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Transcript of An interconnection pricing toolkit for African countries [email protected] Nicolas Chung...
![Page 1: An interconnection pricing toolkit for African countries nchungsiongfah@worldbank.org Nicolas Chung Siong Fah and Ying Liang Global ICT Department The.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649dc45503460f94ab75cc/html5/thumbnails/1.jpg)
An interconnection pricing toolkit for African countries
Nicolas Chung Siong Fahand Ying Liang
Global ICT DepartmentThe World Bank
ITU Workshop on fixed-mobile interconnectionGeneva, 20-22 September 2000
![Page 2: An interconnection pricing toolkit for African countries nchungsiongfah@worldbank.org Nicolas Chung Siong Fah and Ying Liang Global ICT Department The.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649dc45503460f94ab75cc/html5/thumbnails/2.jpg)
Most African countries are introducing competition on the cellular market
Several private mobile operators
One private mobile operator
No private mobile operator
Africa : competition inthe cellular market
Source : World Bank, 2000
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Why is interconnection pricing important ?
• Encourage fair and efficient competition
• Therefore push end-user tariffs down
• Encourage efficient use of infrastructure
• Bring operators to win-win situation, maximize market growth
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NRAs request assistance on interconnection pricing policy
• Little financial and human resources
• Limited experience, need to build credibility on dispute resolution
• Incumbent has historical and political power
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NRAs request assistance on interconnection pricing policy (2)
•Few tools adapted to emerging countries
•Privatization of state-owned incumbent ongoing simultaneously
• Interconnection critical for new entrants
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Specific challenges in African countries
• Under-developed network focus on network expansion capacity problems for interconnection strict LRIC non achievable in short-term
• Little data available complex cost models not adequate accounting data difficult to use
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Specific challenges in African countries (2)
• Incumbent not ready for competition reluctant to objective negotiation lack of interconnection knowledge lack of business visibility
•Other issues : bad debt, waiting lists,unbalanced end-user tariffs...
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Mobile telephony will be takingthe market lead in voice communications
Source : ITU, ATCI
Subscribers - Cote d'Ivoire
0
50000
100000
150000
200000
250000
300000
1996 1997 1998 1999
Fixed lines
Mobilesubscribers
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Mobile telephony will be takingthe market lead in voice communications
• Regulatory focus should progressively shift on the new entrant.
• Mobile network cost models should be developed for regulators (as well as fixed network models, including wireless local loops)
![Page 10: An interconnection pricing toolkit for African countries nchungsiongfah@worldbank.org Nicolas Chung Siong Fah and Ying Liang Global ICT Department The.](https://reader035.fdocuments.us/reader035/viewer/2022062716/56649dc45503460f94ab75cc/html5/thumbnails/10.jpg)
What pricing tools ?
• Cost models
• Benchmarking
• Guide for negotiations
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Cost models1st step : bottom-up cost model
Estimates cost of reconstructing fixed or mobile network
Provides a floor estimate for tariffs
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Bottom-up cost modelEstimating cost of network
Switch locations are given (scorched-node hypothesis)
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Bottom-up cost modelEstimating cost of network (2)
Dimension switches and transmission with traffic data
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Bottom-up cost modelEstimating cost of network (3)
Add-up element per annum cost, attribute right part to interconnection
…$…%+ …$…%+ …$…%+ …………
…….$
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Bottom-up cost modelEstimating cost of network (4)
Add indirect costs
+ Operational cost+ Non-network cost+ Mark-up
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Bottom-up cost modelEstimating cost of network (5)
Obtain per-minute cost with traffic data
Local calls :…… cents/minSingle transit :…… cents/minDouble transit :…… cents/min
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Cost models1st step : bottom-up cost model
Data required :
• network topology operator
• traffic data operator, modeling
• financial data operator, institutions
• equipment costs best practice in similar environment.
Can be implemented if operators cooperative
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Cost models2nd step : top-down cost model
• extracts cost of interconnection from an operator’s accounting
• usually requires an accounting reform
• confidentiality issues
Not achievable at the moment(provides a ceiling estimate for tariffs)
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Benchmarking
• Scarce data on Africa (ITU, World Bank)
• Few countries where competition is stable
difficult to assess best practice
• Different tariff structures in different
countries
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• Compare countries which incur the same costs. try to assess best practice get idea of costs if unavailable directly
• To find cost drivers, run model “backwards”
• Other factors influence tariffs : regulatory power and situation, market power, …
Benchmarking - which countries are meaningful to compare ?
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Benchmarking - what criteria?
• GDP per capita (running costs, site costs)
• Number of lines in main cities (local tariffs)
• Network structure, POI localisation (switching costs)
• Density of population (transmission distance)
• Density of phones per square km (equipment costs)
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• They do NOT give the “right” tariffs
• The bottom-up and top-down models may provide floor and ceiling tariffs between which the operators can negotiate.
• Benchmarking can serve as a reality check, or as a basis for a default agreement.
How to use these tools
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• Clearly written legal documents (sometimes too late) : powers, responsibilities, NRA independence, interconnection decree.
• Publish interconnection guidelines avoid unnecessary disputes set up clear resolution mechanisms
• Get familiar with the issues : training, pricing tools
Negotiation guidelines : up-front preparation
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Negotiation guidelines : regulator’s role
• Should not lead the negotiations… let the market act
• …but set the limits… tariff floor and ceiling, calendar
• …and arbitrate disputes
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• Focus on physical interconnection at first most important for new entrant
• Request interconnection catalog from incumbent
• Stay open to consultation + transparency
• Stick to prescribed calendar
• Swift, motivated, transparent arbitration
• Don’t aim too high if market immature
Negotiation guidelines :during the negotiations
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Next steps
• Test the analytical model in Burkina Faso andGabon
• Pilot the toolkit in one or two selected Africancountries
• Improvement of network cost data by working with equipment vendors and specialized consultants
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Next steps (2)
•Adapt the output of toolkit to rate rebalancing schedule of incumbent
•Put the toolkit on the Web can be updated by NRAs.