1. Interconnection is crucial for communicating across networks, and makes it possible for the subscribersof two different operators to communicate with each other. It is essential for extending the scope andefficiency of the telecom network, and is especially important for new operators entering the market whonormally use the existing facilities of another operator for providing their services. It therefore isfundamental to a competitive market structure.
2. Interconnection involves a linking up of one telecom operator to the infrastructure facilities of another.Interconnections can be considered in terms of network interconnection and access interconnection. Theformer takes place between operators possessing networks, and the latter between an operator with anetwork and another without one.
Three broad types of interconnection are considered for policy purposes.
Connection to the Public Switched Telephone Network (PSTN) of equipment on customer premises, of private telecom networks, or of value-added networks (these types of interconnectiondo not compete with the basic network).
Connection of new fixed local networks or long-distance networks to the PSTN.
Connection of cellular networks or other wireless systems to the PSTN, or of the satellite systemsto the PSTN.
4. Interconnection charges include charges for collecting and delivering calls, for installing, maintainingand operating the points of interconnect, payment for supplementary services (such as directory assistance,fault reporting, network maintenance, or inter-carrier billing), and for ancillary and other facilities (such asspace in the equipment room). Furthermore, in several cases, there is also a charge to fund the deficitarising due to the provision of universal service. However, if the funding of such a deficit is covered by thetelecom tariff, then it should not be a part of interconnection charges, i.e there is a need to avoid double-counting in this context.
5. There are basically two methods for charging for interconnection. One is through sharing of revenuesamong the interconnected operators of telecom services. The second, which is more commonly used, is toestablish interconnection charges on the basis of costs. In a cost-oriented interconnection regime, there isno sharing of revenues between carriers. Instead, the operator from whom interconnection is purchased is paid for providing that interconnection. The principle of cost-orientation in interconnection rates isintended to ensure that the rate charged by the provider of interconnection reflects that operator’s cost of providing the service plus a reasonable profit.
V.1 Procedures Used for Setting Interconnection Charges