CITEL guidelines and practices for interconnection regulation in America

Interconnection is defined by ITU as:  “the technical and commercial arrangements by which providers connect their equipment and networks, and provide their customers with the possibility of access to the customers, services and networks of other service providers[1]”

Interconnection is a central factor in determining market structure, viability of competitors and success of regulation programs. From the start of the telecommunications industry, interconnection has been vital in ensuring network connectivity, but in latter years this factor has become critical, due to the development of multiple communication technologies–such as Internet, mobile telephony, wireless networks, satellite systems – capable of interacting or converging with one another and which have at the same time permitted different competing companies to co-exist within the same market[2]. Interconnection.

For J. Laffont and J. Tirole[3] “an intelligent interconnection policy is the key to the development of competition within the telecommunications industry”. The structure and level of interconnection has important implications for the investment decisions of carriers, for prices and for the added value of the services that consumers receive. Consequently, the regulatory agenda has gone from worrying only about minimizing prices and watching over subsidies, to managing several issues related to the competition and the entry of new enterprises[4].

The telecommunications industry has undergone important changes in the last two decades. Two of the most significant forces governing these changes have been the efforts to promote an effective competition and the global expansion of telecommunications services by means of broad promotion of technology. The changes have transformed the structure of the property, of the industry and of the markets within this sector; State property has become Private property, and a state of natural monopoly has turned into one of competition.

Unfortunately, the appearance of competition within the telecommunications markets has not been complete, because technology has not advanced sufficiently to enable the market to become completely competitive[5]. In many cases, competition depends on the possibility of accessing inputs with natural monopoly characteristics, for example, access to networks and the possibility of interconnecting with these[6].  E. Noam[7]  points out that “control of interconnection by any agency, whether governmental or private, has become the key by which to control the telecommunications system and its market structure”. Thus, the main argument to regulate access to interconnection is market power and its potential consequences on market structure and consumers.

If the major companies, with greater number of customers, do not interconnect with entrants, these will not have much opportunity to attract customers because they will not be able to put them into contact with the users of the major carrier. Experience has shown that major companies do not provide their competitors with access to their networks voluntarily, and even if they did, careful regulation of interconnection policy, including technical and costs aspects, could become necessary in order to prevent the major companies from making use of their market power.

The regulator will endeavour–among other things–to facilitate interconnection between the major carrier and the entrant company; to reach non-discriminatory agreements; to promote rates based on costs; to establish the terms and technical and commercial conditions of the agreements; to limit the period of negotiation; to define quality standards and include the corresponding penalties in case of failures and to establish the mechanisms for settling disputes among carriers[8].

In order to make negotiations easier and for companies to reach agreements, the creation of certain general criteria has been proposed, which must govern interconnection. The most frequently used procedures are the creation of general guidelines and the publication of Reference Interconnection Offers (RIO). In the first case, the regulators establish general guidelines which must be considered as minimum requirements in order to reach interconnection agreements. The guidelines are not – in most cases–detailed, and they give the carriers certain flexibility to carry out the negotiations and shape the agreement as is most convenient to them[9].

On the other hand, the RIO contain the important information on how interconnection shall be provided, and the plan according to which the negotiations shall take place, particularly if there is a major carrier. In most cases, the agreements reached under the RIO are sent to the regulator for approval. If they are not approved, they shall be forwarded to the carriers for their modification, or to the Regulator for correction as it considers necessary. The RIO offer great advantages to the new carriers because they enable them to arrive at negotiations with greater information regarding terms and conditions of the major carrier’s proposals.

At the XIII meeting of the Permanent Consultative Committee I: Telecommunications a document was approved that analyzes the terms, principles and tools available to CITEL member countries which will enable them to implement an interconnection system that will promote competition jointly among telecommunications carriers.

More specifically, this document contains a series of principles that CITEL members agree to consider as critical elements within any interconnection system. The aim of this document is not to instruct, but rather to assist the countries in their effort to face the rigorous task of creating and implementing interconnection regulations. The document includes information gathered through the CITEL study on Interconnection, as well as from the survey of CITEL member countries carried out with the aim of updating the document on CITEL Guidelines and Practices for Interconnection Regulations in America. CITEL Member States, through the surveys, consigned the requested information in order to make advances in the process of updating the document. Among these were Argentina, Brazil, Colombia, Ecuador, Mexico, Dominican Republic, Paraguay, the United States and Venezuela.