Interconnection Regulatory

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Interconnection- Regulatory Legal issues
Presentation by- D.K.Gupta, Deputy Advisor
(Legal), TRAI Email dkgtrai_at_yahoo.com

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Focus points

• Competition
• Impact of Interconnection on competition
• What is Interconnection?
• Determination of Interconnection
• Regulatory principles

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Focus points - contd..

• technical aspects
• commercial aspects
• Legal aspects
• Indian experience

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COMPETITION

• Competition is the key to growth and innovation.
• need for careful regulatory oversight to address
  anti-competitive practices
• Between the safe haven of monopoly and the
  promised land of effective competition lies the
  rough sea of interconnection.

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IMPACT OF INTERCONNECTION ON COMPETITION

• Interconnection is a critical factor for the
  viability of competition in the telecom sector.
• Incumbent operators have little incentive to make
  things easy for their new competitors and most of
  the bargaining power in negotiations rests with
  them.

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WHAT IS INTERCONNECTION?

• Interconnection means the commercial and
  technical arrangements under which service
  providers connect their equipment, networks and
  services to enable their customers to have access
  to the customers, services and networks of other
  service providers.

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ESTABLISHING INTERCONNECTION

• Commercial negotiation between parties.
• Commercial negotiation with the help of
  established framework for negotiation by the
  Regulatory Authority.
• Legal/Regulatory intervention if parties fail to
  agree.
• The Regulatory Authority prescribes specific
  issues from the outset, and parties negotiate
  over the remaining issues.

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ESTABLISHING INTERCONNECTION

• The regulators can intervene by applying
  benchmarks or best practices from other countries
• Without regulatory intervention and direction,
  interconnection negotiations do not usually
  proceed successfully.
• Specification of RIO crucial.

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REGULATORY PRINCIPLES FOR INTERCONNECTION

• The regulatory principles for Interconnection
• Transparency
• Non discrimination
• Mandatory interconnection
• Interconnection charges should be cost based,
  unless specified otherwise accounting for some
  other objective

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INDIAN EXPERIENCE

• Approach followed
• Regulator specified leased circuit charges, port
  charges and revenue share for carriage
• A facilitator in other areas
• Determination on issues that could not be
  resolved

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INDIAN EXPERIENCE
contd

• In May 1999, TRAI issued a Regulation titled The
  Telecommunication Interconnection (Charges on
  Revenue Sharing) Regulation 1999. The Regulation
  has three schedules covering
• Revenue sharing for basic services
• Revenue sharing of cellular mobile services
• Leased Circuit Charges and
• Port charges.

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INDIAN EXPERIENCE - contd..

• The Regulation specified certain principles for
  determining interconnection charges, viz.
• Interconnection charges are to be based on cost,
  unless otherwise specified
• The cost concept for this purpose is directly
  attributable incremental cost (DAIC)

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INDIAN EXPERIENCE - contd..

• Non-discrimination
• Unbundling i.e. service provider should not pay
  for a facility that is not sought
• Except for the interconnection charges specified
  in the Regulation, other charges forborne.

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INDIAN EXPERIENCE - contd..

• For interconnection charges not specified by the
  Authority, the interconnection seeker and
  provider should mutually decide the charges
• In case of no mutual agreement within three
  months of initiating the process, the Authority
  may intervene suo moto or at the request of one
  of the parties.

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TECHNICAL ASPECTS OF INTERCONNECTION

• Some of the technical and operational aspects of
  interconnection are
• The Number and the Location of Points of
  Interconnection
• Level of Interconnection between two networks
• Routing and charging of inter-network calls
• Co-location and sharing of infrastructure

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TECHNICAL ASPECTS OF INTERCONNECTION -contd..

• Quality of Service
• Network integrity
• Interface standards

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COMMERCIAL ASPECTS OF INTERCONNECTION

• The major commercial issues generally relate to
  the cost of interconnection.
• Level and structure of interconnection charges
  basis for calculation
• Revenue share or interconnection usage charge
• Unbundling of interconnection charges for
  different network components
• Resale of network facilities and services
• Confidential treatment of competitive and
  customer information

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Indian Scenario

• India is divided into circles almost coterminous
  with a province

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Indian Scenario Fixed Service Provider (FSP)

• Private FSPs licensed on the basis of Circles
• Inter Circle calls of private FSPs to be routed
  through NLDO
• Interconnection agreement with DOT(BSNL) a part
  of license
• Near-End and Far-End Handover

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Indian Scenario Cellular Service

• Technology initially specified as GSM
• Initially Two operators licensed per Circle
• Inter Circle calls to be routed through NLD
  operator
• Interconnection with DOT (BSNL) on ad-hoc terms
  while licensing

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Developments in 1999

• New Telecom Policy announced
• Annual License fee based on revenue sharing
  arrangement
• One govt. mobile operator allowed in each Circle
• A fourth Cellular Operator also allowed
• Technology neutral regime

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Interconnection regimes

• PSTN PSTN
• Similar network topology
• Switching at all levels
• Location of customer fixed.

• PSTN CMTS
• Different network topology
• Switching from MSC only
• Location of customer not fixed

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Interconnection regimes

• FSP wants
• POIs only at TAX level
• Routing of traffic as per National PSTN routing
  plan

• CMSP wants
• POIs at local level
• Routing of traffic as per convenience

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TRAI determination in 2001

• For mobile FSP should provide POI at L2 L1TAXs
  subject to technical integrity within 90 days of
  request
• In case POI is not provided within 90 days, the
  matter to be referred to an expert committee
  chaired by Secretary, TRAI
• POIs can be provided at lower levels subject to
  mutual agreement.

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To Settle Interconnection related Issues

• TRAI constituted a High Level Technical Committee
  comprising of Experts from MTNL/BSNL/VSNL, RD
  Organizations and representatives of FSPs/ CMSPs
  under the aegis of Secretary TRAI.

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Present Regulatory Regime

• TRAI Act 1997 (as amended in Jan 2000)
• Section 11(1)(b)(ii)
• Notwithstanding anything contained in the terms
  and conditions of the license granted before the
  commencement of the Telecom Regulatory Authority
  (Amendment) Act,2000, fix the terms and
  conditions of inter-connectivity between the
  service providers

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Present legal Regulatory authentication to TRAI

• TRAI Act 1997 (as amended in Jan 2000)
• Section 11(1)(b)(I) ensure compliance of terms
  and conditions of licence
• Section 11(1)(b)(ii) - fix the terms and
  conditions of inter-connectivity between the
  service providers
• Section 11(1)(b)(iii) - ensure technical
  compatibility and effective interconnection
  between different service providers
• Section 11(1)(b)(iv) - Regulate arrangement
  amongst service providers of sharing their
  revenue derived from providing telecommunication
  services.
• Section 11(1)(b)(vi) lay down and ensure the
  time period for providing local and long distance
  circuits of telecommunication between different
  service providers

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Present licensing Regime for interconnection

• Provisions in various license agreements
• Techno commercial provisions for interconnection
  e.g.
• Mandatory interconnection for national and
  international long distance calls
• Conformity with National standards on CCS7
• Condition to comply with Guidelines/Orders/Directi
  ons/Regulations issued from time to time by
  Licensor/TRAI.

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Present Regulatory Regime
(Contd)

• Interconnect Usage Charges Regulation
• (Discussed Later)
• Reference Interconnection offer Regulation
  (Subjudice)
• (Discussed Later)

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Technical issues

• Non availability of CLI information from all PSTN
  exchanges
• Non availability of CCS 7 platform in all PSTN
  exchanges
• Equal ease of access (Carrier Selection)
• Multi-operator Inter-carrier charging and billing

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Commercial/ Procedural Issues

• Billing
• Who bears the cost
• Timely availability of ports and E1 lines
• Opening of MSC codes
• Demand projection by interconnection seeker

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Commercial/ Procedural Issues

• Provision of POIs by interconnection provider
• Time limits for leased Circuit for Internet
• Issues related to collocation of equipment
• Infrastructure Sharing

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IUC Regime

• First Regime notified on 24th January 2003
• Revised Regime notified 29th October 2003
• Third Regime notified on 6th January 2005

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Initial IUC Regime

• Initial IUC Regime specified
• Origination charge,
• Termination charge
• Carriage charge
• Two options for Access Deficit Charge (ADC
  Regime)

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Present IUC Regime
1. Origination Charges. Forbearance. 2.
Termination Charges. uniform _at_ Rs. 0.30 per
minutefor all types of calls.  
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Present IUC Regime
-contd..
3. Carriage charges
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Present IUC Regime - contd..

• Carriage charges (Continued)
• Service providers allowed to negotiate within
  / - 10 of the carriage charge beyond 50 Kms.
• Forbearance, when carrier selection

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ADC Regime

• Requirement of ADC
• ADC Regime required for short period to help
  structural adjustment for fixed line service.
• Tariff rebalancing not yet done.

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Present ADC Regime
(Contd)
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Present ADC Regime
(Contd)

• All fixed operators are allowed to retain ADC
  from their outgoing calls.
• Only BSNL will receive ADC on all incoming
  international calls and outgoing calls from
  mobile/WLL(M).

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Telecommunication Interconnection (Reference
Interconnect Offer) Regulation, 2002
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Important Issues

• Approval Procedure for RIO
• Traffic Routing and POI
• Colocation
• Provisioning of Interconnect Circuits
• Carrier Selection
• Charging Mechanism and Account Settlement
  (Inter-operator Billing)
• Costs of Interconnection/Upgradation
• Interconnect Usage Charge (IUC)

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Reference Interconnect Offer (RIO)

• A Service Provider with significant market power
  (SMP) to publish (RIO).
• SMP, if share of at least 30 of total activity
  in a licensed telecommunication service area.

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Reference Interconnect Offer (RIO)
(Contd)

• Service providers shall not discriminate between
  the service providers in the matter of
  Interconnection charges.
• The parties shall supply the services as per the
  prices listed at Schedules.

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Traffic Routing and POI

• Conformity with National Standards.
• The levels and points of interconnections as per
  the License Agreement and Regulations /
  Determinations of TRAI.
• Based on CCS System No. 7 or on the R2 Signalling
  System, if CCS 7 is not available.

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Traffic Routing and POI (Contd)

• Details of the POI are required to given
• Forecast outgoing traffic, to the other Party's
  System for a period of one year at intervals of
  six (6) months for each POI, in terms of Busy
  Hour Call Attempts and Busy Hour Erlangs

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Colocation

• Wherever possible, physical co-location should
  take place with mutual agreement, within the time
  schedules for interconnection, at a rent based on
  the principles included in RIO.

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Provisioning of Interconnect Circuits

• Seeker shall provide Details normally 6 months in
  advance.
• Within 30 days of such formal demand, provider
  shall intimate
• either the acceptance
• or an alternative proposal
• and also issue the relevant demand notes
• within 30 days of receiving such Demand Note. The
  seeker shall make payment

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Provisioning of Interconnect Circuits
(Contd)

• If no response from provider within 30 days the
  formal demand treated as accepted
• The date of deposit shall be treated as the date
  of "firm demand".
• Such accepted demand shall be met within 6 months
  of such deposit.

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Provisioning of Interconnect Circuits (Contd)

• Minimum number of required E1 ports required for
  the launch of the service, normally be provided
  within 90 days of payment of the demand note.

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Provisioning of Interconnect Circuits (Contd..)

• Testing and Commissioning of Interconnect
  Circuits
• Within 6 month of the firm demand full capacity
  shall be provided and made available for testing.
  
• Both parties to ensure completion of testing
  within 30 days.

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Provisioning of Interconnect Circuits (Contd..)

• Augmentation
• Augmentation for additional capacity for the next
  12 months shall be intimated by either party on
  the basis of traffic measurements.
• Utilization
• The Interconnection seeker shall use the capacity
  for a minimum period of 3 years.

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Provisioning of Interconnect Circuits (Contd..)

• Bank Guarantee
• A Bank Guarantee for the amount covering 50 of
  the rental for the agreed period of use, shall be
  provided within 90 days from the date of firm
  demand.

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Charging Mechanism (Inter-Operator Billing) and
Account Settlement

• Bulk Billing or where feasible Call-by-Call basis
  with Call Data Records (CDRs).
• Both parties shall make arrangements for
  collection, storage and transfer of data relating
  to traffic passing through their network.

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Charging Mechanism (Inter-Operator Billing) and
Account Settlement (Contd)

• Account
• Within 7 days, of the close of the month,
  bill/invoice to be sent.

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Cost of Interconnection/Upgradation

• Cost of Upgradation/modifying interconnecting
  networks shall be met by Interconnection seeker
  or shall be mutually agreed.
• General Principle followed shall be that each
  party bears the INCREMENTAL COST incurred for the
  additional ports required for meeting QOS
  Standards relating to its outgoing traffic to the
  other party.

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Interconnect Usage Charge

• Set Up Charges One time set up charge for
  establishing/augmenting specific interconnect
  facilities as per Regulations.

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Interconnect Usage Charge

• Usage charges
• Unbundled telecom network cost shall be based on
  the principle of FULLY ALLOCATED CURRENT COST
  (FAC).

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Types of Interconnections in Multi-Operator
Multi-Service environment

• Some of these are
• Basic to Basic
• Basic to Cellular
• Basic to National Long Distance
• Basic to International Long Distance (Direct or
  through National Long Distance Operator)
• Mobile to Mobile
• Mobile to National Long Distance
• Mobile to International Long Distance (Direct or
  through National Long Distance Operator)
• Basic to Others including Paging, GMPCS, ISPs
  etc.

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Concerns related to Interconnection in
Multi-Operator Multi-Service environment

• Timely availability of Interconnection from the
  Incumbent
• Inter carrier billing
• Complexity in settlement of interconnect usage
  charges
• Sharing of Intelligent Network Platform

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Concerns related to Interconnection in
Multi-Operator Multi-Service environment (Contd)

• Implementation of Number Portability.
• Implementation of carrier selection.
• Higher range of interconnection cost and Port
  Charges.
• Longer waiting period for provision of
  interconnection capacities.

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Concerns related to Interconnection in
Multi-Operator Multi-Service environment (Contd)

• Higher cost of service
• Inefficient handling of call
• Sub-optimal utilisation of network
• Serious increase of CAPEX and OPEX making
  operation unavailable

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Regulatory and Legal experiences in TRAI

• Appeals against TRAIs orders/regulations/directio
  ns filed before appellate tribunal I.e. TDSAT,
• Appeals against TDSATs orders can be preferred
  before the Apex court i.e. Supreme Court of India

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FIVE MAJOR cases being handled byTRAI

• Requirement of Model Reference Interconnect Offer
  by SMPs,
• Direction on Direct-connectivity between two
  service providers
• Violation in reporting requirements of tariff
  plans
• Power to settle disputes
• Issue of transparency and confidentiality in
  fixing tariffs

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1.Requirement of Model Reference Interconnect
Offer by SMPs,

• TRAI issued regulation requiring SMPs to publish
  their Model RIO after seeking prior approval of
  TRAI
• The regulation challenged by Incumbent
• Appellate tribunal set aside the TRAIs order on
  the grounds of lack of jurisdiction in altering
  terms and conditions of licence.
• TRAI filed an appeal to Supreme Court presently
  pending

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2.Direction on Direct-connectivity between two
service providers

• TRAI issued direction mandating direct
  connectivity between two service providers
• Incumbent challenged it and Appellate Tribunal
  set aside the direction stating that TRAI do not
  have powers to change the terms of licence
• TRAI filed an appeal before the Apex court
  seeking correct interpretation of the TRAI Act

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3.Violation in reporting requirements of tariff
plans

• Reporting of tariffs by SPs to TRAI is compulsory
  under TTO,
• TRAI initiated criminal proceedings against one
  erring SP,
• The SP challenged the action of TRAI and
  appellate tribunal stayed the action of TRAI,
• TRAI went on appeal before the apex court seeking
  correct interpretation of provisions of TRAI Act

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4.Power to settle disputes

• TRAI issued direction that in case
  interconnection is not provided by the provider
  to the seeker within a time frame, they should
  approach to TRAI for settlement of their dispute,
• Incumbent challenged the direction and appellate
  tribunal set aside the direction
• TRAI has filed an appeal before the apex court
  seeking to settle interconnection disputes.

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5.Issue of transparency and confidentiality in
fixing tariffs

• TRAI notified IPLC tariffs in March 2005.
• Incumbent challenged it on the ground of
  non-transparency and principle of natural justice
• Appellate tribunal asked TRAI to relook in the
  matter.
• TRAI again after sharing data, notified the IPLC
  tariffs in Sept 05 incumbent again challenged
  it
• Recently (28.11.05) the Appellate tribunal upheld
  the TRAIs tariff order as well as the
  methodology, transparency adopted by it in fixing
  tariffs.
• However, TRAI seeking apex court indulgence in
  regard to confidentiality of data, transparency
  in tariff fixing exercise.

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Lessons to learn

• Blurring technologies and adequate competition
  leads to disputes and then to litigations,
• Market behaviour changes at times when legal
  uncertainties lies in regulation
• How to regulate in tough times
• Is regulatory interventions necessary for growth?
• Time is wasted in litigation rather than
  promotion of growth in sector

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Regulate the regulation

• By making litigation free sector
• By infusing intense competition
• Investment by all the competitors
• Empower the regulator, and
• Respect the regulation

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Thank You

• For details visit us at www.trai.gov.in