTR on all of its number ranges on IP by April 2025. Their proposal is a means to provide certainty to the industry and prevent harm in the transition and it is good news. But Ofcom has not mentioned porting conveyance charges, let alone a proposal to offer some form of safeguard from harm when traffic potentially flies all over BT’s network to get from A to B.

Anyone that has ever done any form of network redeployment knows the potential issues in unravelling the Chinese jigsaw puzzle; and that’s coming from those of us with fewer nodes in our network than BT!

Porting conveyance in the fixed world is a monopoly. It is a monopoly Ofcom have described in their consultation. But, for whatever reason, Ofcom can’t seem to see it.  

Does it matter? Yes. It matters a lot because we see some 70% of traffic on our network involving BT’s numbers. Yet, Ofcom report BT’s retail market share to be in the order of 38-41%, depending on the metric.

This would suggest, therefore, that over and above that which is expected to, some 30% of the UK traffic passes through BT’s network before reaching the called party’s chosen network provider…

… without getting into an ad-hoc lecture on the subtleties of market power versus market share, it should be clear that it is a highly privileged position for BT to be in and one that could, if abused, lead to significant harm.

We will be calling on Ofcom to adjust the appropriate guidance and/or conditions to pre-empt a repeat of BT enjoying the fruits of its former monopoly in numbering. It should just be as simple as Ofcom procuring an undertaking, or updating guidance, to say that until April 2025, the porting conveyance charge cannot exceed that which would have been incurred absent BT reorganising its network and make it clear that when April 2025 rolls around, that the APCC should be capped at the LRIC of an IP-IP scenario.

Of course, these things are always easier said than done.

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