Bridgetown, 6 December 2011Bridgetown, 6 December 2011

Presentation by: Presentation by:

Sofie MaddensSofie Maddens--ToscanoToscanoITU ExpertITU Expert

Barbados Barbados -- HIPCAR Stakeholder Validation: HIPCAR Stakeholder Validation: Building Blocks for Revision of RegulationsBuilding Blocks for Revision of Regulations

This document has been produced with the financial assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European Union

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ITU-EC HIPCAR Project: Enhancing Competitiveness in the Caribbean through the Harmonization of ICT Policies, Legislation and Regulatory

Procedures

Access and Interconnection Regulations

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Introduction The immediate concern for an interconnection policy is to ensure fair competition

between incumbent operators and new entrants. Incumbent operators enjoy market power, have control over essential facilities

Without interconnection, new operators would be obliged to duplicate expensive infrastructure and consumers would have to subscribe to each of the different operators’ networks to be able to call each other

Interconnection enables consumers to contract with the supplier of their choice and still be able to complete calls, regardless of where they originate or where they are sent

Effective interconnection policies ensure that dominant operators do not use their market power to deter entry by new competitors or subject new entrants to unfair conditions.

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Introduction The WTO Reference Paper requires interconnection by major

suppliers

Different countries may require interconnection from incumbents or dominant operators or operators with SMP

Increasingly, countries take a technology neutral approach and impose interconnection obligations on all network operators

Still asymmetric regulation places heavier interconnection obligations placed on major suppliers

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Introduction

Regulators play a critical role in overseeing interconnection – they: review relevant economic principles regarding

interconnection pricing, analyze and propose interconnection costing

approachesdevelop common cost models to be utilized by all

operatorsdevelop interconnection guidelines and

regulations

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Regional and International Commitments

The EPA provides that

3. Interconnection with a major supplier shall be ensured at any technically feasible point in the network. Such interconnection shall be provided: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;in a timely fashion, on terms, conditions (including technical standards and specifications) and 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; andupon 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.

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Regional and International Commitments

The EPA further provides that

4. The procedures applicable for interconnection to a major supplier shall be made publicly available

5. Major suppliers shall make publicly available either their interconnection agreements or their reference interconnection offers. Such rates are cost‐oriented rates in the EC Party, and cost‐based rates in Signatory CARIFORUM States.

6. A service supplier requesting interconnection with a major supplier shall have recourse, either at any time or after a reasonable period of time which has been made publicly known, to an independent domestic body, which may be a regulatory body as referred to in Article 95, to resolve disputes regarding appropriate terms, conditions and rates for interconnection.

1. Any supplier authorised to provide telecommunications services shall have the right to negotiate interconnection with other providers of publicly available telecommunications networks and services. Interconnection should in principle be agreed on the basis of commercial negotiation between the companies concerned.2. Regulatory authorities shall ensure that suppliers that acquire information from another undertaking during the process of negotiating interconnection arrangements use that information solely for the purpose for which it was supplied and respect at all times the confidentiality of information transmitted or stored.

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International Best Practice

International best practice shows that interconnection regulation is often focused on certain key principles, including: Obligation of cost-oriented, transparent, and non-discriminatory

interconnection; Regulated process for interconnection negotiations amongst operators; Definition and method for determining dominant operator or significant

market power (SMP) status; Reference Interconnection Offer and approved interconnection

agreements; Obligation to share infrastructure; Unbundling of the local loop; Determination of (mobile) termination rates ((M)TRs); Dispute Resolution

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Cost-Oriented, Transparent, and Non-Discriminatory

Key Questions - At least dominant operators, and perhaps all operators, must offer interconnection to their networks on a cost-oriented, transparent and non-discriminatory basis. Is there an obligation to interconnect networks? If so, what

category of operator does it apply to – all or just dominant operators?

Is interconnection mandated for fixed and mobile voice services? Is interconnection mandated for other services (e.g., data

transmission services)? Must interconnection be cost-oriented, transparent and offered

on a non-discriminatory basis?

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Regulated Process Another debate is whether regulation should be applied

prior to interconnection (ex ante) by establishing guidelines for developing interconnection agreements or by requiring standard offers

after interconnection (ex post) by handling disputes that result from an unregulated negotiation process, or

using some combination of the two, for example, establishing a default agreement should negotiations fail

The growing consensus is that ex ante regulation is preferred, based on the notion that incumbents and entrants often lack a level playing field when engaging in negotiations.

Furthermore clarity in regulatory rules and on how regulators will resolve disputes should they occur add certainty to the negotiation process and narrow the range of possibilities that operators would consider as possible outcomes

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Regulated Process

Key Questions - There is a regulated process for interconnection negotiation, which includes specific timeframes in which negotiations must be completed and permits the regulator to intervene if the parties do not reach an agreement. Is there an obligation to make interconnection agreements

publicly available? If so, what category of operator does it apply to (all)?

Are interconnection agreements approved by the regulator? Are interconnection prices approved by the regulator? Is the interconnection negotiation process regulated? What is the regulated timeframe to negotiate interconnection? Can the regulator impose interconnection if the parties do not

reach an agreement? What is the timeframe?

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Definition and method for determining dominant operator or significant market

power (SMP) status Key Questions - Where obligations for dominant operators or operators with

significant market power (SMP) differ from obligations for non-dominant operators, the law and/or regulation should define how dominant or SMP status is determined and such determination should be decided on a fair and transparent basis Do regulations differentiate between dominant operators and operators with SMP? If so, how are

these terms defined? Who may initiate the market analysis procedure and how often does a determination of

dominance or SMP occur? What criteria are used to determine dominance? What types of obligations are placed on dominant operators relating to access and

interconnection? Is a determination of dominance or SMP or imposition of obligations subject to public

consultation? Is the determination and imposition of obligations related to dominance reviewed regularly

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RIO and Interconnection Agreements

Key questions: Dominant operators or those having significant market power must publish a Standard/Reference Interconnection Offer that is approved by the regulator. All interconnection agreements must be approved by the regulator and made publicly available. Is there an obligation to publish a standard

interconnection offer (Reference Interconnection Offer, RIO)? If so, what category of operator does it apply to (all)?

Must the RIO be approved by the regulator? What interconnection services are included in the

RIO?

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Infrastructure Sharing

Infrastructure sharing is intended to facilitate improved coverage and service by allowing operators to share the risks of investment into cheese grater economies in the utilization of fixed network assets.

Operators are reluctant to share network assets that they view as strategic

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Infrastructure Sharing

Key Questions - Infrastructure sharing is allowed and required in some cases, especially with regard to mobile networks towers

Is infrastructure (poles, ducts, etc.) sharing mandated? If not, is it allowed?

Is there an infrastructure sharing standard offer? If so, what category of operator does it apply to (all)?

Are mobile towers included in infrastructure sharing provisions/offer?

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Unbundling Unbundling is the mandatory offering by network operators of specific elements of

their network to other operators, on terms approved by a regulator or sanctioned by a court

Unbundling goes further than imposing an obligation on incumbents to offer interconnection services to entrants. It requires the incumbent to allow entrants to lease certain individual building blocks that make up a telecommunications network

Unbundling of network elements allows competing operators to enter the market and roll out services with considerably less sunk investment in some or all components of a competing network For example:

A new entrant might initially install switches in central business districts only, and lease those components of the incumbent carrier’s network needed to directly serve customers in other areas, or

An entrant might lease just those network elements needed to offer competing retail services (such as DSL services). In this way the entrant can offer competing services to customers without duplicating all components of the incumbent carrier’s infrastructure, and without simply reselling the incumbent’s service offering.

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Unbundling Many countries have implemented unbundling of their telecommunications networks. As of

late 2004, 65 ITU member nations had required local loop unbundling, up from just 23 in 2000

The rationale for unbundling is similar to that for interconnection regulation more generally Some inputs are available only from certain network operators, and cannot easily be duplicated. Unless those inputs are available at

appropriate prices, competition in downstream telecommunications markets would be difficult or impossible.

The emergence of competition from alternative technologies — such as wireless, cable telephony, and VoIP — is eroding this rationale for mandatory unbundling.

Unbundling can be an enormous task for regulators. The administrative costs of defining, and setting prices for, a range of network elements can be high. In addition, unbundling can impose high compliance costs on incumbent carriers. Regulators should carefully consider the merits of unbundling on a case-by-case basis, with a thorough assessment of the likely costs and benefits.

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Unbundling Key Questions: Unbundling of the local loop is required

while bitstream and broadband resale of services may also be mandated. Is there an obligation to offer access to local loop unbundling? Does

this obligation apply only to the “major supplier” or to other operators? Is there an obligation to provide bitstream-like services and resale

wholesale broadband services? Does this obligation apply only to the “major supplier” or to other operators?

Are unbundling of the local loop and bitstream/resale services cost-based and/or is their price regulated?

Is there an obligation to publish a standard unbundling offer (Reference Unbundling Offer, RUO)? Does this obligation apply only to the “major supplier” or to other operators?

Is there an obligation to make unbundling agreements public? Are unbundling agreements approved by the regulator?

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Determination of (mobile) termination rates ((M)TRs);

Regulators are paying much closer attention to mobile interconnection and termination charges rather than allowing operators to set fees themselves

This is especially the case when operators switch to “calling party pays” billing and for international roaming charges as more customers complain

Regulators sometimes pursue market-based solutions to bring down interconnection charges. They can promote competition by encouraging new (e.g., “virtual”) mobile operators or by allowing customers greater

opportunities to choose between mobile operators (by for instance number portability) and generally increasing transparency. Indirectly, more intense competition will reduce mobile termination charges. Regulators have continued to play a role in determining the interconnection charges of fixed operators.

There is a myriad of ways for a country to handle mobile termination charges, including: Full regulation of mobile termination rates (e.g., Austria, Portugal and Cuba); No regulation of MTRs by allowing operators to negotiate freely (e.g., Brazil); Only regulate mobile termination charges for fixed-to-mobile calls (e.g. Jamaica); Require mobile network operators to apply a single regulated termination charge regardless of where the call

originates; and Apply asymmetric regulation where only the MTRs of mobile operators with SMP are regulated (e.g., Colombia)

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Determination of (mobile) termination rates ((M)TRs);

With so many possibilities, the decision on which type of MTR regulations to implement should be based on a complete analysis of each country’s particular needs

MTRs tend to be high where there is no regulation

For example, the MTRs in Brazil, a country without rate regulation, are among the highest in the world.

Several factors should influence the decision, including the amount of price competition in the mobile market; potential costs and delays associated with reliance upon negotiation; the regulator’s available resources; and consumer complaints regarding prices

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Determination of (mobile) termination rates ((M)TRs); Key Questions: There is regulatory intervention

on (Mobile) Termination Rates (MTR) in which mobile operators must offer cost-oriented fixed-to-mobile or mobile-to-mobile termination rates

What methodology is used to set the MTRs (e.g., benchmarking or cost modeling)?

Are the rates symmetrical or asymmetrical for fixed-to- mobile and mobile-to-mobile?

What factors should be included in costs to calculate MTRs – should the factors include non-network related costs or fixed costs?

Is there regulatory intervention in determining termination rates?

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Dispute Resolution

Key Questions: Interconnection/access disputes have a specific and expedited process. However, parties may request the regulator adjudication at any time

Is there a specific dispute resolution process and timeframe for these disputes?

Does the regulator have the authority to resolve these disputes?

Does the regulator have the resources to resolve the disputes?

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Interconnection Matrix The law analysis compares the HIPCAR Model Regulations on Access

and Interconnection with: the Barbados Telecommunications Act, the Fair Competition Act, and the Telecommunications (Interconnection) Regulations, 2003.

Other relevant texts such as the HIPCAR Policy Guidelines as well as texts such as the Interconnection Policy 2003 ,the Telecommunications (Declaration of Dominance) Regulations, 2005 and others are referenced in the other relevant texts and comments sections where these are relevant as background information for the drafting instructions.

The instructions are reflected in the Recommendation and Draft Legislation sections and have been incorporated into a proposal for modifications to the Telecommunications (Interconnection) Regulations, 2003

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Snapshot

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, HIPCAR Model Regulations on Access and Interconnection

Telecommunications Act – CAP 282B Telecommunications (Interconnection) Regulations, 2003

Comments: Recommendation and draft legislation HIPCAR Policy Guidelines

References and Reading ListAccess and Interconnection

HIPCAR Project - Reports on Telecommunications: Reports on Access and Interconnection, available at: Assessment Report on the Current Situation in the Caribbean Model Policy Guidelines and Model Legislative Text

Infodev ICT Regulation Toolkit, available at: http://www.ictregulationtoolkit.org/en/index.html

IDA Singapore Regulatory Framework on interconnection, available at: http://www.ida.gov.sg/Policies%20and%20Regulation/20060421105722.aspx

European Regulator’s Group Final Report on IP interconnection, available at: http://erg.eu.int/doc/publications/erg_07_09_rept_on_ip_interconn.pdf

Singapore Telecommunications Limited's Reference Interconnection Offer (RIO) – 2005 (as updated), available at: http://www.ida.gov.sg/Policies%20and%20Regulation/20060602171047.aspx

Communications and Information Technology Commission of Saudi Arabia Guidelines on Interconnection, available at: http://www.ictregulationtoolkit.org/en/Publication.3674.html

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Thank you!

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Sofie Maddens ToscanoManaging DirectorPygma Consulting International, LLC2 Wisconsin Circle, Suite 700Chevy Chase, MD 20815USA

Tel: + 1 240 235 1860Tel (dir): + 1 202 499 6501Fax: + 1 240 235 1861

Web: www.pygmaconsulting.comEmail: smaddens@pygmaconsulting.com