Select Committee on Trade and Industry Appendices to the Minutes of Evidence


Memorandum submitted by WorldCom


  Brief corporate information about WorldCom is provided in Annex A.


  This paper is intended to assist the Select Committee in understanding WorldCom's position on ULL including its observations that:

    —  OFTEL appears disproportionately focused on unbundling the physical assets of BT and is not equally and sufficiently focused on the importance of unbundling BT's concomitant information and billing systems (as well as the physical assets);

    —  BT's main strategic advantage in the context of ULL is not only its physical assets (ie local exchanges and copper loops), but also its customer and strategic network design and traffic information as well as its customer billing systems;

    —  the importance of "electronic bonding" between BT's network and other ULL operator networks, including real time and open access to BT's OSS and billing systems, is not fully understood or appreciated by OFTEL;

    —  there is strong evidence in other countries which have obliged incumbent PTT's to offer billing services to third party operators that demonstrates the likely positive competitive consequences of obligating BT to offer equal access to OSS and third party billing;

    —  the present UK regulatory objective and the Government's vision on ULL will likely be defeated unless special attention is paid to these last mentioned issues and, if necessary, additional regulatory safeguards provided to effectively deal with them.

  Accordingly, WorldCom considers the challenge to OFTEL in effective unbundling of local loops and opening up local access to effective competition therefore lies in ensuring that, so far as possible, the significant advantages of incumbency and power derived from BT's information and billing endowments are neutralised.


  ULL lies at the heart of the Government's aspiration to ensure that the UK has one of the most vibrant electronic economies in the world. The delivery of the Government's vision depends upon vigorous and effective competition, which is the most powerful means of securing long-term benefits to consumers.

  We do not share OFTEL's view that existing ULL regulations and arrangements are sufficiently comprehensive and cannot be improved. The UK has fallen behind the US and other countries in ULL implementation. In order to catch up, ULL regulation in the UK must ensure effective and speedy delivery of BT of not only the physical assets to facilitate provisioning and delivery of loops, but also the associated intellectual or information assets, including BT's Operational Support Systems (OSS) and billing systems. Otherwise the Government's vision on ULL will likely be defeated.

  Historically, existing regulatory arrangements have not been successful in preventing determined leveraging by BT. The best recent examples of this are Flat Rate Internet Access and DSL: both strategically important markets in which BT has successfully secured first mover advantages despite the protestations of OFTEL and competitors. [14]

  The ability of competitors to rapidly enter the local access market and other "new economy" markets and to innovate is being seriously compromised by regulatory gaps. The cost of this in terms of product innovation and consumer welfare is rising daily. ULL presents an historic opportunity to reformulate and improve the regulatory framework and accelerate competition.

  We cannot overemphasise that BT's main strategic advantage in the context of new market entry is not its physical assets (eg local exchanges and copper loops), but its customer and strategic network design and traffic information as well as its customer billing systems. The challenge to OFTEL therefore lies in ensuring that, so far as possible, the advantages of incumbency and power derived from BT's information and billing endowments are neutralised.


  BT has long understood and sought to exploit the competitive advantages that it derives from the information it holds and its billing systems which represent an essential facility for new entrant operators. WorldCom considers that equal access to information and billing capability is not adequately understood by OFTEL or fully addressed in current ULL regulations or arrangements.


  Open access to network databases is frequently referred to as "electronic bonding". The OSS interface is an essential element of the seamless integration of networks. In order to realise the full potential of the benefits offered by advanced intelligent networks, there must be open access to customer information and billing systems within BT's network, so that:

    —  the competing operator on behalf of the customer can access all information and data which the customer has stored in a particular database from whichever network which the competing operator or customer chooses to log into throughout the day; and

    —  in circumstances where a customer chooses a competing operator to manage all of his or her telecommunications services, that operator can obtain all relevant information about the customer's services acquired from BT's networks—and this requires the operator to be able to access the customer databases of BT (relating to pre-ordering, ordering, provisioning, billing and fault management) in exactly the same manner as BT.

  Electronic bonding, including access to billing systems, not only enhances the openness and connectivity of networks—it has also become a primary competitive differentiator in telecommunications, improving business processes and making them less costly to operate. An absence of electronic bonding raises costs, impacts detrimentally on customer service and impedes the ability of any operator—except BT as the incumbent operating a ubiquitous network—to provide a one-stop shop for its customers.

  It is for this very reason that incumbents such as BT have been, and remain, the strongest opponents of electronic bonding. Electronic bonding results in consumers becoming less dependant on the ubiquitous services of the incumbent—since it enables consumers to acquire all of their services from a particular operator on a competitive basis, even if some of their services are delivered over the incumbent's network:

    —  For example, in situations where a component of the consumer's services comprises services delivered over the incumbent's network (such as the resale of local calls, or services offered over the unbundled local loop), the quality of service that new entrants are able to deliver to their customers depends greatly on the interfaces to the incumbent carrier's databases.

    —  New entrants cannot afford to be mere order-takers, they must provide added value in the form of customer service, customer care and customer billing. They also need to be able to provide real-time support for multiple services.

    —  All of this requires simple and instant access to the customer databases of the incumbent (relating to pre-ordering, ordering, provisioning, billing and fault management) in the same manner as the incumbent in order to be able to deliver the full range of services to customers on a competitive basis.

  While regulation enables new entrants to resell local calls and provide xDSL services over the incumbent's unbundled local loop network, incumbents such as BT will generally avoid providing real-time access to the associated customer databases and billing systems unless they are forced to do so by virtue of regulation or the threat of regulation. As the current ULL unbundling regulations are loosely drafted in relation to OSS and billing operations, BT is and will continue to seek to limit the scope of services to more basic electronic interfacing, without offering solutions based on the real-time interworking of databases and open billing systems.

  In these circumstances, the ubiquity of the incumbent impedes development across the industry and limits the competitiveness of the services that are available to consumers. The current lack of industry progress in this area raises scepticism that OFTEL and the industry can move fast enough via co-regulation, or for that matter agree on where it should be moving.


  In the United States this issue was in part dealt with by the FCC through regulatory requirements for OSS interconnection. Regulations require the regional Bell operating companies (RBOCs) to provide competitors with access to their customer databases and various OSS functions such as pre-ordering, ordering, provisioning and fault management.

  As a result, new generations of OSSs are now being developed in the US to address enterprise data information management.

  We are also aware that in Germany, France and Finland the incumbent PTTs in each country are obliged to provide billing services for competing operators.

  In Germany, Deutsche Telekom (DT) is obliged to provide billing services for competing carriers. The denial of DT to provide such services would be regarded as an abuse of its dominant position within the telecoms market pursuant to Chapter 33 of the Telecommunications Act (the "TKG"). Further, invoicing and collection are viewed in Germany as essential services under the provision of Chapter 33.

  In Finland, interconnection rules mandate that the SMP operator in charge of local access has an obligation to provide billing services to third parties, ie other telecom operators. The legislation on the billing arrangement is in the Communications Ministry's decision on interconnection (22.12.1997/1393) 17.

  In France, recent changes to the interconnect regulations will require FT to offer a single customer billing service on behalf of competing operators by September 2001.

  Attached for information are two WorldCom charts which illustrate the importance of third party billing to effective competition. The headline points from the charts are:

    —  The UK took 14 years to achieve approximately 30 per cent erosion of the incumbent's market share in national long distance calls. Germany took 1r years.

    —  The UK took 11 years to achieve approximately 40 per cent erosion of the incumbent's market share in international calls. Germany took 1r years.

  Whilst other regulatory and competitive dynamics were in play, we believe mandated third party billing provided by DT was a fundamental catalyst to the accelerated competition in Germany. ULL presents a unique opportunity for the UK to learn from experience in other countries and drive accelerated rollout of DSL services through billing and OSS obligations on BT, similar to those imposed elsewhere.

  We have seen less than effective competition including the UK in those jurisdictions, where the regulators have adopted a hands-off approach to electronic bonding. For example, there does not currently appear to be any willingness on the part of BT to incorporate this level of interworking and open access to its billing systems into the ULL arrangements. This is despite the fact that electronic bonding actually has the potential to produce a win/win solution for both BT and competing operators as well as customers. It eliminates manual processes and resource-intensive data matching efforts, and has a significant and positive impact on the quality of services provided to customers.


  WorldCom remains keener than ever on ULL and believes that it represents a huge opportunity for the company and our customers. We will continue to be amongst the most active in continuing to drive forward the ULL debate and its implementation.

  At the same time, WorldCom considers that OFTEL is presently disproportionately focused on unbundling the physical assets of BT and on pricing issues. OFTEL needs to be equally and fully focused on the importance of unbundling BT's concomitant information and billing systems (as well as the physical assets) so as to give confidence to the market that the UK will have effective competition in local access.

  We consider that the Director General of OFTEL should demonstrate:

    —  that he is aware of the evidence in other countries that demonstrates the likely positive competitive consequences of obligating BT to offer equal access to OSS and third party billing; and

    —  that he appreciates and fully understands the competitive importance of "electronic bonding" including open access to BT's OSS and billing systems and that OFTEL is developing appropriate regulation for opening up BT's intellectual and information assets (including mandating third party billing provision) to competitors.

9 November 2000

Annex A


  WorldCom offers a complete set of fully integrated voice, data and Internet communications services over its own metropolitan, national and international facilities to customers throughout the world. The company has established itself as a local, network facilities-based competitor in over 21 countries throughout Europe, North and South America, and the Asia-Pacific region. Telecommunications services in these countries accounts for three-quarters of the $800 billion global market. WorldCom:

    —  Maintains offices in 65 countries.

    —  Operates extensive global network covering over 70,000 (112,651 km) route miles and high-capacity connections to more than 50,000 buildings.

    —  Global network operations centers based in Cary, North Carolina, Amsterdam and Hong Kong provide around-the-clock customer service and network management support.


  WorldCom was one of the first companies to complete a pan-European high capacity communications network combining both local and long distance elements. WorldCom has built and operates metropolitan area networks in major cities across Europe including those in London, Paris, Frankfurt, Hamburg, Dusseldorf, Amsterdam, Rotterdam, Brussels, Dublin and Milan and operates national networks in the UK, France, Germany, the Netherlands, Switzerland, Sweden, Denmark and Belgium.

  WorldCom has more than tripled the original size of its all-fibre, high-capacity pan-European network to nearly 7,000 miles (11,265 km) through nationwide networks completed in Great Britain, France and Germany. The company holds 50 per cent ownership in two high capacity trans-Atlantic undersea cables enabling it to seamlessly connect over 45,000 buildings in the US and Europe.


  WorldCom's strategy has always been to provide its customers with leading edge services provided over an advanced low cost infrastructure. To achieve this objective, WorldCom has been instrumental in the shaping of the UK competitive environment and in particular the Unbundled Local Loop discussions through the various industry working parties.

  Our experience gained through active participation in the US and European ULL programme has helped to shape the framework under which all UK operators will operate. Throughout the ULL process, WorldCom has continued to evaluate whether the active participation in the development of the infrastructure would maximise the flexibility and value of the services developed for our customers.

  However WorldCom has decided, in line with current commitments in Germany and the US, not to deploy our own infrastructure in the ULL arena. The reasons for his approach include:

    —  Our new customer focused line of business structure requires WorldCom to become more customer focused.

    —  WorldCom has decided to focus its resources in the development of new leading edge services instead of the deployment of technology.

    —  Traditionally partnerships have proved more successful in providing the required facilities on which current and future services can be deployed.

    —  There are likely to be a large number of infrastructure providers offering competitive supply of these ULL services.

    —  Through working with a selected number of potential providers, WorldCom will be in a position to maximise the national availability of WorldCom services over xDSL technologies.

14   BT launched its own Flat Rate product, "Surftime", in early July 2000. The first contract for an equivalent "wholesale" input, FRIACO, was concluded in late August and no competing operator has yet launched a FRIACO-based flat rate product to compete with Surftime. BT launched its own mass market ADSL services in August 2000. Unbundled local loops will be available to competitors in limited numbers in early 2001. Back

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