Agreement no. 101-A/97, of 31 of December

Published in D.R. number 301 (Series II) of 31 December 1997

Ministério do Equipamento, do Planeamento e da Administração do Território e da Economia (Ministry of the Equipment, Planning and Administration of the Territory and of the Economy)

Agreement

Convention agreed between the Directorate General for Trade and Competition, Instituto das Comunicações de Portugal and Portugal Telecom, S.A.

Between:

1. The Directorate General for Trade and Competition, hereinafter referred to as DGCC;

2. Instituto das Comunicações de Portugal, hereinafter referred to as ICP; and

3. Portugal Telecom, S.A. hereinafter referred to as PT, a company with head offices in Avenida Fontes Pereira de Melo 40, Lisbon, with a share capital of PTE 190,000,000, registered in the Conservatory of the Commercial Registry of Lisbon, under no. 3602;

this convention, which shall be governed by the following articles, is hereby agreed, pursuant to the terms of Decree-Law no. 207/92 of 2nd October and article 30 of the concession bases of the public telecommunications service, approved in the annex to Decree-Law no. 40/95 of 15th February:

CHAPTER I
 

SECTION I
Scope and principles

1 - Scope of convention - this convention regulates and defines the general framework applicable to the telecommunications services provided exclusively by PT and the price regime in respect of the following telecommunications services provided exclusively by PT;

a) The fixed telephone service, in subscriber, public payphone, and supported by ISDN modes;
b) Interconnection (interoperation of services).

2 - Principles:

2.1 - The price system of the services covered by the convention shall conform to the principle of cost orientation, non discrimination and transparency.
2.2 - Within the scope of the provision of the fixed telephone service, the application of the principle of cost orientation shall be realised progressively, in such a manner as to allow a gradual rebalancing of the price tariff, pursuant to the terms of nr. 15.
2.3 - To ensure the furtherance of the principles referred to in the preceding numbers, PT shall undertake:

a) To maintain a cost accounting system which shall enable the costs associated with each service and, within a specific service, the costs associated with each form of provision thereof to be defined;
b) To publicise the tariffs in force and the conditions of application thereof in a suitable manner, including the situations referred to in sub section II of section II of chapter II.

SECTION II
Definitions and annexes

3 - Definitions - the following definitions are provided for the purposes of this convention:

1. Subscriber - a singular or collective person which is a party to a contract entered into with PT for access to and use of the fixed telephone service;

2. Specific agreements - agreements in respect of the services provided by the concessionaire, entered into between ICP and DGCC on the one hand and PT on the other, pursuant to the terms, in accordance with and for the purposes of the conditions of article 30 no. 5 of the concession bases which define and regulate the conditions governing the provision of each of the services provided by the concessionaire in respect of which any restriction, limitation or loss of exclusivity has occurred;

3. Concession bases - the general framework of the public telecommunications service concession attributed to PT by the Portuguese State, pursuant to the terms of Decree Law no. 40/95 of 15th February;

4. Promotional campaigns - temporary activities, of a pre-defined length, in respect of the services referred to in the convention which may represent the attributing of an economic advantage and/or special conditions to the users of the said services;

5. Residential customer - all and any person to whom the fixed telephone service is provided in subscriber mode for non professional use;

6. Convention - the document agreed between ICP and PT pursuant to the terms and in accordance with the contents of article 21 of the concession bases;

7. Discounts - the application of lower prices than those set out in the tariffs in force, pursuant to the terms of no. 10;

8. Facilities - the accessory provision of telecommunications services which have not been designed for nor support communication on their own;

9. IPC - the rate of inflation forecast for each year by the Government and entered as such in the report for the State Budget each year. If the said document contains a range of figures, the average of such a range of figures shall be considered. If there are any technical difficulties in obtaining this figure, i.e. in respect of interpretation, DGCC and ICP shall be responsible for providing the corresponding clarification;

10. Unit - the measuring unit used for calculating the price of a telephone communication, in accordance with length, time bands and communication zones;

l) Interconnection (interoperation of services) - the connection of public addressed telecommunications services with each other and with the fixed telephone service, on the basic telecommunications network, as a support for the provision of the fixed telephone service;
m) New offers - the introduction of a form of provision of a service covered by the convention, the price of which shall not be a direct result of the price tariff in force, has been altered in respect of the formation of the preceding identical offer price and/or which is associated with technological components or features which require the definition of an advance framework in light of the legal context currently in force;

1. Parties - ICP, DGCC and PT;

2. Integrated Services Digital Network (ISDN) - the digital connections between two terminal points on the basic telecommunications network, as a support for the fixed telecommunications network;

3. Telecommunications services - the form and mode of operation, routing and/or distribution of information on telecommunications networks, with the exception of radio and television broadcasting;

4. Fixed telephone service - the provision of addressed voice transport to the public in general, in real time, beginning and ending at terminal points of the basic telecommunications network, allowing any user to communicate with another terminal point through the use of equipment connected to a terminal point;

5. Subscription charge - the price paid periodically by the subscriber for access to a telecommunications service;

6. Installation charge - the price paid once only by a subscriber for the connection of a telecommunications service;

7. Tariff - the set of prices applicable, over a defined period, for the use of the services covered by the convention, their associated modes and facilities;

8. Telephone traffic - the volume of communications on the fixed telephone service network;

9. Local telephone traffic - traffic within the same local network, between adjacent local networks or between local networks within a distance of 10 kilometres from each other;

x) Regional telephone traffic - traffic between local networks, at a distance of more than 10 kilometres and less than 50 kilometres from each other (but which are not adjacent);
z) Trunk telephone traffic - traffic between local networks, at a distance of more than 50 kilometres from each other;

aa) International telephone traffic - traffic between Portugal and a foreign country;
ab) User - the end user of telecommunications services.

4 - Annexes - the following two annexes, organised in the following manner, are a full part of this convention for all legal purposes:

1. Annex I, "Methodology for the verification of the price variations included in the convention for the fixed telephone service in subscriber mode";

2. Annex II, "System for the activation of the deductions or percentage increases".

CHAPTER II
 

SECTION I
Loss, restriction or limitation of exclusivity.

5 - Consequences of loss, restriction or limitation of exclusivity:

5.1 Whenever a restriction, limitation or loss of exclusivity occurs in respect of any of the services provided exclusively by PT, the conditions for the provision of the service in question shall be established pursuant to the terms of a specific agreement.

5.2 - The prices resulting from the price regimes applicable to the services covered by the specific agreement referred to in the terms of no. 5.1 shall conform to the principles of cost orientation, non discrimination and transparency, pursuant to the terms set out in no. 2.

5.3 -The specific agreements shall contain the following information for each service:

1. The forms of provision of the service;
2. The offer of the service;
3. The applicable price regime.

5.4 - The price regime for the services referred to in no. 5.1, fixed by the convention, shall remain in force until the time when the specific agreement referring to the service in question comes into force.

6 - Specific agreement - procedure:

6.1 - The beginning of the negotiating process leading to the entering into of the specific agreement applicable to a defined service in accordance with the terms of no. 5.3 may be exercised at the initiative of any of the parties.

6.2 - The negotiating process referred to in no. 6.1 shall take the dates scheduled for the liberalisation process into account, in respect of which the parties shall undertake to make every endeavour to ensure that the specific agreement comes promptly and efficiently into force.

6.3 - The specific agreement in respect of a defined service shall come into force on the day therein scheduled, and always after the date of the effective loss, restriction or limitation of exclusivity, pursuant to the terms of the legislation applicable to the service in question.

SECTION II
Prices 

SUB SECTION I
General rules

7 - PT s obligations:

7.1 - PT shall undertake to comply with the rules set out in this convention and may not, without prejudice to the conditions of no. 9, charge prices which are higher than those resulting from the application of the said rules.

7.2 - The effective application of the price variations referred to in the following numbers is contingent upon the fulfillment of the levels of quality of service set out in the agreement, pursuant to the terms of no. 22.

8 - Application of prices:

8.1 - Without prejudice to the special regimes set out in nos. 9, 10, 11, 12 and 16, PT shall inform ICP and DGCC in writing of the prices to be charged from the application of the rules of this agreement, with a minimum advance notice of 15 working days prior to the date upon which they come into force.

8.2 - The communication referred to in no. 8.1 shall be accompanied by a document certifying that the maximum variations pursuant to the terms of this convention have been complied with.

8.3 - The prices shall come into force on the scheduled date if no communication to the contrary is sent by ICP or DGCC, during the period referred to in no. 8.1.

8.4 - ICP or DGCC if deciding not to approve the prices indicated pursuant to the terms of nos. 8.1 and 8.2, shall notify PT of their decision and the respective reasons therefor, within a period of 15 working days beginning from the date upon which the communication referred to in no. 8.1 has been received.

8.5 - The prices charged pursuant to the terms of this convention shall be publicly disclosed by PT to users in general, using suitable means, with a minimum advance notice of five working days prior to the date upon which they are to come into force.

8.6 - For payment purposes, PT may round up invoices to the nearest whole escudo.

8.7 - The current rate of VAT is payable on the prices resulting from the application of the rules of this convention.

9 - Higher than agreed prices;

9.1 - PT may, by contract and pursuant to criteria based on reasonableness, charge higher prices than those applicable under the terms of this convention, provided this is necessary for the respective services to be provided with requirements of quality, speed, and specific characteristics, fault maintenance or repair of a more demanding level than those to which PT is committed to provide.

9.2 - The following situations are covered by the conditions set out in no. 9.1:

1. Situations in which PT is required to mobilise resources which exceed the normal provision of service at the application or with the agreement of the customer;
2. Situations in which PT is required to mobilise special resources or provide the means to permit access to defined services only during events of short duration or on a temporary basis of less than the minimum time defined in the regulations for the public use of the service in question.

9.3 - In the cases referred to in nos. 9.1 and 9.2, PT, with the customer s agreement, may also:

1. Establish forms of participation in the installation of services by the latter, namely by ceding human and material means;
2. Enter into contractual guarantees for the provision of the services in question for periods which are different from those set out in the regulations for the public use of the respective service.

9.4 - PT shall inform ICP and DGCC of all agreements and contracts entered into pursuant to the terms of this number within a maximum period of 10 working days after coming into force.

10 - Discounts:

10.1 - PT may provide discounts on the prices of the services covered by this convention whenever justified for economic reasons.

10.2 - The application of these discounts shall be subject to rules of transparency and non discrimination in respect of all those fulfilling the same requirements and conditions.

10.3 - PT shall notify ICP and DGCC in advance of the table of discounts and provide justification, including the standard contracts to be adopted for the application thereof.

10.4 - If ICP or DGCC consider that the table of discounts or respective standard contracts do not conform to the conditions of no. 10.2, they may, within a period of 10 working days from the date of the communication referred to in no. 10.3 determine the alteration or non application thereof, providing a suitable explanation.

SUB SECTION II
Promotional campaigns and new offers

11 - Promotional campaigns:

11.1 - PT may launch promotional campaigns provided that it does not violate the principles referred to in no. 2.

11.2 - PT shall notify ICP and DGCC in advance of the promotional campaigns it intends to launch, and provide a respective explanation.

11.3 - Promotional campaigns shall be considered as having been approved within a period of 10 working days from receipt of the notification referred to in no. 11.2 if PT does not receive a notification to the contrary, from ICP or DGCC containing a suitable explanation.

12 - New offers:

12.1 - The regime for new offers covered by the convention shall be as follows:

1. PT shall notify ICP and DGCC in advance of the launch of new offers and shall indicate the technological characteristics, features and prices to be charged and shall, furthermore, demonstrate that the principles referred to in no. 2 have been complied with;
2. ICP or DGCC may, after consulting PT, order modifications to be made to the new offers or that they should not be introduced and provide PT with a suitable explanation, within a period of 15 working days from the date of receipt of the communication referred to in no. 12.1, sub paragraph a);
3. ICP or DGCC, whenever ordering any modification to be made to the new offers, shall specify the aspects to be altered and the terms of such alteration;
4. Without prejudice to the conditions of no. 12.2, the new offers shall be considered as having been approved if PT has not received a communication to the contrary from ICP or DGCC containing a suitable explanation, within the period referred to in no. 12.1 sub paragraph b).

12.2 - In cases in which it is at least two of the signatories suitably acknowledge that the characteristics of the regime of the new offer are such that the context thereof requires special analysis, the period referred to in no. 12.1, sub paragraph b), shall be a maximum of 45 working days, provided that the other entity is informed of the acknowledgement of this fact within a period of 15 working days, beginning from the date upon which the communication referred to in no. 12. 1 sub paragraph a) is received by ICP or DGCC.

CHAPTER III
 

SECTION 1
Fixed telephone service

13 - Modes - the fixed telephone service shall be provided exclusively by PT in subscriber and public payphone modes.

14 - Rebalancing - PT shall gradually rebalance the prices of the fixed telephone service, in accordance with the terms of the principle of cost orientation.

15 - Price regime - subscriber mode:

15.1 - The average weighted variation of the prices of the fixed telephone service in subscriber mode may not, in nominal terms, be higher than 4% of the IPC (RPI-Retail Price Index), for each year of application of this convention.

15.2 - The average weighted variation of the prices of the fixed telephone service in subscriber mode, excluding international traffic may not, in nominal terms, be higher than 2% of the IPC for each year of application of this convention.

15.3 - Price variations, pursuant to the terms of nos. 15.1 and 15.2 shall be defined in accordance with the methodology contained in Annex I.

16 - Facilities:

16.1 - Subject to technological constraints, the following are considered as being fixed telephone service facilities for which PT may not exact any payment:

1. Itemised billing, pursuant to the terms of Decree Law no. 230/96 of 29th November;
2. Selective barring of calls to value added telecommunications services;
3. Call forwarding, with the exception of the application charge, to be fixed on the basis of the costs involved;
4. The non inclusion of the subscriber s name in subscriber s directories and/or information services;
5. The issue and distribution of subscriber directories;
6. Lines to fixed subscriber numbers or users with special needs (installation and monthly subscription).

16.2 - The prices of the facilities not covered by no 16.1 may be established by PT in accordance with the principles defined in no. 2.

16.3 - PT shall, with a minimum advance notice of 10 working days prior to the date of coming into force, inform ICP and DGCC of the provision of new facilities, and shall indicate the amount of the respective application charge or price of access, as appropriate.

17 - Free supply - subject to technical constraints, PT shall also provide the following free of charge in its provision of the fixed telephone service:

1. The automatic provision of information on a subscriber s new telephone number, for a minimum period of 180 days, whenever the number has been altered in any way, for reasons imputable to PT;
2. Information on the correspondence between altered subscribers numbers and the new number, for a minimum period of two years, provided that the alterations have been made for a reason imputable to PT;
3. A clear distinction between the tone associated with the dialling of an altered number and the tone associated with the dialling signal or that of an engaged line, when there is no longer any automatic provision of information on the alteration pursuant to the terms of no. 17 sub paragraph a);
4. Detailed billing records for the last 90 days in order to provide any eventual clarifications on the telephone bill received by the subscriber;
5. The use of a handset with an amplifier and an incoming call flashing device for subscribers with special needs.

18 - Social obligations - PT shall be obliged to provide the conditions for the fixed telephone service at less than the following rates for retired subscribers and pensioners whose family has monthly income of the national minimum wage or less:

1. A 60% reduction to the installation charge, in respect of which 10% shall be the responsibility of PT and the remaining 50% applied pursuant to the terms of Decree Law no. 20-C/86 of 13th February;
2. 25 units per month free of charge.

19 - Residential customers with low telephone usage:

19.1 - PT must, in the case of customers with low telephone usage, provide conditions for the fixed telephone service for minimising the impact of tariff changes and ensure economic and social cohesion, in accordance with the following conditions:

1. The monthly telephone bills of residential customers with a value equal to or less than the monthly subscription plus 130 units in respect of the 1997 tariff, may not be higher than they would have been if the 1997 tariff plus the IPC for each of the years 1998, 1999 and 2000 had been applied.
2. Above the 130 units referred to in no. 19.1 sub paragraph a), and over a range of at least 40 units in respect of the 1997 tariff, PT shall realise a gradual and proportional adjustment to the tariff in force each year, avoiding brusque alterations between the basic tariff and the tariff resulting from the application of no. 19.1 sub paragraph a);
3. These conditions only apply to automatic communications from and to the fixed telephone service provided by the operator;
4. The conditions established in no. 19.1 sub paragraphs a) and b) automatically apply to all telephone bills of residential customers in the referred to conditions on a monthly basis;
5. ICP and DGCC may approve another system which PT may propose at any point in time, provided that the said system, even if not automatic, guarantees effective access by the population normally covered by the system to be replaced pursuant to the conditions established in no. 19.1 sub paragraphs a) and b).

19.2 - Without prejudice to the conditions of no. 18 and in respect of retired subscribers and pensioners whose families have monthly income equal to or less than the national minimum wage, the variation in the installation charge may not be higher than the IPC for 1998 and the IPC for 1999 and 2000, with PT being responsible for the provision of this condition.

20 - Price regime in public payphone mode:

20.1 - The ratio between the price of the unit of the fixed telephone service in public payphone mode and subscriber mode may not be higher than 1.5.

20.2 - Without prejudice to the conditions of no. 20.1, in the case of coin operated public payphones, the price of the unit shall, at a maximum, be rounded up to the nearest unit of 5$00.

20.3 - PT shall expand its total installations of public payphones in order to ensure the acceptance of different payment modes.

20.4 - PT shall also take steps to ensure that improvements be introduced to its total number of public payphones with a view to accepting card standardisation.

21 - ISDN price regime for the fixed telephone service:

21.1 - The prices of the provision of the ISDN fixed telephone service shall conform to the following rules:

1. The ratio between the installation charge for a basic access and the installation charge for the fixed telephone service shall not be higher than 2;
2. The ratio between the subscription charge for a basic access and the subscription charge for the fixed telephone service shall not be higher than 2.5;
3. The ratio between the installation charge for a primary access and the installation charge for the fixed telephone service shall not be higher than 10;
4. The ratio between the subscription charge for a primary access and the subscription charge for the fixed telephone service shall not be higher than 25;
5. The price of telephone communications made using an audio support service in circuit, voice or audio mode at 3.1 kHz may not be higher than the price applicable to an equivalent communication on the fixed telephone service in subscriber mode.

21.2 - The circuit modes referred to in 21.1, sub paragraph e) are considered in accordance with the technical specifications of ITU-T Recommendation 1.230 or another Recommendation in replacement thereof.

22 - Compliance with levels of quality of service:

22.1 - If PT fails to comply with the levels of service set out in the agreement for the fixed telephone service, the price variation permitted pursuant to the terms of this section shall be reduced by the following limits:

1. Up to a maximum of 1%, in the event of non compliance in respect of the fixed telephone service in subscriber mode;
2. Up to a maximum of 1%, in the event of non compliance in respect of the fixed telephone service in public payphone mode;
3. Up to a maximum of 1%, in the event of non compliance in respect of the fixed telephone service supported by ISDN.

22.2 - ICP is responsible for deciding the percentage deduction to be applied subject to the limits stipulated in no. 22.1

22.3 - PT has the right to an audience before ICP takes its decision on the application of a reduction in price variation and the percentage thereof.

22.4 - PT and DGCC shall be informed of ICP s decision and, if representing a reduction of the price variations admitted pursuant to the terms of this convention, they shall be applied pursuant to the terms stipulated in annex II and shall affect the prices of the year following the failure to comply.

SECTION II
Interconnection

23 - Interconnection price regime:

23.1 - The prices applicable to the interconnection (interoperation of services) are negotiated between PT and the operators and/or service providers, whose negotiations shall be concluded within a maximum period of three months from the date upon which they begin.

23.2 - The tariff resulting from the negotiations shall conform to the principles established in no. 2 and shall be sent to ICP and DGCC, suitably published and made available upon request.

23.3 - The application of the prices shall be governed by rules of transparency and non discrimination for all those fulfilling the same requirements and conditions.

23.4 - If, during the course of the period referred to in no. 23.1, PT and the operators or service providers fail to reach agreement on the prices to be charged, ICP shall be responsible for fixing the maximum applicable prices, after due consultation with DGCC.

CHAPTER IV
Final dispositions

24 - Suspension of periods - the counting of the periods referred to in this convention shall be suspended on the date upon which PT receives a properly grounded request for clarifications or additional elements from ICP or DGCC and shall only be resumed on the day following the receipt of PT s reply.

25 - Communications:

25.1 - The communications referred to in no. 24 shall be provided in writing and sent:

1. By hand, provided that a receipt therefor is obtained; or
2. By fax, provided that this is certified by a "receipt of uninterrupted transmission"; or
3. Registered mail with recorded delivery.

25.2 - The domiciles and fax numbers of the parties for the purposes of this convention are set out below:

1. ICP - Avenida de José Malhoa, 12, 1070 Lisbon, fax: (01) 7211002;
2. DGCC - Avenida do Visconde de Valmor, 72, 1093 Lisbon Codex, fax: (01) 7974255;
3. PT - Avenida de Fontes Pereira de Melo, 40, 1089 Lisbon Codex, fax: (01) 3566264.

25.3 - The parties may alter the domiciles referred to in no. 25.2 by notifying the other parties in advance.

25.4 - The referred to communications shall be considered as having been made:

1. On the same day on which they were transmitted if sent by hand or by fax, if during the period between 9 a.m. and 5.30 p.m. or the immediately following day, if outside the above referred to times;
2. On the date of the addressee s receipt thereof indicated upon the delivery advice;
3. Three working days after the date of registration, when the date of the addressee s receipt is not determinable owing to omission, illegibility or loss of the delivery advice.

26 - Resolving of disputes - any eventual conflicts which may occur between the parties in matters concerning the execution, interpretation, application or context of this convention and the decisions taken pursuant to the terms thereof shall be resolved in accordance with the terms of the concession bases.

27 - Period of application - this convention shall come into force on 1st January 1998 and shall be valid for a period of three years, without prejudice to the conditions of article 4 of Decree Law no. 207/92 of 2nd October and shall cease to be effective on 31st December of the year 2000.

10th September 1997 - For and on behalf of the Directorate General for Trade and Competition (Illegible Signature) - For and on behalf of the Portuguese Communications Institute (Illegible Signature) - For and on behalf of Portugal Telecom, S.A. (Illegible Signature).

ANNEX I
Methodology for the verification of the price variations

Methodology for the verification of the price variations included in the convention for the fixed telephone service, in subscriber mode.

1 - The price variations referred to by the following clauses in respect of section 1, "Fixed telephone service" of chapter III, shall conform to the following methodology:

The average weighted variation of the prices (D Pi) of the fixed telephone service (SFT), in total and excluding international traffic, as defined in nos. 15.1 and 15.2 of this convention, shall be calculated in the following manner:

in which:

DP i = the average weighted variation of the prices of the SFT in year i;

DPE i = the average weighted variation of the prices for beneficiaries of the economy package in year i);

DPMN(t)i = the average price variation (PMN) for beneficiaries of the economy package of t traffic in year i;

DPME(t)i = the average price variation (PME) for beneficiaries of the economy package of t traffic in year i;

DPANi = price variation associated with the monthly subscription for non beneficiaries of the economy package in year i;

DPAEi = price variation associated with the monthly subscription for beneficiaries of the economy package in year i;

DPIi = price variation associated with the installation for all customers;

kN( ) i-1 = proportion of revenues of t type traffic of subscription A in year i-1 for non beneficiaries of the economy package;

kE( ) i-1= proportion of revenues of t type traffic of subscription A or installation I i in year i-1 beneficiaries of the economy package;

k( I) i-1 = proportion of revenues from installation in year i-1 for all customers;

A = monthly subscription:

I = installation;

t = corresponds to the diverse types of traffic: local, regional, trunk and international.

The values of the prices variations shall be calculated in the following manner (in which the index i represents the year):

DPMN(t)i = (PMN(t)i - PMN(t)i-1,) / PMN(t)i-1 DPME(t)i = (PME(t)i - PME(t)i-1,) / PME(t)i-1 DPANi = (PANi - PANi-1) / PANi-1 DPAEi = (PAEi - PAEi-1) /PAEi-1

DPIi = (PIi - PIi-1) / PIi-1

2 - The process described in 2.1 shall be used for defining the PME and PMN, separately, for beneficiaries and non beneficiaries of the economy package, using the different parameters Zj and dc for each type of customer.

2.1 - The calculation of the average price per call (PMC) is used for calculating the PM in respect of the various types of national traffic (local, regional and trunk) in accordance with the following formula:

in which:

pmj = the average price of a call made during period of the day j :

Zj = the percentage traffic of the day/week which is realised during period j;

n = the number of periods of the day/week in which the duration of the unit is different.

pmj is calculated with the use of the negative exponential distribution function as the distribution of the duration of a call:

in which Fx is the cumulative distribution function of the duration of a call, corresponding to:

in which:

p = price of the unit;

dj = duration of the unit, in seconds, during the period j;

dc = average duration of a call;

i = number of units.

2.2 - For the purposes of defining the price variations 1997/1998 and for enabling comparisons to be made between 1997 and 1998 prices, the price associated with each type of national traffic (local, regional and trunk) in 1997, shall be calculated on the basis of the transfers between traffic types resulting from the geographical alterations to be made in 1998. The PM of each type of traffic shall be calculated in the following manner.

in which:

TTij = the transfer of traffic i to traffic j on the basis of the traffic values, in minutes, for 1997;

i = local, regional 2, regional 3, regional, trunk 1, trunk 2, CAM (1997 tariff structure);

j = local, regional, trunk, (1998 tariff structure).

2.3 - In the case of international traffic, the calculation of the average price (PM) shall be realised by using the calculation of the average price per call (PMC); the price of a call to each country k (Pm??) must, accordingly, be defined by the following formulas:

in which:

in which:

Pm k = price of an average call to country k;

Pm A = price of an average call on the automatic service;

Pm SA = price of an average call on the semi-automatic service;

z A = automatic traffic as a percentage of total traffic;

z SA = semi-automatic traffic as a percentage of total traffic;

pm j = price of a call of average duration made during period of day j;

z j = percentage of daily/weekly traffic made during period of day j;

n = number of periods during the day in which the duration of the unit is different;

p = price of unit;

d = duration of unit for 1st minute, in seconds;

ds = duration of unit for minutes following the 1st minute, in seconds;

dcA = average duration of call on automatic service

dcSA = average duration of call on the semi-automatic service;

SM = average surcharge;

Si = surcharge on i type call;

wi = percentage of i type traffic call;

q = number of types of call.

The PMC is calculated with the Pmk and the traffic originating in Portugal, to the various countries in question.

in which:

Pm k = price of an average call to country k;
t k = percentage of total traffic made to country k;
p = number of countries considered.

2.4 - For the purposes of making comparisons and the latter processing of information on each price, the PMC (average price per call) should be converted to the respective price per minute corresponding to a call of average duration (PCDM) which is calculated from the following formula:

3 - Considering that the economy package will begin to be implemented in 1998 and that, consequently, no data on the package in comparison to last year exists, the method for the calculation of the 1998 variation, as described in no. 1 cannot be applied.

The variation is therefore calculated by using the average traffic parameters for all customers and prices of customers not covered by the economy package, from which the quotient between the forecast loss of revenues for 1998 owing to the introduction of the economy package and the total revenues forecast for 1998 are deducted. The formula shall then be as follows:

in which:

RPBI = revenues which would be earned from the application of the base prices to beneficiaries of the economy package in year i, (1998);

RPEI = revenues from the application of the economy package in year i, (1998);

RTI = total revenues from SFT in year i (1998);

4 - The parameters referred to in the numbers preceding this annex I shall be supplied to ICP and DGCC by PT up until February of each year in which this convention remains in force.

5 - An economy package is considered to be the solution to be adopted by PT, pursuant to technological constraints, which is strictly necessary for compliance with the conditions of no. 19 of this convention. PT shall present this solution to ICP and DGCC and it must be approved pursuant to the terms of no. 8 of this convention, with the necessary adaptations.

6 - If, for reasons owing to the use of estimates for the contribution made by the economy package in defining the prices, the following prices occur at the end of year i:

1. Prices which are higher than those initially forecast and approved pursuant to the terms of this convention shall be corrected by the inclusion of a factor corresponding to the limits referred to by the terms of nos. 15.1 and 15.2 for the year i + 1;
2. Prices which are lower than the initially forecast limits and approved pursuant to the terms of this convention, shall not be subject to any correction for the year i + 1;

ANNEX II
 

SECTION I
Process for the activation of the deduction

Pursuant to the terms of no. 22 of the Convention, the following system for the application of the percentage deductions or increases shall be used:

1.1 - Deduction associated with the global quality of service indicator (IGQS) - the IGQS for each service shall be calculated as follows:

1. The attributing of a classification of between 0 to 100 for each of the quality of service indicators (IQS), in which 100 corresponds to compliance with the objective, 0 represents the failure to fulfill the minimum value and a proportional value of between 0 to 100 for values falling between these limits. In the event of values exceeding the objective, the classification shall also be higher than 100, in proportion to the positive deviation in comparison to the objective. The occurrence of the following value is considered as being a failure to achieve the minimum value:

0.1% less than the minimum value, in the cases of IQS expressed as a percentage;

A unit of less than the minimum value, in cases related with the number of faults and number of complaints;

One second, one hour or one day less than the minimum value in the case of IQS expressed in units of time (seconds, hours and days, respectively);

1. Multiplication of the classifications obtained in sub paragraph a) by the relative importance (IR) as set out in the table and the sum of the multiplications obtained.

If the global indicator is 100 or more, no deduction shall be made.

If the global indicator is 90 or less than 90, the deduction shall be applied in full.

If the global indicator is between 90 and 100, the deduction shall be proportionally applied.

1.2 - Deduction associated with each IQS - for cases in which any of the IQS for each service is lower than the minimum defined values, a percentage of up to the limit of the global variation referred to in the convention, corresponding to the product between the relative importance of the IQS (IR) and the maximum deduction, shall be deducted.

The deduction associated with the diverse IQS shall not be applicable if the IGQS is less than 90.

1.3 - Applicable deduction - the final deduction shall be defined as follows:

1. If the IGQS is 100 or more, the deduction shall correspond to the deduction associated with the failure to fulfill the diverse IQS;

2. If the IGQS is less than or equal to 90, the maximum deduction associated with the system for the activation of the deduction shall be applied in full, for which reason the deduction associated with the diverse IQS is not applicable;

3. If the IGQS is between 90 and 100, the deduction shall be the result of the conjugation of the deductions associated with the failure to fulfill the ICQS and the diverse IQS, up to a maximum of 1%.

The deduction shall be applied in such a way as for the annual price variation to reflect the application of the deduction for the year in which the failure to comply was recorded.

SECTION II
Monitoring and control

The operators shall send quarterly reports to the regulator, up until the end of the month following the month of the end of the quarter, containing the monthly evolution and the accrued values recorded during the course of the year for the above referred to IQS, permitting the values to be monitored.

ICP shall realise the control of these results in its own studies, in respect of which the operator shall provide the statistical information necessary for the satisfactory realisation thereof.

ICP shall inform the operator in advance on the methodology to be used for the control studies, and shall, if necessary, ask for comments to be made thereon.

In the event of divergences between the results obtained by ICP and by the operator, as regards the levels of quality of service, discussions shall be held between both parties for clarifying the issue. If an agreement cannot be reached, the ICP results shall be used for the application of the system contained in this annex.

September 10, 1997 - Secretariat of State for Housing and Communications, Leonor Coutinho Pereira dos Santos. Ratified. September 10, 1997 - Secretariat of State for Trade and Tourism, Jaime Serrão Andrez.