mobile virtual network operators

8/7/2019 Mobile Virtual Network Operators

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Mobile Virtual Network Operators: Oftel inquiry into

what MVNOs

could offer consumers

A consultative document issued by the Director General of Telecommunications

June 1999

Contents

Summary

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

AnnexC - Foreign developments

Annex D - Glossary

Summary

This consultation document seeks views from service providers, mobile and other network operators, consumer interests and other interested parties on the development of what areknown 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 servicesto 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 currentlyconsulting 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 µretail-minus¶.

The document also considers the legal framework that might apply to MVNOs. This is notyet 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 ECDirectives 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:

y The types of services an MVNO might offer and the number of potential MVNOs that

might seek to enter the market; y The possible benefits to competition and consumers of MVNOs; y If commercial negotiations to enable MVNOs fail, whether there is a case for

regulatory intervention; y If regulatory action is justified, on what basis;

y 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



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 µone 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 wouldown 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 onthe 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 callsservices 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 µvirtual¶ mobileoperator). 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 servicesand 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 restswith 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



µowned¶ by another operator. Technically and operationally, this would be arranged by the

MVNOs¶ issuing their own µsmart 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 toindirect 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:

y The types of services an MVNO might offer and the number of potential MVNOs that

might seek to enter the market;

y Possible benefits to competition and consumers of MVNOs;

y 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?;

y If regulatory action is justified, the basis for charging for services which MVNOs may

require from the existing mobile operators;

y 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.

I ssue: 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 onedifference 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.

I ssue: 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 thegradual 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 routecalls 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 minimumamounts 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 locatedso 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 theMVNOs¶ systems direct, or with transit carriers).

2.6 At the other extreme ± maximum use of the mobile operators¶ facilities and minimuminvestment 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 thetransport and delivery of the calls after leaving the mobile networks to reach the terminatingoperators 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 theverification 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.

I ssue: Oftel would welcome views on the ways in which MVNOs may use elements of themobile networks facilities.

K ey 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 thatidentifies 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. ThisIMSI 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 fifteendigits. 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 mostimportant 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 thespecific 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. DTIare 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 thatwould have to be met to secure an MNC allocation ± in particular the condition that intendingMVNOs 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.



I ssue: Oftel and DT I 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 Senseorganisation¶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 questionis 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 whichare 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 toensure 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 3

rd 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 suchagreement 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 thecosts 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 U K ?

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 themaximum 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.

E conomic 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 notnecessary 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 beingconsidered 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 µopen¶ 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 thisreview. 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 inthe consultation document Customer Choice: Oftel¶s review of indirect access for mobile

network s (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 in3G 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 thecase 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 retailtariff 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 havefocused 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 frommobile 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.

I ssue: 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 viewson 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 µaccess¶ 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 termsand 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 duringwhich 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 Pater Regulatory Policy Directorate

Oftel

50 Ludgate Hill

London, EC4M 7JJ

Tel: 0171 634 8863

Fax: 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 sitesubscribers 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 theopportunity 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 usingthe 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

T he 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 ( B SS)

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 receivingantenna, 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 passthrough 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:

y Location information (VLR number);

y Basic telecommunication services subscription information;

y Service restrictions (eg roaming limitation);

y 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 aGSM 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 theycan page the mobile to alert it to an incoming call. The VLR contains information such as:

y The GSM number of the mobile;

y The subscriber directory number;

y The temporary GSM number of the mobile, if applicable;

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

station;

y 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 thenetwork 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 theGSM 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 theyare 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 (asopposed 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 throughthe 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 trafficchannel 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 finalswitch 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 µsmart 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 threedigits, 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.

S tructure of I nternational Mobile S tation I dentity ( I M SI) 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

µMaking a Call¶). This form of roaming is known as mobile station roaming and has verylittle 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 µHow 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 GSMmobile. 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 µfull¶ network wouldfunction 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 µsimplest¶ 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 theopportunity 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 bycall basis.

40 The MVNO would make their profit on the difference between the cost charged to thesubscriber 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 µfull¶ 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 µreal 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. Inthis 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 B

Transcript 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 allocateMNCs 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 theyhave 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 tothis 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 MNCallocations 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 wasagreed 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 beenamended to reflect the outcome of the ETO Workshop. Therefore in advance of such

amendments the following assumptions have been made.

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

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

y The administration of Subscriber Numbers that exist behind the TMNC remainoutside the scope of this interim policy.

Issues

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

y Emergency call handling

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

environment



y Roaming using the ISI

y CLI (Calling Line Identity)

y Zone ID

y Number Portability

y 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?

y Only one TMNC for allocation per logical allocation?

y Role of CII?

y Virtual Country Codes?

y Leading zero suppression?

y Registration Authorities

Scope

9 This interim policy specifies the requirements for, and the method of, assignment for theallocation 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.

I ssues 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:

y The assignment is for 12 months;

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

service;

y 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;



y 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;

y A Service Provider shall not be excluded from applying for a further code if they have

had a code reclaimed under this procedure;

y 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;

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

T etra MNCs ( T MNCs)

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 utilisationmay 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 T elenor 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 questionsraised 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¶sown 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 T elia

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.

F inland

6 The Finnish NRA has been reviewing the issues surrounding the MVNO concept sinceMarch 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 µvirtual¶ operation.

Annex D

Glossary

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 secondoperator 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 effectfrom 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 allelements 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 anational 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.

ThirdGeneration (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¶sUK GSM & UMTS Pages" at http://www.prattfamily.demon.co.uk/mikep/gsmnet.html

Figure 2

mobile virtual network operators

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