1. I&P: Contracts Clinic 24/02/06 1 Minutes Table Derivation & Application of Overflow The focus of the presentation is on principles: How it works how we operate the calculation These principles have been derived using feedback received during the Minutes Table Consultation

2. I&P: Contracts Clinic 24/02/06 2 Context Ofcom determination: NCC Technology Neutral Charging BT intends to move to 21CN: DLE Closure Maintaining LES Rate: BT solution is Virtual DLE interconnect

3. I&P: Contracts Clinic 24/02/06 3 VIC is Designed to: Enable LES rate via NGS Retain current competitive relativities Offer no material advantage / disadvantage Enable new access to LES rate subject to the same conditions as before Protect existing CP investments Ensure CPs pay same amount for circuits and distance to carry the same minutes Ensure CPs continue to pay for local-tandem conveyance when insufficient local capacity procured.

4. I&P: Contracts Clinic 24/02/06 4 VIC Challenges Technically impossible to route BT originating calls to separate physical circuits for each former DLE. So … “Both way” & Ingress traffic from different DLEs will be mixed on a single route. Individual DLE’s traffic can’t be constrained by peak minutes when its combined on a single route. So we need to control total minutes per DLE in order to approximate the economics of interconnect to individual DLEs

5. I&P: Contracts Clinic 24/02/06 5 Commercial Logic for VIC CP chooses DLEs for LES rate (as today) CP procures DLE capacity in E1 units (as today) BT rates all calls on VIC routes at LES Existing conveyance bill reconciliation processes apply using EBC files BT compares total LES minutes to the number of virtual E1’s procured for each VIC route. Excess charge applies to minutes in excess of the minutes capacity of the VIC route Minutes Capacity of VIC route set from minutes table (separate values for day / evening / weekend) Excess p.p.m. = ST – LES (for DLE VIC)

6. I&P: Contracts Clinic 24/02/06 6 Some people get more minutes than others from an E1 Currently minutes constrained by peak capacity with physical circuits Flat traffic gives high minutes per peak erlang Peaky traffic give low minutes per peak erlang

7. I&P: Contracts Clinic 24/02/06 7 Minutes Table Objective: Route size (E1 Capacity) scaled to TC4 reflects the relative efficiencies of larger routes Minutes per erlang per day reflects CP specific traffic profile Same Capacity + Same Traffic Profile = Same Minutes VIC uses each CPs individual traffic profile to identify minutes per peak hour erlang Ratio of minutes to peak hour erlangs is a characteristic of the traffic stream &

8. I&P: Contracts Clinic 24/02/06 8 Issue 81 When minutes table derived, CPs who overflow while still meeting obligation to fully provide will have:  A flatter traffic profile & therefore more minutes in the minutes table If overall traffic increases then more circuits will be required  Overflowing routes get more capacity and stop overflowing  Non overflow routes keep same capacity and start overflowing.  So CP not disadvantaged overall If overall traffic profiles change a review can be requested  CPs would request if profile flattened, BT would request if profile went peaky Blue scenario – traffic fits in TC4 15% growth gives purple mins @ LES + red at ST

9. I&P: Contracts Clinic 24/02/06 9 There are benefits of this approach: Monthly tables smooth daily and weekly variations Traffic spikes will generate less ST rate calls

10. I&P: Contracts Clinic 24/02/06 10 VIC calls are rated at LES rate Excess bill for overflow based on total minutes Excess minutes charged at difference between ST & LES rate ST – LES = LT (defined by NCC) Difference is constant See Carrier Price List Excess Charge

11. I&P: Contracts Clinic 24/02/06 11 Application of minutes table: VIC route defined by Target DLE, NGS, (and Route ID if segregated route option) May optionally apply to specific direction / traffic types (e.g. CPS, NTS) Separate calculations for day / evening / weekend Minutes Table applies to all minutes assigned to the VIC route  BT billed LES minutes as per standard conveyance bill  CP billed NTS minutes - where CP bills NTS rate minus LES  Minutes are based on routing plan not actual exit POC (for BT originated calls) Number of VIC E1s purchased taken from Circuit billing Minutes allowance looked up from mins table and pro-rated to number of weekdays / weekend days per month Incremental rate is constant so it doesn’t matter which minutes are considered as overflowing E.g for daytime: total minutes =120,000 Allowance=106,029 Excess =13,971 Rate =0.1071 (from 1/4/2006) Excess charge = £14.96 (ex VAT)

12. I&P: Contracts Clinic 24/02/06 12 Application of Minutes Table (conceptual model subject to solution design)

13. I&P: Contracts Clinic 24/02/06 13 Overflow: CP Originated Calls CP NGS DLE Segregated Routing Option: Calls sent via DLE route segment (identified by Route ID) Rated at LES – subject to minutes table excess Calls sent via Tandem route segment (identified by Route ID) Rated at ST – excluded from minutes table excess Calls sent via alternative NGS Rated according to options at alternative NGS Consolidated Routing Option: Calls sent via consolidated route segment (identified by NGS NNI) Rated at LES – subject to minutes table excess Calls sent via alternative NGS Rated according to options at alternative NGS Overflow Minutes either ST rated or virtual excess but never both

14. I&P: Contracts Clinic 24/02/06 14 Overflow: BT Originated Calls CP NGS DLE Segregated Routing Option: Calls sent via DLE route segment (identified by Route ID in routing plan) Rated at LES – subject to minutes table excess Calls physically overflowing to Tandem route segment or alternate NGS Rated at LES in line with routing plan Included in VIC minutes table Consolidated Routing Option: Calls sent via consolidated route segment (identified NGS/Route ID in routing plan) Rated at LES – subject to minutes table excess Calls physically overflowing via alternative NGS Rated at LES in line with routing plan Included in VIC minutes table Routing Plan determines rate and the VIC so overflow never double charged

15. I&P: Contracts Clinic 24/02/06 15 Minutes Table Derivation Too complicated to have table by route Too complicated to have tables by DLE Must not discriminate unduly between CPs No material disadvantage or advantage compared with current position Analysis indicates cannot have single table for all CPs

16. I&P: Contracts Clinic 24/02/06 16 Objectives for CP minutes table Non discriminatory methodology Must accommodate route variability TEST 1:  Must show same circuits required for same minutes overall TEST 2:  Extra E1s required =< Number of contractions

17. I&P: Contracts Clinic 24/02/06 17 Common Methodology 1.Select sample routes 2.Calculate Common Calculation  Average profile for each CP Average not good enough  Need to allow for variability between routes (Standard Deviation)  Exclude low usage routes with unrepresentative profile 3.Calculate VICs required for each route 4.Apply Tests

18. I&P: Contracts Clinic 24/02/06 18 How Many Minutes Table(s)? There will potentially be 3 tables per CP: DLE table – generated from fully provided routes only High Usage Route Table – generated from qualifying routes:  Egress only  Up 6XE1 in size  In line with current SIA provisions Tandem Table  Applies to those CP’s taking consolidated traffic only  Recognises that this traffic may have a different profile  Generated from tandem route sample

19. I&P: Contracts Clinic 24/02/06 19 Representative Routes?

20. I&P: Contracts Clinic 24/02/06 20 Will we get it right in all cases first time? Probably not, and even if we do you may not have confidence in that Suggested way forward is: Review post “first tranche” transfer  Enshrined in the VIC schedule  CP specific review (based on common principles and methodology)