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Interconnection – why it is critical

Hallam Hope

Interconnection – why it is critical

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A recent editorial page comment in a local newspaper penned by Hallam Maynard extolled the benefits of competition in telecommunications and, anticipating specific benefits in landline services and products, urged the Fair Trading Commission (FTC) to resolve a dispute between LIME (Cable & Wireless) and Digicel.
At issue is what termination charges should apply when a LIME landline customer calls a Digicel landline customer and vice versa. The issue is determined by the FTC in accordance with regulations known as a Reference Interconnection Offer or RIO. Essentially the RIO provides the framework for competing carriers to arrange for their customers to communicate with each other. To complete a call from one network to another, the originating network transfers the call to the receiving network which then directs the call to its receiving customer.
In most cases there is an obligation on the originating network to pay termination charges in exchange for services provided by the terminating network. In all cases the termination charges are set out in the RIO. This system of regulating interconnection and termination charges is common to all countries with competitive telecommunication markets.
The market for landline services was opened to competition in 2005. At the end of 2011 there were 140 200 landline subscriptions in Barbados, according to the International Telecommunications Union. This equates to just about every household having landline service.
TeleBarbados (Columbus Communications) offers wired and wireless landline services, Karib Cable has started to offer a bundle of services, including landline, which are cabled to the home, and now Digicel wants to offer a landline service based on its wireless network.
TeleBarbados and Karib Cable both already have interconnection agreements with LIME within the terms and rates set out in the RIO. These terms and rates were the same terms and rates offered by LIME to Digicel.
The economics of competition, particularly in an environment where just about everybody has a cellular phone, dictates that telecommunication carriers offer a bundle of services and compete in landline services.
Under the Telecommunications Act, and this is also referenced in the RIO, all carriers are required to compete in a fair, transparent manner as well as on equal terms. The RIO, which was the subject of a public consultation process in which LIME, Digicel and TeleBarbados participated, makes it clear that termination charges paid by one carrier to another for a service must be the same as the termination charges paid by the other carrier to the first carrier for the same service. Carriers are obligated to charge the termination charges set out in the RIO.
In the case of a landline calling a mobile number there is no termination charge between carriers because the mobile carrier charges its own customer to receive the call. This system, known as Receiving Party Pays, is applied in other jurisdictions such as the United States and Canada. Where the customer does not pay to receive a call, for example, mobile to landline service calls, the network originating the call pays to send the call to the terminating network.
However, in the case of landline to landline service, which is where Digicel intends to compete, there is a charge of 2.34 cents per minute to terminate calls. And based on the RIO each carrier is required to charge the same per minute rate for termination of calls. Since carriers are not allowed to discriminate, LIME must charge the same price to all carriers.
Prior to any agreement on interconnection becoming effective, the FTC is reported to check the agreements carefully to ensure that they comply with the RIO on technical as well as pricing terms.
With tens of millions of investment dollars tied up by carriers to compete among themselves, interconnection regulation plays a vital role in guaranteeing competition on fair and reasonable terms.
• Hallam Hope is a student of communication policy and regulation.