Gregory Massel Interconnection: a practical guide 3 September 2009

Target Audience » All providers of telephone network services » Next Generation Network Operators » (“ex-VANS”) » Mobile Network Operators » PSTN Operators » SAME issues, DIFFERENT perspectives » Understanding key to agreement

Overview » Objectives » Reality check » Barriers to entry » Considerations » Practical » Financial » Technical » Practical Solutions » Questions

Objectives » Bidirectional call traffic to/from the global PSTN » Fair and competitive rates » Origination » Termination » Reliable and dependable communications » Restriction-free (within reason) » Limit dependence on competitors or 3 rd parties

Reality Check » 087 numbers allocated to ~111 i-ECS operators (Source: ICASA, Aug 2009) » ~25 of those networks are reachable from Telkom's network (Source: Telkom, Aug 2009) » Even fewer are reachable from other key networks (Vodacom, MTN, Cell C, Neotel) » Direct interconnection between new operators is extremely limited; however, many can & do reach each other via transit » Interconnection regulations still pending (> 2 Years since 1 st draft. 3 rd Draft dilutes protections.)

Barriers to Entry » Cost » Volume obligations » Security deposits » Equipment » POILs » Unwillingness to interconnect » Anti-competitive attitude » Difficulty securing meetings, follow-up, contracts » Unnecessary delays » Disproportionate terms » Unfair constraints » Time Frames » Negotiation & signing » Regulatory compliance » Lodging agreements » Lodging tariffs » Routing, change control, testing » Transit and 3 rd parties » International » No simple inbound transit » Transit may be discretionary ? » Conflict over transit costs

Financial Considerations » Rates » Origination » Termination » Cash flow » Billing cycle » Payment terms » Net offset » Volume Commitments » Credit Risk » Guarantees and security » Currency exposure » Arbitrage » Billing and settlement » Systems for invoicing » Transit » Foreign currency » Reconciliation » Accurate time » Flexible reporting » Source & Destination » Changes and re-rating

Technical Considerations » Interconnect Type » VoIP (SIP) » Codecs used / supported » Fax (T.38 support) » TDM (SS7) » Equipment & Interoperability » SPC » Scalability » POILS » ATM / Ethernet (VoIP) » E1 (TDM) » Common POI (e.g. JINX) » Routing » Number portability » Transit & Failover » New number ranges » International » Caller ID » Fax » Roaming » New number prefixes » Number pooling » Delay / Latency » Testing

Practical Considerations » Direct interconnection between all licensees entirely impractical » > 100 Licensees with number ranges » Mesh requires minimum 4,950 interconnects! (Metcalfe's law) » VoIP and common POI's (exchange points) alleviates technical burden and POIL cost, but not admin and HR » Neither financially nor technically feasible » Negotiations and implementation would take eons » Transit not always ideal » Some operators not always willing to route via a 3rd party » More expensive above a volume threshold » May give a competitor insight into traffic volume

Practical Solutions: Interconnection Seekers » Negotiate transit arrangements » 1 st Interconnect partner should transit outbound to everywhere » Ensure major operators are willing to route to your numbers via that party; do not assume! » Consider newer entrants and ISPA members; they are likely to be more flexible, particularly with credit, volume requirements and VoIP » Consider using a sub-allocation of numbers pending routing of your own ranges » Number portability may be a reality next year » Alternatively, sell outbound products pending successful routing of numbers » Avoid foreign carriers until volumes high » take into account forex costs, complications and risks » Try secure local and international on the same local agreement in ZAR » Be realistic about direct interconnects » If you don't have sufficient volume, start building it first » Expect delays; Start negotiations early » Try build inbound call revenue » Two-way flow reduces exposure and credit risk » Test extensively » Purchase prepaid SIMs on all MNO networks, land lines, VoIP services

Questions Gregory Massel 3 September 2009