optimizing interconnect processes - informa
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
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
2
Outline
● Interconnect Issues
● Inter-country comparisons
● Regulatory Framework
● Commercial arrangements
● Technical arrangements
● Recommendations
3
Telecom Iceberg Under Deregulation
Own Network
4
Telecom Iceberg Under Deregulation
Own Network
Interconnection
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
6
Three Pillars For Effective
Interconnection Regime
● Regulatory Framework & Legislation
● Commercial approach
● Technical arrangements
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
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)
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)
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
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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)
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
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
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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
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
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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 !