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Mobile Number Portability

September 1999

Contents
Abbreviations.................................................................................................................. iv 1. Introduction................................................................................................................ 1 2. Role of the ACCC and the legislative provisions .................................................... 1 2.1. Specific legislative provisions............................................................................... 1 3. The long-term interests of end-users ....................................................................... 1 3.1. Will issuing a direction to the ACA on number portability for mobile services promote competition? ......................................................................................... 1 4.1.1 Market definition.................................................................................. 5 3.1.1. Determining the likely level of competition without MNP against the likely level of competition with MNP. ............................................................ 1 3.2. Achieving any-to-any connectivity....................................................................... 1 3.3. Encouraging efficiency......................................................................................... 1 3.3.1. Economically efficient use of infrastructure............................................. 1 3.3.2. Economically efficient investment in infrastructure .................................. 1 3.4. Commission view................................................................................................ 1 4. Recent developments in the mobile services market.............................................. 1 4.1. Closure of the analogue AMPS network.............................................................. 1 4.1.1. Auction of spectrum............................................................................. 1 4.1.2. Roaming .............................................................................................. 1 4.2. Overseas developments ...................................................................................... 1 4.2.1. United Kingdom................................................................................... 1 4.2.2. The Netherlands................................................................................... 1 4.2.3. European Technical Standards Institute................................................. 1 4.2.4. Commission of the European Union...................................................... 1 4.2.5. Switzerland .......................................................................................... 1 4.2.6. Sweden ............................................................................................... 1 4.2.7. Other European countries..................................................................... 1 4.2.8. Hong Kong.......................................................................................... 1 4.2.9. United States of America...................................................................... 1 4.2.10. New Zealand ....................................................................................... 1 4.2.11. Telecommunication Standardisation Advisory Group of the International Telecommunications Union................................................................... 1 4.3. Commission view................................................................................................ 1 5. Functional requirements of mobile portability ......................................................... 1 5.1. User requirements............................................................................................... 1 5.1.1. Timeliness of process ........................................................................... 1 5.1.2. Seamless transition............................................................................... 1 5.1.3. Equivalent service................................................................................. 1 i

5.1.4. Transfer costs ...................................................................................... 1 5.2. Operational requirements .................................................................................... 1 5.2.1. Industry standardised approach............................................................ 1 5.3. Commission view................................................................................................ 1 6. Network arrangements and possible technical solutions for MNP ........................ 1 6.1. Call Diversion..................................................................................................... 1 6.2. Assessment of Call Diversion.............................................................................. 1 6.2.1. Timing.................................................................................................. 1 6.2.2. Cost-effectiveness................................................................................ 1 6.2.3. Compatibility with international standards.............................................. 1 6.2.4. Portability within and across mobile technologies................................... 1 6.2.5. Impacts on other solutions .................................................................... 1 6.2.6. Operational support systems................................................................. 1 6.2.7. Routing arrangements........................................................................... 1 6.2.8. Interconnection of networks ................................................................. 1 6.3. Nominal Network Model.................................................................................... 1 6.4. Assessment of Nominal Network Model............................................................. 1 6.4.1. Timing.................................................................................................. 1 6.4.2. Cost-effectiveness................................................................................ 1 6.4.3. Compatibility with international standards.............................................. 1 6.4.4. Portability within and across mobile technologies................................... 1 6.4.5. Impacts on other solutions .................................................................... 1 6.4.6. Operational support systems................................................................. 1 6.4.7. Routing arrangements........................................................................... 1 6.4.8. Interconnection of networks ................................................................. 1 6.5. IN-Type Solution................................................................................................ 1 6.5.1. Advantages.......................................................................................... 1 6.5.2. Disadvantages...................................................................................... 1 6.5.3. Information management....................................................................... 1 6.6. Assessment of IN-type solution........................................................................... 1 6.6.1. Timing.................................................................................................. 1 6.6.2. Cost-effectiveness................................................................................ 1 6.6.3. Compatibility with international standards.............................................. 1 6.6.4. Portability within and across mobile technologies................................... 1 6.6.5. Impacts on other solutions .................................................................... 1 6.6.6. Operational support systems................................................................. 1 6.6.7. Routing arrangements........................................................................... 1 6.6.8. Interconnection of networks ................................................................. 1 6.7. Signalling Relay Function (the UK Solution)......................................................... 1 6.8. Assessment of Signalling Relay Function.............................................................. 1 6.8.1. Timing.................................................................................................. 1 6.8.2. Cost-effectiveness................................................................................ 1 6.8.3. Compatibility with international standards.............................................. 1 6.8.4. Portability within and across mobile technologies................................... 1 6.8.5. Impacts on other solutions .................................................................... 1 ii

6.8.6. Operational support systems................................................................. 1 6.8.7. Routing arrangements........................................................................... 1 6.8.8. Interconnection of networks ................................................................. 1 6.9. ETSI Solution..................................................................................................... 1 6.9.1. Advantages.......................................................................................... 1 6.10. Assessment of ETSI Solution.............................................................................. 1 6.10.1. Timing.................................................................................................. 1 6.10.2. Cost-effectiveness................................................................................ 1 6.10.3. Compatibility with international standards.............................................. 1 6.10.4. Portability within and across mobile technologies................................... 1 6.10.5. Impacts on other solutions .................................................................... 1 6.10.6. Operational support systems................................................................. 1 6.10.7. Routing arrangements........................................................................... 1 6.10.8. Interconnection of networks ................................................................. 1 6.10.9. MNP across different mobile technologies ............................................ 1 6.10.10. ...............Advantages of number portability across all mobile technologies 1 6.10.11. ...........Disadvantages of number portability across all mobile technologies 1 6.11. Commission view................................................................................................ 1 7. Costs of MNP............................................................................................................ 1 7.1. Network operators costs .................................................................................... 1 7.1.1. System set-up costs ............................................................................. 1 7.1.2. Additional traffic costs.......................................................................... 1 7.2. Customer costs................................................................................................... 1 7.3. Commission view................................................................................................ 1

List of Appendices
1: Written submissions provided to the ACCC .......................................................... 55

iii

Abbreviations
ACA ACCC ACIF AMPS ATUP AUSTEL CDMA CTIA DCS 1800 ETSI FCC GSM GMSC HLR IMSI IN ISUP LRN MAP MMC MoU MPPG MSC MSISDN Australian Communications Authority Australian Competition and Consumer Commission Australian Communications Industry Forum Advanced Mobile Phone System Australian Telecommunications User Part Australian Telecommunications Authority Code Division Multiple Access Cellular Telecommunications Industry Association (US) Digital Communications System at 1800 Megahertz European Telecommunications Standard Institute Federal Communications Commission (US) Global System for Mobile Communications Gateway Mobile Switching Centre Home Location Register International Mobile Subscriber Identity Intelligent Network Integrated Services Digital Network User Part Location Routing Number Mobile Application Part Monopolies and Mergers Commission (UK) Memorandum of Understanding The NACs Mobile Portability Planning Group Mobile Switching Centre Mobile Subscriber Integrated Services Digital Network Number iv

NAC NANC NERA OFTEL PCS SCCP SIM SMG SMS SRF UK US VLR

The ACAs Numbering Advisory Committee North American Numbering Council National Economic Research Associates Office of Telecommunications (UK) Personal Communications System Signalling Connection Control Part Subscriber Identity Module Special Mobile Group (ETSI) Short Message Service Signalling Relay Function United Kingdom United States of America Visitor Location Register

1. Introduction
Mobile number portability (MNP) is defined as the ability of a customer to change their mobile network operator and/or service provider while retaining the same mobile phone number for the provision of the same service. In September 1997, the Commission issued directions to the ACA on number portability. The directions specified that the ACA must set implementation dates for local number portability and local rate 13 and freephone 1800 number portability and also sought from the ACA to undertake in consultation with industry, further work on the options available for mobile number portability (MNP). The Commission asked the ACA to conduct detailed work on specification of the options available for MNP, together with the implementation issues associated with each of the possible options. Specifically, the ACCC asked the ACA to investigate and report on:

? the minimum functionality which any solution of MNP must meet; ? the minimum requirements which any solution must meet in order to allow successful
integration and interfacing with other mobile technologies;

? costs associated with each of the possible technical solutions to MNP; and ? specific timeframes associated with implementation of each of the possible technical
solutions. The ACAs report on Technical Options for Mobile Number Portability Implementation in Australia was provided to the ACCC in March 1998. Following examination of the ACA report, the Commission requested the ACA to conduct further work in relation to the options available for MNP, including the implementation issues associated with these options. In this regard, updates to report were provided to the Commission in September and November 1998. The starting point for the ACAs analysis was that industrys desired method of achieving GSM number portability would be through development of the European Technical Standards Institute (ETSI) GSM standards and amendment of the GSM MoU - which is controlled by the GSM MoU Group. The Commissions understanding is that ETSI is close to finalising standardisation of technical standards for GSM portability. In May 1999, the Commission issued a discussion paper on MNP. Comments were sought from industry participants, other stakeholders (including end-users) and the public more generally on a range of issues associated with MNP. These comments have been taken into consideration by the Commission in determining whether it should direct the ACA to set out rules about mobile number portability in the numbering plan. A list of those who provided written submissions is at Appendix 1.

2. Role of the ACCC and the legislative provisions

Under the Telecommunications Act 1997, the Commission has statutory powers to direct the Australian Communications Authority (ACA) in regard to number portability. The ACA cannot put rules about number portability in the numbering plan unless directed to do so by the Commission, and any rules the ACA puts in the numbering plan regarding number portability must be consistent with any directions by the Commission. The numbering plan is the plan for the numbering of carriage services in Australia and the allocation and use of numbers in connection with the supply of such services. Sections 455 and 458 of the Telecommunications Act 1997 set out the main responsibilities of the ACA and the Commission in relation to the portability of allocated numbers.1

2.1. Specific legislative provisions

Section 455(1) states The ACA must, by written instrument, make a plan for : (a) (b) the numbering of carriage services in Australia; and the use of numbers in connection with the supply of such services.

Section 455(5)(d) states The numbering plan may set out rules about: (d) the portability of allocated numbers (including rules about the maintenance of, and access to, databases that facilitate portability).

Section 458 states: (1) The ACA must not make a numbering plan that sets out rules about the matter mentioned in paragraph 455(5)(d) (portability of allocated numbers) unless the ACA is directed to do so by the ACCC under subsection (2). The ACCC may give written directions to the ACA in relation to the exercise of the power to determine a numbering plan setting out rules as mentioned in subsection (1). In exercising the power conferred by subsection (1), the ACCC must ensure that, at all times when the numbering plan is in force, the plan sets out rules about the matter mentioned in paragraph 455(5)(d).

(2)

(3)

Allocated numbers are those allocated to carriers or carriage service providers for use under the Plan.

(4)

The ACA must exercise its powers under section 455 in a manner consistent with any directions given by the ACCC under subsection (2). In exercising the power conferred by subsection (2), the ACCC must have regard to whether portability of particular allocated numbers is required in order to promote the long-term interests of end-users of carriage services or of services supplied by means of carriage services. For the purposes of this section, the question whether a particular thing promotes the long-term interests of end-users of carriage services or of services supplied by means of carriage services is to be determined in the same manner as that question is determined for the purposes of Part XIC of the Trade Practices Act 1974.

(5)

(6)

Section 152AB(2) of the Trade Practices Act 1974 states that For the purposes of this Part, in determining whether a particular thing promotes the long-term interests of end-users of either of the following services (listed services): (a) (b) carriage services; services supplied by means of carriage services;

regard must be had to the extent to which the thing is likely to result in the achievement of the following objectives: (c) (d) the objective of promoting competition in markets for listed services; the objective of achieving any-to-any connectivity in relation to carriage services that involve communication between end-users; the objective of encouraging the economically efficient use of, and the economically efficient investment in, the infrastructure by which listed services are supplied.

(e)

3. The long-term interests of end-users

In making directions to the ACA on number portability, the Commission must have regard to whether MNP would promote the long-term interests of end-users of telecommunications carriage services or of other services provided by means of telecommunications carriage services. Whether portability of particular allocated numbers or services promotes the longterm interest of end-users is to be determined in the same manner as the term is determined under Part XIC of the TPA. Section 152AB of the TPA provides that in determining whether a particular thing promotes the LTIE, regard must be had to the extent to which the thing is likely to result in the achievement of the following objectives (the secondary objectives):

? promoting competition in markets for listed services (carriage services or services

supplied by means of carriage services);

? achieving any-to-any connectivity in relation to carriage services that involve

communication between end-users; and

? encouraging the economically efficient use of, and the economically efficient investment in,
the infrastructure by which listed services are supplied. The Commission is of the view that the term LTIE refers to end-users economic interests which include lower prices, increased quality and greater diversity of products. The Commission regards end-users as consumers (both residential and business) of communications carriage services and other services supplied using communications carriage services. This section examines the likely impact of directing the ACA to set out rules about mobile number portability in the numbering plan. Once the likely result on the secondary objectives has been assessed, the overall question of whether MNP is in the LTIE (the primary objective) will be considered.

3.1. Will issuing a direction to the ACA on number portability for mobile services promote competition?
The Commission applies a two stage analysis to determine whether a direction to the ACA on number portability for mobile services will promote competition: 1. identification of the market (or markets) likely to be affected by declaration of the eligible service (market definition); then 2. determine whether issuing a direction to the ACA to set out rules in the numbering plan about MNP is likely to promote competition in those markets and, if so, the extent to which competition is likely to be promoted.

Section 152AB(4) requires in determining the extent to which a particular thing is likely to result in the achievement of the objective of promoting competition, regard must be had to the extent to which the thing will remove obstacles to end-users gaining access to carriage services.2 In this regard, MNP can be said to promote competition if it will be likely to facilitate effective entry and provide end-users with a greater diversity of services, such as niche and innovative services. 4.1.1 Market definition

The Commission considers that the relevant market for MNP is the national market for the supply of public cellular mobile telecommunication services (PMTS) by means of digital technology to service providers and end-users. The functional dimensions of the market are wholesale and retail. Under the Telecommunications Act 1997 if:
(a) an end-user can use a carriage service while moving continuously between places; and (b) the customer equipment used for or in relation to the supply of the service is not in physical contact with any part of the telecommunications network by means of which the service is supplied; and (c) the service is supplied by use of a telecommunications network that has intercell hand-over functions; the service is a public mobile telecommunications service.

For convenience, the relevant market definition is referred to in this report as simply mobile services. The Commissions analysis of market definition and competition are discussed below. Substitutability Section 4E of the TPA defines a market for particular goods or services to include a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first mentioned goods or services. Market definition is thus the process of identifying the sellers and buyers which effectively constrain the price and output decisions of the firms in the market. All services which are substitutable for mobile services must be identified. Substitution is considered at two levels:

? demand substitution; and ? supply substitution.

The explanatory memorandum adds ...it is intended that particular regard be had to the extent to which the particular thing would enable end-users to gain access to an increased range or choice of services.

(i)

Demand substitution

On the demand side, a number of services have been examined, which may be considered as possible substitutes for (cellular) mobile services. However, none of these services are considered to be a good demand substitute for mobile services. Services considered were:

? the fixed network or Public Switched Telephone services; ? Public Access Cordless Telecommunications Services; ? radio paging; ? private mobile radio services; ? trunked private mobile radio; and ? mobile radio and satellite services, such as LEOs and GEOs.3
Fixed Networks Fixed networks, such as the PSTN, provide all the functionality of mobile services except for mobility. The Commission considers that the main factor behind a customers purchase of a mobile service is to obtain mobility of service on which a price premium is charged, particularly for calls to customers in the local area. As fixed networks do not provide mobility, fixed services are not considered close substitutes for mobile services by most consumers. Public Access Telecommunications Services (PACTS) PACTS has some functional similarities with mobile services in terms of two-way communication and interconnection with the PSTN (it has been described as a digital cordless technology). However, there are also significant differences in functionality between PACTS and mobile services. PACTS generally have no call handover ability between cells and users are constrained to stay within a very short distance from the base station (typically a maximum of 100 metres). Because of its limited mobility the majority of mobile services users would not consider PACTS a close substitute. It should be noted that PACTS services are not currently provided in Australia, although PACTS type technology is popular in highly urbanised communities such as in Japan (PHS) and South East Asia. In Europe the technological standard is known as DECTS (Digital European Cordless Telephony). Paging services Paging services have comparable mobility to mobile services but are not considered to form part of the current mobile services market because of the lack of interactive two-way voice communication ability. Radio paging and mobile services tend to be complementary services rather than substitute services. The complementary nature of the services is demonstrated by

Such satellite services include the proposed services that will be offered by Iridium and Globalstar.

customers who use both. If the services were substitutes, customers would choose one or the other but not both. If the price of mobile services increased, there may be some customers at the margin who would move to a paging service. The possibility of very limited substitution at the margin is, however, insufficient to include radio paging in the mobiles market. It should also be noted that mobile phones increasingly feature many of the services provided by pagers, although at a noticeable premium. Private Mobile Radio Services (PMR) PMR is a mobile communications system which is set up and maintained by the user. PMR utilises user owned infrastructure and transmission facilities, and does not have any common or shared facilities between users. The service can provide coverage to large areas depending upon geographical siting of base stations. Two services are considered substitutable if there is a significant migration of customers from one service to another in response to an increase in price of the first service. If the price of mobile services increased, the Commission considers it unlikely that there would be a significant migration of customers from mobile services to PMR. The main factor limiting migration would be the initial investment in the sunk costs necessary to set up the PMR infrastructure and the fact that it is suited to customers with a large number of users, only requiring communication between themselves and a base station. Trunked Private Mobile Radio (TPMR) TPMR is a private mobile radio service with the ability to link to the PSTN, often at premium rate. TPMR services are differentiated from mobile services in terms of improved capacity, signalling capability and group calling and data transmission features. TMPR also provides for all parties to a communication to speak simultaneously. TMPR is also capable of managing several interactive calls at once. There are no indications of the number of customers which could move from mobile services to TMPR, nor indication of the number of TPMR services available should prices for mobile services increase and customers decide to move back to TPMR. The lack of functionality of TPMR in terms of the difficulty and costs of interconnection to the PSTN, together with limited geographic coverage, indicate that TPMR is not a good substitute for mobile services. The differential in mobile services prices and significantly higher functionality also suggest that TPMR is not likely to be a good substitute in the foreseeable future. Mobile Satellite Services Mobile satellite services are a mobile service based upon a satellite rather than (terrestrial) cellular radio. Mobile satellite services are likely to become an important niche in the future. However, it is likely that the cost of satellite mobile services would be, at least initially, significantly higher than terrestrial mobile services meaning that satellite services may not be substitutable for mobile services for some time. Microwave services

Broadband radio services such as Multichannel Multipoint Distribution Services (MMDS) and Local Multipoint Distribution Services (LMDS), which are known as wireless cable reflecting their ability to support high bandwidth services, are not considered substitutes for mobile services as they currently only support one way communication and do not offer mobility of communications. Wireless local loop Wireless local loop technologies offer the possibility of providing local access services at a lower cost than traditional fixed line technologies, and can use a number of different radio technologies such as microwave, digital and analogue cellular, and cordless technologies (such as DECTS). The Commission does not consider wireless local loop to be a close substitute for mobile services because of the limited mobility of communications offered. (ii) Supply substitution

On the supply side, potential sources of substitution can be identified by whether an existing supplier in the mobile services or other markets using existing infrastructure can change its output mix in order to supply mobile services. The relevant output of the market is a public mobile telecommunications service, which can be supplied using either digital technology or analogue AMPS technology, although only Telstra can supply AMPS network services.4 Other services will be considered substitutable for mobile services if suppliers change their output mix to supply more mobile services as a result of a change in demand or supply conditions leading to a price increase for mobile services. The Commission has not identified any existing combination of telecommunications services which could be closely substitutable with mobile services, thus no existing supplier substitutes are included in the mobile services market. No substitutable services have been identified because the conditions of supply of mobile services are unique in terms of factors such as the radio spectrum required or the use of cellular radio base stations. A number of other telecommunications services are complementary services, not substitutes, to mobile services on the supply side. For example, the PSTN is used to terminate calls from mobile services to the fixed network (however the PSTN infrastructure is not a substitute to supply mobile services because additional investment, and spectrum, is needed to supply mobile services). Geographic dimension to market The Commission considers that the geographic areas to which mobile services are supplied is the market for the supply of mobile services within Australia.

Previous and current regulatory requirements dating to 1991 restricts ownership and operation of an analogue AMPS network to Telstra. Other licensed mobile carriers wishing to provide an analogue AMPS service may do so on the basis of resale of airtime purchased from Telstra.

Functional levels of the market The Commission considers that the mobile services market has two functional levels in relation to mobile number portability. The supply of mobile services by vertically integrated suppliers (Telstra and Optus and Vodafone in relation to digital mobile services) constrains the price and output decisions of non-integrated suppliers (resellers at the retail level). These functional levels are detailed below:

? Wholesale
? wholesale of digital airtime by Telstra, Optus and Vodafone to resellers; and ? services required to support the basic functions of MNP: ? authentication ? registration and authentication of the mobile customer; ? mobility management ? the system capability to automatically track the location of the customer; ? call delivery management ? the system capability to originate and terminate the calls (and messages for short message service) between customers; and ? service transparency ? services to support MNP should be transparent to end-users.

? Retail
? digital retail services provided by Telstra, Optus, Vodafone and resellers to individual users. Time dimension of market The Commission considers that the period over which substitution possibilities should be considered is the longer term, but still in the foreseeable future, that will effectively constrain the pricing and output decisions of suppliers of mobile services. 3.1.1. Determining the likely level of competition without MNP against the likely level of competition with MNP. To consider whether MNP is likely to promote competition in the relevant market of mobile services, the Commission initially considered the effectiveness of the existing state of competition. Consistent with the explanatory memorandum in relation to s.152AB, the Commission considers that it should not direct the ACA to set out rules about MNP in the numbering plan where existing market conditions already provide for the competitive supply of mobile services. This subsection initially examines the existing level of competition in the market and then compares the level of competition in the market for mobile services that would be likely to occur without issuing a direction to the ACA on number portability for mobile services against

the likely level of competition that would occur with issuing a direction to the ACA on MNP (the future with and without test). To consider whether issuing a direction to the ACA on number portability for mobile services is likely to promote competition in the relevant market of mobile services, the Commission will need to consider the effectiveness of the existing state of competition and the likely impact of MNP on the structural and behavioural characteristics of the mobile market. Accordingly, factors influencing competition such as market share, coverage and barriers to entry are discussed as part of the existing state of competition. Existing state of competition Currently, there are three carriers operating public mobile telecommunications networks Telstra, Optus and Vodafone. Telstra operates two networks its AMPS network and its GSM network - whereas Optus and Vodafone each operate a GSM network. These carriers supply mobile telecommunications services direct to end-users and through resellers. There are a number of indicators showing that Australia has a reasonably competitive mobile market by world standards. Australia has a relatively high degree of penetration and growth in mobile services compared to most OECD countries. Further the available evidence indicates that prices have been reasonably competitive and that combined fixed and usage prices have fallen. However, the information available also suggests that price competition has not been as intensive as it could be, and that there is still some way to go for Australia to be in the best practice range in relation to retail pricing of mobile services. For example, the Commissions 1998 report entitled Telecommunications Charges in Australia, included an international price comparison between Australia and other countries which indicated that:

? Telstras monthly rental charge is the second lowest of all countries considered for
business customers and mid-range for residential customers;

? Australian charges appear mid-range for both short duration and longer duration calls;
and

? national long distance calls made in peak periods are generally more expensive in
Australia than in other countries.5 One.Tel argued that there was a lack of competition in the Australian mobile services market which is reflected by a market structure comprising a very small number of incumbent operators with:

? homogeneous tariff plans; ? similar market strengths; and

ACCC, telecommunications Charges in Australia, December 1998, p. 53.

10

? similar amounts of spectrum.6

One.Tel also argued that this oligopolistic market structure is reinforced by a regime of high interconnection rates ? which directly affects the wholesale cost of an operator providing originating and terminating calls on another operators network. One.Tel also submitted that:
In a competitive market, there is price movement (both upward and downward) unless the selling price is equivalent to the marginal cost of production. The relatively high charges for mobile long distance calls in Australia, compared with overseas, is a strong indication that prices are not at the marginal cost level. [One.Tel Submission, p. 9].

Industry reports indicate that there is a high churn rate in the market for mobile services in the order of 20 to 30 per cent without MNP. This indicates that the absence of MNP and, consequently, the requirement to change mobile phone numbers may not be the most crucial consideration in customers decisions in switching between service providers. Optus submitted that this level of churn indicates that a direction from the Commission to the ACA would not improve consumer choice. Optus consider this illustrates that a lack of MNP does not preclude customers from switching mobile service providers. Moreover, Optus argued that, with the introduction of a fourth operator and the closure of the AMPS network, churn rates are forecast to remain high in the long term. In this regard, analysts forecast that the level of churn, in the next five years, will be around 30 per cent to 40 per cent.7 If mobile number portability were to be introduced in the near future, the volume of churning customers could be expected to increase. Customer surveys conducted for the portability benefit model used by STM Consulting, for example, found that about four times as many customers would switch GSM mobile providers with number portability available than would do so without portability. It estimated that most of this difference came from residential customers. The Commission received evidence from a number of corporate users who suggested that the absence of MNP caused these large customers to be locked in to a particular provider of mobile services. These submitters argued that the lack of MNP has led to a reduction in the range of competitive offerings for customers and provides significant market power to suppliers when negotiating contracts with users. As Hutchison pointed out, such locking-in of customers would be removed if MNP were introduced. Hutchison argued that MNP will lead to service providers focussing more of their attention on retention rather than on acquisition of customers:
As this trend accelerates there will be more customers not committed to term contracts, thus further increasing contestability in the market. Nevertheless, the nature of mobile services is still likely to see a high concentration on service features and product differentiation as the major elements of competition. [Hutchison Submission, p. 4].

6 7

One.Tel Submission, p. 9. ABN AMRO Mobile Telecommunications, October 1998, p. 6.

11

Service and product differentiation and sales promotion exist to some degree in the mobile market indicating a relatively high level of competition. Service providers are attempting to differentiate themselves in terms of:

? population coverage; ? value added services (such as call diversion, voicemail, e-mail and other data services); ? superior service quality with technology such as enhanced voice quality GSM software; ? removable cards that allow for prepaid digital calls; and ? operator and other call assistance features.
Other factors which indicate that the existing mobiles market is reasonably competitive, such as penetration and growth and market share are discussed further below. Penetration and growth One of the high growth areas in the Australian telecommunications market is mobile telephony. In 1996, Australia ranked 5th in the world in terms of penetration rates for mobiles. This ranking, however, has diminished in recent years, slipping to 7th in 1997 and 9th in early 1999.8 Notwithstanding the declining growth experienced in the last two years, there are expectations that the penetration of cellular mobile phones will continue to grow. In 1996, the penetration in the Australian population had grown to 24 per cent, while by mid 1999 it was around 33 per cent with about 6.5 million mobile customers. It has been estimated that coverage is likely to reach 40 to 45 per cent by the year 2001/2002 ( that is, 8 to 9 million customers). Ovum expects that mobiles will grow by at least 500,000 customers in each year out to 2002. Ovum reported that revenue per customer will stabilise at approximately $800 per customer per year and that airtime prices will come under increasing pressure but price elasticities will lead to increased usage per customer. The three digital GSM networks are experiencing high growth rates and increases in revenue, as analogue mobiles are being phased out. In mid 1997, 95 per cent of all new mobile phone sales were digital. There appears to be strong growth in the number of digital mobile subscribers ? in June 1997 there were approximately 2.243 million digital subscribers out of 4.632 million total mobile subscribers, and in December 1997 there were 2.956 million digital subscribers out of a total of 5.1 million mobile subscribers (excluding service provider subscribers).

Paul Budde Communications, Australia Mobile Communications Subscriber Statistics, August 1999, p. 2.

12

Market Share A comparison of market shares, for both total (analogue plus digital) mobile subscribers and digital only subscribers is set out below. These figures do not include service providers subscribers.

Table 4.1:

Mobile Subscribers and Market Share

Analogue Subs Share % 70.70 29.30 0.00 71.40 28.00 0.00 73.20 26.80 0.00 80.00 20.00 0.00 Digital Subs 1,089 829 325 1,413 1,050 493 1,800 1,300 750 2,650 1,810 1,100 Share % 48.60 37.00 14.50 47.80 35.50 16.70 46.80 33.80 19.40 47.70 32.50 19.80 Total Subs 2,777 1,530 325 2,955 1,667 493 3,000 1,740 750 3,400 2,000 1,100 Share % 60.00 33.00 7.00 57.80 32.60 9.60 54.60 31.70 13.70 52.30 30.70 17.00

30-Jun-97

Telstra Optus Vodafone

1,688 701 0 1,542 617 0 1,200 440 0 750 190 0

31-Dec-97

Telstra Optus Vodafone

30-Nov-98

Telstra Optus Vodafone

1-Jul-99

Telstra Optus Vodafone

Notes: * ** Mobile telephone subscribers (000s) Carrier Market Share

Source: ABN Amro Research9, Paul Budde Communication.

ABN Amro (formerly BZW Australia), Communications News Update, 26 February 1998.

13

A comparison of market shares between June 1997 and July 1999 indicates that Vodafone has increased its market share by 10.0 per cent, mostly at the expense of Telstra (loss of 7.7 per cent market share in 2 years) for combined digital and analogue figures, and Vodafone had increased its digital market share by approximately 5.0 per cent mostly at the expense of Optus. Resale market Information available to the Commissions suggests that within the mobile resale market there are:

? 16 Vodafone service providers; ? 4 Optus service providers; and ? 4 Telstra service providers.
It is estimated that mobile service providers will account for revenues of around $1 billion in 1998-99.10 By comparison, Telstra is expected to generate around $2.5 billion from mobile services (excluding revenue from resale to Optus) and Optus are expected to derive around $1.4 billion from mobile services in1998-99.11 Barriers to entry The Commission notes that the current legislative regime contains no barriers which prevent potential new entrants from supplying mobile services, nor is there any infrastructure build requirements or other conditions attaching to licences to supply mobile services. The Commission has identified a number of barriers to entry into the mobile services market. The Commission considers that these barriers are declining and will become less significant over time. These barriers to entry include:

? capital investment for a new network; ? national coverage (but not required for entry), given that it may take around 5 years to
complete a rollout of a mobile network with national coverage;

? the reduced scope of legislative powers and immunities for carriers ? this may be
addressed to some extent by the operation of the facilities access provisions of the Telecommunications Act 1997 including the Commissions Code of Access to Telecommunications Transmission Towers, Tower Sites and Underground Facilities;

10

Paul Budde Communications, Australia New telcos Market Overview, Revenues, SP Strategies, August 1999, p.5. Paul Budde Communications, Australia Mobile Communications Revenue, Demographics, Equipment, August 1999, p. 2.

11

14

? majority of resellers and dealers at the retail level may be tied to the three incumbents; ? corporate relationships:
? Telstra and Optus have scope to lever off their supply of other telecommunications services; and ? customers migrating from the AMPS network may favour their existing AMPS service provider, however, Telstras decline in digital growth compared to Optus and Vodafone suggests that this may be falling in importance; and

? service and product differentiation may exist to a degree:

? coverage (Telstra, in particular, has differentiated itself by claiming greater coverage); ? carriers have value added services (such as call diversion, voicemail, e-mail and other data services); ? superior service quality with technology, such as, enhanced voice quality GSM software; ? removable cards that allow for pre-paid digital calls; ? operator and other call assistance features; and ? brand name. One.Tel submitted that one of the main structural features of the mobile services market, which inhibits the development of competition, in the lack of MNP:
Whilst market growth is still very high, around 15 per cent per annum, the result of the extraordinarily rapid early uptake of mobile services in Australia in the early 90s means that new entrants are nevertheless at a substantial competitive disadvantage unless MNP is introduced. [One.Tel Submission, p. 5].

AAPT argued that the absence of MNP impedes customers in their choice of network provider. As new entrants will be required to build customer bases primarily from existing customers, AAPT believe the absence of MNP constitutes a competitive inequity in favour of incumbent operators. The promotion of competitive outcomes, therefore, would be achieved by the removal of this inequity. However, Telstra argued that entry barriers are not high as evidenced by the results of recent spectrum auctions with several new carriers entering the market. These include:

? One.Tel, which acquired 1800 MHz spectrum licenses in five capital cities areas
Sydney, Melbourne, Brisbane, Adelaide and Perth;

? Catapult, which acquired 1800 MHz spectrum licenses in Cairns and South Australia;

15

? AAPT, which acquired 800 MHz spectrum licenses in Brisbane, Adelaide, Canberra,
Darwin and other regional areas;

? Hutchison, which acquired 800 MHz spectrum licenses in Sydney and Melbourne; and ? OzPhone, which acquired 800 MHz spectrum licenses in Tasmania, Brisbane, Perth,
Cairns and other regional areas. Telstra submitted that entry by these carriers will result in five competing mobile access providers in every major geographic region in Australia thereby further increasing the level of competition in the mobile services market.

3.2. Achieving any-to-any connectivity

The objective of any-to-any connectivity is to ensure that an end-user who is supplied with a communications service can communicate, by means of that service, with other end-users who are supplied with the same or a similar service, even if they are connected to different networks. The reference to similar services in the legislation enables the application of this objective to services with similar, but not identical functional characteristics. The Commission does not consider that issuing a directive to the ACA on number portability for mobile services is relevant to the achievement of any-to-any connectivity as this has been provided for in the mobile context by the declaration of GSM and AMPS access services.

3.3. Encouraging efficiency

There are two components to this objective; namely, whether MNP would encourage the:

? economically efficient use of infrastructure; and ? economically efficient investment in infrastructure

for the supply of communications carriage services, and content services supplied by means of communications carriage services.

16

3.3.1. Economically efficient use of infrastructure There are likely to be costs associated with MNP (for example, re-configuring the network) and accordingly, these costs need to be considered in deciding whether to issue a direction to the ACA on MNP. In this regard, the TPA requires the Commission to consider whether it is technically feasible to supply and charge for the service. Particularly, the Commission must consider:

? whether supply is feasible in an engineering sense (that is, having regard to the technology
that is in use or available);

? the costs of supply and whether the costs are reasonable; and ? the effect of supply on the operation or performance of telecommunications networks.
The Commission considers that it is technically feasible to supply and charge for the MNP service. The Commission also considers that the costs of supply of MNP will vary depending on which technological solution is chosen. This issue will need to be resolved through industry consultation as part of the implementation framework to give effect to ACA timeframes on MNP. The Commissions view on the cost of MNP and issues surrounding cost reasonableness is presented in Chapter 7. 3.3.2. Economically efficient investment in infrastructure The Commission will also need to consider whether MNP will encourage economically efficient investment in the infrastructure by which communications carriage services, and services provided by means of communications carriage services, are supplied. In this regard, the Commission will examine the likely impact of MNP on economically efficient investment in:

? infrastructure by which MNP is supplied; and ? infrastructure by which other communications carriage services, and services supplied by
means of communications carriage services, are supplied. To examine the likely impact of issuing a direction to the ACA on mobile number portability on the economically efficient investment in infrastructure for the provision of MNP, the Commission has considered the impact of declaration on:

? the legitimate commercial interests of the access provider; ? incentives for investment in the infrastructure used to supply the services; and ? incentives for investment in other infrastructure which could be used to supply the
services. A number of submitters argued that MNP would encourage efficient investment in infrastructure by both existing network providers and new entrants. For example, One.Tel argued that the ability for access providers: 17

to earn substantial profits from their investments will be more closely related to their ability to use their infrastructure efficiently and to make full use of their first mover advantages, compared with the current situation where there is little incentive for efficiency and innovation by incumbents and far greater incentive fro regulatory gaming and subtle collusion. [One.Tel Submission, p, 15].

One.Tel also submitted that a direction on MNP will encourage more efficient investment in network infrastructure. One.Tel argued that MNP will stimulate the market, both at the wholesale and retail levels, which will reduce the risk associated with infrastructure deployment by facilitating market entry and enabling mobile service providers to obtain information about demand characteristics and the likely responses of competitors. In this regard, One.Tel submitted that:
MNP will increase the ability of more efficient service providers to displace less efficient service providers in the provision of mobile services. The provision of MNP, by removing an impediment to competition, also reduces the ability of network operators to maintain artificially high prices, resulting in the more efficient use of telecommunications infrastructure. [One.Tel Submission, p. 16].

In contrast, Optus argues that a direction on MNP will discourage efficient investment in infrastructure as resources will be required to be directed into providing solutions for MNP. Optus, however, did not provide any evidence to support this view. Overall, the Commission has noted the concerns raised by Optus who argued that a direction to the ACA on MNP is not in the LTIE because the mobile market is already competitive and any benefits from the introduction of MNP would only be marginal and would not outweigh the loss of existing consumer benefits and the costs of implementation. However, various submitters argued, and the Commission accepts, that:
Although the mobile market may now be seen as having reached a level of maturity, it is still evolving and market developments and regulatory reforms are required before competition could be regarded as effective. [AAPT Submission p. 4].

3.4. Commission view

The lack of MNP represents an impediment to competition by locking-in customers to particular service providers and making it difficult for new entrants to attract these customers. Based on the evidence provided, the Commission considers that the provision of MNP will:

? increase competition, both at the wholesale and retail levels; ? provide consumers with a greater choice of network provider; ? substantially lower the costs of porting numbers; and ? encourage efficient investment in network infrastructure by offering incentives to new and
existing market participants to offer innovative services to consumers in order to respectively attract or retain existing customers.

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The Commission notes that a large number of studies have been undertaken on the benefits of MNP which have all concluded that the benefits, including those set out above, outweigh the costs. A number of these studies are cited throughout the report. Most recently the European Telecommunications Office (ETO) prepared an interim report12 for the European Committee on Telecommunications Affairs (ECTRA) stated:
[all available evidence indicates that] the total benefits significantly outweigh the total cost of MNP. It is concluded that MNP should be introduced as soon as possible. [ETO Interim Report, p. 6].

12

ETO, First Interim Report on Number Portability for Mobile Services, 24 May 1999.

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4. Recent developments in the mobile services market

Since the Commissions direction to the ACA regarding number portability in 1997, there have been a number of important developments in the mobile market both in Australia and overseas as well as in overseas approaches to the implementation of mobile number portability. These may have a bearing on number portability implementation in Australia. These developments include:

? the emergence of CDMA as an alternative to GSM mobile telephony in the Australian

market;

? the increasing importance both in Australia and overseas of mobile telephony as a

substitute for fixed telephony services; and

? the increasing recognition internationally that there are economies of scale in the
integration of number portability for different services. Such economies of scale could result in lower overall implementation costs, reduced lead times for the introduction of portability and greater future proofing of number portability solutions. In addition, a number of other recent developments will potentially impact on the level of competition in the mobile market and on the role of MNP in promoting competition, encouraging investment and contributing to the LTIE. These developments are set out below.

4.1. Closure of the analogue AMPS network

In February 1998, the Minister for Communications, Information Technology and the Arts, Senator Alston, requested the ACA to review coverage of the current regional analogue AMPS mobile phone system in light of the Governments decision to phase out of the analogue network on 31 December 1999. Following the ACAs report to the Minister, the Government indicated that it would give Telstra, Optus and Vodafone an opportunity to reach agreement as to how they would meet its requirement that all areas of regional Australia which currently receive mobile phone coverage would continue to receive reasonably equivalent coverage after that date. On 30 November 1998, the Government announced that it had reached agreement with the three mobile phone carriers regarding the closure of the analogue mobile phone network in regional Australia. The announcement stated that the three carriers had agreed that 130 analogue base stations will close on 31 December 1999; at least 135 will close on 30 June 2000, and the remainder will close by 31 December 2000. The Government has imposed licence conditions on Telstra requiring it to replace the analogue network with one or more cellular network(s) with coverage which is reasonably equivalent to that currently available on analogue. Telstra has recently announced that it will completely replace the analogue network with a newly constructed CDMA digital network.

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Telstras CDMA network rollout is expected to be completed prior to the final closure of the analogue AMPS network to provide continuity of service during analogue AMPS closure. On 28 January 1999, the Government confirmed the areas around Australia that would cease to have analogue coverage at the end of 1999. The analogue network will close in the metropolitan areas of Brisbane, Sydney, Melbourne, Adelaide, Perth and environs, along with 130 non-metropolitan sites, on 31 December 1999. The remaining sites will close during the year 2000. 4.1.1. Auction of spectrum Eight companies (Optus, Telstra, Vodafone, AAPT, Catapult, Hutchison, One.Tel and OzPhone) successfully bid for spectrum in the 800 MHz and 1.8 GHz bands, through auction, in 1998. This spectrum is suitable for a Personal Communications System (PCS). This is expected to lead to successful bidders introducing a range of new mobile technologies and possibly new services. The new spectrum could be used by carriage service providers to introduce mobile services other than GSM services (eg. Telstras intended CDMA provision). This is an important consideration in respect of mobile number portability implementation decisions; particularly since the ETSI standard(s) will provide GSM solutions and may not be able to provide number portability for all types of mobile services. On 14 October 1998, Telstra announced plans to use spectrum in the 800 MHz range, purchased at auction, for a new national mobile network to replace its analogue AMPS network. The new network will be based on CDMAone technology. Telstra plans to commercially launch CDMAone in mid 1999 in Melbourne, Sydney, Perth, Adelaide and Brisbane. It then intends to introduce CDMAone services into regional locations, commencing in the second half of 1999, which are presently covered by the analogue AMPS network. In September 1998, Telstra was allocated three million numbers with the prefixes 0427-0429 for the provision of these services. In November 1998, Hutchison Telecoms also indicated its intention to offer a mobile service based on CDMAone technology. In April 1999, One.Tel announced that it would be rolling out a GSM network in the 1.8Ghz band. Commercial service will commence in Sydney in the first quarter of 2000 and will be progressively expanded in other capital cities according to demand. 4.1.2. Roaming Inter-carrier roaming allows a customer of one mobile telephone network to access service from another mobile telephone network using the same mobile handset. This is in order to place a call, receive a call or perhaps continue a call. Roaming usually occurs when subscribers are physically located outside the service area of their provider. This is commonly offered on an international bilateral basis. Roaming can also occur across technologies provided the handsets have the appropriate dual compatibility. For example, roaming can enable a customer with a dual mode handset whose service is provided by a GSM 900 MHz carrier to access services of a DCS 1800 MHz carrier. Inter-carrier roaming already exists for Australians on an international basis. GSM 900 customers with appropriate customer agreements can roam between the various networks of 21

cooperating international GSM providers. Domestic inter-carrier roaming is not available in Australia but the suite of European Telecommunications Standards Institute (ETSI) standards, which define GSM operations, provides for inter-system roaming. In 1998, the Commission conducted a public inquiry into whether to mandate (that is, declare) the provision of national inter-carrier roaming between existing and new digital mobile networks which may be established in the 800 MHz and 1.8 GHz bands. Such intercarrier roaming might have been mandated if the ACCC was satisfied that declaration would be in the long-term interest of end-users. The ACCC also considered the nature of any mandated roaming. For example, whether roaming should be available from a host carriers network to networks of other carriers only in areas where the host carrier network does not provide coverage, or whether roaming should also be available in the host carriers coverage area. The Commission decided not to declare the provision of such inter-carrier roaming. In reaching this decision, the Commission took account of commitments by existing carriers that they would be willing and prefer to enter into roaming negotiations on a commercial basis. The Commission believes there are commercial incentives for existing carriers to provide GSM roaming on a non regulated basis. Regulation will follow only if it is required to promote the long-term interests of end-users. Technical and operational aspects will now have to be considered in evaluating technical solutions for mobile number portability. For example, the process will have to take into account the possibility that a customer having ported from network A to network B could actually be roaming on network C at any point in time. The Minister for Communications, the Information Economy and the Arts indicated in February 1998 that the Government will consider mandating roaming between parts of the Australian GSM networks. Such mandation would relate to networks installed as obligations on the carriers to provide for an extended GSM coverage, if necessary, in those areas where the ACA AMPS coverage review finds there is no reasonably equivalent coverage following the AMPS phase-out.

4.2. Overseas developments

Overseas regulatory developments on MNP very clearly indicate the almost universal recognition that MNP promotes competition and provides benefits to consumers. This recognition has resulted in many countries moving quickly towards the implementation of MNP. The international evidence also indicates that the technical issues relating to MNP implementation, such as, the development of common technical standards, have now been resolved. The information available to the Commission suggests that there are now no technical obstacles to the introduction of MNP. The following discussion presents in detail the Commissions understanding of the progress towards the introduction of MNP in the major international jurisdictions. 4.2.1. United Kingdom 22

There are currently four mobile phone operators in the UK ? Cellnet, Vodafone, Orange and One2One. Cellnet and Vodafone each operate two networks ? one analogue (known as TACS) and one digital (GSM). In 1997, the Office of Telecommunications (OFTEL) commissioned a study by Ovum Ltd to assess the economic impact of introducing mobile number portability. The analysis estimated that there would be a net gain to the UK economy of 98m per annum from the introduction of mobile portability. On the assumption of lower than expected growth rates in mobile usage the net benefits fall to 44 million, but increase to 146 million with higher than expected growth rates. OFTEL concluded: there have to be substantial changes in the underlying assumptions before the net present value comes close to zero. We therefore conclude that the economic case for mobile NP is robust, and that its introduction will be of overall benefit to the UK. The study also concluded that OFTEL should require mobile operators to introduce number portability as soon as is practical. OFTEL originally attempted to introduce mobile portability in the UK from 1 July 1998 but extended the deadline for mobile number portability by six months. All four mobile operators agreed to a licence modification which require licensees to provide number portability to other mobile operators on a reciprocal basis from 1 January 1999. The modifications also set out rules on the allocation of costs and charges associated with portability and provide for OFTEL to resolve disputes between operators about the terms and conditions of portability. The technical solution The technical solution implemented in the UK is known as the Signalling Relay Solution. It is based on a minor extension of the already intelligent routing capabilities of the GSM system. The principles held to be important in adopting this solution were that there should be minimum effect on donor network functionality, most work should be done by the recipient network and that the solution should utilise standard interfaces and signalling functions in order to minimise the need for further system development. In mobile networks, calls cannot be delivered to mobile subscribers simply by means of analysing dialled digits because the mobile phone can be anywhere. To deliver a call, a routing enquiry is made to a Home Location Register to determine where the called subscriber is located and to obtain a routing number. The signalling relay solution takes advantage of the routing enquiry to provide number portability. The signalling system operating across the interconnection of mobile networks in the UK will be the GSM CCS7 MAP. Consequently, the Signalling Relay Solution is built around GSM. The technical solution supports speech, fax, data, short-message service, call-back when subscriber is no longer busy and optimally routed calls. However, the optimal routing is not to be used as such routing limits billing processes. The Commission understands that the functionality to support mobile number portability in the UK is already available off-the-shelf from suppliers such as Stratus. The porting procedure will involve the following elements: 23

? the customer requests the new service from the gaining service provider and indicates
whether the change is to be completed in 14 days or a month; the gaining carriage service provider sends the request to the losing carriage service provider (by fax or automated methods);

? the losing carriage service provider checks the request with the customer and advises the
customer of any penalties due to the early termination of a contract;

? the losing carriage service provider confirms the porting to the gaining carriage service
provider;

? each carriage service provider instructs the network operator to conduct the port on the
chosen day. The gaining carriage service provider supplies a new handset or Subscriber Identity Module (SIM) to the customer, as necessary; and

? the gaining network operator activates the new subscription at the start of the day and the
losing operator terminates the subscription during the day, leaving a short overlap period. OFTEL considered that the signalling relay solution developed for the UK will be compatible with any future ETSI standardised or GSM Memorandum of Understanding Group solution. OFTEL determined that standard development by ETSI should not delay progress in introducing mobile number portability in the UK, even though some operators suggested that the introduction of mobile number portability should be delayed pending the outcome of the ETSI standardisation work. Charging principles OFTELs charging principles, contained in the licence modification, require both the licensee and the qualifying operator to abide by charging principles based on cost sharing. The approach recognises that while number portability leads to extra costs for the licensee, there are benefits to subscribers, whether they port their numbers or not. Within this framework, OFTEL expects operators to reach commercial agreement on terms and conditions for providing portability. In the event of a dispute, however, operators may refer to OFTEL for determination of the reasonableness of particular terms and conditions being offered.

24

Other issues Resellers OFTEL determined that customers in the UK must be able to retain their phone numbers whether they change network operators or service providers. The licence modifications also required network operators to ensure that the service of their carriage service providers support resale portability/commercial churn. This is in recognition of the fact that many customers obtain their mobile numbers from service providers and not directly from network operators. Service disruption The UK Network Interoperability Consultative Committee is the industry group which recommended the technical solution adopted in the UK for mobile number portability. It is conducting further work toward achieving a seamless transition to ensure that subscribers experience no loss of service as part of the porting process. This work is focussing on synchronising when the old subscription is terminated and the new subscription is activated. Submissions Telstra submitted that the UK approach, which adds on average a 2 week delay in activation, has reduced customer confidence in MNP. Telstra argued that the UK approach appeared to be the result of a solution which was driven by an implementation date without regard for industry agreement and whether the MNP solution is workable from a carriers perspective. One.Tel also submitted that it understood that the UK experience in implementing MNP:
indicates that a lack of standardisation and clear performance requirements, including billing, may have a negative effect on customer take up. These issues should be ironed out well prior to implementation of a long-term solution, particularly issues in relation to billing systems based on number ranges. [One.Tel Submission, p. 27].

Westel submitted that the UK solution is based on GSM protocol and would require additional protocol conversion technologies to support cross-technology porting. In essence, Westel believe that, in order to facilitate cross-technology porting, the UK solution could require SRF, CDMA (and other) protocol converters and an IN overlay network. 4.2.2. The Netherlands In response to regulatory decisions, Dutch mobile telephone companies (KPN Telecom, EnerTel, A2000, Libertel and Telfort) have prepared a number of process documents detailing the arrangements for portability in the Netherlands. The arrangements adopt the starting point that each originating access telephone company should be capable of routing calls to the correct terminating mobile network. In order to do this, an administrative process is defined so that all telephone companies, both fixed and mobile, have the necessary routing information available. Essentially, this is achieved through a broadcast sent to each telephone company after each number port, informing all operators in the Netherlands that a port has taken place. 25

The Netherlands technical solution will use a central reference database of fixed, mobile and service (information) numbers to resolve issues of conflicts over ownership of subscribers, for operators to check the integrity of their data, and to enable new operators to easily acquire data. It is not intended that the central reference database be used for real time queries to check the holder of the number. The Netherlands solution will allow Dutch fixed line operators to support direct routing from the network originating the call to the mobile network supporting the ported number. Further, each operators interconnect billing system must be able to support the billing needs required for GSM number portability. A recipient mobile operator may charge its new customer for costs associated with number portability. The donor service provider is not permitted to charge the leaving customer for porting. GSM number portability will apply to GSM 900 MHz and GSM 1800 MHz services. The only other mobile technology currently operational in the Netherlands is an analogue service operated by KPN Telecom. KPN Telecom has indicated that it will close this network by October 1999. Mobile number portability in the Netherlands will be subject to the following operational arrangements:

? portability is only possible if a porting agreement has been concluded between operators; ? all network-related services expire automatically when porting takes place as does data
stored for these services eg mailboxes;

? the SIM card is always changed when a port takes place ( a new International Mobile
Subscriber Identity (IMSI) is allocated) - more information on this arrangement follows;

? portability arrangements do not cover the porting of numbers with pre-paid cards; and ? a current contract between a customer and a donor service provider can block a port
from commencing until the contract period has ended unless the customer and the donor service provider have come to an agreement. However, a buy-off of contract must be possible within the terms of a GSM service contract. Both the UK and Netherlands approaches deploy intelligent network solutions to the signalling between the Gateway Mobile Switching Centre (GMSC) and the HLR. The solutions have been designed to ensure satisfactory operation of additional call features such as call completion to busy subscribers, short message services and optimal routing. Both solutions rely on a database to look up the identity, or location, of the network supporting the ported number. 4.2.3. European Technical Standards Institute

26

The European Technical Standards Institute (ETSI) has standardised technical solutions for GSM number portability. Similar solutions have been independently developed in the UK and the Netherlands for the introduction of mobile number portability. 4.2.4. Commission of the European Union The Commission of the European Union is in the process of amending its Interconnection Directive for member nations. This amendment will result in a requirement to implement local number portability by 1 January 2000. The need to implement MNP is currently under consideration. 4.2.5. Switzerland MNP is expected to be implemented in Switzerland on 1 January 2000. While the technical solution to achieve MNP will be a decision for network operators, the routing arrangements have been set by OFCOM (the Swiss telecommunications regulator). Network operators do not have to provide a technical solution for Analogue services, as this technology is to be phased out by the end of 2000. 4.2.6. Sweden In Sweden, a Bill to amend the 1993 Telecommunications Act has been developed, requiring the implementation of number portability for fixed telephony, national freephone numbers and digital mobile services from 1 July 1999. The technical solution(s) to achieve number portability of these services is hoped to be achieved through voluntary agreement between operators. Failure to reach agreement on a technical solution, within a reasonable time, or if the chosen solution is considered to be unsuitable, the National Post and Telecom Agency (the Swedish regulator) will intervene and issue binding regulations. Under the Bill, the costs associated with the implementation of number portability within each operators network will be borne by that operator and only the donor operators costs related to the actual transfer of the subscriber number can be recovered through a charge to the receiving operator. 4.2.7. Other European countries Number portability is expected to be implemented in Belgium and Slovenia for GSM services in the year 2000. GSM number portability is also expected to be implemented in the Czech Republic and Denmark at the start of the year 2001 and in Hungary by the start of the year 2002.

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4.2.8. Hong Kong In early 1997 OFTA, the Hong Kong telecommunications regulator, commissioned an Ovum study of mobile number portability in Hong Kong. The study found that the total benefits of portability for both analogue and digital mobile telephony from 1995 to 2010 (6 per cent discount rate) was estimated to be HK$2,249 million. The total costs over this period were estimated to be HK$920 million. Thus the net present value of providing portability for mobile services during this period was estimated to be HK$1,329 million. When subject to sensitivity analysis the net present value of mobile portability was positive in all cases except the worst credible cost scenario. In August 1998, OFTA released a document Requirements of Mobile Number Portability by Database Solution which sets out the interface requirements allowing mobile number portability where the routing information is obtained by reference to a database. The document contains three implementation options for carriers. The originating network carrier may build its own mobile number portability function, reach agreement to pass calls to an external mobile number portability provider, or establish an external link to a mobile number portability database. It should be noted that these mobile number portability developments in Hong Kong are based on fixed network local number portability shared infrastructure, utilising an IN reference database. Mobile number portability has been available from digital mobile networks in Hong Kong since 1 March 1999. It is offered by all eleven digital mobile networks and for all presently deployed mobile technologies - GSM 900 MHz, GSM 1800 MHz, CDMA and Digital AMPS. Submissions Vodafone submitted that it understands the MNP solution adopted in Hong Kong does not support Short Message Service (SMS) transfer between networks. In this regard, Vodafone argued that:
an MNP solution which did not support SMS in Australia would be inappropriate, especially given the likelihood that even more advanced mobile platforms will be required in the near future. [Vodafone Submission, p. 25].

4.2.9. United States of America On 2 July 1996, the Federal Communications Commission (FCC) issued rules and deployment schedules for the implementation of number portability which required all cellular, broadband PCS and Covered Specialised Mobile Radio (CSMR) providers to have the capability of delivering calls from their networks to ported numbers anywhere in the country by 31 December 1998. In addition, all cellular, broadband PCS, and CSMR carriers in the US must offer number portability on request in the 100 largest market areas by 30 June 1999. By this date, these providers were also required to support nationwide roaming for those customers that switch from one service provider to another.

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In November 1997, however, the Cellular Telecommunications Industry Association (CTIA) filed a petition, seeking a waiver of the implementation schedule for wireless number portability until 31 March 2000. It cited technical difficulties in separating the mobile identification number from the mobile directory number. The FCC announced in February 1999 that it had decided to extend the number portability deadline until 24 November 2002. The difficulties associated with wireless number portability in the US appear to relate to the fact that wireline and wireless portability have been treated together in the FCCs handling of local number portability. In the US, mobile networks use geographic numbers for provision of mobile services and callers pay the same amount for calls to mobile phones as to calls to fixed phones (with the recipient mobile user paying the remainder of the call charge). The FCCs pronouncements on local number portability thus effectively require portability between wireline and wireless services. The FCC has established the North American Numbering Council (NANC), a federal advisory committee to make determinations relating to the structure of local number portability. In making determinations, the NANC seems not to have fully recognised some differences that exist between the defined local serving areas of wireless (mobile) and wireline (fixed) network carriers. A consequence of these differences and determinations is that mobile subscribers outside certain physical rate centre locations may not port from mobile to fixed service carriers. The NANC states that the problem is organisational, rather than technical, and will not affect portability between wireless operators. 4.2.10. New Zealand The New Zealand Telecommunications Numbering Advisory Group has agreed in principle that number portability should be introduced for a range of services, subject to bilateral negotiations on terms and conditions between the parties concerned. Such negotiations on the use of call forwarding technology as a solution to mobile portability are continuing between Telecom New Zealand and Bell South. 4.2.11. Telecommunication Standardisation Advisory Group of the International Telecommunications Union The Telecommunication Standardisation Advisory Group of the International Telecommunications Union (ITU) has considered and agreed to propose a new work program into developing signalling requirements for the support of number portability. Both switch-based solutions and IN techniques will be considered. While primarily concerned with developing service provider portability for local numbers, the solutions may be applicable to other services, including mobile telephones. This work has commenced in study groups 2 and 11 of the ITU and will be progressed during the current 1997-2000 Study Period. Submissions Telstra believe that further study of overseas developments is required to allow an accurate assessment of whether any of these technical solutions could be implemented successfully in Australia. 29

Westel submitted that the most important lessons to date in relation to the UK and the Netherlands experiences of MNP implementation are that: ? communications between the carriers is critical; ? it is essential to have viable processes and procedures in place prior to implementation; ? there is a need for public awareness and education; and ? it is important to leverage off systems which have already been developed.

4.3. Commission view

Overall, the Commission considers that overseas developments on MNP are clearly relevant to the Australian situation and that recent developments in the Australian mobile market increase the need for MNP. The need for MNP has been acknowledged by all overseas regulators who have examined the benefits derived from MNP. Regulators in the UK, USA, Europe and Hong Kong who have concluded that MNP is required to promote competition and benefit consumers.

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5. Functional requirements of mobile portability

The industry working group set up by the ACA has examined the issue of the level of functionality that any MNP solution should provide. User requirements were identified by ATUG and industry requirements were developed by the carriers and carriage service providers in the working group. The Commission has considered the user and operational requirements which have been identified as being central to MNP and has taken advice from the ACA on overseas approaches to ensure that these requirements are catered for in the MNP solutions adopted. From the information available, the Commissions view is that the functional requirements for MNP can be accommodated in MNP IN solutions practically, relatively quickly and with operational and system changes well within the carriers abilities to manage and resolve in a timely and cost effective manner. The functional requirements for MNP are set out below.

5.1. User requirements

ATUG has proposed that the following issues should be considered as user requirements under any mobile number portability implementation solution. 5.1.1. Timeliness of process One issue which will need to be addressed with all forms of GSM portability is that of SIM management. The SIM contains the IMSI allocated by the carrier to the subscriber. Until this number is cancelled, the SIM can be used in any GSM phone to make calls. As IMSIs are unique to a carrier, whenever a subscriber wants to change carrier, it is necessary to change the SIM card. With number portability, a customer may want the change to occur immediately, that is, the SIM may need to be changed on the spot, and the customer will want continuity of service provided. As the connection to the appropriate carrier is performed by the dealer, this will mean that the dealer must have access not only to the recipient's provisioning system (which they have now) but also the ability to notify the donor carriage service provider and all originating access service carriage providers of the number(s) ported. Similar arrangements for notification of number changes to those used for freephone and local rate number portability could be used, however, porting for freephone and local rate numbers will involve a soft handover from one prime service deliverer to another, that is, with timing of changes in the order of hours. Procedures and processes for updating records would need to be improved by orders of magnitude to effect changes with the accuracy and timing required for mobile number portability. If the old SIM card is de-activated too early or the new SIM card is activated too late, the customer will lose incoming calls. If network actions are not co-ordinated closely in time between networks and also with the SIM card provider, calls may be sent to the wrong network and therefore lost to the porting customer or calls may loop between networks, tying up interconnect circuits. 31

Given that any immediate process would seem extremely difficult unless it could be achieved without changing the SIM card, the commencement of porting at a defined later point in time would seem a more achievable option. The MPPG believes that porting of the number should take place as soon as possible and within five working days of the user making an application. 5.1.2. Seamless transition ATUG believes there should be minimal interruption to customers between the termination of an old service and the origination of a new service. 5.1.3. Equivalent service ATUG believes the carriage service provided in relation to a ported number should be an equivalent service as described in section 11.4 of the Numbering Plan 1997; viz: A carriage service provided in relation to a ported number is an equivalent service, if (and only if) any differences, in quality, reliability, services or features, between it and a carriage service provided in relation to a non-ported number: (a) will not be apparent to a customer; or (b) if they are apparent to a customer - will not affect the customers choice of carriage service provider. 5.1.4. Transfer costs ATUG believes the price to the user of porting a number from one carriage service provider to another should bear a relationship to the cost and should be minimal and non discriminatory.

5.2. Operational requirements

5.2.1. Industry standardised approach Industry recommends that the process of porting customers from one carriage service provider to another carriage service provider should be undertaken in accordance with an industry developed code. This code should also include considerations of privacy and security to ensure only authorised transfers take place and also that pre-existing contractual arrangements are identified. Porting processes A technical solution to the provision of mobile number portability is one part of mobile number portability implementation. Bilateral or industry-wide agreements on commercial and operational aspects are also required. The industry has identified the process and system developments required to enable the introduction of mobile number portability. The industry believed that further study is needed to document the full extent of process and systems development work which would be necessary to provide mobile number portability. 32

Operational processes Industry considers that there are several processes that would require development and/or adaptation including:

? service activation/cancellation; ? porting process (including verification); ? service assurance; ? customer billing; and ? interconnect billing
Service activation/cancellation Industry considers that service activation and cancellation is a key element in the provision (or cancellation) of a telecommunications service. To effect GSM portability, for example, the processes which need to be performed include:

? advising donor and recipient networks of the porting of the Mobile Subscriber Integrated
Services Digital Network Number (MSISDN) and entering the Recipient Carriers identity in the relevant network databases in timeframes commensurate with market offerings of the porting service;

? issuing a new SIM card to the customer; ? advising the service assurance system that the MSISDN has been ported; ? advising the billing systems of all relevant carriers and carriage service providers that the
customer has ported to ensure that calls from and to the now ported number are correct;

? advising carrier interconnection systems that the MSISDN has been ported to a particular
carrier to ensure that inter-carrier billing, directory, emergency and fault repair systems function correctly; and

? ensuring transition of voice mail and short message services, if required, to the recipient
carriage service provider. Each of these processes will need to be defined and the systems modified to support them. A number of industry codes are likely to be required. Number portability will impact on present industry practices in this area. It is anticipated that in most cases, numbers will be reserved or issued by carriage service providers for new connections from ranges allocated to the particular carrier on whose network the service will be activated. Industry players consider that it will be necessary to ensure that ported numbers are not reallocated by the carrier responsible for the relevant number block, until the customer has 33

relinquished the ported service and the appropriate quarantine period observed. New categories must be created in the relevant support systems to facilitate this. Industry players consider that to ensure efficient use of numbers the donor carrier must be advised by the recipient carrier when a ported service is relinquished. The relinquished number must be returned to the original allocatee. The porting process A process will need to be developed to facilitate the transfer of services between carriage service providers. Industry participants consider that the process must be compatible with any relevant industry codes but should incorporate the following functions to support mobile number portability:

? Porting order processing. Process and system development is required for the
recipient carrier to process customer requests to port and initiate the porting process.

? Verification. Verification by donor service deliverer of service details and customer

authorisation, must occur before porting can proceed. A process for handling exceptions where the information supplied is incorrect, or the original order is otherwise invalid, is needed.

? Recipient activation of new service. A new service is activated by the recipient

carrier using the number from a range assigned to another carrier. This means that the service activation system has to cater for all numbers, rather than just the carriers numbers.

? Co-ordination of transfer. In addition to the timeliness and seamless transition

elements discussed above, the disconnection and reconnection of value added services such as voice mail, short message services, data or fax services need to be co-ordinated. Any existing services supplied by the donor network in connection with the ported number are disconnected and new services supplied by the recipient network in connection with the ported number commenced. Data and fax services would generally be provided on separate numbers and would therefore require a separate porting process. There is a need to ensure that data and fax calls are not lost during the porting process.

? Donor disconnection of existing service. Once the transfer has occurred, the service
provided by the donor carrier should be cancelled. A final bill must be generated. However, the number cannot be classified as available for re-issue, and the current directory listing (if any) would need to be retained. Responsibility for keeping up to date records of directory listing details would then revert to the new carrier. It is fair to say that on the spot porting will be a major challenge for the industry, particularly because of the need for carriage service providers/dealers to accommodate the need for SIM interchange or destruction, and continuity of service needs of customers. Disconnection can also have implications for other services such as voice message and paging services. When a customer decides to port, he or she will cancel all existing services and carriage service providers/dealers might be considered to be at fault if, for example, any messages 34

associated with the former service are not delivered. It will be important for customers to be informed that additional features would be part of establishing a new service profile.

? Network co-ordination. Industry players consider that irrespective of the solution

chosen to provide mobile number portability, there will be a range of network related activities which will need to be co-ordinated for mobile number portability to occur. Support systems/service assurance Industry participants consider that similar critical issues to those which are being addressed in the provision of local number portability will be necessary, for example, directory assistance, fault finding and clearance. Industry considers that the service assurance process must incorporate the following functions to support mobile number portability:

? Reporting. Identification of the service deliverer responsible for a particular service

when responding to A-party, B-party and third party enquiries is required during and following the implementation of portability. Currently, in the absence of number portability, this can be determined from examining the number range concerned. Systems must be established to enable customer service consultants to determine the service status of numbers ported to other carriers.

? Diagnosis & clearance. Fault diagnosis and clearance systems must cater for the
complex call cases which arise in the provision of number portability. Improved coordination and handover arrangements between carriers are required to support this.

? Customer billing/final bill. When a number is transferred to another carrier the billing
system must be updated immediately to enable preparation of a final bill and ensure customer enquiries are handled correctly.

? Interconnect billing. Alternative arrangements to those presently employed will need

to be introduced for interconnect charging for all calls to ported mobile numbers. The changes to interconnect charges will cater for the additional costs borne by various service deliverers to support portability. The nature and amount of these charges will be subject to bilateral negotiation and/or industry agreement. Currently, inter-carrier billing systems use number ranges to validate interconnection charges. For portable numbers it will no longer be possible to validate calls in this manner. Submissions Optus submitted that service features are clearly a key issue for consumers and overseas experience illustrate that there were some difficulties associated with the implementing a MNP solution without the loss of certain features (for example, in both the UK and Hong Kong, short message service facilities were lost during the porting process). In this regard, Optus believe that a number of features, such as, prepaid, short messaging, fax, internet access, are more likely to be retained if a standarised solution (such as, ETSI) were adopted.

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This concern was also raised by Hutchison who submitted that certain features will not be capable of being supported post porting. Specifically, Hutchison consider that this relates to ancillary services (such as, messaging, data call and voice mail). Vodafone believes that a viable solution for MNP must apply across all operating networks and technologies and:
? include the GSM and CDMA standards, including associated applications like SMS and call completion busy subscriberwhich allows a caller to hold and complete the call when the number is no longer busy; allow for interoperability with PCS platforms operating in Australia as well as any other mobility solutions using number ranges designated for digital mobile services likely to be used in the near future, such as, PHS, DECT. And even Globalstar and other LEO services; apply equally to both pre-paid and post-paid mobile services; permit operators to follow an optimal technology upgrade path, eg: including the deployment of the advanced data capabilities of general Packet Radio Service and ultimately 3GM technologies. [Vodafone Submission, pp. 8-9].

? ?

5.3. Commission view

Based on the evidence available, the Commission considers that most customer transfer and operational issues have been resolved in overseas jurisdictions and the Australia can leverage off this work in implementing MNP thus reducing the timeframes involved. The Commission considers that detailed implementation of these arrangements will need to be resolved through multilateral industry processes and in consultation with the ACA, as part of its role in setting implementation dates for MNP.

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6. Network arrangements and possible technical solutions for MNP

The ACA report to the Commission identified five options and provided an assessment of each based on defined criteria. These options are:

? Call Diversion; ? Nominal Network Model; ? Intelligent Network; ? Signalling Relay Function (that is, the UK Solution); and ? The technical solution(s) identified by ETSI.
For each of these options, an initial assessment has been undertaken by the ACA based on the following criteria:

? timing; ? cost effectiveness; ? compatibility with international standards; ? portability within and across mobile technologies; ? impacts on other solutions; ? routing arrangements; and ? interconnection of networks.
A summary of this analysis is presented below.

6.1. Call Diversion

With this option, existing call diversion techniques in the GSM standard would be used to divert the incoming call to a "shadow" number in the recipient network. Two scenarios for the provision of call diversion should be considered:

? temporary diversion - for a set period; or ? permanent diversion for the life of the service.
Temporary diversion provides some of the benefits of number portability because it allows callers to be advised of the number change over a period when communication with the lessee 37

may be taking place for other reasons. It also allows the lessee to make other changes to signage and stationery over a period. The primary advantage of the call diversion approach is that, from the switching view-point, the solution could be implemented in a shorter time frame, without the need to change standard call processes. However, there are several side effects which detract from service; namely:

? Ability of subscriber to divert call. For some networks, it is only possible to divert
calls once. As this "diversion" is taken up by the "portability" diversion, the subscriber will lose the ability to divert calls in this circumstance. Also, it may not be possible to divert a call to the ported number for a similar reason. If a call has been diverted to suit a customers need, a (second) further diversion to provide for number portability may not be possible.

? Inefficient use of numbers. The scheme requires the use of two numbers for each
ported service; one in the donor network and one in the recipient network. Should a large number of subscribers require portability, the available numbers could be used up.

? Inefficient use of trunks. In many cases, calls will be switched from one network to
another, only to be switched back if the number has been ported to the originating network. This will require the use of two interconnect trunks when, in fact, none should be needed.

? Increased post-dial delay. A call to a ported number will, in effect, be two calls.
Consequently, the post dial delay will increase (to that of a call made to a diverted number).

6.2. Assessment of Call Diversion

6.2.1. Timing Both temporary and permanent diversion may be implemented at present without further development of the network. As the customer would effectively initiate the port using a standard feature of the donor service, no additional processes are required. There may be a delay in negotiation and implementation if the diversion must be provided on new commercial terms. 6.2.2. Cost-effectiveness Whilst there are no initial capital costs associated with this option, there will be additional call conveyance costs associated with less efficient call routing, particularly in the case of permanent diversion. Additionally, the donor carrier must retain customer records within its HLR for ported-out and ported-in numbers. Additional HLR capacity may be required. 6.2.3. Compatibility with international standards

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With the exception to changes required to the short message service, this solution does not involve a departure from international standards. 6.2.4. Portability within and across mobile technologies On the assumption that all technologies will support customer initiated call diversion, this solution would support all present technologies. However, because of constraints related to the current I-ISUP interface, there will not be support for data calls and other value added services between customers with ported numbers on the same GSM network. 6.2.5. Impacts on other solutions As no additional infrastructure is required for this solution (excluding additional routes for call carriage), there is no impact on an alternative long term solution. 6.2.6. Operational support systems There are existing facilities which enable a customer to use call diversion to re-direct calls to another number. If these functions are provided by carriage service providers to provide mobile number portability, there will be extensive support system effects for porting processes, setting up and maintaining call diversion, and for customer billing and interconnect accounting purposes. 6.2.7. Routing arrangements Call Diversion places the porting routing function in the network with the block number allocation. Accordingly, interconnection arrangements have to reflect the contracting responsibilities from the originating access service deliverer to that network. The carriage service providers assigned routing responsibilities would need to have appropriate arrangements in place with other industry participants. 6.2.8. Interconnection of networks Industry considers that if different charging arrangements apply, changes to current interconnection arrangements may be required to distinguish normal call diversion from call diversion used for the provision of number portability. Submissions One.Tel submitted that while there are a number of advantages in using call diversion as an interim MNP solution there are also a number of side effects which should be recognised if call diversion is adopted as a permanent MNP solution. These include:

? inefficient use of numbers; ? inefficient use of trunks; and ? increased post-dial delay.

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6.3. Nominal Network Model

This solution is based on a Telstra proposal which has only recently been identified. It appears to have similarities to the facility redirect solution which will be used by Telstra in its provision of local number portability to Optus. This solution has not been considered in depth by industry at this stage, therefore views expressed by participants other than Telstra are of a preliminary nature. Under this solution, calls would be routed to the nominal carrier as per the assumed number block allocation. In most call cases, the nominal carrier would also be the terminating carrier. In this case, calls would be terminated under normal arrangements. Where the call is to a ported number, that number would have been marked with an appropriate classification (in the Home Location Register) that indicates that the number has been ported to another provider. When the GMSC launches a query to the HLR customer classification, information indicating that the customer has ported to another network and a signal will be returned identifying that network. When this information is returned, the GMSC will then route the call (with or without a special prefix) on a particular route to the recipients network. When the call is received by the recipient network it would be switched under normal arrangements.

6.4. Assessment of Nominal Network Model

6.4.1. Timing Industry anticipates that specification, manufacture and development of prime components and the subsequent support system development could take approximately 18 months following industry agreement on the solution. It is felt that any network changes required would require changes to mobile switching centres and HLRs and would, in Optus view, require at least similar lead-time (that is, about 18 months). Optus states that vendor support for this development is not assured. 6.4.2. Cost-effectiveness Industry players consider that much of the cost of this solution would be associated with network and system development (to varying degrees in the different networks). Telstra is of the view that less co-ordination is required since cut-over must be co-ordinated only with the nominal carrier and not every originating carriage service provider. As such, these costs could be substantially lower than those associated with an IN-type solution. Optus has a contrary view on this issue. Telstra believes that changes to network infrastructure would be relatively minor. Optus has a contrary view. Telstra believes, however, that there may be some additional call conveyance costs associated with less efficient call routing, but these would be relatively minor, particularly at low volumes of traffic to ported numbers.

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6.4.3. Compatibility with international standards Until the relevant international standard is developed, industry considers it would be difficult to comment on this aspect. 6.4.4. Portability within and across mobile technologies Industry believes that variations of this solution could be implemented for both AMPS and GSM. It is also likely that a similar solution could be adapted for other technologies. On the assumption that all technologies will support customer initiated call diversion, this solution would support all present technologies. However, because of constraints related to the IISUP interface, there will not be support for data calls and other value added services between customers with ported numbers on the same GSM network. 6.4.5. Impacts on other solutions Additional process/support system changes would be required to migrate from this solution to an IN-type solution because of the more stringent co-ordination requirements. Details are not yet available to enable evaluation of the interaction with the ETSI solution. 6.4.6. Operational support systems System development would be required to support new service activation/cancellation, porting, and service assurance processes. Due to the complexity associated with co-ordinating all originating access providers, system development associated with an INtype solution would be greater. Changes will be required to the Service Management System to remove ported numbers from the relevant databases and to provide an appropriate message to a message originator. 6.4.7. Routing arrangements Provided those carriage service providers assigned routing responsibilities have appropriate arrangements in place, Telstra believes that the issue of routing responsibilities would not impact on the selection of a technical solution. The solution would, however, require the cooperation of all industry participants. Optus is of the view that the other industry participants might be tied to this solution. 6.4.8. Interconnection of networks The existing interconnect dial plan may be adequate to cater for mobile number portability based on a nominal network model.

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Submissions Telstra argued that the adoption on the nominal network model would promote the LTIE to a greater extent than a PSD network solution because:

? implementation costs are low as only minimal changes to infrastructure is required; ? it can be implemented quickly without prejudice to any potential PSD solution; and ? it uses an efficient and simple method to store and manage customer related data.
Telstra submitted that existing call handling arrangements can be maintained for the majority of mobile calls if the nominal network model is adopted. There is no requirement for the:
development, operation, synchronisation and maintenance of major call handling databases by every responsible carriage service provider (all long distance providers and mobile providers). adaptation of existing infrastructure (at relatively low cost) to achieve MNP is more economically efficient than large scale investment in new, MNP specific, technology, particularly given the difficulty of predicting what the take up of MNP will be. [Telstra Submission, pp. 14 and 16].

Hutchison submitted that while the nominal network model would be the easiest for them to implement, it still requires additional trunking for calls to ported-out MDNs in the same manner as local number portability but without the establishment of third party bilateral agreements. AAPT, on the other hand, expressed concern about the nominal network model proposal as Telstra did not raise this proposal during the preparation of the ACA report on the technical options for MNP implementation in Australia. As a consequence, AAPT believe that:
it would be inappropriate for it [the nominal network model] to be considered outside the proper processes. If Telstra considers that it has, since the finalisation to the ACA Report, developed a process that is more effective than any of the alternatives discussed in the ACA Report then it bears the onus of proving this to the satisfaction of all interested parties. [AAPT Submission, p. 3].

6.5. IN-Type Solution

With one type of IN solution, the originating access carriage service provider would, during call establishment to a mobile station, initiate a database query to identify the terminating mobile carrier. The call would then be delivered to the correct mobile network and proceed in the normal manner. On a GSM mobile originating network, such an IN query would take place before normal GSM call handling. An essential change needed to all mobile networks would be the ability to recognise that an incoming call is destined to a ported number. That call would need to be prevented from leaving that carriers network so that it could not be (again) addressed to the same number. 6.5.1. Advantages The advantages of this solution include: 42

? database query techniques could be used; ? this technique could be made to be applicable across all network technologies; ? this technique could take advantage of database query capabilities in local and transit
exchanges which have been or might be established for long term local number portability. These could also be applicable to other forms of number portability, eg UPT, freephone and local rate; and

? services and features of GSM should be preserved.

6.5.2. Disadvantages The disadvantages of this solution include:

? for a small quantity of ported mobile numbers, all calls to mobile customers, whether
ported or not, initiate a data base query to provide for correct call routing. This is likely to increase the post-dial delay of all calls to mobile customers;

? a relatively high set up cost would be involved; ? for calls originating on a GSM mobile network, the inherent intelligence of the GSM
network is not used, and thus on all mobile to mobile calls there would be two queries one to IN portability database and one to a home location register (or visitor location register) for correct routing of the call; and

? Telstra believes the need to co-ordinate the data in the networks of all originating
networks is a major disadvantage. 6.5.3. Information management Two of several possible architecture options for exchange of information about the porting of mobile numbers are as follows: (i) a centralised data base (reference) with downloads to originating access carriage service providers IN databases (that is, an operational data base); and (ii) a distributed data base, where the recipient mobile network operator would broadcast a message to all originating access carriage service providers in the case of a call to a ported number.

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6.6. Assessment of IN-type solution

6.6.1. Timing There are two aspects to timing for IN, depending upon whether the fixed network or mobile network is the originating access network. Optus believes that fixed network capabilities to perform an IN query are available now or could be deployed relatively soon, since the technology and protocols are well defined and are implemented in recent versions of fixed network switches. Such capabilities are not currently universally available throughout the Telstra fixed network. Vodafone has previously indicated that IN capabilities for its Mobile Switching Centres (MSCs), subject to vendor resources and detailed definition of requirements, could potentially have been made available by January 1999. It should be noted that Telstra and Vodafone MSCs are supplied by the same vendor. Prior to any implementation, the effects on Mobile Switching Centre (MSC) capacity would need to be assessed and additional time would be needed if MSC capacity must be augmented, for example, new MSCs may need to be added to networks. Optus MSC vendor, which is different to Telstra and Vodafones vendor, has advised that mobile number portability capabilities in its MSCs will only be designed around ETSI GSM standards and an IN-based solution. Timing of network developments would only be part of any overall implementation timetable. As with most other possible solutions, once an agreed implementation at the network level is known, considerable work would then be required to define porting processes and to develop information systems to support those processes. Given the complexity of the porting process, the number of carriers and carriage service providers involved and the need to comply with ACIF processes for openness and transparency, definition of porting processes could be expected to take (at least) 12 months, given availability of industry resources. Industry considers that information systems development might take at least that long again. The Commission would, however, encourage industry to undertake as much of this work as possible in parallel. 6.6.2. Cost-effectiveness The cost of an IN-type solution for those carriers with fixed networks could be partially incremental to any IN infrastructure established for local number portability. If such infrastructure is installed, economies of scale from that infrastructure might be achieved. It should be noted that Telstras plans to date have been to utilise Facility Redirect for the introduction of local number portability and it has given no commitment to an IN solution. The cost of an IN-type solution for the mobile networks could be high if required as an Australian only solution from one or more switch vendors. Solutions based on existing HLR/VLR capabilities may be more cost effective and even more so if such solutions emerge from the ETSI standards work. The cost of additional MSC capacity also needs to be considered. However, at this time, there is insufficient information available to compare an IN solution with other options, such as HLR based solutions. 44

6.6.3. Compatibility with international standards ETSI has provided for a solution based on IN. 6.6.4. Portability within and across mobile technologies An IN-type solution could be consistent across different mobile network technologies but there would need to be a separate implementation for each network type. 6.6.5. Impacts on other solutions An IN-type solution is not compatible with a call forwarding solution, as there are significant differences in network routing, feature support and porting processes. An IN-type solution could be made to be compatible with solutions that are based on the HLR/VLR capabilities of GSM networks. However, the UK solution would not appear to be compatible with an IN solution in other GSM networks and fixed networks. (The UK solution depends on implementation by the mobile network with the nominal number allocation, whereas the IN solution is implemented in the originating access network.) An IN-type solution has not been assessed for compatibility with a nominal network solution. 6.6.6. Operational support systems Optus believes that porting processes associated with an IN-based solution would be the optimum model for managing and distributing information, between interested carriers and carriage service providers, in a timely and effective manner. Telstra has a contrary view. 6.6.7. Routing arrangements Under an IN solution, routing arrangements would be consistent with originating access service deliverer responsibilities in the Numbering Plan. 6.6.8. Interconnection of networks The existing interconnect dial plan may be adequate to cater for mobile number portability based on an IN model, depending on the form of IN applied. Submissions Optus argued that the adoption of any solution apart from one which involves an IN, across both fixed and mobile services, will result in inefficient call routing and the inefficient use of infrastructure. One.Tel submitted that the use of an IN solution, using a centralised database, should be carefully considered as:
this technique takes advantage of look-up capabilities in local and transit exchanges which have been or might be established for long term local number portability. It is likely that the IPND can be

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extended to include mobile number look-up capabilities, this will give rise to cost efficiencies. [One.Tel Submission, p. 25].

6.7. Signalling Relay Function (the UK Solution)

The Signalling Relay Function technical solution adopted in the UK might be viable in the Australian context, along with other technical solutions, such as IN based and emerging ETSI solutions that are also technically viable. The UK solution, like all others, does require coordination of interconnection standards between carriers to the extent that all networks must adopt the one interface solution. A disadvantage is that the UK solution may not be applicable to other digital mobile network technologies. The UK solution, along with most others (redirection is the exception), depends upon the exchange of call routing information in real time between donor and recipient networks. This is done using protocols based on the GSM Common Channel Signalling System No 7 Mobile Application Part. Interconnection between GSM mobile networks in Australia is achieved using telephony based ATUP or Interconnect ISUP signalling, but not the Mobile Application Part. The industry view is that the feasibility of the UK solution over the existing or an enhanced interconnect signalling framework in Australia needs further study.

6.8. Assessment of Signalling Relay Function

6.8.1. Timing

This technical solution uses techniques similar to those used in establishing International Roaming between GSM carriers with the added requirement of an internal database system which highlights ported number details. From a network point of view, industry participants believe that this solution may be able to be implemented within twelve months of agreeing a technical specification. Operational and administrative issues will, however, take longer to resolve. Carriers would also need time to replace existing Interconnect signalling with MAP signalling. This could be expected to take in the order of 18 months. 6.8.2. Cost-effectiveness

The cost of technical implementation relates to CCS7 signalling access to appropriate Signalling Connection Control Part (SCCP) functionality in the gateway switch, and additional trunking capacity between the donor and recipient networks. Exact costing details are unknown at this stage, but would be dependent upon the number of ported numbers between networks. Some carriers, including Vodafone, would need to develop and establish the internal database system for this solution. 6.8.3. Compatibility with international standards 46

This solution has been incorporated in the ETSI standard. 6.8.4. Portability within and across mobile technologies

This solution is unlikely to be applicable to technologies outside the GSM family (that is, GSM 900, DCS 1800 and GSM 1900). 6.8.5. Impacts on other solutions

The industry view is that this solution might not be viable once the amount of traffic to ported numbers reaches a critical threshold (indicatively 15 per cent). 6.8.6. Operational support systems

This solution requires some development of an interface to appropriate internal database systems. Otherwise it would not introduce any additional operational and support systems development which would not be necessary for any other solution. 6.8.7. Routing arrangements

Under this solution, an originating network operator will need to route the call to the mobile network with the original block allocation. Arrangements would also need to be in place to ensure that that mobile network would then correctly route the call on from there. Telstra believes additional development of interconnect call screening functions may be required if interconnection is required at the MAP level. 6.8.8. Interconnection of networks

This solution requires direct link access of the CCS7 signalling to a SCCP signalling node to allow for MAP messages and Global Title addressing. This may have to be provided via direct signalling interconnection between mobile networks or by providing the capability of SCCP functionality at the current point of interconnect gateways.

6.9. ETSI Solution

ETSI has commenced work on GSM number portability solutions. The Australian view is that it is likely (and appropriate) that any solution should be applicable across the technology family (that is, GSM and DCS 1800) and, desirably, able to accommodate DECT. The ETSI solution may enable numbers to be ported to other network technologies, but may require originating access carriage service provider routing responsibilities different to those currently outlined in the Numbering Plan. 6.9.1. Advantages

The advantages of this solution include:

? standard solutions from vendors and are therefore less expensive;

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? consistency with GSM services and features eg. roaming; ? a GSM based solution may be more cost effective initially for small volumes of ported
customers; and

? guaranteed future support at the features inclusion and manufacturer levels.

6.10. Assessment of ETSI Solution

6.10.1. Timing ETSI aims to have a standard solution for portability between mobile operators early 1999. A delay of 6 to 9 months would be expected in migrating the solution to Australia. The industry view is that operation and support systems development could be expected to take up to 18 months to 2 years. 6.10.2. Cost-effectiveness The cost of the technical implementation is unknown at this stage. Network software costs should be minimised as they would be largely standard. Hardware costs will be greater if the solution is an IN solution. Operation and support systems development costs are expected to be similar to other solutions and have not been quantified at this stage. 6.10.3. Compatibility with international standards The implementation of the ETSI solution would provide 100% compatibility. 6.10.4. Portability within and across mobile technologies This solution may not be applicable to technologies outside the GSM family (that is, GSM 900 and DCS 1800). The ETSI SMG 3 Chairman has already advised that the US variant of GSM (PCS 1900) will not be accommodated at this time in recognition of the unique USA numbering and billing aspects. 6.10.5. Impacts on other solutions This solution is a long term solution which, in industrys view, could not be introduced before the end of 1999. It is unlikely that any technical development associated with an early interim solution could be utilised in this long term solution. It may be possible, however, to utilise operation and support systems development undertaken for an interim solution.

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6.10.6. Operational support systems The impact on operational and support systems development is not known at this stage as ETSI is currently working on a solution. However, it could be anticipated that there will be an impact on such systems development. 6.10.7. Routing arrangements ETSI are considering two different solutions and these will have different impacts on the routing arrangements. 6.10.8. Interconnection of networks This solution would require direct interconnection between the mobile networks. Interconnect ISUP interconnection may be applicable or MAP interconnection may be required depending on the final solution. 6.10.9. MNP across different mobile technologies One of the key issues is the extent to which any possible solution to MNP should accommodate portability across different mobile technologies for example, between GSM and CDMA. The Commission sought advice from the ACA on this issue. The ACAs and industrys views are presented below. 6.10.10. Advantages of number portability across all mobile technologies According to the ACA and the industry, the declaration of potential and emerging mobile services as portable services would send a clear signal to industry participants of one of the market entry rules (that is, number portability is a pre-requisite) and this would provide benefits for consumers and competitive fairness and neutrality for industry participants. Further, were number portability to be required across all mobile technologies (excluding Analogue AMPS), it is more likely that industry participants would consider future-proof solutions which would cater for any mobile technology in order to benefit from efficient investment in infrastructure, processes and information technology developments, rather than developing technology-specific solutions (for example, for GSM only). In addition, the requirement for MNP across all mobile services is likely to have a positive impact on competition. If only one mobile technology (such as GSM) was the subject of directions to the ACA, a carriage service provider who was only offering services using GSM technology could be competitively disadvantaged relative to a competing carriage service provider, who may provide a range of mobiles services but may not have to provide portability to its customers for all of its mobile technologies. Finally, the ACA and industry considered that MNP across all mobile (excluding Analogue AMPS) services would lead to all customers of such services gaining the benefits of MNP rather than the benefits accruing to customers who used declared portable services.

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Telstra submitted that it supported an approach to MNP that is not technology dependent and believes that should be possible to introduce an integrated solution. This view is shared by the vast majority of submitters. In this regard, Vodafone argued that:
any MNP solution must apply across all operating networks and technologies. To do otherwise would artificially distort the market for mobile services, particularly if some network operators are operating multiple technologies. [Vodafone Submission, p. 8].

With regard to determining an approach to MNP, One.Tel submitted that it did not consider it appropriate for the ACCC or the ACA to mandate a particular technical solution as this decision should be a result of the process of industry self-regulation and the impact of market forces. By contrast, Optus submitted that the ACCC must mandate the appropriate technical solution. If the solution is decided by industry self-regulation, Optus argue that it would inevitably produce a result which fails to minimise the costs of implementation to the industry as a whole. In this regard, it is agued that some competitors will promote solutions that minimise their own individual costs but which will, if implemented, result in higher industrywide costs. 6.10.11. Disadvantages of number portability across all mobile technologies The ACA and the industry consider that unless ETSI develops a GSM solution which is able to be extended to other digital mobile technologies or a solution external to the GSM technology which is able to provide portability between digital mobile technologies (for example, an operational database solution), it is likely that an Australian only solution would have to be developed to provide for portability across all mobile technologies. An Australianonly solution may be able to borrow from overseas (non-ETSI) solutions, however, any national solution (as opposed to global solution) would be more costly to develop and maintain and may limit Australian accessibility to equipment and features developed for world markets. Further, Australian implementation of number portability for all mobile services would, most likely, be delayed compared to that which might be achievable if there was separate implementation for GSM (only) technology. Overseas evidence suggests GSM-only portability may be achievable in Australia before portability can be implemented for other mobile services.

6.11. Commission view

Based on the above discussion, the Commission considers that:

? as far as possible, a long-term integrated approach to number portability is preferred to

short term, ad hoc solutions;

? any solution(s) should provide an integrated future proof approach to number

portability; and 50

? number portability should be required across all mobile technologies (excluding Analogue
AMPS). However, the Commission believes that the eventual solution(s) to be adopted for the introduction of MNP is a matter for the industry to resolve in consultation with the ACA. This approach will ensure that all technical issues are explored in multilateral forums and that all affected parties have the opportunity to contribute and own the eventual solution adopted. Accordingly, the Commission believes that the ACA must work with industry and the ACIF to develop an implementation plan for MNP which provides industry with sufficient time to develop effective and robust customer transfer and porting processes and in a manner which fully addresses all relevant technical and operational issues. Further, in the Commissions view, each carrier must be able to implement MNP within its network in a way that minimises costs and is compatible with its existing and planned network architecture. ACIF must therefore ensure that the standards for MNP do not unduly constrain current and future network design or the selection and deployment of new technologies and that relevant industry standards are sufficiently flexible to ensure that costs within each carriers network are minimised.

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7. Costs of MNP
The cost associated with implementing MNP fall under two broad headings. First, are the costs to network operators and secondly, the costs to customer.

7.1. Network operators costs

The costs to network operators of implementing MNP include:

? system set-up costs (that is, the costs of conditioning existing networks); and ? additional traffic costs (the costs of carrying calls to ported numbers).
7.1.1. System set-up costs Database costs The major cost of implementing MNP using an off-switch solution is the cost of setting up and administering a routing database(s). The database(s) is(are) required to support all mobile numbers (either in a domain or nationally) which must be accessible by all calls. Switch and transmission capacity The cost of conditioning an existing network for MNP will depend on the technical option used to provide portability. An on-switch solution, such as remote call forwarding, would require switch and transmission capacity for physical call routing and the amount of additional capacity required would depend upon the physical call path through the network. Network upgrades Modification may be required for on-switch solutions to ensure CLI information is not affected by MNP. It may also be necessary to modify exiting software in the case of the drop-back re-routing approach to provide additional functionality. For off-switch solutions, there is a need to upgrade some network switches the specific switches that will require upgrading is dependant upon whether an originating or terminating database approach is selected to provide MNP. 7.1.2. Additional traffic costs For non-geographical services, such as mobile services, additional network capacity is required to support MNP. The routing of calls is determined by whether the A partys network operator is either the same as, or has a contractual agreement with, the service provider of the B party. In these circumstances, the call will be routed in an efficient manner. A high proportion of calls, however, originate on an external network and all of these calls will require additional capacity to implement MNP.

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7.2. Customer costs

The additional costs to customers associated with implementing MNP include:

? customer transfer costs (that is, the cost incurred by service providers in closing an
existing account, setting-up a new account and co-ordinating the network operators in the switching over of the mobile number and routing of the calls);

? costs of new handsets or SIM cards (depending upon the handset used; and ? caller costs (the additional delay in setting up a call to a ported number).
In relation to the issue of costs, the ACA report argues that there are different levels at which consideration of mobile number portability implementation costs can be undertaken in the current Australian context. These include:

? the costs of a GSM-only solution; ? the costs of a specific solution for each mobile technology compared to the costs of an all
technologies approach which is independent of any mobile telecommunications technology;

? the costs of implementing a solution for mobile (for example, GSM) number portability as
quickly as possible and then, if necessary, having to introduce another solution (or upgrade the GSM solution) to implement portability for other types of technology or to align with a later available global solution for GSM, individual technologies or all technologies; and

? the costs to industry at large of implementing mobile number portability solutions having
regard to the development work already undertaken (or which may be undertaken) to implement local number portability. Industry considers that the costs associated with each of the four approaches outlined above would be different and could differ by a significant amount. Further, the ACA report argues that even in considering the costs of a GSM only solution, these costs will vary significantly depending on which solution to GSM number portability is adopted by ETSI. In response to the discussion paper, Optus argued that international cost studies cannot be assumed to be reflective of Australian conditions. As such, a cost/benefit study should be conducted in Australia to ascertain the costs and associated benefits of adopting various technical solutions. It was argued that, in the absence of this information, the Commission will be unable to determine whether MNP is in the LTIE.

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7.3. Commission view

The Commission does not consider that a full cost/benefit study is required prior to making a decision on whether MNP is in the LTIE. The Commission believes there is a clear case that MNP is in the LTIE since it promotes competition for existing customers, particularly business customers, and provides benefits to consumers by providing added incentives for carriage service providers to offer new and innovative services in order to maintain their custom. The Commissions view is that the benefits to competition and consumers resulting from MNP have been recognised in all jurisdictions where the introduction of MNP has been considered. In addition, there have been numerous European, United States and Hong Kong reports which provide cost/benefit analyses of mobile number portability implementation. These include:

? the Ovum study, Number portability - strategies for market, technical and regulatory
success (1996);

? the National Economic Research Associates (NERA) and Smith System Engineering
Feasibility study & cost benefit analysis of number portability for mobile services in Hong Kong (prepared for OFTA in 1998);

? the OFTEL document Numbering: Options for Future Part 2 (1996); and ? the UK MMC Telephone Number Portability Report (1995) which provides detailed
analysis of the costs of fixed network number portability. The Commission, therefore, believes that a detailed cost study would only add unnecessary costs and delays to MNP implementation. The cost of MNP implementation will depend on the detailed technical arrangements and the specific procedures each carrier puts into place within its own network which have yet to be resolved. The Commission envisages that each carrier would design these procedures in such a way as to minimise its own costs. As a result, the Commission believes that cost issues (such as, who should bear the cost of providing MNP and how these costs should be recovered) are matters which will need to be resolved once the technical solution(s) is(are) agreed to by industry. At that time, the Commission will consider whether it should issue pricing guidelines for MNP.

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Appendix 1:

Written submissions provided to the ACCC

AAPT Telecommunications Australian Communications Authority Australian Mobile Telecommunications Association American Express ANZ Banking Group Ltd Cable & Wireless Optus Ltd Centre for Telecommunications and Information Networking Consilium Group Pty Ltd Ford Motor Company of Australia Hutchison Telecoms Index Consulting Australia Pty Ltd One.Tel Qantas Airways Ltd Queensland Government Telstra Thompson Corporate Vodafone Westel

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