1 Telecommunications Competition Code Overview of Draft Interconnection Policies May 15, 2000

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Telecommunications Competition Code

Overview of Draft Interconnection Policies

May 15, 2000

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Introduction Objectives Approach to Developing Interconnection Principles Challenges Framework for Interconnection and Access Regulation

Proposed Interconnection Policies Scope of Services Obligation to Provide Access Responsibility for Charges Structure of Charges Charging Standards

Summary

Agenda

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Change Driver

Infrastructure moves from service specific to multi-services

Existing infrastructure can be re-used in ways it was not originally designed

Standards bodies have not been able to keep up with technological change

Content has a significant impact on service demand

Demand is difficult to forecast

Traffic patterns change

IntroductionIntroduction

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Approach

Con

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GovernmentObjectives

InterconnectionPolicy Objectives

PoliciesPolicies

Consultative Process

IndustryDevelopment


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Challenges IntroductionIntroduction

•Greater service innovation, choice and any-to-any connectivity

•Creation of an attractive environment for infrastructure investment

Singapore as Info-comm Hub

• Protection of Investments Except in Instances of Genuine Market Failure

• Network Ownership, Planning, and Design At the Discretion of Operators

• Fair and Just Compensation for Network Usage

• Preference for Commercial Arrangements within Broad Guidelines

• Regulatory Intervention Only As Necessary

• Bias Towards Open Access for All

• Protection of Investments Except in Instances of Genuine Market Failure

• Network Ownership, Planning, and Design At the Discretion of Operators

• Fair and Just Compensation for Network Usage

• Preference for Commercial Arrangements within Broad Guidelines

• Regulatory Intervention Only As Necessary

• Bias Towards Open Access for All

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Elements

Obligation to Provide Services


Responsibility for Charges


Structure of Charges


Cost StandardsCost Standards

Who are the eligible requesting and providing operators for the interconnection related services? What are their obligations, and are these time bound?

Where do the responsiblities lie for costs incurred in establishing or maintaining these interconnection related services?

What rules will be applied to the make-up and level of interconnection charges?

What guidelines should govern the structure of charges?


Scope of services

Scope of services

What are the likely interconnection related services that can be requested in a fully liberalized market?

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Future Considerations IntroductionIntroduction

• Universal Service Obligations

• Retail Price Regulation

• Consumer Protection

• Mobile Access

• Universal Service Obligations

• Retail Price Regulation

• Consumer Protection

• Mobile Access

The following topics are not part of the focus of today’s discussion:

Operator to Operator

Operator to Service Innovator • Network and Service Bundling

• Intellectual Property Rights

• Allocation of Network Capacity

• Network and Service Bundling

• Intellectual Property Rights

• Allocation of Network Capacity

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Today’s Focus IntroductionIntroduction

Customer to customer access

Operator to customer access

Customer to service innovator access

Service innovator to customer access

1. Physical Interconnection (PI)2. Origination and Termination (O/T)

1. Physical Interconnection (PI)2. Unbundled Network Elements

(UNEs)3. Essential Support Facilities (ESFs)

Out of scope

Out of scope

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Scenario Interconnection Related Service

Application

Customer pays network provider who compensates service provider (e.g. CATV)

Customer pays service provider, who purchases network (e.g. ISP)

Network operator pays network operator (e.g. unbundled loop)

Network traffic and payment exchanged (e.g. PSTN)

Today’s Focus

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Summary

Agenda

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Interconnection Related Services Scope of ServicesScope of Services

Type Description Current Example

Physical Interconnection • The physical act of connecting two networks to allow O/T and/or to permit the use of UNE / ESF

• Items that enable competition

• Collocation (for O/T)• Virtual Collocation• SS7 interconnection• Local Number Portability• Collocation for (UNE)• Emergency Services• Operator Services

Originating and Terminating Charges

• Network to Network interconnection charges for traffic origination or termination

• Call termination• Class 5 Aggregation• Equal access

Unbundled Network Element • Elements that will be made available to allow new operators to offer service and promote competition

• Local loop• Switch port

Essential Support Facility • Competitive bottleneck that do not provide a telecommunications service

• Conduit• Utility poles• Radio Tower

One-Time

On-going

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Identification and Examples of PI

Type

O/T Enabling

UNE/ESF Enabling •Collocation (space, heat, light, power)•OSS Interconnection, where appropriate

Competition Enabling •Local Number Portability•White Pages/Directory listings•Equal Access

Examples of PI

•Collocation for FBOs•Signaling Interconnection• Interconnection Trunks

Scope of ServicesScope of Services

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Scope of ServicesScope of ServicesIdentification and Examples of UNEs

Current

Potential Broad-band

Example Logic IssuesIssues

Telephone Loop (Feeder, Distribution, and Drop)

• Made available in conjunction with the sale of service (including the service already using the loop)

• Asset ownership• Availability• Repair and

Maintenance• Cream skimming

• Asset ownership• Availability• Repair and

Maintenance• Cream skimming

Switch Port • Made available to connect to another carrier’s access network

• Asset ownership• Repair and

Maintenance

• Asset ownership• Repair and

Maintenance

Access to the Feeder/Drop at the Jumper Wire Interface

• Allows VDSL type services to be provided • As above plus• Space and Power• Network Intelligence

• As above plus• Space and Power• Network Intelligence

Access to CATV plant at the Final Distribution Node

Access to CATV plant at the Final Distribution Node

• Allows others to provide two way high speed service over CATV plant

• Allows others to provide two way high speed service over CATV plant

• As above plus• Network Intelligence

• As above plus• Network Intelligence

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Identification and Examples for O/T Scope of ServicesScope of Services


Termination of call (PSTN)

• Allows network interconnection for voice services

• Type of origination (National/International)

• Pricing• Asymmetric traffic (e.g.

Dialup ISP, 800)

• Type of origination (National/International)

• Pricing• Asymmetric traffic (e.g.

Dialup ISP, 800)

X.25, Frame Relay, and ATM Packet Termination

• Allows data network interconnection for packet services

• Pricing• Standards• Performance

• Pricing• Standards• Performance

Voice over IP Termination on PSTN

• Allows IP based and PCM based networks to be interconnected

• Call Quality (delay, voice, quality) and Pricing

• Signaling• Type of Origination

• Call Quality (delay, voice, quality) and Pricing

• Signaling• Type of Origination

Native IP Interconnection

Native IP Interconnection

• Allows peering (interconnection) between IP based networks

• Allows peering (interconnection) between IP based networks

• Network performance• Pricing• Signaling• Type of traffic

• Network performance• Pricing• Signaling• Type of traffic

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Identification and Examples of ESEs


Conduit • Difficult/expensive to replicate• May not be being used effectively• Lots of conduit will become available as

fiber replaces copper pair

• Ownership• Availability• Repair and

Maintenance


Maintenance

In building risers and signal distribution networks

• Difficult/expensive to replicate• Control over these resources have

created significant problems for service providers in North America


Maintenance


Maintenance

Towers • Radio towers create environmental impact

• Ownership• Wind loading• Power, spectrum

etc.

• Ownership• Wind loading• Power, spectrum

etc.

Rooftop SpaceRooftop Space • Similar to in building distribution and risers rooftop space is required for radio/satellite based service providers

• Similar to in building distribution and risers rooftop space is required for radio/satellite based service providers

• Ownership• Availability

• Ownership• Availability

Scope of ServicesScope of Services

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Summary

Agenda

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Policy ObligationsObligations

Element Current and Future

PI • All operators and requesting parties

O / T • All dominant operators for all customers / services mix

• All other operators direct or indirect

UNE • All dominant facilities based operators where:–No commercial agreement can be reached–Not economically possible to replicate or bypass

–Necessary to provide “telecom” service

ESF • All facilities based operators and building landlords / owners for current

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Clarification on Availability

IRS Status

Providing Operator’s Obligation

Available - not in use and not reserved

Not Available - in use or reserved

Lease on a Permanent Basis (100% capacity, e.g. loop)

Lease on a Transactional Basis (100% capacity, e.g. call completion) obligation to build

Lease on a Permanent Basis (<100% capacity, e.g. cable channel)

if customer or customer group agrees

ObligationsObligations

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Classes of Requesting Operators

Service Innovator

Services Based Operators (SBOs)

Facilities Based Operators (FBOs)

Service Classes Description Examples

IBMCNNCredit Card Processor

EquantPhoenix Network Inc.

SingTelSCVStarHub

1. Owns or operates switching/ broadcasting equipment but leases transmission capacity from a FBO

2. Operates a private network

Directly or indirectly owns and operates transmission plant together with switching/broadcasting equipment

1. Provides communications, computing or broadcasting services

2. Owns or operates systems that operate over telecommunications facilities


Affected Operators

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Summary

Obligations Rights

Class Dominant Non-Dominant

Not in Code Not in Code

Must Provide• PI• O/T• UNE• ESF

Must Provide• PI• Direct/Indirect O/T

• Existing ESF

Class All Operators

Not in code

May use• PI• O/T• UNE• ESF

Must Provide• PI• O/T

May use• PI only for O/T

FBO

SBO

Service Innovator

FBO

SBOMust Provide• PI• O/T

Service Innovator


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Summary

Agenda

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ResponsibilityResponsibilitySummary

Pays own Pays own

Shared Shared

All(including costs of

modifications)

None

Pays Own Pays Own


modifications)

None


modifications)

None

Requesting Operator Providing OperatorPI, competition enabling

PI, UNE/ESF

O/T

UNE

PI, O/T

ESF

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•In order to ensure that the creation of PI does not become a barrier to competition, the iDA proposes that the dominant operator is initially responsible for the investment

•The iDA will ensure that the dominant operator will provide PI in a timely manner

•The requesting operators will reimburse the dominant operators as they use the PI

•In order to ensure that the creation of PI does not become a barrier to competition, the iDA proposes that the dominant operator is initially responsible for the investment

•The iDA will ensure that the dominant operator will provide PI in a timely manner

•The requesting operators will reimburse the dominant operators as they use the PI

Facilitating Competition ResponsibilityResponsibility

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Summary

Agenda

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StructureStructure

Investment Required by Requesting Party

Low High

Low

High

Unit Cost of Goods Sold to Deliver Service for Requesting Party

End Users

Resale of Retail Service

Leased Bandwidth

Origination / Termination

Policy

Unbundled Network (UNE)

Essential Support Facilities (ESF)

FBOs Only

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Time

Cost Retail Rate

Time Limits on UNEs

UNE

UNEs may not be available after a certain time

StructureStructure

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Symmetrical Charges StructureStructure

Asymmetrical Symmetrical Bill and Keep

Advantages

Disadvantages

• Can help to remove new technology entry barriers

• Covers operators actual costs

• Can be used to deal with Universal Service Obligations

• Rewards inefficiency• Difficult to administer• Leads to arbitrage

• Easier to administer• Can be used to ease new operator market entry (e.g. reciprocal compensation)

• Technology neutral

• Open to significant arbitrage

• Does not reflect the reality in the choice of technology in each network

• Simple to administer

• Does not promote arbitrage

• Technology neutral

• Does not assist market entry

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Summary

Agenda

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Policyobjectives

Cost standards

Maximise customer benefits

Long Run Incremental Cost

low charge

Long Run Average Incremental Cost

fair and equitable charge

Fully Distributed Costs high charge

Efficient Component Pricing Rule high charge

Stand Alone Costhigh charge

Promote investment

Promote effective competition

Optimise resource utilisation

Simple and practical

partially compensatory level “playing” field avoid duplication implementable

fully compensatory; right cost of IRSs

no discrimination optimal use of resources implementable

arbitrary apportionment distorts investment

prone to incumbent’s manipulation new entrants over-invest facilities implementable

price may include monopoly profit

barrier to entry by raising price inefficient duplication if tariffs do not reflect costs

difficult to implement

SAC exceeds cost of providing IRSs

efficient entry discouraged duplication of facilities practicable

StandardsStandardsJustification of Cost Standards

Not desirable for achieving policy objectives

Desirable for contributing to policy objectives

Desirable for achieving policy objectives

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Not desirable for achieving policy objectives

Desirable for contributing to policy objectives

Desirable for achieving policy objectives

Policy objectives

Cost bases

Maximise customer benefits

Historical or Embedded Cost

tend to be higher

Current or Replacement Cost tend to be lower

Forward Looking Economic Cost

likely to be the lowest

Promote investment

Promote effective

competition

Optimise resource utilisation

Simple and practical

no correct signals for investment decisions

prone to incumbent’s manipulation

new entrants over-build systems

transparent and auditable

correct “build or buy” signals

not subject to incumbent’s manipulation

no over-building of systemssometimes difficult to

quantify

invest in efficient and advanced technology

encourage efficient entry; discourage inefficient entry

no wasteful duplication very difficult and time-consuming to

estimate/determine

StandardsStandardsJustification of Cost Bases

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Summary

Agenda

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SummarySummary







Cost StandardsCost Standards

Scope of servicesScope of servicesAll technically feasible IRS across different types of networks

• Based on licensee’s status• Time Bound ?

• Requesting operator for PI, UNE and ESF

• Pay own for O/T or shared to establish

• Asymmetrical ?• Usage Based

• LRAIC• FLEC or Current or Replacement Costs

• Issue implementation details

• Issue enforcement procedures

• Outline the methodology for the calculation of charges to facilitate negotiations between operators

Defining Elements of Interconnection

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iDA Process Review

iDA set framework

Operator requests inter-connection (O /T)

iDA set framework

Can commercial agreement be reached?

Is one operator dominant?

Is the facility necessary?

iDA dispute resolution

Ida puts out costing methodology and guideline

Can commercial agreement be reached?

Is one operator dominant?

iDA dispute resolution

iDA review

No Yes

iDA review

No

Yes

Yes Yes Yes

No action unless appealed to the iDA due to lack of agreement

No

Yes No

No Yes

Can the facility be replicated / obtained?

No

Is the facility available?

SummarySummary

1. Commercial agreements published or iDA arbitrates in the case where dominant carriers are involved

2. If dominant carrier is not involved, no arbitration

Documents

1 Telecommunications Competition Code Overview of Draft Interconnection Policies May 15, 2000