optimizing interconnect processes - informa

23
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 [email protected] : [email protected]

Upload: ahmad-nadeem-syed

Post on 25-Jan-2015

638 views

Category:

Business


1 download

DESCRIPTION

Telecom market opening in South Asia has given rise to Interconnection issues. The presentation discusses various aspects of interconnection regimes in South Asian countries and how to optimize interconnection processes.

TRANSCRIPT

Page 1: Optimizing Interconnect Processes - Informa

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

[email protected] : [email protected]

Page 2: Optimizing Interconnect Processes - Informa

2

Outline

● Interconnect Issues

● Inter-country comparisons

● Regulatory Framework

● Commercial arrangements

● Technical arrangements

● Recommendations

Page 3: Optimizing Interconnect Processes - Informa

3

Telecom Iceberg Under Deregulation

Own Network

Page 4: Optimizing Interconnect Processes - Informa

4

Telecom Iceberg Under Deregulation

Own Network

Interconnection

Page 5: Optimizing Interconnect Processes - Informa

5

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

Page 6: Optimizing Interconnect Processes - Informa

6

Three Pillars For Effective

Interconnection Regime

● Regulatory Framework & Legislation

● Commercial approach

● Technical arrangements

Page 7: Optimizing Interconnect Processes - Informa

7

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

Page 8: Optimizing Interconnect Processes - Informa

8

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)

Page 9: Optimizing Interconnect Processes - Informa

9

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)

Page 10: Optimizing Interconnect Processes - Informa

10

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

Page 11: Optimizing Interconnect Processes - Informa

11

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)

Page 12: Optimizing Interconnect Processes - Informa

12

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

Page 13: Optimizing Interconnect Processes - Informa

13

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

Page 14: Optimizing Interconnect Processes - Informa

14

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

Page 15: Optimizing Interconnect Processes - Informa

15

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

Page 16: Optimizing Interconnect Processes - Informa

16

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

Page 17: Optimizing Interconnect Processes - Informa

17

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

Page 18: Optimizing Interconnect Processes - Informa

18

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

Page 19: Optimizing Interconnect Processes - Informa

19

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

Page 20: Optimizing Interconnect Processes - Informa

20

● 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…

Page 21: Optimizing Interconnect Processes - Informa

21

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

Page 22: Optimizing Interconnect Processes - Informa

22

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

Page 23: Optimizing Interconnect Processes - Informa

23

Thank You !