Optimizing Interconnect Processes - Informa

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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.

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Optimizing Interconnect Processes - Informa

  1. 1. 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 Ahmad.n@mobilink.net : ansyed56@gmail.com
  2. 2. 2 Outline ● Interconnect Issues ● Inter-country comparisons ● Regulatory Framework ● Commercial arrangements ● Technical arrangements ● Recommendations
  3. 3. 3 Telecom Iceberg Under Deregulation Own Network
  4. 4. 4 Telecom Iceberg Under Deregulation Own Network Interconnection
  5. 5. 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. 6. 6 Three Pillars For Effective Interconnection Regime ● Regulatory Framework & Legislation ● Commercial approach ● Technical arrangements
  7. 7. 7 Comparative Statistics Total Subscribers - Million 257 75 37 0 50 100 150 200 250 300 India Pakistan B. Desh No. of Operators/Licenses 135 122 6 88 37 18 4 15 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. 8. 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. 9. 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. 10. 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
  11. 11. 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)
  12. 12. 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. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. 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…
  21. 21. 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
  22. 22. 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
  23. 23. 23 Thank You !

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