Interconnection Principles

Scope

This lesson discusses the interconnection principles. It gives an overview of interconnection agreements. This lesson will help a student acquire in depth the interconnection principles

Review Question(s)

1. Discuss in detail the interconnection principles

Summary of Interconnection Principles

Summary of Widely Accepted Interconnection Principles

• Terms of interconnection should not discriminate unduly between operators or between a dominant firm's own operations and those of interconnecting competitors
  
• Interconnection should be permitted at any technically feasible point, but the requesting operator should pay any additional costs of non-standard interconnection
  
• Interconnection charges should generally be cost-based (i.e. the evolving best practice specifies that the cost standard should be forward-looking long-run incremental costs; there is normally a mark-up to cover forward-looking joint and common costs)
  
• Cost inefficiencies of incumbent operators should not be passed on through charges to interconnecting operators
  
• Where reciprocal interconnection and costs can be expected to be reasonably balanced, bill and keep arrangements are an efficient alternative to cost based- interconnection
  
• Regulatory guidelines and procedures should be prescribed in advance, to facilitate interconnection negotiations between operators
  
• Standard terms and procedures should be published for interconnection to dominant operators
  
• Interconnection procedures and arrangements should be transparent
  
• Interconnection arrangements should encourage efficient and sustainable competition
  
• Network elements should be unbundled, and charged separately

Charges related to universal service obligations should be identified separately, and not bundled with interconnection charges

• An independent regulator (or other third party) should resolve interconnection disputes quickly and fairly
  

As stated in the Telecommunication Regulation Handbook, the interconnection principles are guided by the principles listed below:

• Providing Advance Regulatory Guidelines
  
• Focus Interconnection Obligations on the Incumbent Operator
  
• Transparency
  
• Non-Discrimination
  
• Cost-Orientation

Third-party Neutral Transmission Principle

The principle called "Third-Party Neutral Transmission" is as follows: Once a carrier accepts traffic from a customer to transmit, it cannot accept only selected parts of that traffic based on where they originated. It can discriminate against a potential customer by not interconnecting with it. But it cannot discriminate against a customer by carrying traffic only selectively. This principle of TPNT preserves interconnection, access pricing the non-discrimination and free flow features of common carriage that are of major advantage to society, without making private carriers into common carriers as establishing complex regulations.

Thus, if carrier A does not wish to serve B, or at prices that are unfavorable, all that B has to do is find a C or D which are connected to A, directly or indirectly, and thus gain access to A's network. The system is basically one of arbitrage. It is similar to other transaction cost reducing arrangements in society, such as commercial paper at legal tender [4].

Interconnection Agreements

The number of interconnection agreements in place depends on the number of licensed/authorized operators for public network and public voice telephony (local and national).

The contents of interconnection agreements vary considerably. Much depends on the regulatory framework. If the existing regulatory framework provides sufficient detail on the terms and conditions of interconnection, then interconnection agreements can be shorter. The same is true if an incumbent operator or an industry group has published detailed interconnection tariffs, technical standards, procedures, etc. which can be incorporated into an agreement. In other cases, interconnection agreements must be more comprehensive [2].

For contents of a typical Interconnection agreement, refer to [2] in the third Module on page 3-10.