interconnection principles the views expressed in this paper are those of the authors and do not...

Interconnection Interconnection principlesprinciples

The views expressed in this paper are those of the authors and do not necessarily reflect the opinions of the ITU or its Membership. The author can contacted by e-mail at [email protected].

Dr Tim Kelly, ITUITU/TOT Workshop on

‘Trends in Telecom Prices and Costing in Developing

Economies of the Asia Pacific Region’ Bangkok,

26-29 November 2001

mailto:[email protected]

International Telecommunication Union

2

AgendaThe need for interconnection

Growth of competition and market entry Interconnection between networks

Interconnection principlesWTO regulatory reference paperTrade principlesCost models

Interconnection regulatory frameworksWorldwideWithin the European Union


3

Source: ITU TelecomRegulatory Database.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Africa Americas Asia-

Pacific

Arab

States

Europe

Monopoly Partial competition Competition

Competition in basic services, by region, 2000


4Source: ITU Telecommunications Regulatory Database.

0

10

20

30

40

50

60

70

80

90

100

1995 1997 2000 2003 2012

LocalLong distanceInternational

Countries

Competition in basic services, 1995 - 2012


5

Key events driving competitionMid-1980s:

Break-up of AT&T Licensing of competition in UK and Japan

Late-1980s, early 1990s: Competition in Australia, NZ, Finland, Chile Introduction of GSM mobile creating scope for licensing

additional mobile operators

Mid-1990s: Full competition in UK and US international Growth of international simple resale, callback, VoIP

Late 1990s: WTO basic telecoms agreement (15 Feb ’97) EU full competition (1 January 1998)



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Basicservices

Cellular Cable TV ISPs


Competition in selected services, 2000



0%

10%

20%

30%

40%

50%

60%

70%

80%

Local Longdistance

International Cellular


Competition in Asia-Pacific, 2000

Countries permitting competition in Countries permitting competition in basic telecoms:basic telecoms:1990 1995 1998JapanUnited KingdomUnited States

AustraliaCanadaChileFinlandJapanKorea (Rep.)New ZealandPhilippinesSwedenUnited KingdomUnited States

AustraliaAustriaBelgiumCanadaChileChinaDenmarkEl SalvadorFinlandFranceGermanyGhanaHongkong SARIsraelItalyIreland (Dec 98)

Japan Korea (Rep.)MexicoNew ZealandNetherlandsNorwayPhilippinesRussiaSpain (Dec 98)SwedenSwitzerlandUgandaUKUSA

plus others ....


9

Calling opportunities, China

2000: Total, 129.8 m fixed + 85.3 m mobile

Fixed-to-fixed, 36%

Fixed-to-mobile, 24%

Mobile-to-fixed, 24%

Mobile-to-mobile, 16%1995:

Total, 40.7 m fixed + 3.6 m mobile

1990:

Total, 6.5 m fixed + 0.02 m mobile

Source: ITU World Telecommunication Indicators Database.


10

Telecoms at the WTO 1947-1986: GATT

Successive rounds of trade negotiations reduce trade barriers for telecom equipment

1986-1994: Uruguay round Negotiations begin on Trade in Services Culminate in creation of WTO and GATS

1994-97: Basic telecommunications agreement (Protocol 4 to the GATS)

72 countries (93% of market by value), make telecom commitments Information Technology Agreement sees further liberalisation

5 February 1998: Implementation of basic telecoms agreement

November 2001: Successful conclusions of Doha Summit sees launch of new trade negotiating round, including accession of China


11

Selected trade principles

Market access Access to foreign market on reasonable, non-

burdensome terms Access to telecommunication transport networks

Transparency Rules of the game clear for all players

Most-favoured nation Preferential market access granted to most favoured

nation made available to all signatories

National Treatment Foreign service providers treated no less favourably

than domestic ones


12

WTO regulatory reference paper, principles

Competitive safeguards Interconnection

“linking with suppliers providing public telecommunications transport networks or services in order to allow the users of one supplier to communicate with users of another supplier and to access services provided by another supplier”

Universal serviceTransparency Independent regulatorsAllocation and use of scarce resources


13

Interconnection principles (1) Interconnection with a major supplier will be ensured at any

technically feasible point in the network. Such interconnection is provided.(a) under non-discriminatory terms, conditions (including technical

standards and specifications) and rates and of a quality no less favourable than that provided for its own like services or for like services of non-affiliated service suppliers or for its subsidiaries or other affiliates;

(b) in a timely fashion, on terms, conditions (including technical standards and specifications) and cost-oriented rates that are transparent, reasonable, having regard to economic feasibility, and sufficiently unbundled so that the supplier need not pay for network components or facilities that it does not require for the service to be provided; and

(c) upon request, at points in addition to the network termination points offered to the majority of users, subject to charges that reflect the cost of construction of necessary additional facilities.


14

Interconnection principles (2)Public availability of the procedures for interconnection

negotiations The procedures applicable for interconnection to a major supplier

will be made publicly available.Transparency of interconnection arrangements

It is ensured that a major supplier will make publicly available either its interconnection agreements or a reference interconnection offer.

Interconnection: dispute settlement A service supplier requesting interconnection with a major supplier

will have recourse, either:• (a) at any time or• (b) after a reasonable period of time which has been made publicly known to an

independent [regulatory authority] to resolve disputes regarding appropriate terms, conditions and rates for interconnection within a reasonable period of time, to the extent that these have not been established previously.


15

Approaches to costing

Fully-allocated pricing models total costs for providing service (including

historical, depreciated investment costs) divided by the volume of service provided (e.g., minutes of use, number of subscribers)

Incremental pricing models (e.g., LRIC)marginal cost of providing an additional unit of

service (e.g., next minute of traffic, next subscriber)

1001 different flavours of the above


16

Alternative methodologies for interconnection

Per minute Based on level of usage in each direction Normal system for interconnection between fixed and

mobile

Revenue-sharing Based on level of usage in both directions Normal system for international traffic (international

accounting rate system)

Capacity-based Based on level of capacity requested Normal system for Internet peering

Hybrid Variations on the above


17

Countries with an Interconnection regulatory framework, by region

Source: ITU Telecommunications Regulatory Database.

0

5

10

15

20

25

30

35

40

Africa Americas ArabStates

Asia-Pacific

Europe

Countries


18

Countries imposing regulatory obligations

Source: ITU Telecommunications Regulatory Database.

0

10

20

30

40

50

60

Incumbent(fixed) only

Fixedoperators

SMP

All fixedoperators

All mobileoperators

Mobileoperators

SMP

Other

Countries


19

Interconnection in Europe

Existing regulatory framework Many different sector-specific directives, notably

Interconnection Directive (97/33/EC) Two parts: Recommendations on Interconnection pricing

and accounting separationMethodology for identifying “best practice” pricing

Lowest 20% of published interconnection offers in 15 EU Member States at local (0.9 €/100), single transit (1.5 €/100) and double transit (1.8 €/100)

New technologically-neutral regulatory framework Access to, and interconnection of, electronic

communications networks and associated facilities First reading in European Parliament on 4 July 2001 Amended proposal available at: http://europa.eu.int/information_society/topics/telecoms/regulatory/new_rf/com2001-369en.pdf


20

Range of Interconnection rates in EU, US$ per minute

0 5 10 15 20 25 30

Mobile-to-fixed LOCAL

Mobile-to-fixed SINGLE

TRANSIT

Mobile-to-fixed DOUBLE

TRANSIT

Fixed-to-mobile

Lowest

Best-practice(20%) guidelineHighest

Source: ITU, compiled from ECTA/Analysys, EU Interconnection Tariffs in Member States, ITU Regulatory Survey 2000.


21

Selected European interconnect and settlement rates, US cents per min, 2000

0

2

4

6

8

10

12

14

Spain Italy France Germany Nether-lands

UK

Double transitinterconnect

SettlementRate to USA

Sources: ITU, EU, FCC.


22

Double transit interconnection (in US cents per minute)

0

1

2

3

4

5

Mar-98 Sep-98 Dec-98 Mar-99 Nov-99

Spain

Germany

France

UK

Sources: ITU, EU.


23

Looking ahead: Interconnection issues under IP

Full circuit model Separate charges for circuits and traffic exchange (peering) Obligation for entity requesting interconnection to pay full

charges, even though traffic flows both ways

Capacity-based model Charges according to capacity (bandwidth) rather than usage

(minutes)

Technology neutral model Many different types of service (e.g., voice/data,

real-time/store and forward) over same network

Variable quality of service Possible variation in interconnection charges (or refunds)

according to different levels of service quality


24

For more information ….

ITU publication “Trends in Telecom Reform 2001, Interconnection Regulation”

ITU website on regulation at: www.itu.int/ITU-D/treg/index.html

WTO website at www.wto.org

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