Policy and Legal Issues of Interconnection

1. Policy and Legal Issues of Interconnection Abdelfattah Abuqayyas Coordinator Arab Centre of Excellence Abdelfattah.abuqayyas@ties.itu.int ITU BDT

2. Sources • The 2000 edition of Trends in Telecommunication Reform: Interconnection Regulation and the ITU World Telecommunication Regulatory Database of the Sector Reform Unit of the BDT. • The materials Prepared for ITU by Link Centre, Witwatersrand University, South Africa

3. Topics • Introduction • Procedural Aspects of interconnection • Terms of Interconnection Agreements • Technical and Operational Aspects of Interconnection

4. The purpose of the presentation • provide an understanding of the importance of regulating interconnection for effective delivery of services (consumers) and for creating a fair competitive environment (users/operators). • provide an overview of the important issues for regulating interconnection, including • the procedures for concluding agreements and the substance of such agreements; • identify and begin to understand technical and operational aspects of interconnection • the economic factors determining interconnection costs • unbundling and number portability and unique issues involving mobile networks and the Internet

5. 1- IntroductionThe content • Contextualisation of interconnection within telecommunications regulation • What is interconnection? • Definitions of interconnection • Why is interconnection important? • Interconnection and international law • Why is Interconnection Regulated • Should there be a legal requirement that all players must interconnect? • The legal requirement – what instrument?

6. The purpose of this session • To understand the reasons for regulating telecommunications in order to contextualise interconnection regulation. • To understand what is interconnection and its various elements. • To understand why interconnection is important. • To become familiar with international law impacting on regulation. • To understand why interconnection is regulated. • To understand the different legal mechanisms that may be employed to require interconnection. • To understand the various legal instruments that might be used to regulate interconnection

7. Level of Competition, World, Selected Services, 2001 Source:ITU World Telecommunication Regulatory Database, 2001.

8. Monopoly Competition 90% 80% 70% 60% 50% Cellular mobile services 40% 100% Monopoly Competition 30% 90% 80% 20% 70% 10% 60% 0% 50% Africa Americas Asia- Arab Europe World 40% Pacific States 30% 20% 10% 0% Africa Americas Asia- Arab Europe Pacific States Level Of Competition By Region For Basic And Mobile Services, 2001 Cellular mobile services Basic services Source:ITU World Telecommunication Regulatory Database, 2001.

9. Growth in National Regulatory Authorities 9 national regulatory authorities in mid 2002 in the Arab region Source: ITU/BDT World Telecommunication Regualotry Database.

10. Why is telecommunications regulated? • To control use of a valuable national resources (eg, frequencies) • To ensure access to a valuable public services (examples other than telecommunications - water, electricity, etc) • To ensure that monopoly or dominant players (which have traditionally been protected) do not abuse their monopoly or dominant positions

11. Aspects of telecommunications regulation • Telecommunications access/Universal service • Interconnection • Monitoring of and controlling anti-competitive conduct, such as abuses of dominant positions • Resolution of disputes in the industry • Licensing • Tariffs

12. What is interconnection? • Physical connection of networks • Terminating traffic on one network originating from another network • Roaming – one service provider uses another’s network to originate the call of its customer • Reselling – one service provider uses another’s network to carry the call of its customer

13. What is interconnection? • Facilities leasing – one service provider provides the telecommunications facilities used by another service provider to make up his/her own network • Customer Premises Equipment (CPE) – an end user connects his or her own equipment to the network of his or her service provider • Supplementary services – billing, directory and operator services, etc

14. Generic PSTN Network Structure Source: ITU Trends in Telecommunication Reform 2000- 2001

15. Definitions of Interconnection • The Reference Paper related to the Basic Telecommunications Agreement of the General Agreement on Trade in Services • This section applies to 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, where specific commitments are undertaken.

16. Definitions of Interconnection • International Telecommunication Union, The Changing Role of Government in an Era of Telecom Deregulation – Interconnection: Regulatory Issues, Report of the Fourth Regulatory Colloquium held at the ITU Headquarters (1995) • While definitions cannot encompass the complexity of the matter, loosely speaking interconnection comprises the commercial and technical arrangements under which service providers connect their equipment, networks and services to enable customers to have access to the customers, services and networks of other service providers.

17. Definitions of Interconnection • International Telecommunication Union, Trends in Telecommunication Reform 2000-2001 – Interconnection Regulation (2001) • The physical connection of separate telephone networks to allow users of those networks to communicate with each other. Interconnection ensures interoperability of services and increases end users’ choice of network operators and service providers.

18. Why is interconnection important? • Enables communications • Public interest • Right to communications • Consumer choice • Enables competitive entry • Fair competition • More and better services … which lead to telecommunications access/universal service • Develops integrated global networks • Promotes efficient infrastructure • Provides incentives for network buildout • Provides benefits for end users • Promotes health and safety

19. Interconnection and competition • “Regulators around the globe consider interconnection to be the single most important issue in the development of a competitive market place for telecommunication services.” • (Introduction to Trends in Telecommunication Reform 2000-2001 "Interconnection Regulation" – 3rd edition, 2000 by the International Telecommunication Union (www.itu.int/;ublications/docs/trends2000.htm)

20. Interconnection and competition • “Interconnection is key to the development of a competitive telecommunications arena…”. • (Introduction to The European Interconnection Manual by InterConnect Communications (www.icc-uk.com/pubs71.html))

21. Interconnection and universal service • Provides access to all consumers • Reduces unnecessary duplicative costs • Provides more efficient communication services • More competitors means more, better and cheaper services

22. The Importance of Interconnection • Approaches to Interconnection Policy: • National • Regional (APEC, CITEL,TRASA, EU) • Global harmonization of approaches-WTO

23. World Trade Organization • General Agreement on Trade in Services (GATS) • Annex on Telecommunications • Schedules of commitments • Annex on Negotiations on Basic Telecommunications • Fourth Protocol on Basic Telecommunications • Schedules of commitments

24. WTOInterconnectionObligations • Non discriminatory terms, conditions and rates • Sufficiently unbundled • Provide interconnection at any feasible point in the network • Transparency • Reference Interconnection Offer

25. WTO Reference Paper • Interconnection to be ensured • Public availability of the procedures for interconnection negotiations • Transparency of interconnection arrangements • Interconnection: dispute settlement

26. Why regulate interconnection? • To ensure parties interconnect where the market structure is such that one or more parties have an economic disincentive to interconnect • Access • Competition • Universal service

27. Interconnection regulatory framework 39 23 20 20 4 Africa Americas Arab States Asia-Pacific Europe Interconnection Regulation by region, 2001 Source:ITU World Telecommunication Regulatory Database, 2001.

28. The legal requirement for interconnection • what law? • Telecommunications law • Competition law • what instrument? • Legislation (requirement) • Regulations (rules applicable to all – framework and required terms and/or guidelines for terms) • Regulator rulings (supplementary) • License conditions (may be necessary with new liberalization, but should be replaced ASAP by regulations)

29. Activity • why regional guidelines on Interconnection are important. • Does your country subscribe to regional or national guidelines? • Why are interconnection guidelines important to sector development? How do the regional guidelines compare with WTO Reference Paper with regard to interconnection?

30. Summary • What is interconnection? • Why is interconnection important? • What are the common principles embedded in various definitions of interconnection? • Why has interconnection become internationalised? • What does it mean for a country which has committed to the reference paper with regard to interconnection?

31. 2- Procedural Aspects of Interconnection The content • The players • Procedures for concluding interconnection • Principles – efficiency, fairness and transparency • Who does what? • The role of the interconnecting parties • The role of the regulator • The role of the courts • Alternative Dispute Resolution • Mediation • Conciliation • Third party expert • Arbitration • Alternatives for avoiding disputes

32. The purpose of this session • To understand the players involved in concluding interconnection and the roles they play. • To understand the principles of interconnection procedures, in particular, fairness, transparency and efficiency. • To understand alternative dispute mechanisms that might be employed in regard to interconnection disputes • To understand alternative dispute avoidance mechanisms that might be used in regard to interconnection

33. The players • Interconnecting parties • Independent regulator • Courts

34. The Players – Interconnecting parties • Dominant players v non-dominant players • Existing players v new entrants • Different types of service providers (public fixed, mobile, value added, private, etc)

35. Operator Interconnection Obligations, 2001 Source:ITU World Telecommunication Regulatory Database, 2001.

36. Possible responsible authorities • Government ministry or department • Independent regulator • Administrative tribunal

37. The Regulator • Adequacy of regulatory guidance for interconnection negotiations • Availability of interconnection • Access to standard interconnection terms • Independent and timely dispute resolution • Non-discriminatory access to interconnection facilities and services • Access to PSTN network specifications • Universal service, universal access • Adhere to principles – efficiency, fairness and transparency • Set out clear, detailed and efficient procedures to conclude agreements and resolve disputes • Issue guidelines for agreements • Reference interconnection offers • Provide mediation services

38. The courts • Appeal • Review • Other appeal/review body

39. Procedures for negotiating interconnection - the principles • Promote competitive entry • Efficient • Clear • Fair • Transparent • Enforceable • Allow the parties to negotiate if they can and if not allow the regulator to make a quick and enforceable decision

40. Who does what? • Parties negotiate, subject only to general commercial and competition law (New Zealand) • Parties negotiate, but if they fail to agree, the regulator can intervene (UK) • Parties negotiate, but the regulator must approve (Australia) • The regulator decides interconnection terms and rates

41. Interconnecting parties • Must negotiate in good faith • Transparent and non-discriminatory interconnection • Cost based interconnection • Unbundled interconnection • Must publish network information and advance notice of proposed changes

42. The regulator • Establish guidelines in advance of negotiations • Set default inter connection arrangements in advance of negotiations • Establish deadlines for various stages • Alternatives to dispute resolution • Establish prices or cost basis • Incentive regulation to complete negotiations

43. Regulator • Must decide disputes quickly • Set out clearly and imposes sanctions for parties not interconnecting or delaying interconnection • Reviews and approve/disapprove interconnection agreements • Monitor interconnection to ensure compliance with regulations and agreements 

44. Appeal of merits Review of process – was it fair Courts

45. Alternative Dispute Resolution • Formal negotiations • Mediation • Conciliation • Third party expert • Arbitration

46. Dispute avoidance • A credible regulator • Industry forums

47. 3 - Terms of Interconnection Agreements The content in this session • Pricing elements of interconnection • Cost-based • Discount off retail prices • Fully allocated costs • Long run incremental costs • Controlling cross subsidisation • Non-pricing issues in interconnection agreements • Guaranteed quality • Transparency and non-discrimination provisions • Provisions contracting out of interconnection regulations – should not be included • Time periods for concluding interconnection • Operational aspects – planning and expansion of networks • Dispute resolution • Review mechanisms

48. The purpose of this session • To understand that interconnection pricing must be cost-based. • To understand various methods of cost-based pricing for interconnection and to identify the relative advantages and disadvantages of each. • To understand various accounting and/or structural separation rules and the purpose behind them. • To identify and understand important non-pricing provisions to be included in interconnection agreements

49. Economic Issues in Interconnection • Whatare the costs of interconnection? • How can Interconnection costs be measured? • How should costs be recovered? • Network Development and Universal Service.

50. Pricing • Cost-based • What does cost-based mean? • Methods of calculation • Percentage off retail rates • Fully allocated costs • LRIC