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INTERCONNECTION OF TELECOMUNICATIONS NETWORKS

INTERCONNECTION OF TELECOMUNICATIONS NETWORKS. THE MOROCCAN REGULATOR EXPERIENCE Dr. ZOUAKIA Rochdi ANRT. Morocco: Geographic Fact-sheet. A large country 29.9 millions inhabitants 5.6 millions households 710,850 sq km A young and growing population

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INTERCONNECTION OF TELECOMUNICATIONS NETWORKS

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  1. INTERCONNECTION OF TELECOMUNICATIONS NETWORKS THE MOROCCAN REGULATOR EXPERIENCE Dr. ZOUAKIA Rochdi ANRT

  2. Morocco: Geographic Fact-sheet • A large country • 29.9 millions inhabitants • 5.6 millions households • 710,850 sq km • A young and growing population • 30% below 15 years, 60% between 15 and 59 • Growth Rate : 1.4% per annum • Schooling rate: 97% • A large urban population • 55.1% today, expected to reach 63% in 10 years • Growth Rate : 2.1% per annum • Concentrated in few cities (Casablanca, Rabat, Tangier, Marrakech, Agadir, Fes, Meknes, Kenitra account for 55% of the urban population)

  3. Morocco has taken some engagements towards further regulatory reforms Regulatory Commitments • Interconnection based on Long Run Incremental Cost: 2006 • Pre-selection: 12 months after the award of New Generation licenses • Partial unbundling of local loop: 18 months after the award of New Generation licenses Complete • Unbundling of local loop: 36 months after the award of New Generation licenses

  4. ON THE IMPORTANCE OF INTERCONNECTION The success of the liberalization of the telecommunications sector in Morocco is closely linked to the efficiency of the interconnection policy. Interconnection is one of the main issues of the liberalization process : The access of a new entrant to the market is conditioned by the current interconnection policy. Interconnection tariffs are the “Hard-core” of competition

  5. THE REGULATORY FRAMEWORK OF INTERCONNECTION • The interconnection is regulated by : • 1- The post and telecommunications Act n° 24-96 as completed and amended which sets up : • The right of interconnection of each operator holder of the licence of establishment and operation of a public telecommunications network. • The necessary conditions which should respect in interconnection • The power of the regulator to resolve interconnection disputes. • 2- The Interconnection decree which specifies : • The main clauses (technical, financial and administrative clauses) that each interconnect agreement should include. • The operator’s obligations ( General obligations for all operators and specific ones for operators with significant market power). • The principles of interconnection tariffs. • The conditions of interconnect offer. • The ANRT prerogatives.

  6. THE MAIN CHALLENGES FACED BY THE INTERCONNECTION REGULATION Approval of interconnect offer • The TECHNICAL AND TARIFF INTERCONNECTION OFFER should be published by the operator who holds a market share higher than 20% of a telecommunications service. • It  must be approved by the regulator. • The regulator shall be informed regularly on the modifications of the interconnection offers. • Process of approval of the interconnection offer • It is an important process which requires : • Effective cooperation with the incumbent operator in term of providing relevant information related to interconnection cost. • Efficient tools for analysing and assessing the tariff offer. The principal difficulty : INFORMATION ASYMMETRY

  7. THE MAIN CHALLENGES OF THE INTERCONNECTION REGULATION Resolution of interconnection Dispute 1/2 • Interconnection tariff are in general the principal subject of interconnection dispute, especially between new entrant and the incumbent operator. • The ANRT experience : • The first interconnection dispute that the ANRT had to arbitrate was over termination tariffs : • 1- The dispute description : Disagreement between IAM (the incumbent) & Medi Telecom (the new entrant) about interconnection Tariffs. This dispute occurred in February 2000, just few months after the entry of the new mobile operator.

  8. THE MAIN CHALLENGES OF THE INTERCONNECTION REGULATION Resolution of interconnection Dispute 2/2 • 2- The dispute inquiry : • ANRT entrust the inquiry to an internal commission namely the Interconnection commission, which was supported by international experts during all the inquiry process. • 3- The inquiry process : • Benchmark : Analysis of the data related to interconnection tariffs in different countries ( East Europe & European union countries). • - Audition of both parties. • - Analysis of the interconnection cost models of both parties • 4- The decision of the administrative comity of the ANRT : • With reference to the commission inquiry report, supported by international experts recommendations, the administrative comity of the ANRT decided that Interconnection tariffs proposed by the interconnection commission are applicable.

  9. THE TOOLS OF INTERCONNECTION REGULATION 1/4 • Given the fact that interconnection is a complex issue, it’s important to develop some tools, in order to assist the regulator in : • assessing the relevancy of the interconnect tariff data provided by operators • reducing the impact of asymmetry information phenomena • preparing the regulator for each interconnect dispute • checking the eventual anti-competitive behaviour of the operator in the telecommunications market. • To reach these objectives, ANRT developed its own tools for calculations and assessment of interconnection costs.

  10. THE COST ALLOCATION MODEL OF THE ANRT 2/4 • The ANRT Model was developed in collaboration with international experts that worked closely with ANRT’s multidisciplinary team . • The cost allocation model was conceived to provide two basic deliverables: • financial results by service using Fully Allocated Costing methodology based on “cost causation” and • unit cost information suitable for calculating interconnect conveyance costs. - The results of the model was based on historic costs.

  11. Model development & outputs Operator 2 Operator 1 Operator 3 MCAM Excel Models Fixed Mobile USO interconnect interconnect Costs Costs Costs DESCRIPTION OF THE COST ALLOCATION MODEL 3/4 Service Costs

  12. THE COST ALLOCATION MODEL STRUCTURE 4/4 Drivers Functional Activities Cost Pools The operator Manpower Analysis Final Services Direct The operator Current Account Cost Shared The operator Depreciation Common Algorithms

  13. THE NEW INTERCONNECTION CHALLENGES 1/2 There are many issues related to interconnection that ANRT should face up in order : • to adapt the legal framework of interconnection to the international context and the development of technology. • To allow visibility to operators including those expected to enter the market. • To foster the telecommunications market as whole.

  14. THE NEW INTERCONNECTION CHALLENGES 2/2 • ANRT had launched a public consultation on 27th of December 2001 in order to set up guidelines related to some aspects which are not defined in the legal framework of interconnection. • These aspects are notably : • the definition of relevant market and the determination of SMP; • the method of long run incremental cost (LRIC); • Carrier pre-selection; • local loop unbundling; • Number portability.

  15. CONCEPTS OF RELEVANT MARKET AND SMP (Significant Market Power) • The concept of relevant market is a source of important debate for regulators and it is a complex subject : The definition of the relevant market in both its product and geographic dimensions often has a decisive influence on the assessment of a competition case. • As of today, a possible relevant market could be : • - Market of fixed telephony • - Market of mobile telephony • - Market of leased lines • - Market of Interconnection. • It is necessary for ANRT to determine the criteria of the relevant market and to establish the methods of assessing the position of operators in the market of concern.

  16. INTERCONNECTIONPRICING: LRIC The LRIC (Long run Incremental cost) method will allow the regulator to assess the operators efficiency through the orientation of their interconnection tariffs toward costs. • On the other hand, LRIC would insure the respect of the following principles : • principle of relevancy • principle of efficiency • principle of economic optimum • principle of financial viability • principle of fair competition • - The current challenge for ANRT is to finalize a tool for interconnection costs calculations based on LRIC Approach.

  17. CARRIER PRE-SELECTION Carrier pre-selection is a technique whereby the customer keeps his telephone connection to the incumbent operator, while all the outbound calls are however processed and invoiced by an alternative operator, using the interconnect between the incumbent and the new operator. Carrier pre-selection can use the call-by-call technique whereby a carrier is selected through a prefix dialling.The other variant would be a pre-programmed selection of the carrier in the switch. The introduction of this service will be significant with the liberalisation of the fixed telephony market.

  18. INTERCONNECTION & NEW LICENCES Introduce adaptation to the legal framework of interconnection in order to take into account the specification related to advanced services like UMTS, IP telephony, GPRS etc…

  19. SHORT TERME CHALLENGES 1/2 LOCAL LOOP UNBUNDLING Important competitive stakes: • Diversity of choice for customers • Reduction of the access cost to the market. • Efficient means for the new entrant ( Direct relationship with the customer) Opportunities for the development of the economy via the development of internet access.

  20. SHORT TERME CHALLENGES 2/2 LOCAL LOOP UNBUNDLING • Prior to unbundling, the regulator has: • To Launch public consultations in order to assess the market and to take into account the needs of operators. • To establish working groups comprising different actors of the telecommunications sector in order to define the elementary conditions of unbundling. • To prepare a legislative framework which determines the obligations and the principles of this issue.

  21. SHORT TERME CHALLENGES 1/2 NUMBER PORTABILITY • Number portability is the possibility for the customer to keep his phone number while he can : • change the geographical zone • change the operator • change the telephonic services Number portability fosters the development of competition and the satisfaction of customers needs and also resolves the problem of customers mobility.

  22. SHORT TERME CHALLENGES 2/2 NUMBER PORTABILITY • Necessity of establishing a legal framework for number portability by taking into account technical and financial challenges of this issue. • What should be undertaken ? • The regulator has to : • launch a public consultation on this issue ; • Oblige incumbent operator to provide this service for new entrants ; • Proceed to the configuration of numbering tables ; • Analyse technical models related to number portability ; • Determine the charges resulting from this service ; • Establish a study group combining operators, regulators, providers of equipments and eventually the representative board of customer associations.

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