The EU And Telecoms (Part 2)

Following from part 1 we continue with part 2 where we explore more fully EU telecoms regulations and its current situation especially regarding Flexcit.

As happens in other areas of EU competence, laid down by the treaties, member states must adhere to the telecommunications chapter of the EU acquis and are bound together by network governance and by harmonisation measures as a consequence. These span shared policies and legislation, implementation and regulation, standards and the accreditation of qualifications.

It’s interesting that what is often overlooked is the EU is a project not yet finished. It currently remains a work in progress following the engrenage (gearing) principle the well established method to engineer another leap forward in integration, the slow, salami-slicing approach adopted by Jean Monnet.

This principle has the consequence that while it continues a process of hollowing out member states competences and trying to move them up to EU level that there often occurs a period of absence of any competence at all. In this we are reminded of Booker’s comment on a criticism of evolution:

Years ago…Attenborough himself [claimed] to ‘prove’ Darwin’s theory by showing us a mouse and a bat, explaining how one evolved into the other. He seemed oblivious to the obvious point that, as the mouse’s forelegs evolved by minute variations to wings, there must have been a long period when the creature, no longer with properly functioning legs but as yet unable to fly, was much less ‘adapted to survive’ than it had been before.

For the regulation of network industries there have been delegations of powers by governments of the member states to EU institutions, notably to the European Commission (EC), but also to their own domestic National Regulatory Authorities (NRAs). This was somewhat ad hoc and piecemeal in the 1980s and 1990s, however from the 1999 Electronic Communications Services review (COM(1999) 539 final, 10.11.1999) the intentions and the outcomes increasingly concentrated on a more systematic approach.

Yet there continues to be considerable variations between member states which the European Commission and the European Parliament sought to reduce the disorder and to complete the single market for telecommunications.

As we previously noted the UK regulator Ofcom – determined to breakup BT’s monopoly further – used competition law powers under the Enterprise Act 2002 – itself a result of EU Directives – to come to an agreement with BT over a separate network access division called Openreach which would offer its wholesale products on an equivalent basis to both external customers and itself.

The establishment of Openreach and its relationship to external customers at the time was unique to the UK within the EU and its experience was studied by regulators in other European countries who experienced similar competition problems arising from the presence of a large incumbent telecommunications operator, such as France Telecom.

Viviane Reding, the European Commissioner who in 2006 was in charge of telecommunications regulation, took inspiration from the UK in forcing the “structural separation” of incumbent telecom operators into service and infrastructure divisions across the European Union.

With this in mind Reding unveiled proposals aimed at not only extending competition among telecom operators, but also the the idea of one single EU wide telecom regulator, to act as an umbrella organization for Member States’ national regulators. Reding’s proposals became the “review of EU Telecom rules: Strengthening Competition and Completing the Internal Market” which argued that:

“The most effective way to achieve a real level playing field for telecom operators across the EU would of course be to create an independent European telecom regulator that would work together with national regulators in a system, similar to the European System of Central Banks. In such a system, national regulators would continue to act as direct contact points with operators and could directly analyse the market. At the same time, a light European agency, independent from the Commission and from national governments, could ensure by guidelines and, if necessary, instructions that EU rules are applied consistently in all Member States.”

Here Reding sought to achieve “a real level playing field” by tackling what she called the three issues; Firstly the need for more internal market integration for a more effective use of radio spectrum. Falling back on the traditional EEC/EU arguments of fish, pollution or ‘climate change’ which knows no country boundaries as a reason for extending EU competences Reding relies on this regarding spectrum:

Radio spectrum itself knows no borders, but it is managed at national level, normally in an administrative, bureaucratic way that creates scarcity by prescribing in detail what every part of the spectrum may be used for in that Member State.

I also believe that we need to put the idea of a European spectrum agency on the table…we have to recognise the competitive disadvantage the EU faces because, instead of having one single regime for spectrum management and spectrum licensing, as they do in the US, we have 25 different ones.

Reding also argued that with the “switch from analogue to digital TV there is a one off opportunity to re-use the analogue frequencies for new technologies”. The second issue she addressed was better regulation:

“…a more consistent application of the EU telecom rules”. In the telecom sector, where neither technology nor economic interest nor consumer behaviour know national borders any more, I see a clear, long overdue need to make the internal market a reality also in regulatory terms”.

The third proposal was that there should be no “regulatory holidays” in the face of technological advances and with the liberalisation of the telecoms market should come “structural separation”:

Structural separation means that telecom regulators could require a dominant operator to provide non-discriminatory access to all operators by separating infrastructure provision from service provision to a greater or lesser extent. Today, the EU rules in force do not foresee structural separation as a regulatory remedy on the telecom markets. But I see that the United Kingdom, which has opted for a form of structural separation at national level, has made good experiences with this remedy. 

Her legislative proposal was for a European Electronic Communications Market Authority (EECMA) in which the EC sought a formal cooperation structure to remedy the lack of coherence within the internal market, which included “a fragmentation of European markets” and the absence of mechanisms for authorising cross-border services (e.g., mobile and IP-based services).

This proposal was significantly reshaped by the Parliament (which increased its own influence as a consequence) and the Council and, via Regulation (EC) No 1211/2009, became the Body of European Regulators of Electronic Communications (BEREC):

The main objective of this body is to enhance cooperation among national regulatory authorities (NRAs) and to strengthen the internal market in electronic communications networks.

BEREC consists of NRAs members where each is nominated per Member State. (NRAs from the European Economic Area (EEA) States only have observer status and are represented “at an appropriate level”). Thus BEREC consolidated the “official” status of NRAs despite having no democratic credentials.

BEREC itself conducts its business in secret and it attempts to justify this by claiming that there is often a special requirement to avoid public scrutiny and stakeholder involvement. We can see this secrecy, or ‘independence’ officially laid out under Regulation (EC) No 1211/2009 Article 4: Composition and organisation of BEREC:

The members of the Board of Regulators shall neither seek nor accept any instruction from any government, from the Commission, or from any other public or private entity.

In addition, there is a lack of clarity whether its decisions and opinions can be challenged in the EU courts alongside that it is unaccountable before the EU parliament, giving it a democratic and judicial deficit. Even the mechanism for engagement with BEREC is through consultations on terms determined by the organisation itself.

Aside from BEREC, further complications in European telecoms governance arise from earlier attempts at European harmonisation mechanisms via European Regulatory Networks (ERNs).

ERNs were established particularly with network sectors in mind; designed to respond to the multiplication of regulators and their uneven development. ERNs were an attempt to address by the need for greater co-ordination in implementing  regulation by member states. 

However within the institutional design of ERNs lies their genesis. Their design reflects acutely the difficultly of trying to move from national governance to one of supranational governance. Having been given grandiose tasks, the European Commission and national governments still maintained many powers. Here then we see the creation of double delegation, with powers “delegated up” from the NRAs and “delegated” down from the EU with the inevitable result of dissatisfaction:

The EU’s ‘double delegation’ to IRAs and the EU Commission has led to major and as yet unresolved problems of coordination and implementation.

Thus this means that ERNs can be seen as a ‘second best’ method of dealing with implementation of EU regulation; a compromise between EU ‘colleagues’ pressing for greater European integration and those member states, especially national governments, reluctant to endorse it fully. The compromise inevitably means that while more uniform regulation by coordinating approaches and functions was the intention, there has been little evidence of success in harmonisation and no attempts even to measure the effectiveness of the measures.

But within ERNs remains legacy EU regulatory telecoms governance that sits alongside and is distinct from BEREC, and this is apparent in the various EU bodies such as the Radio Spectrum Committee (RSC);

The Radio Spectrum Committee (RSC) is responsible for specific technical measures required to implement the broader Radio Spectrum Policy. The RSC is composed of Member State representatives and chaired by the European Commission.

Established by the 2002 Radio Spectrum Decision (676/2002/EC), the Radio Spectrum Committee (RSC) is assisting the Commission for the development of technical implementing decisions to ensure harmonised conditions across Europe for the availability and efficient use of radio spectrum.

…and the Radio Spectrum Policy Group (RSPG) which enables Member States, the Commission and stakeholders to coordinate the use of radio spectrum.

Here we can see that unlike the secret nature of BEREC, bodies such as the RSC and the RSPG within ERNs involve extensive consultation amongst all stakeholders, which include “regulatory authorities and the ministries having responsibility for radio spectrum related matters in each Member State”, manufacturers, network operators and users.

RSC and RSPG are also part of the comitology process which allows the Commission to discuss its proposals with national administrations before implementation in order to ensure that any measure is optimised to the various national situations. Thus under these rules the following associations are permitted to be consulted:

Consumers:
The European Consumer Organisation (BEUC) – which brings together 40 European consumer organisations from 31 countries (EU, EEA and applicant countries). 

International Telecommunications Users Group INTUG – an international association of business users of telecommunication.

Operators:
European Communities Trade Mark Association ECTA – which in addition to having close links with the European Commission and the Office for Harmonization in the Internal Market (Trade Marks and Designs) (OHIM), ECTA is recognised by WIPO as a non-Government Organisation (NGO).

European Telecommunications Network Operators’ Association  ETNO – who are pan-European operators and has been the voice of Europe’s telecommunications network operators since 1992

GSM Association GSMA– is an association of mobile operators and related companies devoted to supporting the standardising, deployment and promotion of the GSM mobile telephone system.

Manufacturers:
Digital Europe

We can see therefore that even under EU telecoms governance and the comitology process there is extensive consultation with international associations. A further example can be seen with the European Conference on Posts and Telecoms (CEPT). CEPT extends far beyond the EU, including the countries of the former USSR and currently includes 48 countries in its membership.

And it is with international relationships with the EU we will examine further in part three. But first we will look at the EEA agreement where although there is commitment to adhering to the EU telecommunications acquis there is more flexibility with regard to the implementation as per the EEA agreement.

And it’s with the EEA’s relationship regarding telecoms and the EU where we turn our attention to next.

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Oftel, Ofcom And BT

With this piece we seek to explore the nature of the regulatory structure of telecommunications within the UK as illustrated in the above diagram. The intention is an attempt at simplicity which is to look at national, EU and international regulation in turn.

However problems emerge in the sense that such dividing lines don’t truly exist – the EU for example is a fundamental part of the UK government, as is international governance. This becomes especially so with telecommunications. An example is that the Body of European Regulators for Electronic Communications (BEREC) has a direct relationship with the UK regulatory body The Office of Communications (Ofcom) as do indeed EU bodies such as COCOM.

So while we wish to deal with each in turn as an attempt to illustrate clearly the very complex world of telecommunications, we appreciate that there is a very fine line to be drawn between attempting simplicity and being inaccurate. With this in mind the above picture showing the EU as a separate ‘cloud’ and the following piece should be viewed with EU and international governance in mind, and as a consequence much overlap will occur over the next few pieces.

Yet even on just a domestic basis regulation is continually being updated, the above diagram was relevant until April 2014. The Enterprise and Regulatory Reform Act 2013, merged the ineffectual Office of Fair Trade and Competition Commission (established in 1999) to create the Competition and Markets Authority (CMA) meaning the diagram now looks more like this below:

Further domestic complexity was brought to the fore by the Scottish independence vote; that despite political and legislative devolution to Wales, Scotland and Northern Ireland, there aren’t any formal mechanisms which involve the devolved legislatures with representation in telecoms governance and oversight.

Governance at a global, EU, ministerial and and regulator levels exclude representation from the UK’s four nations. For example in the Scotland Act 1998 which established a devolved Scottish Parliament, telecoms was kept as a “reserved” matter – a constitutional term meaning that it was to be decided by the UK Parliament as per Section C10:

  1.     Telecommunications and wireless telegraphy.
  2.     Internet services.
  3.     Electronic encryption.

With Scotland rejecting independence recently, telecoms regulation remains a democratic challenge within the UK. Ofcom appointed the Advisory Committee for Scotland (ACS) to advise Ofcom “about the interests and opinions, in relation to communications matters, of persons living in Scotland.” However as only an advisory committee it sits to one side, unelected and unaccountable. The same lack of ‘devolution adjustment’ also applies to Wales and Northern Ireland. This could be consider unsatisfactory when telecoms across the UK have different needs with regard to rural location, broadband and 2G, 3G 4G mobile phone access.

Thus not unsurprisingly, with this in mind, the demand for an independent Scotland to have a say in telecommunications regulation was made in its White Paper, Scotland’s Future – Your Guide to an Independent Scotland (page 276):

The government of an independent Scotland will have the powers to properly prioritise the needs of rural Scotland in relation to telecommunications…

Scotland’s dissatisfaction with regard to a lack of representation laid bare on page 311 (my emphasis):

We have also felt the impact of other decisions in communications policy that did not take account of Scotland’s circumstances. When 3G mobile licences were auctioned in 2000, an initial coverage target of 80 per cent of the UK population was set. This was increased to 90 per cent of the UK population in December 2010. Despite the efforts of the Scottish Government, a distinct Scottish target was not set. Currently, 3G coverage in Scotland is the lowest of the four UK nations, reaching only 96 per cent on the most optimistic estimates. 

Furthermore, there is a disparity between urban and rural Scotland. Coverage in rural Scotland drops to as low as 92 per cent, demonstrating that there will always be poorer coverage in rural areas unless these areas are given priority in allocating licences.

A contrast could be considered between the lack of telecoms representation by Scotland within Ofcom and with Ofcom’s broadcasting responsibility – where the BBC, with its Audience Council Scotland, has a representative member for Scotland on the BBC Trust which is currently Bill Matthews.

To explain Ofcom’s lack of coherence we can see that one of the notably observations taken from the above graph as indicated by the arrows is that in terms of its relationships with other interested regulatory bodies Ofcom has a prominent central role to play in UK communications regulation. But it is a role that is always inconsistent.

The lack of consistency has been a consequence of a lively mix of ever evolving nature of technology, of the growth of “regulator watching” and of the ever integration of the EU and international considerations.

Domestically the implementation of privatisation of previously nationalised industries under Margaret Thatcher led to a growth of “regulator watching” with often mixed success for the customer, and this was particularly apparent in telecoms.

Ofcom’s predecessor was the telecoms regulator Oftel. Oftel was established under the 1984 Telecoms Act  which had privatised the telecoms market, known as the “Abolition of British Telecommunications’ exclusive privilege”. It was the first major privatisation by the then Conservative government.

Oftel was often accused, particularly towards the end of its regulatory life, of being very sympathetic to BT and with good reason. BT’s relationship with the regulator Oftel was one of “coercive-diplomacy” rather than a telecoms company being more subservient to an assertive telecoms regulator.

The relative impotency of Oftel largely stemmed from BT remaining intact instead of being broken up; a decision which reflected the government’s view on maximising proceeds from shares and future tax revenues on what was the world’s biggest telecommunication company. But by remaining effectively as a monopolist telecoms company BT had every incentive to exclude competition by refusing interconnection between networks or threatening competition by fixing interconnection charges as high as possible.

So what followed was “coercive diplomacy” between the powerful monopolistic BT and its less powerful regulator. This somewhat uneven conflict was particularly encouraged by modifications to BT’s operating licenses. BT was entitled to reject licence modifications proposed by Oftel under Section 12A of the 1984 Telecoms Act.

Thus despite privatisation, many difficulties were experienced by other companies attempting to enter a market wholly dominated by BT, particularly with its inherent well established infrastructure. A problem acknowledged by Oftel itself in its 1st report of 1984:

BT is competing in a large number of spheres of activity in the telecommunications industry from a position of significant strength, resulting from such factors as its established reputation and its established customer base supported by a selling organisation of extensive scope. Understandably many organisations have been apprehensive about the possibility of effect competition in this situation.

Problematic regulation and promotion of competition could also be seen when Mercury (Cable and Wireless) obtained its licence in 1985.

According to condition 13.1 of BT’s licence at the time, any competitor which had been licensed had to enter into a connection agreement with BT to run a connectable system and therefore needed connection to BT’s network. BT’s reluctance to succeeded a measure of market share became apparent in 1985 when Mercury and BT had failed to agree terms for a connection contract.

So Mercury applied to the Director General of Telecommunications (DGT) to make a ruling under the conditions 13.5 and 13.6 of the BT licence. However while the outcome eventually favoured Mercury, who had incurred significant financial costs, the difficulties of overcoming BT’s market place dominance meant that UK privatisation of telecommunications remained little more than a duopoly until the early ’90s.

BT’s dominance as underpinned by Section 12A meant it could bypass Oftel by threatening to force the issue to go for consideration by the then Mergers and Monopolies Commission (MMC) – a body which was eventually replaced by the Competition Commission in 1999, (given further powers under the Enterprise Act 2002) and then itself replace by the CMA.

By going to the MMC then open up the possibility of third party challenges to the cosy and convenient alliance of both BT and Oftel. Thus at the time Section 12A gave both strong incentives to negotiate terms to avoid uncertainties outside the charmed world of telecommunications that a third party may induce. The threat of a big stick in the guise of MMC gave each party a mechanism which could be used to bear down pressure on the other.

As a result Oftel was to suffer from “regulatory capture” by BT, eventually becoming as a regulator unfit for purpose. A successor was needed to further open up the telecoms market to competition. That came in the form of Ofcom whose prominence as the major regulator was established by The Communications Act 2003 (TCA)

Yet it was less Oftel’s failings as a regulator that led to its demise but more a need to implement a number of EU directives into UK law which resulted in the Communications Act – EU Directives which unsurprisingly sought to further harmonise communications regulation across the European Union under the guise of modernisation but naturally implied a further step towards EU integration. Such EU Directives included; Directive 2002/19/EC, Directive 2002/21/EC, and Directive 2002/22/EC.

Using these EU Directives the then Labour government established Ofcom which inherited the duties of five separate other former regulators – the Broadcasting Standards Commission (BSC) the Independent Television Commission (ITC), Oftel, the Radio Authority and the Radio Communications Agency.

Out of the TCA Ofcom became a “super regulator” and it comes as no surprise given Ofcom’s inheritance that it was criticised for having “a too wide a brief“. Not for the first time this was less a reflection of EU law and more the habitual enthusiasm of UK governments to gold plate EU law. Thus we have to query whether the initial establishment of Ofcom needed such a wide brief to comply with EU law or whether it was the political nature of the then Labour government which had unwelcome habit of reliance on big state solutions.

However it was not only the wide ranging powers that posed Ofcom problems but the inconsistency of those powers. Despite inheriting the briefs of the ITC, BSC and the Radio Authority it became clear that Ofcom was to have limitations in certain areas for domestic political reasons.

During the Parliamentary debate in 2002 on the Telecommunications Bill, Labour MP, Secretary of State for Culture, Media and Sport, Tessa Jowell argued in support of the Bill that:

Finally, part 5 gives Ofcom tough competition powers to act concurrently with the Office of Fair Trading. Ofcom will be able to use general competition powers, but we are also retaining, very importantly, sector-specific competition rules for broadcasting—a vital part of protecting markets that do not deliver key policy objectives purely by leaving them to competition alone. Ofcom will have flexibility to use sector-specific powers, but it will not use them where it would be more appropriate for it to use general competition powers.

Reading carefully Tessa Jowell’s statement indicates very clearly that the BBC was not to be fully within the remit of Ofcom a single independent regulator for the UK’s broadcast media. From the outset its creation is fatally flawed as long as the biggest and most powerful broadcaster is not fully under the supervision of the independent regulator for the UK communications industries.

Other issues which became apparent with the TCA 2003, as is typical of the UK’s relationship with the EU, was that it took advantage of EU legislation as an excuse to go further with lawmaking and introduce other controversial parts. An example being, Section 127 of the Act 2003 which makes it:

…an offence to make improper use of a public electronic communications network such as grossly offensive, indecent, obscene, menacing or annoying phone calls and emails.

This was used notoriously used against Paul Chambers who joked on Twitter that he would “blow Doncaster airport sky high”, a charge which he was subsequently cleared by the Supreme Court in London.

With Ofcom we can see that a consequence of a national regulatory body emboldened by new powers is that they purse paths different from government national bodies unhindered. In the UK this was reflected by Ofcom’s decision in 2003 having been established by the TCA 2003, in response to the telecommunications market developing rapidly, to conduct what it called a ‘root-and-branch’ strategic review of the regulatory regime.

Unlike its predecessor Ofcom, determined to breakup BT’s monopoly further, concluded in 2005 a major strategic review of the fixed telecommunications sector by using its separate powers under the Enterprise Act 2002 – itself a result of EU Directives. The objective of the review was to determine whether the sector was suffering from competition problems of such a persistent nature that they could not easily be remedied using Ofcom’s specific market review powers under the TCA.

The outcome of the strategic review meant that BT offered a host of undertakings to Ofcom by which it agreed to set up a separate network access division called Openreach (a so-called “BT group business”) and also to offer its wholesale products on an equivalent basis to both external customers (Cable and Wireless, Carphone Warehouse etc) and its own downstream divisions. The undertakings have brought about a fundamental shift in the way in which BT had conduct business with all its customers, meaning all were now on a more equal footing in terms of wholesale access.

Thus despite the EU inspiration behind TCA and the Enterprise Act, from a regulatory perspective, the establishment of Openreach and its relationship to external customers is currently unique to the UK and is being actively studied by regulators in other European countries who experience similar competition problems arising from the presence of a large incumbent telecommunications operator.

The term “super-regulator” though does not mean Ofcom is the only regulator when it involves telecommunications, there are at least sixteen others and the list below demonstrates with great clarity the criticism that Ofcom has a brief which is too wide, and a reflection of the diversity of telecoms: it has its tentacles everywhere:

1)   Advertising Standards Authority (ASA)
2)   Telephony Preference Service (TPS)
3)   Ombudsman Services
4)   Communications and Internet Services Adjudication Scheme
(CISAS)
5)   PhonepayPlus
6)   Internet Watch Foundation (IWF)
7)   UK Council for Child Internet Safety (UKCCIS)
8)   UK Safer Internet Centre
9)   Child Exploitation and Online Protection Centre (CEOP)
10) NICC – UK home of network interoperability standards
11) Go On UK – “empowering everyone in the UK to reach their digital potential”
12) NGN UK – dormant now part of OTA
13) Office of the Telecommunications Adjudicator (OTA)
14) Gambling Commission
15) Information Commissioner’s Office
16) British Board of Film Classification (BBFC)

Not surprisingly with sixteen different organisations we have a complex mixture of Ofcom approved and EU financed regulatory structures. An example of the myriad structure can be found with the Internet Watch Foundation which came to media attention when it censored a Wikipedia page over an entry regarding an album cover by the German band The Scorpions. Here we see a registered charity, which works very closely with Ofcom (although Ofcom has no powers to regulate the internet) and receives EU funding. Susie Hargreaves the Chief Executive has also joined the BBFC’s Consultative Council.

Further evidence of the diversity and Ofcom’s overreaching remit comes via the Advertising Standards Agency which describes a system as being one of “co-regulation of broadcast advertising” – it is self-regulation within a co-regulatory framework. It is underpinned by an enabling statutory instrument, The Contracting Out (Functions Relating to Broadcast Advertising) and Specification of Relevant Functions Order 2004 and a formal Deed between Ofcom and the ASA (Broadcast), BCAP and Basbof.

Interestingly Ruth Sawtell who is on ASA Council is also a non-executive director of PhonepayPlus, the regulator of premium rate telephone services.

In addition to the hydra nature of Ofcom, and its regulatory offspring, telecommunications are also responsibilities imbued within various government ministries and the agencies for which they are responsible, requiring within government itself a need for coordination as the table below illustrates (click to enlarge):

Thus it’s apparent that even on a domestic basis telecoms regulation is diverse, overlapping and often incoherent. In the next piece we will move our focus away from domestic regulatory structures and turn our sights on the EU’s role in UK telecommunications regulation.

Brexit And Telephones (1)

One of the greatest revolutions of the 20th Century is the obvious but often forgotten advancement in mass electronic communication technology. The rather humble telephone, along with devices such as the likes of television, came to dominate the 20th Century.

Although the telephone was commercially available in the late 19th Century it took until 1912 before a unified telephone system was available throughout most of Britain with the National Telephone Company providing for over ½ million subscribers. By the early 1930s radio, while in its infancy, emerged nationally; mass television though was still a distant dream, and the internet was not even a vague concept.

Thus from the outset, before the emergence of the internet (and other data networks), telecommunications had a simple clear meaning: the telephone and its elder brother, the telegraph. The relative simplicity meant that placing a conventional phone call used what is known as the Public Switched Telephone Network (PSTN), informally known as the Plain Old Telephone Service (POTS) – using copper wires which carried analogue voice data over the dedicated circuits.

Described as circuit-switched telephony; the system worked by setting up a dedicated channel (or circuit) between two points for the duration of the call. Nothing illustrates this better than images in the early days of telephony showing operators needing to physically connect a call, moving cables from one place to another, as pictured below.

The basic principles of telephony endured during 1960s even after the innovation of the modern “fax” pioneered by Xerox and the digitisation of the PSTN. Facsimile sent via the PSTN, adding the ability to communicate documents and data at a distance, was still considered a telecommunications issue because it was still carried over a PSTN.

That changed after the 1960’s when advances in telecommunications continued with indecent haste aided by significant advancements in computer technology. Thus as a consequence in recent decades electronic communication expanded to include data, video conferencing, e-mail, instant messaging, and web browsing.

Telecommunications therefore as concept has also moved away from traditional copper wires to include microwave, terrestrial wireless, satellite and diversification of broadband via mobile phones. The modern industry therefore is far more diverse including not only software-based applications with a communications emphasis but also being suppliers of telecommunications equipment and software products as well as the telecommunications service provider.

Ironically the unprecedented relatively recent divergence in the types of electronic media to communicate, via voice, audio, video, or data, has led to a path of convergence of telecommunications hardware. Telecoms architecture has become increasingly integrated. Previously the PSTN, cable, and data networks coexisted as separately owned and operated networks carrying different types of communications.

Now most media is increasingly being communicated over a single common network as telecommunications has moved from the traditional circuit-switching to computer based packet-switching. A transition that was probably best epitomised by technology such as Integrated Services Digital Network (ISDN) – which achieved faster dial-up speeds on the traditional circuit switched network before it was killed off by packet switching broadband which led to BT Home Highway being withdrawn in 2007.

To give but one example of convergence; the existence of a private telephone exchange (PBX) within a company usually means two separate networks – one for telecoms and one for computer data. This meant two sets of cables and two types of incompatible sockets (RJ45 for network sockets and Type 600 for BT sockets) which would run throughout the building.

However with the emergence of Voice over IP as a technology (as popularised by programs such as Skype), which uses packet-switched telephony – voice information travels to its destination in countless individual network packets across the Internet –  means voice calls can be transmitted over computer data network. This not only makes voice calls free but eliminates the need for a separate voice network in businesses.

This voice/data integration of architecture offers economies of scale in both capital expenditures and operational costs, and also allows different media to work within common applications. Convergence has now meant that both telecoms technology suppliers and service providers are in the business of providing telecommunications in all media simultaneously rather than specializing in a particular type such as voice, video, or data.

The increasing technological advances and diversity has been significantly reflected in the continuous development of telecommunications regulation in the UK with government policy makers often struggling to keep up with rapidly evolving technology.

Beginning in 1901 with the licensing of private telephone companies, telecoms was then nationalised in 1912 and remained so until 1984 – the simplicity of regulation being directly related to the fact that it was a direct provision of the government – essentially it was a regulated monopoly

Then with privatisation in 1984 we had a regulated duopoly consisting of BT and Cable and Wireless who were able to provide competing telecoms services. In 1991 the existing duopoly in telecoms services was ended and licensing of multiple service providers permitted for domestic service only. International telecommunications remained within the duopoly framework. In 1996 the international duopoly was ended, and other operators were free to offer international services within the UK.

Thus we can see that the UK has progressed from a state regulated monopoly in terms of telecoms to one of a myriad of regulated markets. Yet it’s not only internal pressures and technological changes that have lead to a diversification of the UK’s telecoms regulation. Electronic communication very obviously has worldwide implications and not unsurprisingly is affected by international regulatory bodies notably by governance systems such as the EU, the International Telecommunication Union (ITU) and the Organisation for Economic Cooperation and Development (OECD).

The EU for example began “liberalising” the telecoms market in 1990 with Council Directive 90/387/EEC – “the establishment of the internal market for telecommunications services through the implementation of open network provision”. This was during a 10 year period leading up to 1998 where the EU imposed on member states, via a series of green papers, directives, and recommendations obligations with respect to equipment markets, regulatory structures, value-added services, and regulation of infrastructure and service competition where it existed.

Then in 1998 the European Union issued framework directives to liberalize entry into telecommunications markets effectively trying to end monopoly provision in EU countries:

In order to accompany the opening of the sector to competition, the European Commission began the huge task, in 1999, of recasting Europe’s regulatory framework for telecommunications. The general aim was to improve access to the information society by striking a balance between regulation of the sector and Europe’s competition rules. This regulatory framework for electronic communications is made up of five harmonising directives, focussing in particular on the framework directives, access and interconnection, authorisation, universal service and users rights and protection of privacy. To these were added the Decision of 2002 on radio spectrum policy and the Regulation of 2002 on access to the local loop.

By 2003 further European directives removed the need for telecommunication service providers to be licensed by national regulators which in the UK led to several existing regulators merging to form Ofcom via The Communications Act 2003. EU involvement has probably been more immediate to telecoms customers by the privatisation of directory enquires as per EU Directive 2002/77/EC and mobile phone roaming charges within the EU.

Thus with the enthusiasm of the EU for increasing political integration, a process which is not yet complete, coupled with international bodies and a multitude of domestic authorities we see a muddled regulatory system that is not only less than ideal but also deeply embedded in the UK. The telecommunications regulator, OFCOM now sits amidst a number of ancillary and overlapping bodies in the United Kingdom, including horizontal or cross-sector regulators which include advertising, competition and data protection.

That there are various almost competing regulatory bodies which can intervene at all levels raises concerns about effective coordination and the risks of a lack of transparency. Too many ministries, agencies and authorities inevitably creates a danger of responsibility overlap and blind-spots in the formulation, implementation and oversight of policies.

This undoubtedly creates considerable confusion for customers, where awareness is often limited to only to domestic bodies such as the ASA and OFCOM, and perhaps Parliament. EU and International involvement remains hidden as is so often the case.

Telecommunications is one of Europe’s most important economic sectors. It’s worth around £38.8bn for the UK and  €234 billion in total for the EU. Revenues are equivalent to the gross domestic product of a mid-sized country. EU and UK companies have invested in building businesses in every continent and the services they provide, in particular the broadband and wireless infrastructure, are central to many other sectors of the economy and to the daily lives of almost every citizen.

Therefore the complexities of European political and regulatory networks present significant challenges when considering Brexit, With this in mind we will be returning in more detail to this subject over the next few blog pieces.

Hot Wired

In light of Autonomous’ Mind’s excellent post on the stupidity of the media’s reporting of our current energy crisis, I had a quick gander at this Hansard account from Thursday 17 October 2013. What’s intriguing is the openness of MPs in mentioning the EU when discussing our energy policy in contrast to most media reports.

That is not say though that all of the discussion had a degree of sense. This from Alex Cunningham – Labour MP for Stockton North – in particular struck me (my emphasis):

I think that just 25 people have benefited from the green deal in my constituency so far, but thousands of people across Stockton-on-Tees could have warmer homes thanks to a tremendous project to externally clad their homes run by the borough council and deliverer partner, Go Warm. This has attracted £20 million of investment and 300 jobs. Sadly, a legal judgment means that BT is the only company that can remove the eyelets that support the wires in the houses that are benefiting from the scheme. This is slowing the programme down because of insufficient resources to do the work in a reasonable time. Will the Minister please intervene, tell BT to get its act together, get the work done more quickly and give my constituents the warmth they deserve?

Having dealt with BT for over 10 years in my previous job I can accuse them of many things, but that they are somehow culpable of failing to provide “constituents with warmth” is a new one on me.

118 707

My blog title refers to BT’s ‘no frills’ directory inquiries service, and I’ll come onto the significance of this later in the post.

Ten years ago, 192 (and 153 for international) was the only, and easy to remember, telephone number used to provide a directory inquiries service. Originally free, it did eventually cost 40p a call, yet it provided a simple, quick and efficient service – manned by staff who largely were familiar with the quirks of the many idiosyncratic place names in this country born out of our rich history and heritage.

In 2003, however, that was all to change. 192 was abolished on 24 August 2003 and the service opened up to competition. According to Ofcom at the time the reason was (in answer to question 17):

This is why we have decided to create better value and choice for you by introducing the new range of 6-digit numbers for DQ services, each starting with 118. All DQ service providers can compete on equal terms.

Ah the ‘better service and choice’ argument, but the real clue for the change is given further on in the answer:

Several other countries have already successfully introduced similar changes to their DQ markets.

We have chosen numbers starting with 118 because other countries in Europe will increasingly be using these numbers for their DQ services. 

What is left unsaid, and was at the time, the reason for the change was EU Directive 2002/77/EC, specifically article 5:

Member States shall ensure that all exclusive and/or special rights with regard to the establishment and provision of directory services on their territory, including both the publication of directories and directory enquiry services, are abolished.

As a result of complying with EU law, what then followed resembled a farce in the UK by Ofcom – the governing body – who quite frankly didn’t have a clue. Naturally prices went up and were on the whole confusing, standards plummeted and most of the original copious services faded away as inevitably BT, and obviously 118 118, cornered the market. Not only that, but in order to comply, a coach and horses had to be driven through previous legislation which resulted in the Communications Act 2003.

Ofcom have clear laid out categories within their telephone numbering plan. For example; Freephone (0800), Local rate (0845), National rate (0870) and Premium rate (090). The problem is that national rate has an upper limit of 10p per minute. This meant that for directory inquiries companies they could not make work a service that would be cost effective – it would be an unworkable business model. As a consequence it was obvious in 2002 that 118 numbers would have to fall into the Premium rate category, allowing companies to charge a phone call rate that recoups their costs at the very least.

So Ofcom, eager to comply with EU law, hit on another problem, by forcing 118 numbers to come under the Premium rate category meant being part of the one area of telephone services that is heavily regulated (a reason why many chatline services advertised in national papers are national 0870 numbers because the rules are far more relaxed).

Applying for a Premium rate number in 2002 meant having a 75 page booklet (ICSTIS 10th edition – now known as PhonepayPlus) of ‘do’s and don’ts’, as well as legal responsibilities, thrown at you. These conditions at the time for most premium rate numbers included:

  • Not allowed to be put on hold
  • A maximum cost for the phone call was set – for example 6.2 (a) (Pay for Product Services) [product must not cost] more than £20.00 or (d) terminate by forced release.
  • Premium rate callers must be over 18, for example 5.6.2 (a) Service providers must ensure that operators use reasonable endeavors to prevent persons under 18 years of age from taking part…
  • Children’s services had a category of its own and under 6.1.2 (b) the service should only be used with the agreement of the person responsible for paying the telephone bill…or as another example, 6.1.4 (a) Children’s services must cost no more than £3.00.
  • There’s a maximum price per minute, a maximum which varied service to service – but was set ultimately at £1.50 per minute.
  • Advising you at the beginning of the call how long the call was likely to last and how much it ws to cost for example 6.6.2 (b) include an introductory message, giving the likely total cost of the call…

The rules were, and are endless, but in order to deregulate the directory inquires service they were circumnavigated by Section 120 of Communications Act 2003, which gave Ofcom the power to regulate the Premium rate industry but crucially it did not apply to all Premium rate services (my emphasis) thus letting 118 numbers off the hook:

120  Conditions regulating premium rate services(1)OFCOM shall have the power, for the purpose of regulating the provision, content, promotion and marketing of premium rate services, to set conditions under this section that bind the persons to whom they are applied.

(2)Conditions under this section may be applied either-

(a)generally to every person who provides a premium rate service;

 Ofcom could therefore ride roughshod over existing regulation:

In a classic example of understatement, it cited the example of one man who was charged £350 for a 118 call and connection from a landline in 2009: “Consumer has said that he is upset with the lack of information given by directory enquiries as they didn’t advise him of what the connection costs would be and the charge to call them.”

Thus 118 numbers were given the freedom to put people on hold – by necessity of volume of calls at any given moment – and charged more the fixed rate per minute, plus no upper limit because that would mean cutting off a phone call with your gran (for example) after exceeding the limit when being put through.

There was also another problem which affected businesses, which was rarely reported. The ability of 118 services to put callers through to a number of their choice, which not only incurred a significant cost but more importantly it posed a telephony security risk.

At the time of the change, one part of my previous job was being a PBX installer and programmer. For those unfamiliar, a PBX is a private branch exchange – a telephone exchange installed in big companies or hotels -one that allows many extensions numbers to be used in one building as an example. (Technology has now moved on and with VOIP (Voice over IP) – the technology behind Skype – the traditional PBX has largely been made redundant, but I digress).

Typically to save businesses money, premium rate and national rate numbers would be barred on such a system. Yet by dialing 118, it allowed company employees to bypass barred numbers by being put through via a 118 service. They could ring up and ask for the number or service in question, costing the company a lot of money in the process.

The reason I mention this is because part of my job involved conducting a cost/benefit analysis of the new 118 services – initially due the incompetence of Ofcom a hugely frustrating process. Ultimately though this actually proved to be dead easy because very few 118 numbers at the time provided the PBX security that was required – i.e a bog standard service. I lost count of the number of 18 year old Account Managers (who I knew I wouldn’t see in 6 months time) trying to sell me their product’s services  – bells and whistles – that I didn’t want and were anyway against company policy.

And that leads me onto 118707 – the title of my blog post. Though the number is not well advertised, 118707 is the BT service designed for businesses mainly for the reasons listed above. In short it’s the old 192 service in disguise. Dialing it is like going back in time.

But such is progress courtesy of the European Union…