Price Benchmarking of Manx Telecom's Services 2006 - Isle of Man Treasury and the Communications Com

The Isle of Man Treasury and

The Communications Commission

-

Price Benchmarking of Manx Telecom's Services

Final version

GOS Consulting Limited May 2006

Table of Contents

1. Executive Summary............................................................................................1
2. Introduction and Methodology ..............................................................................6
3. Broadband Internet Access - Retail........................................................................8
4. Broadband Internet Access – Wholesale...............................................................12
5. Residential Fixed Line Tariffs ..............................................................................15
6. Business Fixed Line Tariffs .................................................................................18
7. Private Circuit Service Tariffs..............................................................................21
8. Mobile Services ................................................................................................23 Annex A: Tariff details...............................................................................................28 Annex B: Composition of baskets for fixed and mobile telephone users .............................41 Annex C: Instructions for Using Tariff Model.................................................................45

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1  Executive Summary

This study has taken a snapshot, using published data, of Manx Telecom's tariffs across a range of services at the end of 2005 and compared them with a number of other jurisdictions in order to provide a benchmark of its prices. Where a tariff consists of several components, a consolidated price (expressed as an Equivalent Monthly Price or EMP) has been calculated and, where appropriate, the sensitivity of the tariff is tested by re-calculating the EMP for different usage levels. This EMP effectively represents the price paid by the user including, where appropriate, the amortisation over a reasonable period of any set-up charges. For ease of comparison, the results are expressed as an index with MT set, in each instance, at 100.

For retail broadband services using digital subscriber loop (DSL) technology, Manx Telecom (MT) competes locally with a number of other Internet Service Providers (ISP) and these have been included in the comparisons. Unlike ISPs in some other jurisdictions, MT has a single residential service offering with downstream speeds of up to 2 Mbps and no download capacity constraints. Consequently, its ranking, in EMP terms, depends very much on the assumed service requirement. For example, the chart below compares MT's tariff with other services that offer a downstream speed of at least 2 Mbps and a download capacity of at least 16 Gb/month. There are only limited comparators available but MT (and the other ISPs in the Isle of Man) is on a par with BT and considerably cheaper than Jersey Telecom. (Connection charges in the Isle of Man are currently covered by a government/MT-backed subsidy scheme and – to give a consumer's perspective - have been excluded from the EMP calculations).

Summary figure 1 Residential broadband DSL access with 2 Mbps downstream speed

Downstream speed min 2 Mbps, Monthly download capacity min 16 Gb

160 140 120 100 80 60 40 20 0

Domicilium MCB (IoM) MT BT (UK) Jersey Telecom

(IoM)

However, when we consider residential users with more modest requirements, MT's limited tariff options place it at a disadvantage. For example, the chart below looks at residential services with a downstream speed of at least 1 Mbps. Service providers who offer an entry- level tariff (ie with only limited download capacity and/or downstream speed) have EMPs that are some 30 to 40 percent below MT. The gap narrows as the monthly usage increases but even for a higher volume user (a minimum of 16 Gb/month is used for Summary figure 2 overleaf), MT's tariff remains at the bottom of the ranking.

A similar situation exists with MT's DSL access tariffs for business users. For a user with high demand, MT outranks the other small island economies, but not BT and Eircom. For more modest user requirements, MT's single tariff again causes it to slip down the rankings.

Summary figure 2 Residential broadband DSL access with min. 1 Mbps downstream speed

Residential DSL (Min 1Mbps downstream) Capacity limits: Entry level and Minimum 16 Gb/month

120 100 80 60 40 20 0

Min. 16 Gb/month Entry level

BT (UK) Eircom C&W Guernsey Jersey Telecom Domicilium MCB (IoM) MT

(IoM)

MT also provides a number of network services at wholesale rates to facilitate the provision of broadband Internet access by other Internet Service Providers. Its wholesale tariffs for the so-called end-user data path (which connects each end-user with the local MT exchange) generally compare very favourably with other jurisdictions. However, the absence of a speed- dependent tariff structure means that it ranks only fourth when compared to relatively low- speed (entry-level) business-grade services.

Summary figure 3 Wholesale broadband access for business users

ADSL wholesale access - business user (low contention)

350 300 250 200 150

100 50 0

Manx Telecom C&W Guernsey Jersey Telecom Eircom BT (UK)

For fixed line telephony services, residential users may choose from four MT tariff options, which compare favourably with other jurisdictions. Its Lifeline tariff puts MT in second place for the lightest usage basket (see chart below) and its range of tariffs maintains MT in the top three across the full spectrum of call usage patterns.

Summary figure 4 Fixed telephony for light residential users

Lowest Use Fixed Line Telephone Tariff (Residential Basket No. 1)

300 250 200 150 100 50 0

BT (UK) Manx Telecom C&W Guernsey Gibtelecom Jersey Telecom Eircom Light User Scheme Lifeline Standard Gibwireline Coreline Standard

For business users, MT performs even better - ranking first for heavier usage levels and either first or second for the lighter baskets.

Summary figure 5 Fixed telephony for heavy business use

High Use Fixed Line Telephone Tariff (Basket No. 6)

160 140 120 100 80 60 40 20 0

Manx Telecom C&W Guernsey BT (UK) Jersey Telecom Eircom Gibtelecom GlobalChoice Standard Standard Encompass Talktime Level 7 GibWireline

MT is similarly strong for mobile business users who are assumed to have a high volume of call traffic.

Summary figure 6 Mobile telephony for business user

Business user with light data requirement

180 160 140 120 100 80 60 40 20 0

Manx Telecom Jersey Telecom Vodafone (Ireland) Vodafone (UK) C&W Guernsey Gibtelecom

For light business users and leisure users, when VAT liability becomes a differentiating factor among the various jurisdictions, MT's ranking drops to fourth or fifth.

Summary figure 7 Mobile telephony for medium leisure user

Semi-light (mostly peak) leisure mobile Leisure basket 2 - 400 calls a year

120 100 80 60 40 20 0

C&W Guernsey Jersey Telecom Vodafone (Ireland) Vodafone (UK) Manx Telecom Gibtelecom AllTalk StraightTalk50 PerfectFit100 Anytime75 Pronto30 Reload

The picture for MT in the provision of private circuits is quite mixed, depending on the particular service being considered and it is difficult, in this particular area, to draw any general conclusion. For a local 64 kbps digital circuit, for example, MT ranks only fifth.

Summary figure 8 Local 64 kbps private circuit

64kbps digital circuit - same exchange

120 100 80 60 40 20 0

C&W Guernsey Eircom JerseyTelecom Gibtelecom Manx Telecom BT (UK)

But, for a higher speed (2 Mbps) local circuit, MT ranks second.

Summary figure 9 Local 2 Mbps private circuit

2 Mbps digital circuit - same exchange

160 140 120 100 80 60 40 20 0

C&W Guernsey Manx Telecom Eircom JerseyTelecom BT (UK) Gibtelecom

Details of all the tariffs that form the basis of this benchmarking exercise are summarised in Annex A and the various user baskets are described in Annex B.

To accompany this report, we have produced an Excel workbook that contains all of the calculations used to determine the Equivalent Monthly Price data. This is in a form that allows the Communications Commission and Isle of Man Treasury to vary the underlying assumptions and produce their own benchmark comparisons. Instructions for using the workbook are given in Annex C.

1.1 Conclusion

Looking at the overall picture emerging from this benchmarking exercise, we conclude that MT is positioned favourably vis-à-vis other small island economies, such as the Channel Islands and Gibraltar. This is despite the fact that MT's residential services attract VAT, unlike the other small island economies, although its existence clearly affects MT's ranking for certain services. Furthermore, in some instances, the lack of scale in MT's operations means that it cannot compete favourably against the larger economies such as the UK and Ireland.

MT's prices are, in particular, consistently competitive for the high-user markets for both residential and business customers. Less competitive areas include mobile services for light users and also low bandwidth broadband access where other operators offer access at 0.5 Mbps – 1 Mbps and MT only offers a 2 Mbps service. Lastly, MT's prices for low bandwidth leased lines (64 kbps) are higher than in other jurisdictions.

The Communications Commission has recently announced that it has licensed two new mobile providers for the Isle of Man. This is likely to introduce price competition in the provision of mobile services and could therefore remedy the situation of less competitive pricing for light mobile users.

2  Introduction and Methodology

The Communications Commission and Isle of Man Treasury are committed to ensuring that the Isle of Man remains at the forefront of developments in telecommunications and, in particular, to encouraging increased choice and value for consumers. To this end, it conducts regular reviews of the range, quality and price of telecommunications services available to businesses and residents on the island.

A comparative study of tariffs was carried out in 2001 by Interconnect Communications and a follow-up study, focusing on Manx Telecom's business tariffs, was performed in 2004 by Pure Pricing. Given the dynamic nature of the telecommunication sector, and the continuing development of new services, it is important to maintain regular oversight of the full range of services that are on offer and how they compare with offerings in other areas.

The purpose of this study is to provide an updated benchmark of telecommunication service tariffs across an expanded range of services including the provision of broadband and wholesale services. It also looks at the range of service (and price) options available to consumers and service providers within key service categories.

The focus of this study is the prices charged by Manx Telecom. The benchmarking is achieved by comparing its prices with those of similar operators in other island or off-shore economies – namely Guernsey, Jersey and Gibraltar – and with the dominant service providers in the Republic of Ireland and mainland Britain. All of these areas are subject to similar telecommunications regulatory climates although, as we discuss below, local market conditions will undoubtedly vary.

The study looks at tariff packages in the following areas:

• Broadband Internet access services, both retail and wholesale;
• Fixed line telephone services;
• Mobile services; and
• Private circuits.

For all but the last category, we consider packages for both residential and business customers. In the case of internet access, MT's prices are also compared with those of local competitors.

Telecommunication tariffs can be complex with several price components, eg a once-off connection charge, a regular monthly rental and volume-dependent call charges, and a number of tariff options to suit different levels of usage. For each comparison we have combined these price components into a single Equivalent Monthly Price (EMP).

Where there is a usage element we have looked at different levels of consumption and, for multipart tariffs (eg different charges for local, national and international calls), we have used a series of "baskets" that represent different typical user profiles. Further details of particular baskets are given in the sections on particular services.

Even with a range of baskets, the results of the comparisons depend on certain underlying assumptions. Key variables have been flexed as part of our analysis in order to test the robustness of our results. This was done using a spreadsheet model developed specifically for this study and a copy of this will be made available to the Communications Commission and the Treasury so that they may make further comparisons. Operating details for the model are given in the Annex.

2.1 Methodology

The general principles underpinning the study are described here. Specific assumptions relating to individual services appear with the results of the comparisons in the subsequent sections.

Within each service category we have looked at all tariff options available to the general public (ie we have excluded special tariffs that are only available to a sub-sector of the market such as senior citizens). Discount options and savings that are generally available and form part of the provider's regular tariff structure have also been taken into account where applicable but not time-limited special offers or "Family & friends" and similar discounts that only apply to limited destinations.

Where alternative tariffs are available from a service provider we select the most economic for each basket and use that in the cross-country comparison.

The basic measure for all of the benchmarking is the Equivalent Monthly Price (EMP) to the consumer  based  on  current  published  prices  (mostly  taken  from  the  service  providers' websites in December 2005). Any once-off payments, such as connection charges, are amortised over an estimated lifetime of the purchase; mobile telephone contracts, for example, tend to be changed more frequently than fixed line services and so have a shorter assumed lifetime.

When comparing prices we have taken the customer's perspective. Hence, VAT has been included at the appropriate rate for residential prices but excluded for business prices. Of the six jurisdictions included in the comparison, only three - one being the Isle of Man - levy Value Added Tax (VAT), as shown in the Table below. Consequently, for the Channel Islands and Gibraltar, the absence of any VAT helps to deliver favourable results for residential services.

Figure 1 VAT rates

Similarly, any subsidies that are generally available to customers have also been taken into account. Specifically, connection charges for broadband DSL services in the Isle of Man are funded by the Government and underwritten by Manx Telecom. Discounts that are available for direct debit payments are also included.

The published tariffs are expressed in Pounds Sterling with the exception of those for the Republic of Ireland, which are in Euros; these have been converted to Sterling at the rate of 1:£0.68. The conversion rate can be adjusted within the model.

For each comparison, the MT price is expressed in absolute terms and as an index of 100 with all other prices referenced to it. Hence, another service provider with a price index of 105 would be 5% above MT's EMP.

3  Broadband Internet Access - Retail

Broadband Internet access services are available from MT under the brand name, Manxnet, and from a number of competing service providers in the Isle of Man. We have focused on the most popular form of access service for residential and small business customers, which is offered over the fixed telephone network using Digital Subscriber Loop (DSL) technology.

Broadband DSL customers are required to rent a fixed telephone line to use the DSL service. However, since they are almost certain to already have a line installed the price of this has been excluded from the comparisons below (they are considered, however, as part of the telephone service comparisons in Sections 5 and 6).

DSL installations also require a broadband modem and filters. MT includes the supply of the latter in its service tariff. Some other service providers also include the cost of the modem in their service tariffs (MT has also provided the modem for free under a limited offer but, following our stated methodology, this has not been taken into account). Where necessary, we have factored in the cost of purchasing the additional necessary equipment so that all services are compared on the same basis.

1. Residential Services and Tariffs

MT currently has a single DSL broadband service aimed at the residential market that offers downstream speeds of up to 2 Mbps (the realisable maximum speed is dependent, as is the case with all DSL services, on the distance between the customer's premises and the local exchange). It has a simple two-part tariff:

Figure 2 Manx Telecom's ADSL Residential Broadband Tariff

Under a subsidy scheme operated by the Isle of Man Government and underwritten by Manx Telecom, customers do not have to pay the connection fee and so it has been excluded from the comparison. However, its impact is considered when looking at the results of individual tariffs. For comparable services, any connection charge is amortised over a three year period in order to arrive at an EMP.

To benchmark MT's prices we have looked at a number of competing access providers in the Isle of Man and the incumbent fixed network operator in each of the comparator countries.

Competing broadband DSL access service providers in the Isle of Man have to pay MT for access to its local network infrastructure (the relevant wholesale prices are considered in detail in the next section). MT has the same, one-price strategy regardless of downstream speed for its wholesale Internet DSL service and so the competing access providers are effectively limited to also having a single retail price for all downstream speeds up to 2 Mbps.

In contrast to MT's single offering with a relatively high service specification, providing a downstream speed of up to 2 Mbps and no limit on the download capacity, some of the providers in other jurisdictions have a range of prices to reflect different downstream speeds or, in the case of Eircom and BT, different limits on the downstream capacity.

Figure 3 Broadband DSL access services

We begin by looking at MT's tariffs alongside other 2 Mbps service offerings and then consider the impact of MT's singe tariff by considering two user profiles with more modest requirements:

• A downstream speed of 1 Mbps with a minimal download requirement (eg to suit an entry- level user); and
• A downstream speed of 1 Mbps with a more substantial volume of at least 16 Gb per month (this would typically represent someone, for example, who regularly downloads video clips).

The results of the comparisons are shown in Figure 4 and Figure 5

Figure 4 Min 2 Mbps downstream speed broadband DSL access – residential

Downstream speed min 2 Mbps, Monthly download capacity min 16 Gb

160 140 120

100 80 60 40 20 0

Domicilium MCB (IoM) MT BT (UK) Jersey Telecom

(IoM)

Not all of the service providers offer a 2 Mbps service and so the comparison is limited. However, of those that do, MT is on a par with BT and considerably cheaper than Jersey Telecom. If the connection charge were to be taken into account, MT's EMP would increase by four percent, making it slightly more expensive than BT.

It must be remembered, of course, that not all users are located sufficiently near an exchange to benefit from a 2 Mbps downstream speed service. Comparisons with services that offer a 1 Mbps downstream speed follow.

Figure 5 Min 1 Mbps downstream speed broadband DSL access - residential

Residential DSL (Min 1Mbps downstream) Capacity limits: Entry level and Minimum 16 Gb/month

120 100 80 60 40 20 0

Min. 16 Gb/month Entry level

BT (UK) Eircom C&W Guernsey Jersey Telecom Domicilium MCB (IoM) MT

(IoM)

Given MT's relatively high service specification, it is not surprising that its tariff looks relatively expensive alongside the entry-level options available from some other service providers. The gap is reduced if the user has a higher capacity requirement although MT's tariff remains one of the most expensive.

2. Business Services and Tariffs

While the residential services considered above may also be of interest to business customers, we have looked specifically at the offerings from MT and others configured specifically for businesses (with fixed rather than dynamic IP addressing and a lower contention ratio – typically 20:1 compared to 50:1 for a residential service).

As with its residential service, MT has a single tariff for downstream speeds from 0.5 Mbps to 2 Mbps. There are, however, two options: the Premier Service provides a basic facility whereas the Managed Service also includes router equipment and technical support.

Figure 6 Manx Telecom's ADSL Business Broadband Tariff

We have selected MT's Premier Service for benchmarking (with an allowance for purchasing the necessary modem) and, like the residential service, the connection charge is currently met by the Isle of Man subsidy scheme and has been excluded from the base comparison. We have considered two different customer requirements:

• A 2 Mbps downstream speed and high download capacity requirement (40 Gb per month);
• A more modest downstream speed (at least 1 Mbps) with lower download capacity requirements (10 Gb per month).

As with the residential service, competing access providers in the Isle of Man are effectively limited to having a single retail price for all downstream speeds up to 2 Mbps. Again, with only limited tariff options, MT's performance in the benchmarking depends significantly on the user's  speed  and  capacity  requirements.   The  results  of  the  comparisons  are  shown  in Figure 7 and Figure 8 below.

Figure 7 2 Mbps downstream speed broadband DSL access – business

Downstream speed min 2Mbps, Monthly download capacity min 40Gb

160 154 156 140

120

98 99 100

100 93

80

60

46

40

20

0

BT (UK) Eircom MCB Domicilium MT Gibtelecom Jersey Telecom C&W

(IoM) (IoM) Guernsey

Although BT and Eircom outrank MT, the latter compares favourably alongside the other island economies. However, for those users who have a less demanding requirement or are placed sufficiently far from a MT exchange that they cannot benefit from the higher speeds, MT's limited tariff options rank poorly.

Figure 8 Min 1 Mbps downstream speed broadband DSL access - business

Downstream speed min 1 Mbps, Monthly download capacity min 10 Gb

160 140 120 100 80 60 40 20 0

BT (UK) Eircom Jersey Telecom MCB Domicilium MT C&W

(IoM) (IoM) Guernsey

MT's Premier business service is relatively expensive for a business customer with modest downstream  speed  and  capacity  requirements.  Inclusion  of  the  government-subsidised connection charge would only increase MT's EMP by two percent, with no material change on the results.

4  Broadband Internet Access – Wholesale

Since MT is the incumbent infrastructure operator in the Isle of Man it is obliged to provide essential network access facilities to competing broadband Internet service providers who wish to provide consumers with a DSL-based service. Of the various network components that an ISP may require, we focus in this Section on the wholesale prices that it has to pay for the DSL-enabled link between each consumer's premises and the local exchange (sometimes referred to as the End User Data Path or local access link).

This facility can be configured to suit particular end-user requirements and, just like the preceding retail services, MT has separate offerings for residential and business users. These are considered separately in the following sections.

1. Residential Services and Tariffs

MT has a single wholesale tariff for residential end-users covering downstream speeds of up to 2 Mbps (as mentioned earlier, the realisable maximum speed is dependent on the distance between the user's premises and the local exchange), although there is a 10% discount if the ISP assumes responsibility for billing the end-user for the access element. Pricing details are given below.

Figure 9 MT's wholesale tariff for residential users

Unfortunately, only limited comparators are available – see Figure 10 for a full list. In Gibraltar, the incumbent operator does not provide a wholesale service and in Guernsey and Ireland, there are only relatively low speed services for residential users. To put MT's tariffs in context, we have looked at two situations: an entry-level price, representing the lowest-priced option available (giving a minimum downstream speed of 0.5 Mbps), and a high-speed (ie 2 Mbps downstream) option.

Figure 10 Wholesale broadband DSL access services for residential users

The results, illustrated in Figure 11, are expressed in terms of an indexed entry level price and, where applicable, a surcharge for upgrading to the high speed option. MT's tariff is within seven per cent of the cheapest entry level price (Jersey Telecom) and the most cost-effective of all network providers, by a significant margin, for the high speed option.

Figure 11 Wholesale broadband local access - residential users

ADSL wholesale access - residential user (high contention)

350 300 250 200 150 100 50 0

Manx Telecom C&W Guernsey Jersey Telecom Eircom BT (UK)

(1 Mbps max) (1 Mbps max)

2. Business Services and Tariffs

Like its residential service, MT has a single ADSL wholesale tariff for business end-users covering downstream speeds of up to 2 Mbps with a 10% discount if the ISP assumes responsibility for billing. Pricing details are given below. There is currently no connection charge since the retail subsidy scheme mentioned previously is extended to all ISPs, not just end-users serviced by MT.

Figure 12 MT's wholesale tariff for business users

Again, only limited comparators are available – see Figure 13 for a full list. As before, we have looked at two situations: an entry-level price, representing the lowest-priced option available (giving a minimum downstream speed of 0.5 Mbps), and a high-speed (ie 2 Mbps downstream) option.

Figure 13 Wholesale broadband DSL access services for business users

Figure 14 gives the results of the comparison. As with the residential service MT's tariff is the most cost-effective for the high speed option but, in terms of entry-level options, it ranks only fourth.

Figure 14 Wholesale broadband local access - business users

ADSL wholesale access - business user (low contention)

350 300 250 200 150 100 50 0

Manx Telecom C&W Guernsey Jersey Telecom Eircom BT (UK)

5  Residential Fixed Line Tariffs

Fixed line or Public Switched Telephone Network (PSTN) tariffs have multiple components and to  facilitate  comparison  we  have  calculated  the  EMP  under  a  range  of  different  usage assumptions (each of which is represented by a particular basket – described below).

Connection charges are based on a weighted average of the connection prices for new lines and the same-day takeover of existing lines. The total is amortised over a five-year period.

The prices of customer premises equipment are not included.

1. Usage Baskets

MT's tariffs have been compared with those in other jurisdictions using six residential baskets that represent different levels of customer usage. They range from a low volume user making only a modest number of local and national fixed line calls a month, through to high volume users with nearly 2,000 fixed line calls and substantial calls to mobile and international numbers. The definition of each basket is based on a series of assumptions used by OFCOM for price benchmarking and is summarised below.

Figure 15 Residential fixed line telephony baskets

Each basket consists of a mix of calls to local, national and international fixed line destinations and to mobile phones during peak (ie daytime, weekdays) and off-peak (evenings and weekend)  periods. In  the  OFCOM  baskets,  a  full  range  of  national  and  international destinations are included with weightings based on actual traffic volumes for each of the comparator countries. For the purposes of this study, a simplified approach has been adopted using five specified categories[1]. These are summarised in the table below.

Figure 16 Chosen destinations for cross-border and international call categories

The duration of each call is varied according to the destination and time-of-day. Details of this and other aspects of each usage profile are given in Annex B. The accompanying spreadsheet allows the usage parameters to be varied and other baskets added.

2. Service and Tariff Packages

MT has four general usage tariff packages for its residential fixed line service. In addition to its Standard package there is Island Choice, which offers cheaper local calls to fixed and mobile  telephones,  and  Global  Choice,  which  offers  cheaper  international  calls.   Some indicative prices within each package are given below.

Figure 17 Elements of Manx Telecom's Telephone Tariff Packages

These are compared with the tariffs from the incumbent fixed line operator in the comparator locations. The complete list of comparison tariffs is given below.

Figure 18 Tariffs included in residential fixed line comparison

MT's Lifeline tariff is understandably well-suited to the low usage baskets and ranks second only to BT's Light User Scheme for basket 1 (see Figure 19). Although some of the other jurisdictions also have similar social-oriented tariffs, they are not generally available and so have been excluded from the comparison.

Figure 19 MT's Lifeline tariff for low volume residential users

Lowest Use Fixed Line Telephone Tariff (Residential Basket No. 1)

300 250 200 150 100 50 0

BT (UK) Manx Telecom C&W Guernsey Gibtelecom Jersey Telecom Eircom Light User Scheme Lifeline Standard Gibwireline Coreline Standard

As call volumes increase, so different tariff options become optimal. MT's Standard Tariff surpasses the Lifeline tariff with basket 3. By the time we reach basket 5, the Island Tariff becomes the more cost-effective of MT's tariff options. Figure 20 below illustrates how it compares with other operators' tariffs for Basket 5.

Figure 20 MT's Island Choice tariff for higher volume residential users

High Use (Off-Peak) Fixed Line Telephone (Residential Basket No. 5)

140 120 100 80 60 40 20 0

C&W Guernsey BT (UK) Manx Telecom Jersey Telecom Eircom Gibtelecom

Standard Together Option 1 Island Choice Homestyle Talktime Anytime Standard

For residential users, the availability of several tariff options helps to ensure that MT compares reasonably well with other jurisdictions; although C&W Guernsey is some 15 to 20 per cent cheaper for all baskets except number 1.

6  Business Fixed Line Tariffs

The approach used for benchmarking business fixed line tariffs is broadly the same as that used for residential services using a series of baskets but with an emphasis on higher call volumes and more daytime traffic. Details are given in the following section.

The prices of telephones and PABXs are not included. The connection charge is based on a weighted average of the connection prices for new lines and the same-day takeover of existing lines. The total is amortised over a five-year period.

1. Usage Baskets

A different set of six baskets has been used to compare MT's tariffs under typical levels of business usage. They represent different permutations of two business sizes and three usage profiles. The definition of each basket is again based on a series used by OFCOM for price benchmarking and is summarised below.

Figure 21 Business fixed line telephony baskets

As with the residential baskets, a simplified approach has been adopted for long-distance and international calls using five specified categories. These are summarised in

Figure 16 in the previous Section.

Details of call duration and other aspects of each usage profile are given in Annex B. The accompanying spreadsheet allows the usage parameters to be varied and other baskets added.

2. Service and Tariff Packages

MT has the same tariff options for residential and business users and three of them – Standard, Island Choice and Global Choice – have been considered in the comparisons. In addition, however, MT's business customers automatically qualify for a series of discounts on call charges under the Standard tariff. These discounts, details of which appear below, have been incorporated into the comparisons.

Some  other  operators  have  tariff packages  designed  specifically  for  business  customers. Jersey Telecom, for example, has Encompass, which offers cheaper daytime calls to the UK and  international  destinations. Other  operators  provide  optional  tariff  components  that provide additional discounts on call charges according to the level of usage. A full list of the services used for benchmarking the business tariffs is given below.

Figure 22 Tariffs included in fixed line business telephony comparison

MT's Global Choice is the most cost-effective of its tariff options across the full range of business baskets. It performs well in the comparisons, ranking first for the three heaviest usage baskets, and either first or second for the others. These favourable results are essentially due to Global Choice's relatively low charges for calls to mobiles and international destinations - both of which feature strongly in the business baskets.

Figure 23 MT's Global Choice tariff performs moderately for a low use business

Low Use Fixed Line Telephone Tariff (Business basket No. 1)

140 120 100 80 60 40 20 0

C&W Guernsey Eircom Manx Telecom Jersey Telecom BT (UK) Gibtelecom Standard Talktime Level 7 GlobalChoice Coreline Standard GibWireline

Figure 24 ... and significantly better for the highest usage basket

High Use Fixed Line Telephone Tariff (Basket No. 6)

160 140 120 100 80 60 40 20 0

Manx Telecom C&W Guernsey BT (UK) Jersey Telecom Eircom Gibtelecom GlobalChoice Standard Standard Encompass Talktime Level 7 GibWireline

7  Private Circuit Service Tariffs

There are numerous private circuit services available catering for different transmission speeds and quality of service. Their prices usually depend significantly on the distance of the circuit and MT's tariffs have been designed, understandably, to suit local conditions in the Isle of Man. This can make comparisons with other jurisdictions difficult and, for the purposes of this study, we have focused on three different speed circuits linking customers' premises in the same exchange area to avoid any distance-dependent price component:

• Analogue voice-grade circuit;
• 64 kbps digital circuit;
• 2 Mbps digital circuit.

We have also looked at the relative price of a 2 Mbps circuit from either the Isle of Man or the Channel Islands to London.

7.1 Service and Tariff Packages

MT's tariffs were not available on its website and the figures set out below are based on quotations provided by its Sales Department.

Figure 25 Selected MT tariffs for private circuits

Figure 26 to Figure 28 inclusive represent the outcome of the various local (ie same exchange) circuit comparisons. There is no discernable pattern to the results with MT's ranking varying from the second highest to the second lowest.

Figure 26 Local analogue (voice grade) private circuit

Analogue (voice) circuit - same exchange

160 140 120 100 80 60 40 20 0

JerseyTelecom Eircom Gibtelecom C&W Guernsey Manx Telecom BT (UK)

Figure 27 Local 64 kbps digital private circuit

64kbps digital circuit - same exchange

120 100 80 60 40 20 0

C&W Guernsey Eircom JerseyTelecom Gibtelecom Manx Telecom BT (UK)

Figure 28 Local 2 Mbps digital private circuit

2 Mbps digital circuit - same exchange

160 140 120 100 80 60

40 20 0

C&W Guernsey Manx Telecom Eircom JerseyTelecom BT (UK) Gibtelecom

In the case of the comparison of 2 Mbps digital circuits from the Isle of Man, or respective Channel Island, to London, Jersey Telecom and C&W Guernsey are some 13 to 15 per cent cheaper than MT. However, given that the distances involved are commensurately less for the Channel Islands operators, MT's prices are more favourable in terms of price per kilometre.

Figure 29 2 Mbps private circuit to London

2 Mbps circuit to London

160 140 120 100 80 60 40 20 0

JerseyTelecom C&W Guernsey Manx Telecom

8  Mobile Services

Mobile telephone services are largely interchangeable between residential (or leisure) users and business users, although certain tariffs are more suited to particular usage patterns. In addition, some mobile operators market "business" tariffs that suit higher call volumes and may include one or more options for data transfer (to suit emailing and web access).

For the purposes of this study, therefore, we have made comparisons based on two tariff groupings:

• a leisure group, which covers a range of voice usage and includes varying levels of text messaging; and
• a business group, which has a high level of voice usage and varying levels of data transfer.

Most post-paid and some pre-paid service packages include a basic mobile telephone and, where it is not, the price of a basic telephone has been included for consistency. The cost of this and any connection charges are amortised over a two-year period.

1. Usage Baskets

Comparisons have been made using five baskets representing different levels of customer usage. They cover a range of call volumes (both voice and text messaging) and a mixture of either predominantly peak or off-peak calling patterns. Also included in the baskets are varying levels of voicemail retrieval.

Basket 5 (highest volume, peak) is used with differing levels of GPRS data usage (for emailing, web access etc) to assess the data tariff options that are targeted at the business community.

The basket definitions are derived from a series used by OFCOM for price benchmarking and have been selected to illustrate each of MT's tariff packages.

Figure 30 Baskets used for mobile services

2. Service and Tariff Packages

MT's mobile service and tariff packages are designed to suit differing levels of call usage with one pre-paid (or pay-as-you-go) package called Pronto Go and two post-paid (or contract) packages, Pronto 30 and Pronto 100. Key elements of the tariffs are summarised below.

Figure 31 Elements of Manx Telecom's Mobile Voice Tariffs

In addition, for GPRS data transfer, MT has three tariff options to suit differing levels of usage. Details are summarised below.

Figure 32 Elements of Manx Telecom's Mobile Data (GPRS) tariffs

MT's tariffs are compared with those offered by the mobile operator with the largest market share in each of the other jurisdictions. A full list of the services considered is given below.

Figure 33 Tariffs included in leisure mobile comparison

The results of the benchmarking are presented below. The first basket (No 1) illustrates the costs to a light user of MT's Pay-as-you-go tariff alongside several other pre-paid packages. Although it is fourth in the rankings, it is within seven percent of the cheapest offering.

Figure 34 Mobile – light leisure user

Light (peak and off-peak) leisure mobile Leisure basket 1 - 160 calls a year

140 120 100 80 60 40

20 0

Vodafone (UK) C&W Guernsey Vodafone (Ireland) Manx Telecom Gibtelecom Jersey Telecom PayAsYouTalk AllTalk ReadyToGo ProntoGo Reload Freedom

Figure 35 Mobile - medium leisure user

Semi-light (mostly peak) leisure mobile Leisure basket 2 - 400 calls a year

120 100 80 60 40 20 0

C&W Guernsey Jersey Telecom Vodafone (Ireland) Vodafone (UK) Manx Telecom Gibtelecom AllTalk StraightTalk50 PerfectFit100 Anytime75 Pronto30 Reload

An increase in the annual call volume from 160 to 400 (basket no. 2) results in MT's Pronto 30 (post-paid)  service  becoming  its  most  cost-effective  offering. However,  as  Figure  35 illustrates, MT ranks as one of the most expensive when compared with other service tariffs. This is partly due to Pronto 30's rental charge being £5 higher than the Channel Island services, which do not attract VAT.

MT's ranking remains much the same for the third and fourth baskets but the situation changes with basket number 5. This represents a high level of call volumes and more international traffic. This favours MT's third tariff package, the Pronto 100, and puts MT second in the rankings, as shown in Figure 36.

Figure 36 Mobile - Heavy leisure user

Heavy (mostly peak) leisure mobile Leisure basket 5 - 4000 calls a year

140 120 100 80 60 40 20 0

C&W Guernsey Manx Telecom Jersey Telecom Vodafone (Ireland) Vodafone (UK) Gibtelecom Roamer Pronto 100 BigTalk 400 PerfectFit 200 Anytime 500 Select 250

As mentioned earlier, for a business user's perspective we have focused on a single, high voice call profile (basket 5) and looked at varying levels of GPRS data usage. The relevant tariff packages included in the comparison are summarised below.

Figure 37 Business mobile data tariff packages