Wednesday, 8 May 2013

OFCOM destroying competition

At the moment there is a lot of choice for VoIP telephone services in the UK. Many small players adding value to simple telephony. There is competition in the market, which is good for everyone, and (I believe) something OFCOM are meant to encourage.

To give you an idea, here is what you needed to set up as a VoIP operator providing calls and geographic numbering:-
  • Technical and business experience - that is perhaps "the tricky bit"
  • A VoIP server, maybe £1000 for linux based box, and a few hundred a month to have it hosted in a rack on the Internet.
  • Blocks of telephone numbers, £0. Yes that is £0.
  • Hosting blocks of numbers with a larger carrier, £0.
  • Incoming call routing for those numbers to your VoIP server, £0.
  • Outgoing call routing to the PSTN via larger carriers, £0 (plus call costs).
  • Joining an ADR scheme (OFCOM requirement), few hundred a year
As you can see, whilst you do had to know what you are doing, and be able to afford hosting of boxes on the Internet, it is actually very cheap to start up as a VoIP provider. Carriers will usually host number blocks free as they make the interconnect revenue for incoming calls.

Small operators give a lot of choice and add a lot of value. At A&A we have things like Centrex short code dialling, ringing multiple phones at once (e.g. mobile and desk phone). hunt groups, call divert and transfer, live billing details for calls, and even call recording. Until recently we even integrated mobiles in the service. There is a rich variety of choice of different operators and features and prices.

There are two changes OFCOM have instigated. Remember, OFCOM are meant to be acting in your interests and encouraging competition.
  • Charging for numbering. Whilst a pilot this year, rolled out to just geographic numbering this is looking like £65,000 a year for the smallest allocation in each area (650 areas of 1,000 numbers). A huge entry price to the market
  • Reducing interconnect fees on geographic numbering calls. This is making the hosting-for-free model less viable for carriers and looks like we may have to start paying for incoming calls.
The numbering thing is huge. It makes any small VoIP providers business model break badly. It is a charge for something we already have, not just new blocks or new telcos. We are trying to work out what to do. We may have to give the blocks to a larger carrier as the larger carriers with more paying customers may find it viable - but these blocks are no longer an asset we could sell, but a liability we are trying to avoid. So this may not be possible and we may have to hand them back to OFCOM. That will stop service for all customers in those blocks even if ported out to another provider already. Clearly this is not in the consumer's interests.

The interconnect pricing issue is also pretty huge. If we had to pay for incoming calls, we could not really sell a service. With the numbering charges, we'd just need a heck of a lot more paying customers, but charging for incoming calls is not going to be something our customers would tolerate, or something that is easier with more customers.

We have seen a model where customers have to make enough outgoing (chargeable) calls to balance the incoming calls and hence not pay for incoming calls. This may work, but it ruins competition too. Instead of us, or a customer choosing a carrier for outgoing calls (on a per call basis even) based on price, reliability, quality, etc, they will find they are tied in to a carrier that provides the incoming calls to balance the calls out. This breaks competition and ultimately means higher call prices and locked in contracts.

When speaking to OFCOM they seemed to treat numbering like radio spectrum, as a limited resource that they should use charging as a means to control. Of course, with radio spectrum, you don't suddenly get a huge bill for spectrum you already have allocated, but importantly you can't just add an extra digit to radio spectrum and have lots more, like you can with numbers.

I have pondered how I think they should do this. So here are some of my musings on this. It is a bit late, as OFCOM seem uninterested in these ideas and determined to ruin the market...
  • The interconnect rates have to be at a level that a carrier can host numbers and pass on inbound calls for free. Any lower and you have a serious issue. That may be possible at lower rates than previously, but they may have gone too far. Why are they not allowing the free market to set rates anyway?
  • Numbers could be allocated in smaller blocks. Apparently the larger telcos can't handle this. So, simple, make anyone that can't handle smaller blocks pay a penalty until they can. Don't make the small telcos that would be happy to have smaller blocks and not hog lots of numbers pay extra. If we could get numbering in 100 number blocks the bill at current prices would be nearer £6,500 a year which is expensive compared to £0, but more of a viable model.
  • Ideally they should allocate blocks with a DNS style (possibly actually DNS like enum) routing to a point code, and an API to allocate (and port) numbers on a per number basis. We'd be happy to design such a system for them! Charging for numbers would not be ideal, but charging only for actual in-use numbers would be a viable model for most people. This would also solve the serious issue with porting that it relies on the original number block owner - porting would be a change in the OFCOM maintained numbering database, that is all.
  • Make more numbers. Simply do number changes in the congested areas, as was done in London. Even go for longer numbers. It takes time, and is some disruption, but is how it was always done by the post office and BT.
  • Allow variable length numbers as used in many other countries. This solves a hell of a lot of the problems with number allocations.
The variable length numbers thing is quite nice. I have seen cases where a town would have, say, 6 digit residential numbers, but large companies have 4 digit "main number", which is nice, but 7 or 8 digit DDI numbers within the company. Areas with a high demand for numbers would simply have longer numbers. It would allow areas to retain their familiar area codes even, and still allow local dialling.

Anyway, over the next few months we should be able to find out the position taken by each of the carriers with which we work, and understand whether we can make any sort of business model to continue providing VoIP. I suspect that, even in a worst case scenario, we'll still offer some VoIP services - but possibly with incoming charges or "balanced usage" terms, and possibly using carrier's numbering and not our own. I really hope we don't have to hand back our numbering and kill off the numbers in use by our customers. Talking to other small telcos this seems like it may be happening a lot. So, goodbye competition in the UK. Well done OFCOM.

26 comments:

  1. I'll start off by saying that it sounds like OFCOM have completely jumped the shark here, but:

    > "When speaking to OFCOM they seemed to treat numbering like radio spectrum, as a limited resource that they should use charging as a means to control. Of course, with radio spectrum, you don't suddenly get a huge bill for spectrum you already have allocated, but importantly you can't just add an extra digit to radio spectrum and have lots more, like you can with numbers."

    Its true that you can add another digit to phone numbers, but I'm not sure its really in the customer's interest to keep increasing the length of phone numbers forever though. It would seem sensible to have old blocks handed back when they aren't in use so they can be reallocated. However, clearly the number-porting needs to be fixed so that the old telco isn't continually responsible for the ported numbers.

    Out of interest, does the old telco need to run any equipment to keep ported numbers working? What happens when the old telco goes bust - do all the ported numbers break even though those customers are no longer with the affected telco?

    > "Why are they not allowing the free market to set rates anyway?"

    I'm not sure there's really a free market here is there? If I want to call you then I have to pay the rate your carrier charges - I can't pick an arbitrary carrier to handle the call because your number is handled by only one carrier. We could allow variable call pricing so that the price the caller pays depends on which carrier is handling the callee's end of the call, but then we'd end up with callers having absolutely no idea what they are being charged when they make the call since you wouldn't have a standard rate that covers all geographic calls (I'm aware that we have a similar situation with some nongeographic prefixes already, and it seems like a mess that isn't in the consumer's interest).

    > "Numbers could be allocated in smaller blocks."

    I did used to work on the software side of SS7 and SIGTRAN equipment, but I can't honestly remember how call routing works. Could this produce similar problems to having too many small routes in the internet's core routing tables; which is a real technological hurdle and not simply solvable by fining people who don't allow it?

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    1. Increasing number length is tricky, but it is a long standing way of doing it and has happened since I can remember as a child having our local number change from 742 to 840742. It is not the best solution I am sure, but it shows that numbers are not at all like radio spectrum. I made a few other suggestions too :-)

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    2. Are OFCOM seriously considering a proposal which would add £65 a year to everyone's phone bill (fixed or mobile) just for having a unique telephone number?

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    3. re charging. Do anyone have any idea what calling an 0844 number costs, and how to find out?

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    4. OFCOM charge 0.10p / number/year so nowhere close to adding £65 to you bill.

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    5. OFCOM charge 0.10p / number/year so nowhere close to adding £65 to you bill.

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    6. Err, 10p / number / per year. So a block of 1,000 numbers is £100 per year, and 650 blocks (all of UK) is £65,000 per year. We have blocks in every area, many of which are 10,000 number blocks so at present, if they extend this to all geographic, we are talking a lot more than £65,000 a year.

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    7. Presumably you use these number blocks efficiently or could give some 1000 parts back.

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    8. The 1,000 numbers blocks are for area codes, and (at present) can't be split to smaller blocks. We'd be happy to give 900 numbers in a 1,000 block back if we only have a few customers and they are in the same 100 number block, but OFCOM won't do it. Efficient us would not allow handing 1,000 number blocks back as we have customers in every area code.

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  2. Or how about just make the telecoms infrastructure nationalised - all the physical hardware, DSLAMs (i.e. BT Openreach and BT Operate) and all telephone numbers are owned by "National Telecom Grid". Approved providers (registered under Ofcom), when they want a number just apply "give us a continuous block of X numbers under STD xxx". These are then allocated (and billed) to the provider.

    Oh wait - that'll be an ideal world.

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  3. Is there any way for customers to feed into the consultation process? I am sure that if there were some good examples of how this might affect customers / end users, some of the consumer organisations might be interested in getting involved in some lobbying. If costs to providers go up then at some point end users will pay, even those not directly affected.

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  4. Scary, you are tip-toeing up to asking OFCOM to enable "overdialling" within the UK ISDN numbering scheme. This exists in Germany (and Australia I believe), and it makes dial plan administration.. Interesting.

    Far better that they leave it well alone, but if they can't keep their mitts off, perhaps an industry association of "small telcos" is called for, pool numbering, and run an API between the group as a whole?

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    1. Can an open numbering plan be prefix-free (or does it even need to be)? I'm guessing they don't need to be, since this doesn't really help you know when the number is complete unless you [*] know every single prefix, at which point you might as well know every single number anyway.

      [*] 'You' being anybody who needs to decide if a number being delivered digit-by-digit is a complete number.

      Even if there is no 'real' value to shorter numbers, I can see there being perceived value. "Oh look, your number is longer than ours. You must have moved here recently. We've been here for 20 years."

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  5. Is there any way for customers to feed into the consultation process? I am sure that if there were some good examples of how this might affect customers / end users, some of the consumer organisations might be interested in getting involved in some lobbying. If costs to providers go up then at some point end users will pay, even those not directly affected.

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  6. Having read these two last blog posts, I have to say I'm concerned at potentially loosing my phone number, one of the reasons for porting it to AAISP was to make it portable if I ever wanted to physically move.

    Now reading this it appears that I couldn't even port it elsewhere if the owner of the block it belongs to wasn't willing to pay for it and returned the block to Ofcom.

    Surely we as phone number holders have some rights, most companies spend a great deal of money in advertising, van sign writing, letter head, business cards and of course the customer base you've already built up who keep your number in their contacts.

    So I've looked into what Ofcom have to say about it, and their advice is clear - "So if you’re staying at the same address and your number is active, your current provider must allow it to be transferred to a new phone company." - from http://ask.ofcom.org.uk/help/telephone/phonossitch1

    So how can Ofcom force you to return a block and cut off numbers if their own advice is that you must allow the number to be transferred? It seems like Ofcom doesn't know what they are doing.

    So why don't you test them, I'm sure you have a lot of numbers spare, could you not allocate a single number form a block, transfer it to another provider and then return the unused block.

    If the number then gets cut off raise a complaint with Ofcom and force the issue with complaints, now who do you report Ofcom to if you unhappy with their service I wonder?

    If they really are concerned about number allocation abuse they should allow a block of a single number to be allocated, and as you say fine the companies that won't upgrade old hardware to support it.

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  8. This could be interesting (in a bad way). We ported a 10 number DDI range to you from BT Retail, what happens to that under this scheme?

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  9. I've always used a different outbound provider than the 3 different inbound ones I have. These changes worry me.

    How about AAISP start doing what BT Retail do "You need to make at least 10 calls per months to avoid a £2 monthly charge" ;) ?

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  10. The consultation was in March last year, did no one notice?

    Where does Aled get £65/year from?

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    1. Yeh, odd. I said £65,000 for blocks of 1,000 numbers in all areas (i.e. 650,000 numbers).

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    2. Oh, and yes, several larger players have been beating up OFCOM on this, and I left them too it. I am really surprised they did not contact affected telcos directly in advance though, rather than relying on publication on their web site.

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    3. They are considering blocks of 100 numbers and Ofcom have an email list any proper organisation would subscribe to.

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  11. I can sort of see OFCOM wanting to stop companys (large telco's) squatting on large blocks which are unusued.

    Adding 10p a year to all phone contracts to the consumer sort of makes sense (assuming the above is a real problem), but and it a big but, it isn't 10p - it is 10p*(Block_size*Pc_Unused/100) .

    Which again IMHO wouldn't be much of a problem if blocks as small as 10 could be easily and quickly allocated (perhaps by some sort of web provisioning). Then AA and similar small telcos would only buy small blocks as a when they needed them.

    But knowing our civil service getting block allocations isn't that easy is it?

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  12. Yep. Small blocks is such an obvious fix for this - isn't it??

    And is it me or are ofcom really hard to complain to? I was thinking of writing to them to express my concerns about the potential of loosing my number and asking for them to comment but I couldn't see an email. Only a snail mail address to write to if I have contract issues.

    On a side note where can I find the VoIP contract?

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  13. Ah, ha!

    YOU re-sell the 10 or 100 number blocks to the small telcos

    1. Write web based system
    2. Profit

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  14. I'm quite happy with the reduced termination payments - yes, the loss of that revenue stream would force terminating operators to recover their costs another way, but I doubt this would mean charging customers for the incoming calls - perhaps a small per-number fee for the termination facility.

    The number block mess, though - yes, Ofcom should have either introduced much smaller allocations or some sort of 'small operator' arrangement (for example, assign one block per area code as "subdivided" and pre-port numbers within that block individually as needed). Perhaps it's not too late to implement this before the full rollout of number charges beyond the 30 trial areas?

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