1. For discussion purposes. No implementation assurances 1 Consult 21 Interconnect & Portfolio Working Group NGN Interconnect - PSTN Emulation Blended Rate Suggestion from 28 April 2006 (Without Prejudice) The information in this presentation relates to plans currently under development and subject to consultation, and may be subject to change. Detailed implementation depends upon a number of factors including the capabilities of suppliers and the final 21CN network design.

2. For discussion purposes. No implementation assurances 2 PSTN Emulation Interim Scheme – The Issues Need for simplicity – short duration Need for Level Playing field NGN and PSTN footprint mismatch The desire for minimum upheaval from existing arrangements Charges should encourage efficient network investment:  Don’t penalise connections at the right place  Don’t encourage connections at the wrong place  Traffic Engineering arrangements should be congruent with post NCC regime / underlying NGN economics – calls which cross the core should cost more than those which do not

3. For discussion purposes. No implementation assurances 3 Blended Rates - The Third Way Developed at Meeting on 28 April Two blended rates per CP to differentiate between calls which terminate directly from a metronode and those which cross the core to terminate off another metronode  A higher blended rate based on CP volumes for double tandem short, medium and long  A lower blended rate based on CP volumes for LES and Single Tandem To achieve the desired financial outcome in line with the TDM regime for all players, the lower rate would be available for a CP sending traffic directly to :  The Metronode on which the line is parented (Metronode 1 for Concentrator 1 on Slide 4)  The Metronode for the MSAN on the former site of the DLE on which the line was parented (Metronode 2 for Concentrator 1 on Slide 4) N.B. A CP having interconnect to both Metronodes 1 and 2 would be expected to send the traffic to the parent Metronode – i.e. Metronode 1

4. For discussion purposes. No implementation assurances 4 The Third Way – Rates applying to CP1 with Interconnect at Metronode 2 but not Metronode 1 Metronode 1 DLE Concentrator1 MSAN parented On Metronode 1 Metronode 2 Concentrator2 MSAN parented On Metronode 2 MSAN CP1 MSAN Lower Rate Higher Rate Concentrator3 MSAN parented On Metronode 1 DLE MSAN Higher Rate

5. For discussion purposes. No implementation assurances 5 The Third Way – Blended Rate Calculation At the time of introduction of first SIP-I interconnect, analysis is undertaken of the individual CP’s average cost base  E.g. 70% LES, 25% ST, 3% DT Short, 1% DT Medium, 1% DT Long Two blended interconnect rates calculated, e.g. 0.7xLES + 0.25xST for lines parented on metronode where calls 0.95 handed over 0.03 DTS + 0.01 DTM + 0.01 DTL for lines not parented on metronode where 0.05 calls handed over

6. For discussion purposes. No implementation assurances 6 Blended Rates – Other Features Avoid the need for VICs, use a PPM surcharge per CP which equates with the IEC charge  Take the total annual IEC payments made by the CP as a percentage of the total call termination and call origination payments made by the CP and add that percentage on to the blended rate Use routing plans to agree where traffic will be handed over to BT to manage migration and ensure efficient routing Have separate blended rates per CP by time of day to promote efficient network utilisation (calculated as now by applying Tariff Gradient to 24hr rate) Agreement required on :  Arrangements required for new entrants  The period over which the analysis is done to calculate the rates - could be previous 12 months, 6 months, 3 months, 1 month  How to manage changes to traffic patterns due to volume changes, mergers and change effects of BT roll out  Monitoring and Policing