"1" stands for the position in the posting. Vendor line is always #1 , so there is "1" in front of the service provider. You can read about it here http://www.sapdatasheet.org/abap/cus0/simg_ohr0038.html"1"
Your service provider doesn't have to be called C1. You can call it V1, or whatever you want. But you have to configure it first in the "Define Service Providers".
