Contents of module
- Part Three: PNETS, 'Type I' and 'Type II' Interconnection
- Interconnection index
- eLearning main Index
Type I Type I
Statement No.7 (Revised), issued 18 November 1997, a revised version of the Statement ‘Carrier-to-Carrier Charging Principles’, issued 10 June 1995, is the TA’s most comprehensive review of what OFTA terms Type IType I interconnection. It spells out both the physical configuration of interconnection as relevant to Hong Kong, and the charging principles. The text below quotes extensively from that Statement.
Type IType I interconnection is defined as a notional mid-point in the link interconnecting the gateways of two networks.
The gateways can be toll exchanges, tandem exchanges, local exchanges or dedicated interconnection gateways.
The link itself can be by wire, optical fibre, co-axial cable, or radio, microwave, wireless local loop, etc. Usually it is a T1 or E1, but can now be as large as a T3 or STM1, depending on traffic demands.
The TA states Type IType I interconnection should be based on three principles.
- Equal Responsibility: the licensing conditions require holders to share equally the responsibility of ensuring their networks are interconnected promptly and efficiently.
- “Any-to-any”connectivity (symmetrical interworking): any customer in any one network can have access to any other customer or any service offered in any interconnecting network. Call progression between and within networks should be "transparent" and "seamless" to both the calling and called parties.
- Interconnection upon request: each network must respond positively to any reasonable request from any other network for Type IType I interconnection.
The objective of such an interconnection is to allow networks to communicate with each other at reasonable and relevant costs. Costs will be examined in Part Four.
The advantage of type IItype II interconnection is that it allows customers on one network to connect directly to customers on another network.
In some cases, two networks may not be directly connected but may each be connected to the same third network, in which case customers can be connected indirectly to one another, a process commonly known a “tromboning”. Sharing the reasonable and relevant costs involved in tromboning is also treated in Part Four.
The disadvantage of type Itype I interconnection is that FTNS carriers can only exchange traffic at the “higher” level of gateway centers. A new carrier still must make the large investments required in extending its network below that level, over the so-called “last mile,” for it to enjoy “direct access” to its own customer base.
Build versus Buy
Type IType I interconnection is typically preferred by the incumbent operator over local loop unbundling, or what is known in Hong Kong as type IItype II interconnection.
This is partly because the incumbent does not want to give up its control over customer access, and partly because it holds the best cards when negotiating type Itype I interconnection charges. It has the dominant position, with an extensive backbone and access network covering most of its service area and a large existing base of paying residential and business customers.
It is this lucrative base which the new entrants are primarily targeting, as well as under-served or new users.
The new entrants have to decide whether they want to “build or buy”. If they build they have their own network and can make their own decisions over how to provision that network, for example which technologies to use which may influence their ability to offer a range of new value-added services.
But building is an expense, and takes time before access services come to market. Buying is faster to market, and, depending on how the charges for interconnection are set may be more efficient.
The regulator has to choose between a rapid and effective introduction of service competition, and the longer-term objective of facilities-based competition. By allowing incumbents to overprice interconnection, competition may be harmed, but by setting interconnection charges too low the regulator may unreasonably penalize the incumbent’s investments and deter new entrants from building their own networks.