1 Telecommunications Competition Code Overview of Draft Interconnection Policies May 15, 2000

2 Introduction  Objectives  Approach to Developing Interconnection Principles  Challenges  Framework for Interconnection and Access Regulation Proposed Interconnection Policies  Scope of Services  Obligation to Provide Access  Responsibility for Charges  Structure of Charges  Charging Standards Summary Agenda

3 Change Driver Infrastructure moves from service specific to multi-services Existing infrastructure can be re-used in ways it was not originally designed Standards bodies have not been able to keep up with technological change Content has a significant impact on service demand Demand is difficult to forecast Traffic patterns change Introduction

4 Approach Consumer Needs Technological Development Government Objectives Interconnection Policy Objectives Policies Consultative Process Industry Development Introduction

5 Challenges Introduction Greater service innovation, choice and any-to-any connectivity Creation of an attractive environment for infrastructure investment Singapore as Info-comm Hub Protection of Investments Except in Instances of Genuine Market Failure Network Ownership, Planning, and Design At the Discretion of Operators Fair and Just Compensation for Network Usage Preference for Commercial Arrangements within Broad Guidelines Regulatory Intervention Only As Necessary Bias Towards Open Access for All Protection of Investments Except in Instances of Genuine Market Failure Network Ownership, Planning, and Design At the Discretion of Operators Fair and Just Compensation for Network Usage Preference for Commercial Arrangements within Broad Guidelines Regulatory Intervention Only As Necessary Bias Towards Open Access for All

6 Elements Obligation to Provide Services Responsibility for Charges Structure of Charges Cost Standards Who are the eligible requesting and providing operators for the interconnection related services? What are their obligations, and are these time bound? Where do the responsiblities lie for costs incurred in establishing or maintaining these interconnection related services? What rules will be applied to the make-up and level of interconnection charges? What guidelines should govern the structure of charges? Introduction Scope of services What are the likely interconnection related services that can be requested in a fully liberalized market?

7 Future Considerations Introduction Universal Service Obligations Retail Price Regulation Consumer Protection Mobile Access Universal Service Obligations Retail Price Regulation Consumer Protection Mobile Access The following topics are not part of the focus of today’s discussion: Operator to Operator Operator to Service Innovator Network and Service Bundling Intellectual Property Rights Allocation of Network Capacity Network and Service Bundling Intellectual Property Rights Allocation of Network Capacity

8 Today’s Focus Introduction Customer to customer access Operator to customer access Customer to service innovator access Service innovator to customer access 1.Physical Interconnection (PI) 2.Origination and Termination (O/T) 1.Physical Interconnection (PI) 2.Unbundled Network Elements (UNEs) 3.Essential Support Facilities (ESFs) Out of scope Operator to Operator Interconnection Operator to Service Innovator Interconnection Scenario Interconnection Related Service Application Customer pays network provider who compensates service provider (e.g. CATV) Customer pays service provider, who purchases network (e.g. ISP) Network operator pays network operator (e.g. unbundled loop) Network traffic and payment exchanged (e.g. PSTN) Today’s Focus

9 Introduction  Objectives  Approach to Developing Interconnection Principles  Challenges  Framework for Interconnection and Access Regulation Proposed Interconnection Policies  Scope of Services  Obligation to Provide Access  Responsibility for Charges  Structure of Charges  Charging Standards Summary Agenda

10 Interconnection Related Services Scope of Services TypeDescriptionCurrent Example Physical InterconnectionThe physical act of connecting two networks to allow O/T and/or to permit the use of UNE / ESF Items that enable competition Collocation (for O/T) Virtual Collocation SS7 interconnection Local Number Portability Collocation for (UNE) Emergency Services Operator Services Originating and Terminating Charges Network to Network interconnection charges for traffic origination or termination Call termination Class 5 Aggregation Equal access Unbundled Network ElementElements that will be made available to allow new operators to offer service and promote competition Local loop Switch port Essential Support FacilityCompetitive bottleneck that do not provide a telecommunications service Conduit Utility poles Radio Tower One-Time On-going

11 Identification and Examples of PI Type O/T Enabling UNE/ESF EnablingCollocation (space, heat, light, power) OSS Interconnection, where appropriate Competition EnablingLocal Number Portability White Pages/Directory listings Equal Access Examples of PI Collocation for FBOs Signaling Interconnection Interconnection Trunks Scope of Services

12 Scope of Services Identification and Examples of UNEs Current Potential Broad- band ExampleLogic Issues Telephone Loop (Feeder, Distribution, and Drop) Made available in conjunction with the sale of service (including the service already using the loop) Asset ownership Availability Repair and Maintenance Cream skimming Asset ownership Availability Repair and Maintenance Cream skimming Switch PortMade available to connect to another carrier’s access network Asset ownership Repair and Maintenance Asset ownership Repair and Maintenance Access to the Feeder/Drop at the Jumper Wire Interface Allows VDSL type services to be provided As above plus Space and Power Network Intelligence As above plus Space and Power Network Intelligence Access to CATV plant at the Final Distribution Node Allows others to provide two way high speed service over CATV plant As above plus Network Intelligence As above plus Network Intelligence

13 Identification and Examples for O/T Scope of Services ExampleLogic Issues Termination of call (PSTN) Allows network interconnection for voice services Type of origination (National/International) Pricing Asymmetric traffic (e.g. Dialup ISP, 800) Type of origination (National/International) Pricing Asymmetric traffic (e.g. Dialup ISP, 800) X.25, Frame Relay, and ATM Packet Termination Allows data network interconnection for packet services Pricing Standards Performance Pricing Standards Performance Voice over IP Termination on PSTN Allows IP based and PCM based networks to be interconnected Call Quality (delay, voice, quality) and Pricing Signaling Type of Origination Call Quality (delay, voice, quality) and Pricing Signaling Type of Origination Native IP Interconnection Allows peering (interconnection) between IP based networks Network performance Pricing Signaling Type of traffic Network performance Pricing Signaling Type of traffic Current Potential Broadband

14 Identification and Examples of ESEs ExampleLogic Issues ConduitDifficult/expensive to replicate May not be being used effectively Lots of conduit will become available as fiber replaces copper pair Ownership Availability Repair and Maintenance Ownership Availability Repair and Maintenance In building risers and signal distribution networks Difficult/expensive to replicate Control over these resources have created significant problems for service providers in North America Ownership Availability Repair and Maintenance Ownership Availability Repair and Maintenance TowersRadio towers create environmental impact Ownership Wind loading Power, spectrum etc. Ownership Wind loading Power, spectrum etc. Rooftop Space Similar to in building distribution and risers rooftop space is required for radio/satellite based service providers Ownership Availability Ownership Availability Scope of Services

15 Introduction  Objectives  Approach to Developing Interconnection Principles  Challenges  Framework for Interconnection and Access Regulation Proposed Interconnection Policies  Scope of Services  Obligation to Provide Access  Responsibility for Charges  Structure of Charges  Charging Standards Summary Agenda

16 Policy Obligations ElementCurrent and Future PIAll operators and requesting parties O / TAll dominant operators for all customers / services mix All other operators direct or indirect UNEAll dominant facilities based operators where: –No commercial agreement can be reached –Not economically possible to replicate or bypass –Necessary to provide “telecom” service ESFAll facilities based operators and building landlords / owners for current

17 Clarification on Availability IRS Status Providing Operator’s Obligation Available - not in use and not reserved Not Available - in use or reserved Lease on a Permanent Basis (100% capacity, e.g. loop) Lease on a Transactional Basis (  100% capacity, e.g. call completion) obligation to build Lease on a Permanent Basis (<100% capacity, e.g. cable channel) if customer or customer group agrees  Obligations

18 Classes of Requesting Operators Service Innovator Services Based Operators (SBOs) Facilities Based Operators (FBOs) Service ClassesDescriptionExamples IBM CNN Credit Card Processor Equant Phoenix Network Inc. SingTel SCV StarHub 1.Owns or operates switching/ broadcasting equipment but leases transmission capacity from a FBO 2.Operates a private network Directly or indirectly owns and operates transmission plant together with switching/broadcasting equipment 1.Provides communications, computing or broadcasting services 2.Owns or operates systems that operate over telecommunications facilities Obligations Affected Operators

19 Summary Obligations Rights ClassDominantNon-Dominant Not in Code Must Provide PI O/T UNE ESF Must Provide PI Direct/Indirect O/T Existing ESF ClassAll Operators Not in code May use PI O/T UNE ESF Must Provide PI O/T May use PI only for O/T FBO SBO Service Innovator FBO SBO Must Provide PI O/T Service Innovator Obligations

20 Introduction  Objectives  Approach to Developing Interconnection Principles  Challenges  Framework for Interconnection and Access Regulation Proposed Interconnection Policies  Scope of Services  Obligation to Provide Access  Responsibility for Charges  Structure of Charges  Charging Standards Summary Agenda

21 Responsibility Summary Pays own Shared All (including costs of modifications) None Pays Own All (including costs of modifications) None All (including costs of modifications) None Requesting Operator Providing Operator PI, competition enabling PI, UNE/ESF O/T UNE PI, O/T ESF

22 In order to ensure that the creation of PI does not become a barrier to competition, the iDA proposes that the dominant operator is initially responsible for the investment The iDA will ensure that the dominant operator will provide PI in a timely manner The requesting operators will reimburse the dominant operators as they use the PI Facilitating Competition Responsibility

23 Introduction  Objectives  Approach to Developing Interconnection Principles  Challenges  Framework for Interconnection and Access Regulation Proposed Interconnection Policies  Scope of Services  Obligation to Provide Access  Responsibility for Charges  Structure of Charges  Charging Standards Summary Agenda

24 Structure Investment Required by Requesting Party Low High Low High Unit Cost of Goods Sold to Deliver Service for Requesting Party End Users Resale of Retail Service Leased Bandwidth Origination / Termination Policy Unbundled Network (UNE) Essential Support Facilities (ESF) FBOs Only

25 Time Cost Retail Rate Time Limits on UNEs UNE UNEs may not be available after a certain time Structure

26 Symmetrical Charges Structure AsymmetricalSymmetricalBill and Keep Advantages Disadvantages Can help to remove new technology entry barriers Covers operators actual costs Can be used to deal with Universal Service Obligations Rewards inefficiency Difficult to administer Leads to arbitrage Easier to administer Can be used to ease new operator market entry (e.g. reciprocal compensation) Technology neutral Open to significant arbitrage Does not reflect the reality in the choice of technology in each network Simple to administer Does not promote arbitrage Technology neutral Does not assist market entry

27 Introduction  Objectives  Approach to Developing Interconnection Principles  Challenges  Framework for Interconnection and Access Regulation Proposed Interconnection Policies  Scope of Services  Obligation to Provide Access  Responsibility for Charges  Structure of Charges  Charging Standards Summary Agenda

28 Policy objectives Cost standards Maximise customer benefits Long Run Incremental Cost low charge Long Run Average Incremental Cost fair and equitable charge Fully Distributed Costs high charge Efficient Component Pricing Rule high charge Stand Alone Cost high charge Promote investment Promote effective competition Optimise resource utilisation Simple and practical partially compensatorylevel “playing” fieldavoid duplicationimplementable fully compensatory; right cost of IRSs no discriminationoptimal use of resourcesimplementable arbitrary apportionment distorts investment prone to incumbent’s manipulation new entrants over-invest facilities implementable price may include monopoly profit barrier to entry by raising priceinefficient duplication if tariffs do not reflect costs difficult to implement SAC exceeds cost of providing IRSs efficient entry discouragedduplication of facilitiespracticable Standards Justification of Cost Standards Not desirable for achieving policy objectives Desirable for contributing to policy objectives Desirable for achieving policy objectives

29 Not desirable for achieving policy objectives Desirable for contributing to policy objectives Desirable for achieving policy objectives Policy objectives Cost bases Maximise customer benefits Historical or Embedded Cost tend to be higher Current or Replacement Cost tend to be lower Forward Looking Economic Cost likely to be the lowest Promote investment Promote effective competition Optimise resource utilisation Simple and practical no correct signals for investment decisions prone to incumbent’s manipulation new entrants over-build systems transparent and auditable correct “build or buy” signals not subject to incumbent’s manipulation no over-building of systems sometimes difficult to quantify invest in efficient and advanced technology encourage efficient entry; discourage inefficient entry no wasteful duplicationvery difficult and time- consuming to estimate/determine Standards Justification of Cost Bases

30 Introduction  Objectives  Approach to Developing Interconnection Principles  Challenges  Framework for Interconnection and Access Regulation Proposed Interconnection Policies  Scope of Services  Obligation to Provide Access  Responsibility for Charges  Structure of Charges  Charging Standards Summary Agenda

31 Summary Obligation to Provide Services Responsibility for Charges Structure of Charges Cost Standards Scope of services All technically feasible IRS across different types of networks Based on licensee’s status Time Bound ? Requesting operator for PI, UNE and ESF Pay own for O/T or shared to establish Asymmetrical ? Usage Based LRAIC FLEC or Current or Replacement Costs Issue implementation details Issue enforcement procedures Outline the methodology for the calculation of charges to facilitate negotiations between operators Defining Elements of Interconnection

32 iDA Process Review iDA set framework Operator requests inter- connection (O /T) iDA set framework Can commercial agreement be reached? Is one operator dominant? Is the facility necessary? iDA dispute resolution Ida puts out costing methodology and guideline Can commercial agreement be reached? Is one operator dominant? iDA dispute resolution iDA review NoYes iDA review No Yes No action unless appealed to the iDA due to lack of agreement No YesNo Yes Can the facility be replicated / obtained? No Is the facility available? Summary 1.Commercial agreements published or iDA arbitrates in the case where dominant carriers are involved 2.If dominant carrier is not involved, no arbitration