Mobile Virtual Network Operators: Oftel inquiry into what MVNOs

could offer consumers

A consultative document issued by the Director General of Telecommunications

June 1999

ContentsSummary

Chapter 1 - Why this consultation?

Chapter 2 - The MVNOs and what they might offer

Chapter 3 - Regulatory issues

Chapter 4 - Issues on which Oftel welcomes views and comments

Consultation

Annex A - How the technology works

Annex B - Mobile Network Code allocation

Annex C - Foreign developments

Annex D - Glossary

SummaryThis consultation document seeks views from service providers, mobile and other network operators, consumer interests and other interested parties on the development of what are known as Mobile Virtual Network Operators (MVNOs).

MVNOs would not have a licence to use radio spectrum, but would have access to the radio networks of one or more of the current mobile operators and would be able to offer services to customers using that spectrum. It is envisaged that the MVNO would be able to offer both subscription and call services to customers. One of the key purposes of this consultation is for Oftel to understand more clearly the types of services which MVNOs may be able to offer and any benefits that they might offer to consumers through increasing competition.

There are already a number of competitors in the mobile market. As well as the network operators, Independent Service Providers sell subscriptions and calls to customers and have some flexibility to offer their own service packages to customers. Oftel is currently consulting on whether Indirect Access (IA) should be mandatory on mobile networks. If IA is introduced, there will be another layer of competition in the market, whereby customers can choose to make certain calls (typically national or international calls) through an IA operator and be billed by this operator for these calls. In this case, the customer still pays their existing operator or service provider for subscription and other calls. MVNOs will be a yet further type of competitor.

In order for MVNOs to offer services to customers, they will need to conclude commercial agreements with at least one mobile operator to gain access to that network. If commercial agreement cannot be reached, Oftel may be asked to intervene, potentially to decide whether access should be allowed, on which networks and at what price. Oftel’s clear preference is that the industry should reach commercial agreements.

If commercial agreements cannot be reached, whether Oftel would intervene would be critically dependent upon an assessment of a number of economic and legal considerations. From an economic perspective, Oftel would take into account the competitiveness of the mobile market and the impact of MVNOs on promoting competition in the market. If regulatory intervention is justified, Oftel’s presumption is that the price of access should be based on ‘retail-minus’.

The document also considers the legal framework that might apply to MVNOs. This is not yet clear, in particular given the uncertainty around the precise definition of an MVNO. However, the document sets out Oftel’s preliminary views on the legal framework under EC Directives that might apply to MVNO requests for access.

In addition, there are a number of technical and implementation issues on which comments are sought. There are a number of ways in which MVNOs may be implemented, and they may require different levels of use of the mobile network operator’s infrastructure. Some of the technical issues are detailed in an annex to this document, and Oftel would welcome industry comments on the technical and cost implications of MVNO access.

In summary therefore, Oftel is seeking views on:

The types of services an MVNO might offer and the number of potential MVNOs that might seek to enter the market;

The possible benefits to competition and consumers of MVNOs; If commercial negotiations to enable MVNOs fail, whether there is a case for

regulatory intervention; If regulatory action is justified, on what basis; The types of technical implementation which might be feasible for MVNOs.

Responses to this document are sought by 30 July 1999; written comments will be made publicly available in Oftel’s Research and Intelligence Unit (except where respondents ask to keep details confidential), and comments on the responses are invited by 20 August 1999. Full details of where to send responses are shown at the end of the document under the heading ‘Consultation’.

Once Oftel has analysed these responses, we will issue a further document by the end of September 1999.

Chapter 1

Why this consultation?

Introduction

1.1 In the course of recent consultations on the mobile market, approaches by operators to DTI and discussions with other regulatory authorities, Oftel has become aware of potential demand from some commercial organisations to establish Mobile Virtual Network Operators (MVNOs) on GSM networks. This consultation aims to bring out for discussion the consumer, economic and regulatory factors that need to be taken into account if any proposals to run these services cannot reach commercial agreement and Oftel is asked to resolve a dispute on the issue.

1.2 MVNOs potentially offer the customer additional choices. Depending on the technical approach chosen and commercial agreements made between the MVNO and the existing mobile networks, the MVNO may be able to offer different packages of services and tariffs from those available today by network operators and service providers and from those that might come from the prospective Indirect Access operators on whose potential Oftel is currently consulting.

1.3 MVNOs would make up the final tier in a hierarchy of service providers on mobile networks in which each successive level has greater freedom from the network’s control and can therefore offer the consumer further degrees of flexibility and innovation in the way they package and tariff services, and has progressively greater scope to develop new value added services accessed by mobile customers. The bottom tier of this hierarchy is provided by the direct sales forces of the network operators. By definition, these sales organisations sell the network’s own services in the packages and at the prices set by their organisation. The call services are end-to-end calls from the calling subscriber right through to the called customer.

1.4 The next tier contains the Tied Service Providers (TSPs) who sell only branded subscriptions and calls (airtime) of their parent network. These services are the same as the network sells via its direct sales force. The TSP buys them at wholesale rates and has some freedom to vary packaging and tariffing. The customer’s contract is not with the network but the TSP who is responsible for customer services and billing.

1.5 The Independent Service Providers (ISPs) form the next stage up in the hierarchy. They buy the same wholesale subscriptions and airtime services to resell to their contracted customers. ISPs compete with the TSPs by offering differentiated customer servicing and billing - and to a limited extent alternative packaging and tariffing. Their major advantage is

to offer choices between networks: BT Cellnet and Vodafone are obliged to provide services. However, ISPs rely heavily on the branding of the services and some networks only supply branded services. Many ISPs add a range of further value added services to the basic subscription and calls services, aiming to offer a ‘one stop’ shop.

1.6 Oftel is consulting on the next stage in the hierarchy – the Indirect Access (IA) operators. IA operators’ contract with customers for call services only. For connection services the customers would still contract with the networks or the TSPs/ISPs. The IA operators’ key advantage: they would not buy complete (end-to-end) calls but only the use of the mobile network to originate calls. The customers would exercise their choice on a call-by-call basis, by dialling four digit codes which would route the calls out of the mobile networks and into the entire control of the IA operators. For each of these calls, the IA operators would own the customer. Their aim would be to find more efficient ways of handling the calls beyond the mobile network, sharing the benefits with the customers. Much less dependent on the network than the TSP/ISPs, they would compete with them on costs, packaging and tariffing. Like ISPs they will be eager to add in value added services. Oftel sees IA for mobiles as adding significantly to the range of choices open to end consumers.

1.7 The MVNOs would complete the hierarchy. They would have the same control of calls services as the IA operators - but there would be no need for the customer to dial any access code. Unlike the IA operators, however, they would also have full control of their customers’ subscription services. Subscribers’ contracts with the MVNOs would cover all services; there would be no contract with the mobile operator (hence the term ‘virtual’ mobile operator). The MVNOs would pay the network operators both for use of the mobile network to originate calls and for the access (subscription) to the networks. With such wider control, the MVNO could develop a fully independent range of call services and tariff packages. Would-be MVNOs however see plain calls as simply the starting blocks of new services to offer customers: they expect to innovate extensively in the design and packaging of combinations of new value added services and mobile calls.

1.8 Oftel believes that there can be more than one type of MVNO, depending on how far an MVNO wishes to rely on facilities of the host mobile network. All MVNOs would have the common and essential feature that they would be entirely dependent on the mobile network for the use of the radio spectrum to link their subscribers to the mobile operator’s base stations. At one end of the range of possibilities, the MVNOs would use only the minimum elements of the mobile operators’ facilities – the element using the radio spectrum – and supply all the other elements itself, maximising the opportunity to provide different services and add value. At the other end of the range, the MVNOs might make maximum use of the mobile operators’ facilities. In this case, the MVNOs’ services would scarcely differ from those available directly from the network operators or their service providers – except for the packaging and pricing of the service and the fact that the entire control of the customers rests with the MVNOs.

1.9 The key factor on which the MVNO concept depends for its implementation is the acceptance by the mobile networks of mobile calls transmitted by (or to) customers who are ‘owned’ by another operator. Technically and operationally, this would be arranged by the MVNOs’ issuing their own ‘smart cards’ in place of those issued by the mobile network operators. These smart cards - SIM (Subscriber Identity Module) cards - contain the key

functions identifying the customer to the network. They act as a passport for the customer and their handset: provided they are recognised by a mobile network operator.

1.10 In assessing whether regulatory action might be justified, Oftel will consider both the benefits to consumers of mobile services that might result from MVNOs and the effect on existing operators and their customers. Oftel will follow the same process as it has adopted in its consideration of other mobile issues. It will define the market; review the competitiveness of the market; assess how far and in what ways MVNOs could be expected to add to competition at either the network or the service level, or both; how they might reduce any barriers to effective competition; and what competition there might be between MVNOs. If Oftel were to decide that regulatory action is justified, then, consistent with its approach to indirect access for mobile networks, Oftel would expect the appropriate cost basis to be retail-minus (that is: the MVNO charge would be the retail price after deducting the costs of elements of the service that are now to be supplied by the MVNO and no longer by the network operator).

Purpose of the consultation

1.11 Oftel’s purpose in publishing this document is to gain consumer and industry views on a number of questions arising from the potential introduction of MVNOs into the UK market. These questions cover:

The types of services an MVNO might offer and the number of potential MVNOs that might seek to enter the market;

Possible benefits to competition and consumers of MVNOs;

If commercial negotiations to enable MVNOs fail, on what basis would a case for regulatory intervention be founded, and, if justified, would it apply to all or only some of the mobile operators?;

If regulatory action is justified, the basis for charging for services which MVNOs may require from the existing mobile operators;

Identification of any technical issues that might impose practical or timetable restrictions and how far these might vary according to the variations in the types of MVNO services (identified above) or restrict their implementation.

1.12 Oftel is seeking the views of consumers and the industry as a necessary step in forming its own conclusions. The views received will be used by Oftel to prepare more defined proposals on what (if any) regulatory measures may be necessary on MVNOs, in the interests of consumers and industry and the stimulation of effective competition in mobile markets. The first phase of this consultation will last until 30 July 1999, after which there will be the usual two week period for comments on the responses during the first phase, ending 20 August 1999. Oftel will review the results of the consultation and publish a further document by the end of September.

Chapter 2

The MVNOs and what they might offer

2.1 This Chapter sets out Oftel’s current understanding of what sorts of services MVNOs would offer to the customers; what sorts of organisations might wish to act as MVNOs; and what sorts of facilities they would require from the mobile networks. Oftel is very aware that MVNOs are a comparatively new concept and that ideas and approaches are evolving constantly. What follows is a snapshot of the key features as Oftel understands them at this point in time. Oftel is keen to have views on the issues set out in this Chapter and in Chapter 3. The areas on which views are specifically sought are listed in Chapter 4.

What benefits might MVNOs bring to consumers?

2.2 One of the purposes of this consultation is to understand the benefits to consumers that MVNOs would bring. The MVNOs may be able to offer :

(a) Expanded choices – with MVNOs, the customer would have a wider range of organisations offering them a complete mobile service;

(b) Potentially wider range of services: use of the IN (Intelligent Network) functionality in the MVNOs’ networks may enable them to provide a wider range of services than those available from the mobile networks themselves;

(c) Possibly lower retail prices – exactly how much lower would depend on the one hand on the terms and conditions for the payments by MVNOs to the mobile networks for the connection to their systems and the use of the systems for calls; and on the other hand on how much more efficient MVNOs are in procuring those elements of the service where they substitute their facilities for those of the network operators.

Issue: Oftel would be glad of views on what specific benefits would be provided to customers if MVNO services are available on mobile networks.

What organisations will seek MVNO status?

2.3 If the principle of serving MVNOs were established, then no doubt a range of service providers and established networks, both fixed and mobile, would wish to consider developing MVNO operations. At one end of the range (see paragraph 8) would be the sorts of organisations that have already been formed in Scandinavia. They would make substantial investments in facilities which would parallel many of the functions of the mobile networks and would have their own IN (Intelligent Network) facilities to develop value added services. They would have extensive interconnection with fixed and mobile networks as well as some (at least) network facilities. These organisations would wish to depend on the mobile networks only for the minimum services – those that they cannot supply themselves because they do not have licences to use spectrum. At the other end of the range (see paragraph 8 also) would be MVNOs with minimal investment, possibly confined to facilities for retailing,

customer service and billing. They would look to the mobile networks to supply virtually all elements of the services they supply to their customers. In this sense, they would be little more than resellers and their services would be nearly indistinguishable from the service providers who currently buy airtime on wholesale terms from the networks. The one difference would be that the MVNOs would have the potential to move away piecemeal from total dependence on the networks’ facilities; whereas the ISPs/TSPs have to take or leave the complete packages from the networks.

Issue: Oftel would be glad to learn from respondents what sorts of organisation believe there could be market opportunities for them if MVNO access is made available.

What will the MVNOs require of the mobile network?

2.4 As explained in paragraph 8 (and more extensively in Annex A), there is a range of ways in which MVNOs can implement their services: from the minimum use of the mobile networks’ facilities to almost total dependence on them. This would be mirrored by the gradual increase in the number of elements of the mobile networks’ facilities that MVNOs might wish to have supplied by the mobile networks rather than supply themselves. Ultimately, this could extend to some MVNOs’ being totally dependent on the facilities provided by mobile networks – at which point, from a consumer’s point of view, these MVNOs would scarcely be distinguishable from service providers or the network operators themselves.

2.5 At minimum, all MVNOs will require is the use of the radio elements of the mobile networks and such fixed parts of the mobile operators’ networks as are necessary to route calls between the radio elements and the first convenient points at which calls can leave (or join) the mobile networks en route to (or from) the facilities of the MVNOs. (This minimum amounts to no more than, firstly, the radio transmission link, its control functions and the mobility management functions that keep track of exactly where mobile handsets are located so that calls can be delivered to them; and secondly, some transmission and switching facilities needed to link the radio facilities to the points of interconnection either with the MVNOs’ systems direct, or with transit carriers).

2.6 At the other extreme – maximum use of the mobile operators’ facilities and minimum investment by the MVNO – calls from MVNOs’ customers will be handled virtually entirely by the mobile networks as if in fact they were calls from subscribers to the mobile networks. In particular all the verification operations would be carried out by the mobile operators – whose databases would have to be geared to receive, process and supply data concerning the MVNOs’ customers as well as their own. (In the same way, the routings used for the transport and delivery of the calls after leaving the mobile networks to reach the terminating operators would be exactly those chosen for the calls originated by the mobile networks’ own customers. Virtually all that would be different is that the billing and service performance information would have to be transferred from the mobile operators to the MVNOs).

2.7 Between these extremes there is a range of varying degrees of use by MVNOs of the mobile networks’ facilities and corresponding use of, and investment in, their own facilities. One such permutation could be that some MVNOs set up their own verification facilities to check that calls are acceptable for onward transmission, but the onward transmission would be the same as for calls made by the networks’ own customers. This is the arrangement for

the present system of international roaming for subscribers of other countries’ networks (see Annex A): here the databases of the visited networks and the networks that own the visiting subscribers already exchange this information, but the calls are handled by the visited networks in their usual manner. A completely opposite alternative approach would be for the verification to be carried out by the mobile operators’ facilities but for the calls to be routed to MVNOs for onward conveyance and termination. Clearly if MVNOs are accepted, each will want to specify and agree the range of services to be provided by the mobile networks and reflect this in the contracts, along with an appropriate set of charges.

Issue: Oftel would welcome views on the ways in which MVNOs may use elements of the mobile networks facilities.

Key requirement for MVNOs’ operations: their own issue of SIM cards with their own Mobile Network Codes (MNCs)

2.8 An integral part of any GSM system is the SIM card which contains the information that identifies the user to the network. By exchanging this information with the mobile system when the handset is switched on, the handset is readied to make or receive calls by generating and receiving radio signals. These radio signals are used to make contact with a base station as required. Without a SIM card, a handset can usually make only emergency calls. This is detailed in Annex A. The key information required for this identification is contained in the IMSI (International Mobile Station Identity) code which allows the mobile network to check that the handset/ SIM card is used by a customer who has a contract with the network. This IMSI number is entirely separate from the public telephone number through which the customer is contacted for incoming calls and billed for outgoing calls.

2.9 The IMSI code is also more fully explained in Annex A. In summary, it consists of fifteen digits. The first three identify the country to which the SIM card (and as at present the issuing network) belong - they make up the Mobile Country Code (MCC). The next two are the most important for the purposes of this consultation document and identify the network issuing the SIM card - they are called the Mobile Network Code (MNC). The last ten digits identify the specific customer. The allocation of MCCs is governed by the International Telecommunications Union (ITU). In the UK, MNCs are allocated by the DTI. As with most numbering schemes, these numbers are a finite resource.

2.10 In order to issue its own SIM cards, any MVNO would need to have its own MNC. DTI are developing guidance for the industry and other interested parties on how the MNC allocation process in the UK might work. DTI’s letter of guidance to mobile network operators on GSM code allocation is contained in Annex B. It sets out the conditions that would have to be met to secure an MNC allocation – in particular the condition that intending MVNOs would need to demonstrate that they have effective agreements with mobile network operators so that their customers could use a mobile network. Attention has been focused on the role of MNCs, and the potential demand for them by organisations other than mobile network operators, particularly by the bids made in Scandinavia by the Sense organisation for the right to have its own SIM cards recognised by mobile networks (see Annex C). In the UK, some organisations are also making enquiries about MVNO services and have approached DTI about the allocation of MNC codes.

Issue: Oftel and DTI would be glad to have respondents’ assessment of the demand for MNCs.

Chapter 3

Regulatory issues

3.1 If the MVNO concept is to be translated into services, there has to be an agreement between MVNOs and mobile networks. As ever, Oftel’s strong preference is that any such agreements should be the result of commercial negotiation. The experience of the Sense organisation’s negotiations in Scandinavia has demonstrated some of the regulatory issues that arise if commercial negotiations fail (see Annex C). This Chapter explores some of these issues and seeks to identify questions on which Oftel would like responses. The key question is whether, in the absence of commercial agreement, there needs to be regulatory intervention so that would-be MVNOs can have access to existing mobile networks. If there were seen to be such a need, then on what terms and conditions should the services be supplied? The rest of this Chapter considers such parallels as exist for this sort of service. It briefly reviews some of the economic and competition issues that must be addressed, and considers what powers Oftel has which bear on these issues.

When are other operators’ SIM cards recognised by mobile networks?

3.2 There are two areas where mobile networks recognise or may recognise SIM cards which are not their own. The first is roaming by the subscribers of foreign mobile networks on UK mobile networks. Such agreements are routinely arranged for the joint benefit of customers of both operators and both networks. The arrangements are purely commercial and depend on negotiations between operators. They are not mandatory. There is in fact every incentive for networks to reach this sort of commercial agreement as this valuable traffic is purely additional.

3.3 The second potential category of roaming , not yet in operation, arises from the launch of the Third Generation (3G) of mobile services and systems. The UK Government have said that if any new entrant mobile network operator is successful in the bidding for the use of 3G spectrum, then it will have the right to require roaming from one of the established Second Generation (2G) licensees, under certain limiting conditions. This is to provide a level playing field for such a new entrant by allowing it to offer its customers access to nationwide 2G services in the same areas as the 2G networks. These limiting conditions are designed to ensure the roll-out of the new entrant’s 3G network and will have a finite term (expiring in the year 2009). In its consultation document Access to 2nd Generation mobile networks for new entrant 3rd Generation mobile operators, Oftel has indicated that it expects operators to come to commercial agreement on charges for this sort of roaming service. However, if such agreement is not reached and Oftel is required to set a rate, then the principle would be retail-minus. That is: the charges would be set by deducting from the retail prices of the calls the

costs of the elements of the calls that would no longer be supplied by the mobile network operators but by the MVNOs.

Developments abroad

3.4 The MVNO concept and hence this question of recognition of other operators’ SIM cards, has been developed particularly by the Sense organisation in the Scandinavian countries. Oftel’s understanding of the way the concept is currently emerging there is set out in Annex C.

What basis for regulation in UK?

3.5 The answers to the key questions of the principle of an obligation on mobile networks to

supply MVNO and the basis for charges may in part depend on how the service is defined; that is, which of the range of forms MVNO services can cover is the subject of any dispute. Some elements of the service are clearly akin to interconnection: particularly the conveyance of the call (once accepted) over the fixed (non- mobile radio) parts of the mobile operators’ networks. But the status of others is not clear and it is part of the purpose of this consultation to bring out the issues of definition of what an MVNO service is, and the elements necessary to implement it, in order to develop understanding of what parts of the regulatory regime may be relevant.

3.6 To simplify discussion of a complex issue, it seems best to start with the minimum form of MVNO: that is the form with minimum use of the mobile operators’ facilities, and the maximum use of the MVNOs’ own facilities. This has the merit of focusing the question on the common factor to all forms of MVNO services. This is the access to the air segment and the facilities necessary firstly to register that the MVNO SIM cards are backed by agreements on their recognition; and secondly to handle the calls according to the agreement – which in the simplest case would require the calls to be routed out of the mobile networks at the earliest economic point.

3.7 This common element - the access to the radio and other facilities necessary for handling MVNO calls - has some similarities with access to the local loop fixed networks. This is a current source of discussion by National Regulatory Authorities (NRAs) and with DGXIII. Oftel, too, will be considering what, if any, of the principles discussed in the fixed context may be relevant in the mobile context.

Economic assessment

3.8 The key initial question for Oftel to address in preparing an economic assessment on which to base conclusions on whether MVNO access should be mandatory, is to define the market and its competitiveness. If the market for mobile services is effectively competitive then we might presume that intervention to require access to be provided to MVNOs is not necessary or appropriate; Oftel would expect players in the market to be able to come to commercial agreements on terms of access. If access is not provided there would be a presumption, in a competitive market, that entry would not be efficient.

3.9 Oftel has concluded that the mobile market is a separate market which is not yet effectively competitive. The basis for these conclusions was outlined in the consultation document Competition in the mobile market (February 1999). Consequently there could be benefits from increased competition if Oftel were to intervene to mandate access for MVNOs.

3.10 A requirement to allow access by MVNOs will not increase the number of competitors in the provision of underlying airtime because the MVNOs will not have their own spectrum. There may be benefits, however, from the entry of MVNOs in the form of increased competition between the existing network operators. This could occur if MVNOs are able to reduce barriers to effective competition between the existing four network operators.

3.11 The barriers to competition include the existence of switching costs which make it difficult for customers to change operators. An MVNO may undertake the switching between the underlying networks rather than the retail customer, who would continue to obtain service via the MVNO. Competing MVNOs could have lower network costs of switching from one network to another than a retail customer. For example, they may have lower costs of gathering information and would be able to spread these over a large number of customers.

3.12 This may induce more intense competition between the networks (to supply to the MVNOs). However, its impact on retail customers would clearly depend on the intensity of competition between MVNOs, although if barriers to entry as an MVNO are low then competition may be relatively strong.

What are the legal considerations?

3.13 Oftel is considering the legal framework that might apply to MVNOs. This is uncertain given the lack of precise definition about the form of MVNOs. However the following paragraphs outline some of the possibilities.

3.14 If MVNO services were defined as interconnection services which are governed by Article 4(1) of the Interconnection Directive (ICD), the ICD would provide Oftel with regulatory powers. For example, there would then be an obligation on the networks to negotiate on the provision of services. In the event of a dispute over this negotiation, the issue would be referred to the Director General for resolution using the criteria set out in Article 9(5) of the Directive.

3.15 However, in the light of the consideration given to this issue over the last three months, Oftel is increasingly of the view that the key feature of MVNO operations, recognition of a SIM card, is not a service which falls under the category of interconnection (in the terms of the services to be provided as a result of the working of Article 4(1) of the ICD). We understand this is also the view of other NRAs who have had to look closely at this issue and see MVNO services as the equivalent of roaming services. DGXIII has indicated to UK representatives that in its view roaming is not interconnection as defined in the ICD.

3.16 Requests by MVNOs for access to operators’ networks may also fall under Article 4(2) of the ICD. This applies only to networks which are designated as having significant market power (SMP). The implications of the application of Article 4(2) are currently being considered by some NRAs and also by DGXIII.

3.17 A third basis for asserting that Oftel has the power to mandate MVNO services may derive from Oftel’s statutory duties and powers under Section 3 of the Telecommunications Act 1984. Representations have been made to DTI that they should consider acting on this issue under this Section.

What should be the basis of charges if MVNOs are required?

3.18 The discussion in this Chapter is in deliberately ‘open’ terms: Oftel is seeking views and has not yet formed a clear opinion itself, from either economic or legal analysis, on whether (if commercial agreement cannot be reached) there are any ground for mandating access to mobile networks for MVNOs. An obligation may however be one of the outcomes of this review. It seems wise therefore to include in this stage of consultation a review of the basis of charges if, in the event, there is to be an obligation. This does not prejudge the principle of the obligation to supply MVNO services.

3.19 Whilst Oftel is seeking views on this issue of the charging basis for MVNO services, Oftel believes it is right for it to state that its initial view is that the logical principle for charging would be retail-minus. This would be consistent with the charging basis set out in the parallel context of any 3G new entrant roaming on an existing 2G network; and with the principle proposed in the consultation on IA for mobile networks. Oftel would not expect to adopt the same cost-plus basis (that is: recovery of relevant costs including an appropriate return on capital employed) that is applied to BT’s services to other operators. The relative merits of both approaches when applied to indirect access were discussed at some length in the consultation document Customer Choice: Oftel’s review of indirect access for mobile networks (February 1999). Oftel favours retail-minus charging on the grounds that intervention to reduce retail prices to close to the level of costs is unnecessary in a market which is becoming increasingly competitive and, moreover, could damage incentives to invest in infrastructure, particularly for the two newer 2G operators and operators investing in 3G systems.

3.20 The implementation of a retail-minus principle for MVNOs would however be different from its implementation for 2G/3G roaming and for IA for mobile networks, because (in the case of 2G/3G roaming) the avoided costs would be different and (in the case of IA) the retail tariff from which avoidable costs are to be deducted would be different from the IA retail tariff starting point.

3.21 On the difference between retail-minus for MVNO services and retail-minus for roaming between 2G and 3G networks, MVNO services, in the form on which we have focused in this document (minimum use of the mobile operator’s facilities), would require much less from the mobile network than the end-to-end call connection required to provide a roaming service to visiting subscribers of other countries’ mobile networks. The foreign visitors’ calls would be routed end-to-end just like any other calls on the mobile networks from mobile operators’ own customers, who have service contracts directly with them or with their service providers. By contrast, the MVNOs’ calls would be routed off the mobile network at the earliest economic point to reach the MVNOs’ facilities for further conveyance and delivery. In this, the MVNO calls would be much more akin to indirect access calls from mobile networks, using access codes to select IA operators’ facilities.

3.22 Conversely, on the difference between retail-minus for MVNO services and retail-minus for IA services on mobile networks, the retail tariff starting point for MVNO calls would need to parallel the retail tariff starting point for roaming calls: that is - covering the cost of access to the network as well as the cost of handling the calls. Retail-minus for MVNO calls has thus also to include elements of the retail price for the network subscription, covering the cost of the radio facilities linking the handset to the base station, the equivalent of the local loop, in the same way as such costs have to be included in the price base for retail-minus when applied to 2G/3G roaming.

Issue: Views are invited on the basis for charging for MVNO services outlined above.

Chapter 4

List of Issues on which Oftel welcomes views and comments

Definition of MVNOs

4.1 Behind the concept of MVNO, there is a range of ways in which it can be put into effect depending on the extent of the use of the mobile operators’ facilities: Oftel welcomes views on what these variations might be and which would be most attractive to operators or customers.

4.2 As part of this definition of what the MVNOs may request from networks, Oftel would welcome views on which elements constitute parts of the ‘access’ service and which are akin to interconnection services; and especially on the classification of the important ancillary services (such as interrogation of data bases for essential verification, location and routing information and for the entering and storing of information on such data bases).

Assessing demand for MNCs

4.3 Oftel recognises that its own decisions on whether there should or should not be an obligation on mobile network operators to supply services to MVNOs – and on what terms and conditions - will influence the level of interest in MVNOs and hence the demand for MNCs. Nevertheless Oftel (and DTI) will be glad of views that will help gauge the likely scale of demand for MNCs.

In the absence of commercial agreement, is there a basis for requiring mobile network operators to supply MVNO services?

4.4 Oftel’s preference is for the parties to come to commercial agreements. However, this may not prove possible. Oftel would be glad of views on the consumer, economic, or competition factors commentators believe should be taken into consideration.

If there were an obligation, which of the mobile operators should be liable? Under what criteria?

4.5 Oftel prefers minimum regulation, confined as far as possible to those with market power. Oftel welcomes views on whether any obligation to supply MVNO services should extend to one, two or all of the mobile networks.

If there is to be an obligation, what are the terms – especially for charging?

4.6 Oftel sets out in this consultation document its preliminary conclusion that, consistent with its proposals in parallel cases, the appropriate basis is retail-minus. Nevertheless, this is consultation and Oftel would welcome views

What technical considerations may need to be kept in mind?

4.7 The technical descriptions in Annex A have been deliberately simplified in the cause of explaining a concept which, on a first encounter is not easily assimilated. Oftel wishes to be sure that there are no serious technical considerations which it needs to take account of either for the general principle of MVNO services or for the implementation of particular versions of MVNO. Oftel would therefore like to have views from interested parties identifying any potential points of technical or operational difficulty and their possible effect on timetables.

Consultation Oftel seeks the views of consumers and industry on the proposals contained in this consultation document by 30 July 1999. There will then be a 2-week further period during which comments on the representations made during the first period of this consultation are invited; this will end on 20 August 1999.

Comments should be made in writing and sent to:

Steven PaterRegulatory Policy DirectorateOftel50 Ludgate HillLondon, EC4M 7JJ

Tel: 0171 634 8863Fax: 0171 634 8924E-mail

Written comments will be made publicly available in Oftel’s Research and Intelligence Unit except where respondents indicate that their responses, or parts of it, are confidential. Respondents are therefore asked to separate out any confidential material into a confidential

annex which is clearly identified as containing confidential material. In the interests of transparency, respondents are requested to avoid confidentiality markings wherever possible. Appointments to view written comments in Oftel’s Research and Intelligence Unit, which must be made in advance, can be arranged by ringing: 0171 634 8761 (fax: 0171 634 8946).

Oftel would like to set up a link between this Consultative Document and any responses placed on respondents own Internet pages. Please contact Lauren Ryner at Oftel on 0171 634 8753 or by e-mail  to arrange this. Confidential responses should not be sent via the Internet.

Oftel has a free e-mail based mailing list to help people stay informed about the work that Oftel is doing. Each time an Oftel document is published and placed on Oftel’s web site subscribers to the list receive an e-mail informing them about the document. If you would like to join please click here.

Alternative Formats

Copies of the full Consultative Document are available on disk.

The Summary is available in large print, Braille, and tape formats.

Please contact the Oftel Research and Intelligence Unit on 0171 634 8761, or by e-mail, or call textphone 0171 634 8769 for more information.

Annex A

How the technology works

Introduction

1 In order to help understand the implications of some of the changes being consulted upon in this document this Annex has been included to give an overview of digital mobile networks, and how some implementations of MVNOs may work in relation to them. This is not intended to be an exhaustive or detailed description, but one that gives the general reader the opportunity to understand how the standard components work in relation to each other and a brief description of them.

2 Central to the concept of an MVNO is the ability of its subscribers to roam onto other mobile networks. That is having the MVNO’s customers able to make and receive calls using the infrastructure of a GSM network with radio frequencies. The MVNO would not have any radio spectrum itself, so could not implement a full mobile network.

3 Figure One gives an overview of how a Global System for Mobile Communications (GSM) network operates, and the terminology employed:

 

Click here to view figure 1

 

General description

The Mobile Station (MS)

4 This is the mobile that a user will have. The mobile station consists of a subscriber identity module (SIM), that is needed to allow the phone to make normal calls, and the mobile phone. It is worth noting that it is possible within the GSM standard to make emergency calls without a SIM, however this is sometimes barred by network operators. The SIM is placed inside the phone (normally at purchase) and is a small smart card type device that has details of the user. It has the users public telephone number and the numbers required by the network to recognise and authenticate the subscriber (authentication key). The SIM is transferable between different mobile phones and also contains pre-programmed personal numbers. There are two sizes of SIM possible, normal and mini. Most modern phones use mini SIMs.

5 This SIM roaming (moving your SIM from one phone to another) is sometimes not possible between phones of different GSM networks, due to SIM roaming being barred by the network operator.

Base Station System (BSS)

6 The BSS consists of the Base Transceiver Station (BTS) and the Base Station Controller (BSC). The BTS can be a large metal mast, comprising the transmitting and receiving antenna, or a smaller structure mounted on an existing building.

7 The BSC is not usually located with the mast as the BSC can control a number of BTSs. The BSCs main function is to control the radio interface management, ie allocation and release of a radio channel, and handover from one BTS to another for mobility management. This mobility management is central to how a mobile network operates. Users are mobile and want to be able to walk or drive whilst making calls. This means that during the length of a mobile call a user may actually be making their call through a number of BTSs in succession. The ability to do this without suffering a loss of service or quality is controlled by the BSC.

8 When a call is made to or from a mobile phone, radio signals are transmitted and received by the mobile phone and the network operator’s base station. The radio part of a mobile network is also known as the air interface.

Mobile Services Switching Centre (MSC)

9 The main purpose of the MSC is to co-ordinate the setting up of calls to and from mobile phones in the GSM operator's network. It routes the call to and from the Public Switching Telephone Network (PSTN), which is the series of networks that a call is required to pass through from the person making the call the person called. For instance a call from a GSM mobile phone to a BT customer will go via BT’s network. To a subscriber outside the UK this

will need to go via international networks. The first point of contact between the PSTN and the GSM network is called the Gateway MSC. The choice of which MSCs act as gateway MSCs is up to the operator (ie all MSCs or some designated MSCs). This gateway MSC contains the interworking functions that are required to connect the GSM network with the PSTN. The gateway also enables calls from the PSTN to be routed to the correct MSC by interrogating the Home Location Register (HLR). The HLR is a database that contains the subscriber information required to provide customer services without knowing the exact location of the mobile within the network. The HLR contains information such as:

Location information (VLR number);

Basic telecommunication services subscription information;

Service restrictions (eg roaming limitation);

Supplementary services; the tables contain the parameters attached to these services.

10 The Visitor Location Register (VLR) is responsible for keeping more accurate information as to where the mobile phone is within the GSM network. There are a number of VLRs in a GSM network, and they are logically associated with an MSC. Whenever a mobile registers with a VLR the VLR informs the HLR that the mobile has registered. In this way any call for a particular mobile can be routed to the correct area of the network (group of BTSs) so they can page the mobile to alert it to an incoming call. The VLR contains information such as:

The GSM number of the mobile;

The subscriber directory number;

The temporary GSM number of the mobile, if applicable;

The location area where the MS has been registered. This will be used to call the station;

Supplementary service parameters.

11 Associated with the HLR is the Authentication Centre (AUC), this contains the information required to verify that the SIM card in the mobile is the one that is announcing itself to the network.

12 There is also an Equipment Identity Register (EIR) associated with each GSM network. This checks that the mobile equipment (ME : ie handset) as opposed to the SIM is valid. Each ME has a number associated with it called the International Mobile Station Equipment Identity number (IMEI). For instance the handset could be stolen or known to be faulty or not fully approved for the network. It can also be useful to monitor how particular makes of handsets perform within the network. The network can ask the mobile for its IMEI number on each call or on specific occasions such as location area up dates (see below), or a selection of call updates. The choice is the operator’s.

13 The network is controlled and monitored by the operator at the Operations and Maintenance Centre (OMC). Here the operator can monitor how traffic is passing through the network and detect any alarms indicating faults within the network.

14 The last part of network shown in the diagram is the Service Control Point (SCP). This is associated with the Intelligent Network (IN) part of a GSM network. The appearance of SCPs in GSM networks has evolved from their use in fixed networks. Their main advantage is that they allow operators to implement new and innovative services in their networks more rapidly and at lower cost.

How calls are made

15 GSM networks are divided into a number of Location Areas (LA) which have a number of BTSs within them. Each BTS supports a number of cells (normally one to three cells). LAs help to define where a mobile is within a network when a mobile needs to be contacted. If the LAs are too small then the network would constantly be updating which LA the mobile was in. If the LA were too large then the network would have to send more signalling than required to contact a mobile.

Registering on a GSM network

16 For a mobile to register on a new GSM network, a Location Update is performed (after the mobile has detected the broadcast channel of that network). This is performed automatically. If the mobile was not previously registered with the network the IMSI (International Mobile Subscriber Identity) number is sent by the mobile to the MSC/VLR. The IMSI number is the GSM number associated with each mobile, although it is not the same as the directory number used to dial someone from the PSTN. Sometimes a temporary IMSI (TIMSI) is used which is allocated by the VLR - this improves security by keeping the number of times the IMSI is transmitted over the air interface to a minimum.

17 In the case of a mobile registering on its home network a location update request is sent is on the random access channel of the air interface. This is a signalling channel used by mobiles to signal the network that they wish to communicate. In this case to register. The mobile will then await a reply on the paging channel. If no reply is forthcoming the message is resent. On receiving this message the BSS will contact the MSC/VLR. The MSC/VLR will check with the HLR to ensure the user is entitled to register, and also to update the HLR as to which VLR to contact regarding incoming calls for that mobile. The HLR will also be able to inform the VLR of any subsequent changes to the status of the mobile’s subscription status. Before the location update is completed a process of authentication may be carried out to ensure that the mobile is whom it purports to be.

18 The authentication involves the use of the authentication key which is stored in the AUC and the SIM. A calculation performed on this key using a random number which will result in a value (SRES). The random number is sent to the mobile which performs its own calculation of SRES, which it sends back to the network. The network compares the two values. If they are the same then the mobile is authenticated. The process of contacting the HLR also means that the HLR knows where the subscriber is and which VLR to contact if an inbound call for the subscriber arrives at the gateway.

19 The network then sends the successful location update message to the subscriber and is then successfully registered. The EIR may also be interrogated to check if the mobile (as opposed to the SIM subscription) is valid.

20 The mobile is now registered in the location area and able to make and receive calls. The size of location areas will vary depending on network characteristics.

21 In the case of a roaming customer (ie a mobile visiting another GSM network) the IMSI is used to identify the home country and network. This allows the visited network to send a signalling message to the HLR of the subscriber’s home network (assuming there is a roaming agreement with the two networks). The home HLR will be able to check the roamer’s subscription status to see if roaming is allowed. This information is communicated back to the HLR of the visited network.

Inbound call

22 If an inbound call is made this will be routed using the PSTN number to the gateway MSC of the home network. The GMSC then interrogates the HLR. The HLR has a translation table to convert the PSTN number to the International Mobile Station Identity (IMSI) number used by the GSM networks. The HLR will have a record of the last VLR to update the position of the subscriber (or if the subscriber is attached to the network). The HLR interrogates the VLR, which responds with the Mobile Station Roaming Number (MSRN) for routing. That is the information needed by the gateway MSC to route the call. The HLR then passes the MSRN to the GMSC which routes the call to the visited MSC. If the call is to a mobile that has roamed onto another GSM network the GMSC will use the MSRN to route the call through the PSTN.

23 The visited MSC then sends a paging message to the BSS which will initiate the paging request over the air interface to establish a call with the mobile subscriber. The mobile on detecting the paging message for it will send a message on the random access channel to respond. On receipt of this the BTS will allocate a dedicated traffic channel and notify the mobile of this using the paging channel. This is the initial channel assignment. This traffic channel will be maintained unless a handover occurs. This can be because the mobile has moved out of the coverage of a particular cell, or if the radio signal is better on another cell or channel, or if the traffic load is too high on a cell and another with less loading is available.

Outbound call

24 For an outbound call from the mobile (assuming it is registered), the mobile requests access to make a call using the random access radio channel, the BSS will then assign a channel and the call will be routed to the MSC. If the call is external to the mobile network it will be routed through the GMSC using the ISDN to the correct country, then network or region (depending on that particular countries assignment of subscriber numbers). The final switch or exchange will then route the call to the correct subscriber.

25 For a roamed customer there may be a requirement to check with the home network if they are authorised to make the call, but this would not normally happen on a call by call basis, and will be dependent on the terms of the roaming agreement reached.

Mobile Network Codes (MNC)

26 The common feature of all forms of MVNO operations - and the major distinction from Indirect Access (IA) operations – is that the SIM card (the ‘smart card’ that provides the key function of identifying the customer to the network) would be provided and owned by the MVNO and not by the host mobile network. This is the key control that would allow the MVNO to own the customer. Of course, the SIM card would have to be recognised by the network.

27 Within GSM the number given to a particular subscriber is the International Mobile Station Identity (IMSI). The construction of the IMSI is shown below. The IMSI is stored on the SIM card. Part of the IMSI is the Mobile Network Code (MNC).

28 To issue a SIM card there is a requirement for an MVNO to have an MNC. The MNC identifies the subscribers host network, which normally would contain the subscribers HLR, where information on how any call is handled when the subscriber roams onto another network resides. Therefore consideration needs to be given as to how MNCs might be allocated to MVNOs.

29 The IMSI number is not the same as the user’s telephone number which is dialled by others to contact the subscriber, but the number GSM networks use to identify subscribers.

30 The IMSI is partitioned into three parts: the country code, the network code and the mobile subscriber identity number (MSIN). The mobile country code (MCC) consists of three digits, the Mobile Network Code (MNC) consists of two digits, and the MSIN has ten digits.

31 The MSIN is the number by which the GSM network recognises its customers. As the MSIN is ten digits long, it has the potential to accommodate 10,000,000,000 subscriber numbers.

32 One of the questions that arises in the issuing of SIM cards is the requirement for the issuing of MNC numbers. Some of these are already allocated to existing mobile operators. It may be possible for more than one MVNO to share a single MNC. As the number space contained within a single MNC is so large, this sharing may help conserve the valuable number resource. Comments are sought on the viability of this and the technical implications.

Structure of International Mobile Station Identity (IMSI) number

 

MCC

3 digits

 

MNC

2 digits

MSIN

10 digits

MCC : Mobile Country Code

MNC: Mobile Network Code

MSIN: Mobile Subscriber Identification Number

How might an MVNO work?

33 A roaming agreement requires a commercial contract between two operators to allow customers to use their respective networks. An MVNO will require such an agreement to be able to operate. An MVNO would not be able to reciprocate roaming as it has no spectrum.

34 It is possible for the mobile of one network to roam onto another network (as described in ‘Making a Call’). This form of roaming is known as mobile station roaming and has very little extra functionality required other than the signalling required between the two networks and an agreement as to how often the billing information is sent between the two. However the first time the roamer logs onto the visited network can be a lengthy process (of the order of 30 seconds) as the two networks pass data to each other.

35 For an MVNO to work in the simplest technical form would require it to have the same functionality as an existing GSM network has to allow its customers to roam onto another GSM network. This functionality is explained in ‘How a call is made’ above.

36 It requires a gateway MSC function to allow the MVNO network to interact with the PSTN, an HLR, MSC, AUC, EIR, and billing functions, along with a maintenance centre. Calls to the mobile subscriber would be made in the same way as calls to a normal GSM mobile. That is the MVNO would have a network code (or a number space within a network code) which would route the call to the MVNO GMSC. From there the MVNO would check its own HLR to find the last location of the subscriber and contact the VLR it has recorded against that subscriber. This would be the VLR of the visited network. The VLR of the visited GSM network would pass the MSRN to the HLR, which would pass it to the MVNOs GMSC. Using the MSRN the MVNO would be able to complete the call using whatever route it desired.

37 Calls made by a mobile subscriber of an MVNO registered on a ‘full’ network would function in the same manner as described above for any GSM roamer. That is via the visited networks gateway MSC and then on using the visited networks preferred routing option.

38 This represents the ‘simplest’ form of MVNO in terms of how it fits into the existing GSM framework, that is the easiest to implement technically.

39 In the above scenario the routing of the call made by the mobile is in the hands of the visited network, which will have agreements with various fixed providers to carry the GSM traffic (via BT, C&W, NTL, etc). There is the possibility that the call can be ported to the MVNO’s gateway directly, leaving the MVNO to decide how to carry the call. This is shown in Figure Two. While this adds an extra leg to the calls journey, it gives the MVNO the opportunity to have a commercial agreement with their own fixed network providers which may leave the MVNO with a larger profit per call than using the visited GSM operator’s network routing (beyond the GMSC). There may also be the possibility to decide on a call by call basis.

40 The MVNO would make their profit on the difference between the cost charged to the subscriber and the amount paid to the visited GSM network and the costs involved in

terminating the call beyond the visited GSM network. The same would be possible for inbound calls to the mobile. In this case because the MVNO has a unique MNC (or subspace within one) the call would be routed directly to the MVNO’s GMSC. It would then be up to the MVNO on which route to use to get the call to the visited GSM networks gateway MSC.

41 There is also another option whereby the MVNO does not have any switching or HLR capability, but enters the customers data directly onto the ‘full’ network’s databases (HLR etc). In this case all that is required is a database that can communicate with any GSM network (which has radio spectrum), and this is not required to be ‘real time’, ie during call set up. The visited GSM network will have all the details required to handle the call from or to the mobile, and will produce the billing information for the MVNO who will process it. In this situation the MVNO might not require their own MNC, but issues SIMs with the MNC of an existing operator. Technically this is very similar to what happens with existing GSM service providers.

 

Click here to view figure 2

Annex BTranscript of DTI letter of 13 April 1999 sent to mobile operators regarding Mobile Network Code allocation (plus Radiocommunications Agency attachment on TETRA code allocation).

"Allocation of Mobile Network Codes

1 As you will know, in accordance with ITU Guidelines COM 2-R 35-E Paragraph 7.2.2 the DTI is the national administration in the UK which has the task of issuing Mobile Network Codes (MNCs) to GSM operators. These guidelines call for MNCs to be allocated in an efficient manner.

2 Interest has been expressed by potential Mobile Virtual Network Operators (MNVOs) who are seeking access to GSM networks and are endeavouring to establish suitable agreements with network operators either in the UK or overseas. A consultation document relating to the MNVO concept will be released by Oftel in the near future. It will raise the issue of allocation of unique MNCs available for GSM in the UK, if allocated in accordance with the ETSI specifications, is 200 of which at present some 8 have been allocated to GSM operators (including operators in the Channel Islands and the Isle of Man) and one has been allocated to Dolphin.

3 In principle the DTI considers that there are no reasonable grounds to refuse to allocate MNCs to legitimate MNVO applications in the UK. However, since there is a finite number of MNCs available, the DTI will only allocate MNCs to operators who can show that they have plans for an adequate network infrastructure, and can also demonstrate that they have

negotiated an agreement with a mobile network operator allowing access to a GSM radio network. Typically this would be by means of a suitable roaming agreement. In addition to this the applicant would also be expected to submit information similar to that requested when applying for a licence: ie background on the company, a description of the services to be offered, details of the system to be run, interconnection agreements, typical chain of conveyance of messages, technical expertise, summary business case etc.

4 The DTI obviously wishes to maintain a consistent approach to the issue of MNC allocation. With regard to future TETRA operators, it is clear that the DTI and the RA (who are responsible for the allocation of TETRA MNCs) will need to provide the necessary MNC allocations in the UK. A draft policy document on the procedures for TETRA allocations is therefore being developed and the latest version of the document is attached. In the light if the need to maintain consistency in our approach, you may find this paper of interest as it may affect our future consideration of applications from MNVOs for MNCs.

5 I would be grateful for any comments which you may wish to make on the contents of this letter. I would also be grateful if you could set out how you are using all of the MNCs which have been allocated to your company."

Attachment to DTI letter of 13 April 1999 to mobile operators.

"Interim policy for the allocation of TETRA Mobile Network Codes

Introduction

6 Following the outcome of the ETO Workshop on TETRA Numbering and Addressing, which acknowledged the need for a separately administered Numbering space, RA CTEC identified the requirement for a process for Number Allocation. At the ETO Workshop, it was agreed that the numbering aspects contained in the relevant standards required amendment for clarification. Such clarification was on the basis of TETRA and GSM having distinct and separate Numbering and Address space.

Assumptions

7 At the time that this policy was written (Q2/1999), the TETRA standards had not been amended to reflect the outcome of the ETO Workshop. Therefore in advance of such amendments the following assumptions have been made.

A Tetra Country Code has been assigned by the appropriate Administration Body.

The RA has been identified as the Administrating Body of the TETRA Mobile Network Codes, that exist behind the TETRA Country Code.

The administration of Subscriber Numbers that exist behind the TMNC remain outside the scope of this interim policy.

Issues

8 The following issues need to be addressed by the appropriate ETSI group:

Emergency call handling

Dual working with other mobile technologies e.g. zone identity from a GSM environment

Roaming using the ISI

CLI (Calling Line Identity)

Zone ID

Number Portability

Do implementations of TETRA require a licence? Is so, then, this should be a prerequisite for any allocation. Should allocation of spectrum be a prerequisite?

Only one TMNC for allocation per logical allocation?

Role of CII?

Virtual Country Codes?

Leading zero suppression?

Registration Authorities

Scope

9 This interim policy specifies the requirements for, and the method of, assignment for the allocation of numbering resource for both civil and public safety implementations of TETRA. The allocation of GSM Numbering resource is not covered by this policy.

Process

10 Service Providers who require an allocation of TETRA MNC shall apply in writing,

giving the information required by the RA. The RA shall have up to 28 days to seek further information from the applicant. At the end of the 28 days, a written answer shall be given.

Issues Outstanding:

a. An appeals process shall be required. b. The responsibilities of the various departments within the RA exist, and

perhaps should be reflected in the process.

11 Once an MNC has been allocated, then:

The assignment is for 12 months;

At the end if 12 months the RA shall ensure that the resource has been brought into service;

If after 12 months the resource is not used then: an extension of a further 12 months shall be negotiated or it shall be reclaimed;

If after the granting of an extension, the resource is not in use and no progress can be shown towards bringing it in to use, it shall be reclaimed;

A Service Provider shall not be excluded from applying for a further code if they have had a code reclaimed under this procedure;

The Service Provider shall provide annual returns on the use of the Numbering resource behind the TETRA MNC. These records on which Service Providers base their returns shall be liable to audit by the RA;

The returns shall be used in judging the viability or not of any subsequent application for TETRA MNC.

Tetra MNCs (TMNCs)

12 The TMNCs allocated shall be four digits.

10 bits 14 bits 24 bits

3 digits 4 digits 8 digits

TETRA Mobile Country Code

TETRA Mobile Network Code

Network Specific Short Subscriber Identities

Subsequent allocation of TMNCs

13 When applying for subsequent TMNC’s, Service Providers (SPs) shall need to justify the request either through high utilisation, conformance to ETSI standard, or supporting a multi-vendor environment.

Requirements on service providers

14 Service Providers shall ensure that accurate records are kept of numbers allocated, and that appropriate management processes are employed. Audits may be carried out, and resources that are being misused, or that fail to meet the minimum required level of utilisation may be withdrawn.

15 Any change in the rationale used to obtain the number should be notified to RA. Where this contravenes the TETRA Numbering Resource Conventions, the bi-lateral discussions between the SP and the RA will be undertaken to resolve the issues.

Requirements for allocating TETRA numbering space

16 An organisation requiring allocation of TETRA Numbering Space shall specify when the Numbering space will be required, the scope of any application, the potential number of users (in confidence)."

Annex C

Foreign developments

1 An important part of Oftel’s review of the MVNO concept has been to obtain an up to-date assessment of the state of policy development on this issue in other European countries. In conducting its research, Oftel has found that, with a few exceptions, it is early days for European regulators - issues surrounding the MVNO concept have not been discussed in any great detail, and hence most regulators are not yet in a position to provide categoric statements of policy. The exceptions are the Norwegian, Danish and Swedish regulators - all three have formally ruled on disputes relevant to the MVNO concept in response to requests they have received from an organisation called Sense Communications (a Norwegian based service provider). The Finnish regulator has also reviewed some of the issues surrounding MVNO, although it has not formally ruled on a dispute. Some background detail on these foreign developments now follows:

Norway: the Sense dispute with Telenor Mobile

2 In September 1998, after six months of discussion and mediation, the Norwegian NRA ruled on a dispute between Sense and Telenor. The NRA ruled in favour of Sense, because under Norwegian legislation, Telenor is an operator with SMP and is thus obliged to meet all reasonable requests for access. Consequently, Telenor Mobile was ordered to begin interconnection negotiations with Sense. However, all three operators with a licence to operate a GSM 900 or DCS 1800 network in Norway appealed against this ruling, and the Ministry of Communications decided to examine the matter. In March 1999, a government telecomms authority made a Statement that would have the effect of reversing the NRA ruling, although the Ministry has not yet endorsed this. A report on the fundamental questions raised by the MVNO concept is due to be presented to the Norwegian Parliament in Autumn.

Denmark: the Sense dispute with Sonofon

3 In early 1998, Sense requested access to interconnect with the mobile network of Sonofon. Sonofon refused access on the grounds that recognition of another organisation’s SIM card is roaming, and that roaming is not interconnection (this is a DGXIII ruling). In June 1998, the Danish NRA was asked to resolve the dispute, and in February 1999 it outlined its decision, effectively ruling in favour of Sonofon.

4 In its ruling, the NRA decided that Sonofon had significant market power and had an

obligation to meet Sense’s reasonable requests for interconnection as specified under the ICD. The NRA also endorsed Sense to use SIM cards which contain Sonofon MNCs and Sense’s own subscriber numbers. However, it decided that Sonofon should not be required to route calls received from mobile terminals with SIM cards containing Sense’s own MNC code, because the service desired by Sense constitutes the same functionality as roaming between mobile networks. In other words the NRA did not regard roaming as an extension of interconnection, which agrees with the argument as presented by Sonofon above. Sense had, nevertheless, been issued with an MNC by the Danish NRA.

Sweden: the Sense dispute with Telia

5 The Swedish NRA has considered the MVNO concept in some detail, and just like the

Danish NRA, it has decided that an established GSM network, Telia, is not obliged to accommodate Sense’s request for access, on the basis that the form of connection requested by Sense, ie recognition of Sense’s SIM card, is roaming and does not constitute interconnection. However this is regarded as a legal argument, not an economic one. The NRA believes it would be beneficial to the competitiveness of the Swedish mobile market, and particularly in the encouragement of downstream competition at the service provider level, if a business concept such as Sense’s was realised. It has therefore proposed amendments to the Swedish Telecommunications Act which would oblige networks to provide MVNO services; the main argument being that GSM operators should have to accommodate all reasonable requests for network capacity on market-based conditions. In the long term, NRA envisages lower tariffs due to the increased service provider competition.

Finland

6 The Finnish NRA has been reviewing the issues surrounding the MVNO concept since March 1998 – triggered in particular by complaints from operators on the difficulties they are having reaching commercial agreement for MVNO facilities with the national SMP mobile supplier. Up until now, no request to resolve a dispute has been registered with the NRA, but the NRA has encouraged potential MVNOs to continue to negotiate their preferred terms with the incumbent. The key question is whether the recognition of the MVNO’s SIM card is interconnect or roaming, and whether it is more similar to access to the MVNO’s switch (like local loop in the fixed network) than to interconnect (particularly given the replacement of the mobile network operator’s facilities by those of the MVNO operator, with the exception of the base station, the base controller and the VLR). This raises the interesting question of whether the MVNO concept can properly be described as a ‘virtual’ operation.

Annex DGlossary

AUC – Authentication Centre*

BSC – Base Station Controller*

BSS – Base Station System*

BTS – Base Transceiver Station*

Cost-Plus – a charge which covers the costs incurred by the network operator in providing services for other operators, including a reasonable return on capital employed.

EIR – Equipment Identity Register*

GSM – Global System for Mobile Communications

HLR – Home Location Register*

IMSI – International Mobile Station Identity*

Indirect Access – a situation where a customer contracts to buy a telecommunication service from an operator to which the customer is not directly connected, and where the second operator pays the first operator for the use of that connection.

Interconnection – the physical and logical connection of two operators’ networks thereby allowing customers of one system to connect with customers of the other, or to access services provided from the other system.

Interconnection Directive (ICD) – the European Union Directive which came into effect from 31 December 1997, setting rules for, amongst other things, who has rights and obligations for interconnection and the terms on which it should take place.

Market Power/ Market Influence – the ability to raise prices above the competitive level for a non-transitory period without losing sales to such a degree as to make this unprofitable.

MCC – Mobile Country Code*

MNC – Mobile Network Code*

MSC – Mobile Services Switching Centre*

Network operator – the operator of a telecommunication network with a PTO licence which provides, amongst other things, network services.

OMC – Operations and Maintenance Centre*

Originating operator – operator on whose network the call originates, i.e. the operator with the line to the customer.

Retail-Minus – a charge based on the retail price to the end user minus the costs of all elements of the call which are no longer supplied by the mobile network operator (since they

will now be supplied by the MVNO).

Roaming – the provision of connection services by means of the Applicable Systems to authorised mobile operators in respect of teleservices and bearer services pursuant to a national roaming agreement between the licensee and a relevant mobile operator.

Service provider – provider of telecommunication services, or services with a telecommunication service component, to third parties whether over its own network or otherwise.

Significant Market Power (SMP) – the SMP test is set out in various European Directives, notably the Interconnection Directive. It is used by the National Regulatory Authority (in UK: Oftel), to identify those operators who must meet additional obligations under the relevant Directive. It is not an economic test; rather it requires a consideration of the factors set out in the test within a specified market – much is left to the NRA’s discretion.

SIM – Subscriber Identification Module*

Terminating operator – the operator on whose network a call terminates.

Third Generation (3G) mobile systems – A European 3G mobile communications system will provide an enhanced range of multimedia services (such as high speed Internet access). 3G networks are expected to enter service in 2002/3 using radio spectrum in the 2GHz bands.

VLR – Visitor Location Register*

* For further details, please refer to Annex A.

Images

Figure 1

 

Note: The photograph in Figure One has been reproduced with permission from "Mike P’s UK GSM & UMTS Pages" at http://www.prattfamily.demon.co.uk/mikep/gsmnet.html

Figure 2