1. Mike Conradi Telecoms Policy Mike Conradi Legal Secondee from Baker & McKenzie World Bank, 9 March 1999 michael.conradi@bakernet.com

2. Mike Conradi Market Information

3. Mike Conradi 0 50 100 150 200 250 300 350 400 1986/87 1987/881988/89 1989/901990/91 1991/92 1992/93 1993/94 1994/951995/96 1996/971997/98 1986/7=100 LocalNational International 370 Local, National and International Call volumes

4. Mike Conradi UK Traffic by Region UK Traffic by Region of the World (Jan-March 1998) 0 100 200 300 400 500 600 700 800 900 EU US and Canada Other Western Europe Australia/NZ Far East Africa Former Eastern Bloc South Asia Middle East Central and S America Millions of minutes Outbound Inbound

5. Mike Conradi All Operators Local 60% National 28% Other 6% Calls to mobile 2% International 4% Retail Call Volumes Q3 97/98

6. Mike Conradi Profits 1997/8 33% 36% 0% 10% 2% BT’s Retail Profits Local National 19% International Calls to mobile Payphone Private Circuits Other DQ

7. Mike Conradi Residential Users 0% 20% 40% 60% 80% 100% 1992/93 Share of revenues Others Cable CWC BT 1992/93 Business Users Market Shares - 1992 to 1997

8. Mike Conradi Residential Users 0% 20% 40% 60% 80% 100% Share of revenues Others Cable CWC BT Business Users 1997/98 Market Shares - 1992 to 1997

9. Mike Conradi Methods of Conveyance

10. Mike Conradi Switch Handover point Call Origination International Conveyance Call Termination Settlement Rate Accounting Rate The Accounting Rate System NB: Major profits come from incoming calls

11. Mike Conradi 0 0.1 0.2 0.3 0.4 0.5 Dec-96Jun-97Dec-97Jun-98Dec-98 Value (SDR) France Germany Greece Spain Italy USA Canada Netherlands Accounting Rate Trends EU, USA and Canada Weighted Average

12. Mike Conradi Rest of the World Accounting Rate Trends 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 Dec-96Jun-97Dec-97Jun-98Dec-98 Value (SDR) South Africa Turkey India Pakistan Poland Russia Israel Weighted Average

13. Mike Conradi International Simple Resale Allowed in UK since 1994 Competition but constrained by cost of leased circuit. Complaints re: BT’s IPLC prices No network competition. No return traffic - unlike Accounting Rates. Many countries - illegal (deprives incumbent of revenues). OFTEL/DTI “liberalised” list. Packaged IPLCs - on SDH rings

14. Mike Conradi Competitive Origination Competitive Transport Competitive Termination Cross Border Interconnection Model REGULATION NB: Profits can arise from either outgoing or incoming calls

15. Mike Conradi Policy Issues

16. Mike Conradi One-Way Bypass 1,000,000 minutes 1,500,000 minutes 1,000,000 Minutes Dodgy Tel Dodgy Tel UK

17. Mike Conradi Policy Issues One-Way Bypass Whipsawing Asymmetric pricing imposed by monopolist; or Other manipulation - depending on balance of traffic IFL Licence conditions aim to prevent these: Proportionate Return Information to DG - no longer “parallel accounting” Specifications & Consents

18. Mike Conradi Review of BT’s wholesale IDD pricing: Gross pricing replaced by net pricing New Guidelines out (very) soon BT Retail price control review expected this year Monitoring the market: Publication of Accounting Rates (Statement on the Collection and Publication of International Call Information - July 1998) Detection of breaches CWC WEO review - results published February 1999 Policy Issues

19. Mike Conradi Tromboning Mobile Interconnect rate:20p Int’n mobile term rate:5p Settlement rate:3p BT’s loss per mobile call:2p/min Solutions: Call “gapping” & Negotiation of separate rates for calls to mobiles - coming soon!

20. Mike Conradi Efforts to Reform Accounting Rates Study Group 3 - Focus Group. Target rates according to teledensity Moves to compensate those who suffer significant revenue losses. Outcome of last meeting Settlements rate “deficit” - 1996, > $5.5bn Benchmarking proposal - implementation dates, and target rates, staggered by income. Upper Income benchmarks - 1 Jan 1999.

21. Mike Conradi Efforts to Reform Accounting Rates Investigation begun December 1997 7 operators’ charges merit further investigation. Also, looking at availability of cross border interconnection. - Implementation of ICD WTO Basic Telecommunications Agreement Signatories made “offers” detailing stages of liberalisation. Offers are binding.

22. Mike Conradi Submarine Cables

23. Mike Conradi Submarine Cables Cases concerning capacity on consortia cables - 1997/87 Now, three changes: 1. Economics 2. Private Cables - capacity for sale Atlantic Crossing, Flag, Flute (dark fibre) 3. Self-owned networks Farland (BT), Hermes, Worldcom, Viatel, Esprit CWC, Colt, Unisource & others

24. Mike Conradi 0 100 200 300 400 500 600 700 Capacity (current) Max Capacity end 2000 Total Capacity - Gb/s Pan-European Networks

25. Mike Conradi Winterton UK-Germany 5 UK-Netherlands 14 Aldeburgh UK-Netherlands 12 Farland (1999) Goonhilly TAT-9 UK-Spain 4 SEA-ME-WE 3 (mid 99) Folkestone UK -France 5 Brighton UK -France 3 Brean PTAT Widemouth TAT-8 Redcar CANTAT-3 Land’s End (Porthcurno) CELTIC RIOJA TAT12/13 FLAG Gemini Broadstairs UK-Belgium 5 Oxwich Bay TAT-11 Gemini SOLAS (early 99) St Margaret’s Bay UK Belgium 6 UK-France 4 Farland (1999) Scarborough UK-Denmark 4 UK-Germany 6 (3/99) BT operated CWC operated Bude TAT-14 (2000) Holyhead BT-TE 1 UK Cable Landing Stations January 1999 NB: Excludes self-owned cables Atlantic Crossing

26. Mike Conradi CWC obligations lifted - February 1999 Could be significant bottleneck Breakout below STM-1 (155 mb/s) Backhaul & Cable Station Access Conveyance: Switch & Cable Landing Station (CLS) CLSs owned, usually by BT or CWC only So obligations - re: access to CLSs, publication of backhaul prices & non-discrimination Submarine Cables

27. Mike Conradi Telecoms Policy Mike Conradi Legal Secondee from Baker & McKenzie World Bank, 9 March 1999 michael.conradi@bakernet.com