Interconnect Product Forum

21st October 2009

STANDARD CONTRACT FORUM SESSION

21 October 2009

Keith Mitchinson

STANDARD CONTRACT FORUM SESSIONWhat is the CMM?

• A process CPs can use to resolve disputed issues when negotiating terms and conditions of supply with BT on SMP (significant market power) products. • Applies to CPs who purchase services from BT.

• Stems from the TSR Undertakings

STANDARD CONTRACT FORUM SESSION

History of the CMM

• CMM Issue 1 published on 22 March 2006 to be reviewed after nine months

• Review conducted by industry and BT in Jan 2007 following open invitation to industry to participate“It was recognised that the CMM had not been used.  It was felt that this was, in part, a reflection of the good work that had been done over the last 12 months to resolve potential CMM issues and find a compromise without needing to resort to the formal CMM process.  It was also recognised that the number of contract negotiations over the last 12 months was not huge.”

• CMM Issue 2 published on 1 June 2007

• Agreed to further review at later of 12 months, or 6 months after CMM is first used

STANDARD CONTRACT FORUM SESSIONScope of current CMM

• CMM will apply to all disputes arising out of the negotiation of terms & conditions for BT contracts of supply for SMP Products in relation to:

- Reference Offer for new SMP products; and- Review/variation of existing T&Cs for SMP Products or as a consequence of a

regulatory right of either party; and- Provisions covering the position where a CP has objected to terms and

conditions it is being asked to sign up to.

• A dispute may be raised on a specific term or condition but CMM will take account of overall context and other T&Cs

• Can only use CMM once negotiations on the issue(s) have reached an impasse

• Use of the CMM is optional for CPs - BT must participate in process if it is invoked by a CP. CMM can be invoked by one or more CPs

STANDARD CONTRACT FORUM SESSIONCMM process• Step 1 – Internal Escalation: Once the CMM is invoked, the parties have 30 days to escalate and discuss the issue internally

• Step 2 - Mediation: If not resolved then parties can take to non-binding mediation (BT pays 50% costs of mediation)[Mediation process as per Chartered Institute of Arbitrators Independent Dispute Resolution Scheme (IDRS) document (see link in CMM)]

• Step 3 – Early Neutral Evaluation (ENE): If mediation fails within 2 months then parties can take to non-binding ENE (BT and CP each pay 15% and remained to be allocated as part of the ENE). NOTE EXCEPTIONS SLIDE[ENE process as per Chartered Institute of Arbitrators Independent Dispute Resolution Scheme (IDRS) document (see link in CMM)]

Caps: - £10,000 per party per dispute (for mediation and ENE)- £500,000 per party per annum for all CMM disputes.

STANDARD CONTRACT FORUM SESSIONScope of current CMM

• CMM will apply to all disputes arising out of the negotiation of terms & conditions for BT contracts of supply for SMP Products in relation to:

- Reference Offer for new SMP products; and- Review/variation of existing T&Cs for SMP Products or as a consequence of a

regulatory right of either party; and- Provisions covering the position where a CP has objected to terms and

conditions it is being asked to sign up to.

• A dispute may be raised on a specific term or condition but CMM will take account of overall context and other T&Cs

• Can only use CMM once negotiations on the issue(s) have reached an impasse

• Use of the CMM is optional for CPs - BT must participate in process if it is invoked by a CP. CMM can be invoked by one or more CPs

STANDARD CONTRACT FORUM SESSIONExceptions to ENE

• Unless the parties otherwise agree, the following types of disputes will not be eligible for early neutral evaluation:

Pricing and payment terms;Limitation of liability or exclusion of loss provisions (except

clauses with uncapped liability on part of CP);Regulatory policy;Network security or integrity;Fraud or issues relating to artificial inflation of traffic;Network policy;Credit vetting policy and terms;Termination rights (relating to: insolvency or ceasing to

trade; repeated or persistent breach; which provide the party in breach with the opportunity to remedy that breach; for convenience; relating to change of control of BT or change of legal ownership of BT);

Intellectual property rights; andThird party financial or performance guarantees

STANDARD CONTRACT FORUM SESSIONFurther information

BTW website:

http://www.btwholesale.com/pages/static/Pricing_and_Contracts/Contract_Management_Mechanism.html

Openreach:

http://www.openreach.co.uk/orpg/products/cmm/cmm.do 

STANDARD CONTRACT FORUM SESSIONBTW Credit Vet Review

• In MSA, PPC and SIA 2008 Contract Reviews industry looked for review of BTW Credit Vet Policy

• Agreed to take as stand-alone exercise “later” in 2009Interconnect Briefing 330/09 issued 26 August 2009 to launch

• Process generally per MSA Contract Review GuideIndustry issues invited for Wednesday 16 September; BT circulated consolidated list of issues 25 September. Web-site created to chart progress

• BT initial responses 13 October; meeting with interested industry players 15 October - notes available shortly

• BT to consider and respond – possible further session 5 November

STANDARD CONTRACT FORUM SESSIONUpdated AIT: Effective date

• Industry generally signed up to SIA 2008 AIT Supplementary; Ofcom Determination on final few 28 July 2009

• Interconnect Notification 331/09 issued 28 August 2009 is BT Notification of 1 March 2010 Effective Date - gives agreed six month period for CPs to prepare upstream/downstream arrangements

• BT Reference Offer website updated accordingly: revised 2009 AIT Supplemental Agreement for new signers

• Session at today’s October IPF/SCF session; further session December

• See AIT Review website to follow progress

• BT to issue guidance per Ofcom requirement

[Note: all A1 Retention Notices pre-1 March 2010 to existing T&Cs; all A1 Retention Notices from 1 March 2010 onwards to updated process]

STANDARD CONTRACT FORUM SESSION2008 SIA Contract Review• 17 March BT circulated a redraft of the SIA

• 22 May BT circulated the CP responses to that draft, and proposed an action plan

• Things then went quiet…..but are now moving again

• Liability meeting held 24 September (also for MSA and PPC) – also discussed SIA Contract Amendment process, TUPE and Force Majeure: CP and BT actions ongoing

• The outstanding product/finance issues of • Carrier Price List practice• Retrospection• Adjustment and Default Interest Rates• Periods for Billing/challenging bills

programmed for discussion today