MANAGING INTERCONNECTION

The most popular critical ingredient in the development of effective competition is well managed interconnection. There is general agreement that interconnection arrangements between operators in the market should be initiated and negotiated between willing players and not be imposed by governments or regulators. However,  experience has shown that incumbent carriers who in the past determined the content of interconnection arrangements between carriers have little incentive to share network presence after years of investment, and are likely to resist interconnection in a competitive era.

In order to ease cooperation between incumbent carriers and new operators it is critical that a regulator be involved in shaping interconnection agreements. Regulatory intervention in the US resulted in the collection of USD 69 million in penalties from a dominant service provider (ITU, 2002). There are many different approaches to the way in which efficient and acceptable terms of interconnection can be reached. For instance, the regulator can provide guidance to complex technical and operational issues which enter negotiations. This is commonly referred to as ex ante or advance regulatory guidelines, and has become the dominant approach in the telecommunications environment. A regulator can also provide guidance only after a commercial agreement between two operators has failed, this is called ex post regulatory guidelines. The advantage of the ex ante is that the regulator can add regulatory pressure to ensure that technical, commercial and operational agreements reached between operators are successful. The disadvantage is that it imposes additional responsibility on the regulator, including dispute resolution. Ex post however carries more disadvantages, it requires a reactive rather than proactive response, it is time consuming and encourages procrastination on the part of the resisting carrier. Through ex ante regulation, the regulator can limit tendencies toward delaying interconnection agreements, by including the time frame within which negotiations are conducted, concluded and filed with the regulator.

Interconnection agreements in different countries vary in the details or content they contain, there is no consistent set of guidelines as each country has developed guidelines according to its legal framework. In South Africa guidelines are detailed, they instruct operators to “bear their own port, data-fill and switch costs to support point of interconnection” and “share the costs of interconnect capacity equally”, in other countries such as New Zealand guidelines are more generalised, and favour commercial settlements.

Interconnections terms of agreement typically contain information on the following;

Regulators may draw on accounting and economic experts to assist in formulating financial details in interconnection agreements and engineers to provide technical data, but invariably they will also need the assistance of the service providers who own knowledge of the complex technical and operational issues associated with the services they provide in the market.

Yan, Xu. 2001. “The impact of regulatory framework on fixed mobile interconnection settlements: the case of China and Hong Kong”. Telecommunications Policy 25 (7) 515-532