Optimizing Interconnect Processes - Informa
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Optimizing Interconnect Processes
For Effective Management of
Increasing Number of Interconnect
Partners In India And South Asia India & South Asia Com Conference
By Informa
At Mumbai, India
April 23-24, 2008
Ahmad Nadeem Syed
Director Interconnect &
Regulatory Economics
Mobilink Pakistan
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Outline
● Interconnect Issues
● Inter-country comparisons
● Regulatory Framework
● Commercial arrangements
● Technical arrangements
● Recommendations
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Telecom Iceberg Under Deregulation
Own Network
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Telecom Iceberg Under Deregulation
Own Network
Interconnection
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Interconnection Issues
Issues ● Non-provision/Delays in interconnection generally by incumbents
● Large No. of operators
● Inability of regulators to implement interconnection Regulations
● Large number of Disputes
● Complexity of interconnection mesh
● Congestion
Who Suffers: ● Subscribers
● Operators Including Incumbent
● The country & economy
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Three Pillars For Effective
Interconnection Regime
● Regulatory Framework & Legislation
● Commercial approach
● Technical arrangements
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Comparative Statistics
Total Subscribers - Million
257
75
37
0
50
100
150
200
250
300
India Pakistan B. Desh
No. of Operators/Licenses
135122
6
88
3718
415 5
0
20
40
60
80
100
120
140
160
India Pakistan B. Desh
Wireless Fixed Line NLD/ LDI
Circles/Zones
28
14
6
0
5
10
15
20
25
30
India Pakistan B. Desh
Population - Million
1130
160 150
0
200
400
600
800
1000
1200
India Pakistan B. Desh
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State of Interconnection in South Asia
● Major Issues o Pakistan Mainly billing with PTCL
o Bangladesh Connectivity & Billing
o India Connectivity & Billing
● Interconnection Disputes (Connectivity related) o Pakistan None (Some delays because of Incumbent’s bureaucracy)
o Bangladesh Data Not Available
o India Many
● Congestion (Fixed-Mobile) o Pakistan 1% - 10%
o Bangladesh Not Available
o India* 40% - 90% (* Source TRAI Case Study)
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State of Interconnection in South Asia
● Threshold for additional capacity o Pakistan 70% Capacity Utilization
o Bangladesh Not mentioned
o India Not mentioned
● Time duration as per Interconnect agreements o Pakistan 45 – 90 Days (Actual 21-60 Days)
o Bangladesh 90 Days
o India Upto 360 Days
● Billing Disputes Mechanism o Pakistan Defined among Mobile, Escrow account, Onus
of disproval on invoiced party, Gross payment, time limit for settlement, (mutual with PTCL -
under review)
o Bangladesh Mutual (Source: Interconnect agreement)
o India Mutual (Source: MTNL RIO)
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Regulatory Framework & Legislation
● How strong is the regulator in terms of: o Driving strength from legislation
o Independence (without political & judicial pressures)
o Decision making authority (Assumed vs Vested)
● How well defined are the powers and functions for the regulators in the Act regarding: o Issuance of licenses
o Modification of licenses
o Authority to penalize
● How well defined are the rights and obligations of the operators? o In the Act, the Rules, Regulations and Licenses
o Recourse availability to the aggrieved
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Regulatory Framework & Legislation Contd…
● How much are the consumer rights protected ? o Definition of rights
o Recourse availability
● How well defined are the terms of the interconnect agreement? o “Shall” or “May”?
o “Mutual” or “defined” - specifying responsibilities
● How clear and effective is the dispute settlement mechanism? o Escalation vs swift resolution
o Time binding vs open ended
o Arbitrators & umpire (Appointment & authority)
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Regulatory Framework & Legislation
Compared ● Powers of regulator w.r.t. licenses
o Pakistan Issuance & amendment with the consent of operator (Regulator gets some leverage from Act)
o Bangladesh Issuance only
o India Issuance
● Regulator’s authority to penalize? o Pakistan $ 5.645 M & Cancellation of License (Clause 23 of
Act & clause 11of Interconnect dispute regulations)
o Bangladesh $ 0.004 M & Cancellation of license (Clause 63 of Act)
o India $ 0.008 M (Clause 20 of Act)
● Interconnection rights & obligations for operators? o Pakistan Mandatory for all (Telecom Act clause 21, Telecom Rules
clause 13)
o Bangladesh Mandatory for SMP only (Clause 47 of Act)
o India Mandatory for SMP only
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Regulatory Framework & Legislation
Compared
● Consumer’s rights w.r.t. Interconnection o No protection available in any of the three countries
o No recourse available in any of the three countries in any country
● Basis of interconnect agreements “Shall” or “May”? o Pakistan Generally “Shall instead of “May”
o Bangladesh Mutual & May
o India Mutual & May
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Commercial & Economic - Attitude
● The Incumbents fear loss of market share
● They use delaying tactics, which o Defy objective of fair competition
o Becomes impediment for growth for all
o Causes suffering for the subscribers, therefore
o Results in loss of revenue for all including incumbent
● The +ve attitude results in Win-Win for all o Overall growth of the market
o Growth for the incumbent
o Capitalizing on Revenue earning opportunity
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Economic & Commercial-Termination Rate
● Is it real impediment for fair competition?
o No evidence of being true in south Asia
● Symmetric vs Asymmetric termination rates
o Symmetric (fixed vs mobile) is unrealistic
o Fixed rate is always lower than mobile as access cost is not
included in the cost for fixed
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Adequacy Of Termination Rates
● Inadequate termination rates
o Lead to lack of interest for interconnection
o Creates cash flow crunch – Non-availability of sufficient funds for
network expansion
● Basis for termination rate
o Bench mark
o Retail minus
o Cost based
● Implementation of cost based interconnection rate allows:
o Recovery of cost of operation
o Reasonable return on investment
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Adequacy Of Termination Rates
● Determining cost of operation is very subjective and mainly depends upon the mindset of the authorities in South Asia
● Comparative termination rates per minute o Pakistan ¢ 2.02 for Mobile & ¢ 0.84 for fixed
o Bangladesh ¢ 0.58
o India ¢ 0.77
● Implementation of cost based interconnection regime is practical and realistic only where there is: o Capacity building both at regulator and operator’s end
o Infrastructure for market study & analysis is functional
o The regulator works with open mind & is free from political pressures
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Adequacy Of Termination Rates
● The basis of cost causation principle varies from country to country based on the customer behavior and usage pattern
● Cost based interconnection charge - Is LRIC applicable anymore? Given that o Technology is changing rapidly
o Applying MEA (Modern Equivalent Asset) in NGN is not possible
o The market prediction is difficult therefore defining Long Run is not possible
o Definition of Increment is hard
● South Asian market has lowest ARPU in the world -Questions then arise: o Should we follow existing models blindly? Or
o Should we devise some new mechanism, which meets requirements of our markets including Network Externality
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Technical – The Challenges
● Interconnection mesh is becoming complex with increasing
number of operators
● Technology is changing
● Available Interconnection options
o Direct connectivity
( may not either technically or economically be feasible for many operators)
o Transit
(Not only adds up another switching layer but also cost)
● Congestion – The major reasons
o Long lead time in provision of capacity
o Lack of proper forecasting & capacity planning
o Inefficient maintenance and fault Management system
o Lack of direct connectivity
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● Long distances and call handover issues
o Complex routing
o High carriage costs
● Technology challenges – advent of NGNs
o Legacy TDM – TDM networks
o Transition Phase : NGN – TDM networks
o Final Phase : NGN – NGN networks
Technical Contd…
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Possible Technical Solutions
● Establishment of Interconnect Exchange (IE) (Short - medium term)
o One IE in each circle/zone/region
o Mainly wired – (Connectivity on OFGEN among major players)
o Limited transit facility
o Keep clearing house separate
o Does it make business case? If not should it be based on no
profit no loss basis managed by consortium of operators
● IP connectivity – The ultimate solution (Medium – long term) – Need to work around
o Regulatory framework
o Charging mechanism
o Compatibility and interpretability issues
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Recommendations
● Interconnection be protected by legislature
● Regulator must be empowered w.r.t interconnection
● Operators must take interconnection an opportunity and not threat
● Regulatory framework for interconnect exchanges must be in place
● Regulatory framework for NGN deployment, IP interconnectivity and charging mechanism models need to be developed
● South Asian Interconnect experts group be formed
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Thank You !