Co-Location as an essential resource of interconnection. Referential value.

Summary: This document aims at describing the initiative implemented by the National Telecommunication Commission regarding the determination, through Providencia, of the referential value and the rules to be applied by said regulating entity, according to its powers, to set up the monthly fee the operator requesting interconnection should pay to the co-locating operator in terms of co-location in closed spaces.

The National Telecommunication Commission, as regulating entity of the telecommunication sector in Venezuela, has arbitrage power to solve disputes between service operators, whenever said action is requested by any of the operators involved or when it derives from the Telecommunication Organic Law.

According to this, regarding interconnection of public telecommunication networks, Venezuelan laws grant the regulating entity the power to act on its own accord to order effective interconnection of public networks as well as to determine its technical and economic conditions.

Likewise, within the field of interconnection of public telecommunication networks, the use of physical spaces owned or managed by an operator who provides telecommunication services through a public network to install the necessary equipment and broadcasting devices to be interconnected by another operator with whom he has entered or will enter an interconnection agreement (co-location), turns out to be a means to gain access to the operator’s local network distribution facilities to be interconnected. In this way, the possibility that the operator to whom interconnectivity is requested provides physical co-location to the requesting operator is limited by the space available at the exchange center.

Based on the above, that use of physical spaces owned or managed by the operator to whom interconnection is requested is fundamental for the requesting operator, i.e. it turns out to be an essential resource for interconnection.

In fact, the Venezuelan Interconnection Regulations set forth that all telecommunication service operators shall allow for the physical co-location in their facilities of the necessary equipment and broadcasting means for the interconnection of the operator who requested it. Said regulations further establish that essential resources for interconnection are those network elements mentioned therein, highlighting point 6 which indicates that an essential resource for interconnection will be “(…) Access to auxiliary elements and to elements that are used by both parts at the same time, such as, power supplies, physical equipment and facilities in general and added value services, among others”. All these provisions recognize co-location as an essential resource for interconnection.

It should be born in mind that the Venezuelan provisions ruling co-location establish that this shall be provided in return of a fee that will cover for physical space as well as for all auxiliary services related to that, which shall be freely negotiated by the operators pursuant the principles mentioned in the Interconnection Regulations published at the Official Bulletin Nr. 5.735 Extraordinary dated November 11, 2004.

In view of this regulation framework, this Commission deemed it necessary to set up guidelines with the purpose of determining a referential value and the rules to be applied by the National Telecommunication Commission, according to its powers, to determine the monthly fee that the co-located operator shall pay in terms of co-location of closed spaces. In this sense, according to the above legal provisions, a Providencia Administrative Project was drafted to include these rules and the referential value. [1]

In order to set the referential value for co-location, the principles established in the Interconnection Regulations were taken into account, which establish that the operators in charge of telecommunication services shall provide co-location, i.e. supply the operators with the capability to be interconnected with physical space and auxiliary services such as power supply, air conditioning and other necessary facilities for the proper operation of the equipment and broadcasting means required for interconnection. To this purpose, the services of American Consult S.A. were hired, a consulting company specialized in fixed asset management, assessment, real estate and technology and information [2] counseling, which estimated some of the components corresponding to said monthly fee.

The components taken into account to determine the monthly referential value in terms of co-location were the following: (i) Rental of Physical Space; (ii) Air Conditioning Use; iii) Security, which included: Personnel Estimates and Security Equipment; (iv) Use of Electric Supply Generator; (v) Utilization of Back-up Electrical Supply, DC kind; (vi) Administrative Expenses; (vii) Other Expenses [3].

Once the values of the cost components were obtained, each was assigned a percentage of use, according to the use that the co-located operator makes of these components, for later defining the relationship of said costs depending on the number of cubicles destined to the co-location placed in the centrals selected for this study. The value per square meter per central resulted from the obtained data and the referential of a physical space of co-location of four square meters (4 m2) for each zone.

Furthermore, the unique national charge corresponding to the monthly fee for co-location in closed spaces was determined based on an weighted average of the selected centrals depending on the potential offer of spaces to be offered on each of these centrals, which totaled BOLIVARES TWO HUNDRED AND SIXTY FIVE THOUSAND SEVEN HUNDRED AND SEVENTEEN WITH SEVENTY FIVE CENTS (Bs. 265.717,75), which equals United States DOLLARS ONE HUNDRED AND TWENTY THREE WITH FIFTY NINE CENTS ($. 123,59). As regards this referential value it should be noted that it must be annually readjusted by the Commission by means of an update index that, among other variables, took into account the selling exchange rate of United States Dollars, the consumer price index and the private sector wages index, all as published by the Venezuelan Central Bank.

On another note, the Providencia Administrative Project, following the guidelines set forth by the Interconnection Regulations, indicates that the auxiliary services include the supply of energy, air conditioning and other necessary facilities for the appropriate operation of the equipments and means of transmission required for the interconnection.

In that sense, all auxiliary services are considered covered by the received monthly co-location, except energy supply. In this regard, the value of electric energy consumption made by the operator co-located in the physical space arranged for the co-location, must be added to the fixed monthly referential fee. At any rate, the way to determine the value of the electric energy consumption shall be mutually agreed on by the operators; it shall take into account the equipment and facilities located in the physical space of co-location, at the price of kilowatt-hour (kw/h) arising from current rates for the supply of electric energy of the physical facilities where the operator is co-located.

This Commission also considered it relevant to address the issue of co-location in the Providencia Administrative Project by dealing with the need of making adaptations in the physical space set up for the co-location. On this matter, CONATEL, following a principle set forth by the Venezuelan Civil Code, established that in these cases the requesting operator will only bear those costs arising from the necessary adaptations for installing the equipments required for the interconnection. The adaptations that represent a useful improvement of the installations of the co-locating operator, that increase the value of said property, will be born by said operator.

Finally, the Providencia Administrative Project states that, should the National Telecommunication Commission need to act, given the case that operators do not reach an agreement on the conditions of co-location or upon the existence of a controversy, it shall act pursuant to the mechanisms set forth in the Interconnection Regulations.

CONATEL-Venezuela