OFCOM destroying competition

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

To give you an idea, here is what you needed to set up as a VoIP operator providing calls and geographic numbering:-

• Technical and business experience - that is perhaps "the tricky bit"
• A VoIP server, maybe £1000 for linux based box, and a few hundred a month to have it hosted in a rack on the Internet.
• Blocks of telephone numbers, £0. Yes that is £0.
• Hosting blocks of numbers with a larger carrier, £0.
• Incoming call routing for those numbers to your VoIP server, £0.
• Outgoing call routing to the PSTN via larger carriers, £0 (plus call costs).
• Joining an ADR scheme (OFCOM requirement), few hundred a year

As you can see, whilst you do had to know what you are doing, and be able to afford hosting of boxes on the Internet, it is actually very cheap to start up as a VoIP provider. Carriers will usually host number blocks free as they make the interconnect revenue for incoming calls.

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

There are two changes OFCOM have instigated. Remember, OFCOM are meant to be acting in your interests and encouraging competition.

• Charging for numbering. Whilst a pilot this year, rolled out to just geographic numbering this is looking like £65,000 a year for the smallest allocation in each area (650 areas of 1,000 numbers). A huge entry price to the market
• Reducing interconnect fees on geographic numbering calls. This is making the hosting-for-free model less viable for carriers and looks like we may have to start paying for incoming calls.

The numbering thing is huge. It makes any small VoIP providers business model break badly. It is a charge for something we already have, not just new blocks or new telcos. We are trying to work out what to do. We may have to give the blocks to a larger carrier as the larger carriers with more paying customers may find it viable - but these blocks are no longer an asset we could sell, but a liability we are trying to avoid. So this may not be possible and we may have to hand them back to OFCOM. That will stop service for all customers in those blocks even if ported out to another provider already. Clearly this is not in the consumer's interests.

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

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

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

I have pondered how I think they should do this. So here are some of my musings on this. It is a bit late, as OFCOM seem uninterested in these ideas and determined to ruin the market...

• The interconnect rates have to be at a level that a carrier can host numbers and pass on inbound calls for free. Any lower and you have a serious issue. That may be possible at lower rates than previously, but they may have gone too far. Why are they not allowing the free market to set rates anyway?
• Numbers could be allocated in smaller blocks. Apparently the larger telcos can't handle this. So, simple, make anyone that can't handle smaller blocks pay a penalty until they can. Don't make the small telcos that would be happy to have smaller blocks and not hog lots of numbers pay extra. If we could get numbering in 100 number blocks the bill at current prices would be nearer £6,500 a year which is expensive compared to £0, but more of a viable model.
• Ideally they should allocate blocks with a DNS style (possibly actually DNS like enum) routing to a point code, and an API to allocate (and port) numbers on a per number basis. We'd be happy to design such a system for them! Charging for numbers would not be ideal, but charging only for actual in-use numbers would be a viable model for most people. This would also solve the serious issue with porting that it relies on the original number block owner - porting would be a change in the OFCOM maintained numbering database, that is all.
• Make more numbers. Simply do number changes in the congested areas, as was done in London. Even go for longer numbers. It takes time, and is some disruption, but is how it was always done by the post office and BT.
• Allow variable length numbers as used in many other countries. This solves a hell of a lot of the problems with number allocations.

The variable length numbers thing is quite nice. I have seen cases where a town would have, say, 6 digit residential numbers, but large companies have 4 digit "main number", which is nice, but 7 or 8 digit DDI numbers within the company. Areas with a high demand for numbers would simply have longer numbers. It would allow areas to retain their familiar area codes even, and still allow local dialling.

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