Sunday 20 May 2012

Contents of module

Charging for Direct and Indirect Interconnection and Two Anomalies

In Statement No7 (Revised) the TA enumerates the permutations of possible charging arrangements that arise in Hong Kong’s multi-carrier environment.

Direct Interconnection Direction of Payment
1. Carrier 1 Carrier 2 C1 pays C2 termination
2. Carrier IGF and IGF Carrier IGF pays Delivery fee to C for IDD call origination and termination
3. Carrier Mobile and Mobile Carrier M pays C for origination and termination
Indirect Interconnection
4. Carrier 1 Carrier 2 IGF C2 pays C1 for origination; IGF pays Delivery Fee to C2 for IDD call origination
5. Carrier 1 Carrier 2 VAS C2 pays C1 for origination
6. Carrier 1 Carrier 2 Carrier 3 C1 pays transit to C2; C1 pays C3 for termination
7. Mobile Carrier 1 Carrier 2 Mobile pays transit to C1; Mobile pays C2 for termination
8. Carrier 1 Carrier 2 Mobile Mobile pays transit to C2; Mobile pays C1 for origination
9. Mobile 1 Carrier Mobile 2 M1 pays transit to C; M2 pays C for origination
10. Mobile 1 Carrier 1 Carrier 2 Mobile 2 M1 pays transit to C1; M2 pays transit to C2
Special Numbering for re-routing calls Callback anomaly
11. IGF Carrier 1 Carrier 2 Callback (An anomaly arose whereby C2 paid C1 for call origination; see 5 above) IGF pays Delivery Fee to C1; C1 pays C2 for termination to ‘special number' of callback operator

Note: IGF means international gateway facility

The second anomaly arose with case 10. Many mobile operators are affiliated to carriers and by routing calls through their respective associated carriers they can avoid paying rival carriers. Note that in case 10 no carrier-to-carrier payment is involved.

If this arrangement arose it would violate the principle of the most efficient use of network resources. Indeed, it could even give rise to a triple transit if the two carriers involved required interconnection through a third, dominant, carrier.

In reality this situation was avoided in Hong Kong because mobile traffic grew so extensively that direct interconnect between mobile operators became cost effective on a sender keeps all basis. Each pair of mobile operators shared the costs of a leased circuit from a carrier.

Then mobile number portability (MNP) was introduced and Hongkong Telecom established a centralized ported numbers database. The mobile operators now interconnect directly with HKT’s interconnection gateway (ICG) to access the database, for which they pay a cost-based “dipping fee” of 1.19¢ per dip for “interlocation”, but the PNETS (see Part Three) charge for this service is waived by HKTC.

However, HKTC negotiates a commercially set transit charge for each mobile operator, but only one of the two interconnecting mobile operators pays HKTC the transit charge.

Because the transit for mobile-to-HKTC-to-mobile utilizes less of the HKTC network than fixed-to-HKTC-to-fixed transit, a cost-based transit charge should be less than the mobile-to-fixed interconnection fee of 5.9¢, and the TA has just completed a review on the model for calculation of PNETS charge and has decided to include such transit charge in the model. considering a determination on this issue. Two of the mobile operators, Smartone and SUNDAY, operate their own ported numbers databases.

Although these two anomalies are no longer significant in Hong Kong, it has been useful to draw attention to them to illustrate the need to think through and note the possible permutations that can arise from different interconnection charging policies, and the signals they send to operators.

Are they incentives to operate networks efficiently or inefficiently? And how do they impact on the competitive structure of the market, and upon the quality of customer service and customer choice?

In Hong Kong the government owns no part of any network, so there is no imperative to protect the commercial interests of one particular carrier at the expense of others. The only constraint is to be seen to be acting fairly and reasonably and equitably. Part Five will discuss mobile interconnection in more detail, as well as mobile roaming and the international Delivery Fee mechanism.