Term project interconnection v.1.0

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IT Technology Program (ITTP)

Term Paper forICT Management

Analysis of the Interconnection Approach by the Countries of Costa Rica, Indonesia,

Sri Lanka and Korea

David Zamora BarrantesArdimas Yuwono

A. Sanath W. Bandusiri Silva Riri Kusumarani

Course ITP 750 Offered by Prof. Myeon-Cheol Park

Assisted by Patrics OghumaSpring 2012

2ITTP 750 Term Project: Interconnection

Project Description

Objective: Identify and compare the interconnection strategies in the

countries of Costa Rica, Indonesia, Sri Lanka and Korea with best practices to recognize possible recommendations that can

improve the approach.


Contents

1. Interconnection Description

a. Principles b. Procedures c. Financials d. Technology

2. Country Profile a. Costa Rica b. Indonesia c. Sri Lanka d. Korea

3. Key Findings and Conclusions

a. Country´s SWOT Analysis b. PEST for Similarities and

Differences

4. Detected Recommendations


1. Interconnection Description


Interconnection Principals • Provides regulatory guidelines in advance• Dominant carrier (or significant market power - SMP) focus•Transparency

Charges, information shared, operators-operators agreement

•Non-Discrimination Giving equal access to interconnection

facilities and services

•Cost Orientation Interconnection charges should generally be cost-based

ITTP 750 Term Project: Interconnection

Interconnection Procedures

• Establishing Interconnection Arrangements

• Negotiation of Interconnection Arrangements

• The Regulator’s Role in Interconnection Negotiations

12/05/2012


Interconnection Financials

• Forward Looking Incremental Costs: the approach sets the most efficient price based on current technology.

• Historical Accounting Costs: charges are based on the accounting records of the operator.

• Sender Keep All (SKA) or (Bill and Keep): each operator pays for its own facilities up to the point of interconnection.

• Revenue Sharing: new entrants pay the incumbent operator a share of their revenues.

• Interconnect Charges based on Retail Prices: interconnection charges are based on prices to end users.


Interconnection Technical Issues

• Provision of Information by Incumbents– Availability of Agreements or Offers – Network Specifications – Network Changes

• Treatment of Competitor Information • Treatment of Customer Information • Points of Interconnection • Access to Unbundled Network Components• Local loop unbundling• Sharing of Infrastructure and Collocation• Equal Access • Quality of Service to Interconnecting Operators • Quality of Interconnected Services


2. Country´s Profile and Interconnection Approach


Country Profile

• FBC vs. SBC (Rationale)

• Market Structure (Relations & No. Operators)

• Price Definition (Concept & Process)

• Regulator Role (Assuring Interconnection)


Country Profile: Costa Rica

General Data• Capital: San José• Official Language: Spanish• Government:

Constitutional Democracy• Independence: 1821.09.15• Area: 51,100 Km2• Population: 4,301,712• Density: 84 Km2 • GDP: $51,166 billion• GDP per Capita: $11,215• Currency: Colón

Telecommunications *• Fixed Lines: 1.54 million• Mobile Lines: 1.95 million • Broadband Internet

Accounts: 269,480• Mobile Telephone

Penetration: 68% • Broadband Increasing Rate

per Habitant: 42.79%• Smartphone Penetration: 4%• Telecom Sector Represent

8.86% of GDP

* 2009 and 2010 Data


Costa Rica

• Service Based Competition

“The objective is to guaranty the access and interconnection to the public telecommunication networks, to pursuit efficiency, competition, resource optimization and major benefit for users. The interconnection must be timely, non-discriminatory, reasonable, transparent…”

Art. 59 Telecomm Law

• Market Structure

One Operator Three Operators

Competition and Entry Barriers: “The operator requested to provide

interconnection must provide it unbundled, transparent and in equal conditions, as it were providing it to

himself or his affiliates…”

Art. 15 Telecomm Regulation


Costa Rica

• Price Definition

- Negotiation between operators- Report the initiation - Report agreements - But if one of these happens:

- No willing to negotiate - Extending more than 3 months

- Regulator will intervene

• Regulator Role

- Modify, add and delete clauses from the contracts

- Intervene when: - Deny of negotiation - Request of a party - Its own determination - Periodically

- Intervention process


IndonesiaGeneral Data:Capital: JakartaOfficial Language: Bahasa IndonesiaGovernment: Republic Independence: 17 Agustus 1945Area: 1,919,443 km2 Population: 239,870,937

GDP: $706,558,240,891GDP per Capita: $ 2945Currency: Rupiah

Telecommunications *• Fixed Lines: 8,429,180• Mobile Lines: 211,145,429 • Internet User: 218,282,255• Mobile Telephone Penetration: 88% • Telecom Sector Represent 2.87 % of GDP


Indonesia

Facilities Based• In the telecommunications network

Provider as defined in Article 3 paragraph (2) and paragraph (3) telecommunications network operator must establish and provide telecommunications network.

• (2) Operators of telecommunications networks or provide in building and networking telecommunications as referred to in paragraph (1) shall follow the technical provisions in fundamental technical plan stipulated by the Minister.

• Minister regulation number 20 years 2001

• Market Structure

PT. Telkom (Incumbent) 58 %PT. Indosat 2,2 %PT. Bakrie Telekom 38,6 %PT. Mobile 8 1,2 %

PT. Telkomsel (Incumbent) 47,8 %PT. Indosat 22,8PT. XL Axiata 19,2 %PT. Smart Telecom 1,5 %PT. Hutchinson 4,3%PT. Natrindo 2,4 %PT. STI 0,4 %PT. Mobile 8 1,6

PT. Telkom (Incumbent) 99%PT. Indosat 0.5 %PT. Indosat 0.002 %


Indonesia

• Price DefinitionTelecommunication provider offer the interconnection price to government and the government will define the price.

Regulator Role:• Price defining• Mediator (if Dispute happen)


Sri LankaFixed Access Telephone service 4

Cellular Mobile phones 5

Data Communications (Facility based) 6

Data Communications (Non-facility based) & ISP’s

08

Trunk Radio 1

Leased Circuit Providers 1

Licensed Payphone Service Providers 1

External Gateway Operators 33

Direct-to-Home Satellite Broadcasting Service

02

Cable TV Distribution Network 02

Total 63

Area: 65,610 sq.kmPopulation: 20.8 millionCommercial Capital: ColomboCapital: Sri JayewardenepuraGDP Capita – 2,500 US$Teledensity (Fixed) - 17.1Mobidensity - 86. 7Capital city population: 0.681millionLanguage: Sinhala, Tamil, EnglishReligion(s)Buddhist 69.3%Hindu 15.5%Muslim 7.5%Christianity 6.9%Other 0.8

http://www.trc.gov.lk/


Sri Lanka

* Without interconnection in between networks communication impossible.•Therefore Sri Lanka Telecom system license includes 1.Interconnection interoperate obligation2. Interconnection arrangements 3. Access Charge4. Roaming agreements5. Interconnection rules

• Price Definition• & Regulatory Role- Allow Negotiation between

operators- Report to the Regulator - Report of agreements - if any operator complaint to

Regulator about unfairness or dispute :Regulator will intervene

- Term and condition and charges which are subject to Regulators & Government decision



Korea

General Data• Capital: Seoul• Official Language: Korean;

English widely taught in junior high and high school

• Government: Republic with powers shared between the president, the legislature, and the courts

• Independence: August 15, 1945

• Area: 98,480 sq. km• Population: 48,754,657• GDP: $1,459 trillion• GDP per Capita: $20,757• Currency: Won

Telecommunications • Fixed Lines: 28,543,173 • Mobile Lines Subscription:

50,767,241 • Broadband Internet

Subscription: 17,193,570 • Mobile Telephone

Penetration: 105.36%• Broadband Increasing Rate

per Habitant:• Smartphone

Penetration:34%


South Korea

Broadband Market : FBC considering change into SBC Telecommunication Market : ?

Market Structure

84.5%

FBC and SBC

2.4% 13.1%Fixed

Mobile 50.57%31.54% 17.89%

Wireless 32.45% 49.95%17.61%


South Korea• Price Definition

Calculated with consideration of:* the supply costs,* profits,* classification of cost and profits by Service type,* cost saving by Service-providing method,

* impact on fair competition environment;Regulator Role:

• KCC Defines Price• Changes in Price Structure Consult

KCC First


3. Analysis, Key Findings and Conclusions


Strengths • Legal framework • Competition • Procedure for settlement • Deadlines on the procedure • Cost based charges • Data protection

Weakness• Procedure enables delays by

incumbent • Unbundled interconnection

Opportunities • Regulator control• Charges are desegregated• Universal service and access deficit

contributions on interconnection

Threats • Technical standards • Technical compatible• Peak and off-peak charges

SWOT Costa Rica


Strengths • Subscribers from new provider can

communicate with any subscribers from different networks.

• Price of telecommunication can be decreased and more competitive

• Coverage of telecommunication become wider

Weakness• Calculating the price of

interconnection is not flexible • In the operational of interconnection,

role of the government is only as mediator.

Opportunities • All Providers can propose the price of

interconnection and the Government will define the price

• The Entrances can provide the same service with the same quality as the incumbent

Threats • Customer’s data can be used illegally • Compatibility technologies between

providers• Incumbent have not enough capacity

to serve entrance customers

SWOT Indonesia


Strengths • Regulatory Body under H.E. President• More powers than other Ministries• Legislation power• Power Delegate Through

Telecommunications Act• Encourage fare Competition

Weakness• Employee Turn over• Lack of Expert in the field of Inter

Connection• ICT & Telecommunications Functions

Overlap

OpportunitiesFinancial StabilityFare Frequencies allocation Powers & withdrawal

Threats • Illegal activities like traffic bypass• Duplication of works and black market

threats

SWOT Sri Lanka


Strengths • Government Intervention • Government full support on

competition• Greater consolidation across markets

Weakness• Static changes in market share • Diverse technology that is being used

Opportunities • Handset subsidies • Introduction of MVNOs• Issuance of spectrum

Threats • Free Application for communication

(kakaotalk, yahoomessenger, Eggtalk)

SWOT Korea


Similarities• Power to intervene• Assure competition• Regulators role is strong

• process for setting the interconnection charge

• No peak and off-peak charges

• Consumer can report • Coverage has become wider

• Technical compliance and compatibility of networks are requested

Differences• Organization structure of the

telecommunication sector

• Approach to set the interconnection charge

• Time approach on procedure • Charges disaggregation

• Participation of costumers

• Technical standards of network equipment

PEST Analysis

P

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P

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4. Recommendations


• Apply peak and off-peak charges for the interconnection agreements.

• There should be specific regulation or methodology for assuring

compliance and compatibility of networks.

• Based on ITU, the Regulators for telecommunication should be

independent from political levels and interference.

• The approach to set the interconnection charge should be cost based

according to cost study outcomes.

• Time frame must be regulated for the settlement of disputes and for

defining the interconnection charges.

• Disaggregation and unbundling should be in place to guaranty a good base

for interconnection charge definition.

Recommendations


References• Telecommunications Rectory. Statistical Compendium of Telecommunications Sector

in Costa Rica. August 2011. • General Law for Telecommunications No. 8642 of 30th of June 2008. Costa Rica. • Telecommunications Regulator. Regulation for Access and Interconnection of

Telecommunication Networks. October 2008. • Minister Communication and Informatics Regulation No.

14/PER/M.KOMINFO/02/2002 about clearing telecommunication traffic• Minister Communication and Informatics Regulation No. 08/Per/M.KOMINF/02/2006

about interconnection.• KT Fact Sheet March 2012• http:// www.itu.int• http://www.wto.org• http:// www.kcc.go.kr• http://www.trc.gov.lk• http://www.postel.go.id• http://es.wikipedia.org/wiki/Costa_Rica


http://www.itu.int/

http://www.wto.org/


http://www.kcc.go.kr/


http://www.postel.go.id/

http://es.wikipedia.org/wiki/Costa_Rica


Thank you!