Box 7-8: Interconnection Disputes [7.4.1]

Interconnection disputes are the most prevalent type of disputes between service providers. Operators of all different types of access networks (e.g., fixed-mobile, wire line-wireless) must be able to interconnect with one another. This need becomes even more acute in the context of market liberalization. In such cases, entrants require interconnection to the incumbent’s network in order to provide competitive services. The incumbent operators, however, generally have economic incentives to delay interconnection by making it more difficult and costly, and hence prolonging their competitive advantage over new market entrants. Moreover, incumbent operators generally exercise significant bargaining power, and employ it to hinder entrant’s efforts to secure interconnection on favorable terms.

Interconnection disputes may involve a myriad of technical, operational, and financial issues. Among the main types of interconnection disputes are the following:

  • Failure by a dominant operator to develop a Reference Interconnection Offer (RIO) or standard interconnection arrangements;
  • Failure to conclude negotiations on a timely basis;
  • Disagreement on interconnection charges;
  • Disputes over quality of interconnection services;
  • Failure to comply with the terms of a negotiated interconnection agreement;
  • Poaching of customers by new entrants through improper customer transfers i.e., slamming; and
  • Improper use of competitively sensitive customer information by incumbent operators.

Interconnection disputes may develop either during the negotiation phase or during the implementation and life of interconnection agreements. Many service providers, particularly new entrants, often wield little weight in disputes with incumbent operators. Third-party intervention is thus generally necessary to ensure that a fair and pro-competitive resolution is attained.

Most regulators consider it important to maintain some form of regulatory oversight of the negotiation and implementation of interconnection arrangements, as they often contain key policy considerations for the sector. However, most regulators recognize that operators generally have a better understanding of their networks and the operational requirements for interconnection than regulators do. Thus, the challenge for regulatory authorities is to strike an appropriate balance between the need for continued oversight with the need to reach agreements and resolve disputes quickly and efficiently; providing room for the operators to work out their own arrangements while maintaining sufficient control over the process to keep negotiations moving in the right direction and in a pro-competitive way.

The Reference Paper of the WTO Agreement on Basic Telecommunications Services commits adherents to establish an independent dispute resolution mechanism. More specifically, it requires parties to an interconnection dispute to have recourse to an independent, domestic body that can resolve the dispute within a reasonable period of time.

For this purpose, regulators have taken different approaches to fostering an interconnection environment that protects the interests of new entrants while also leaving room for parties to negotiate agreements on their own. These approaches include prescribing interconnection arrangements on an ex ante basis; establishing interconnection guidelines; approving RIOs or model interconnection agreements; policing operators with significant market power; and generally overseeing the interconnection process. Often, this involves assisting with dispute resolution, either through mediation or arbitration.

Moreover, regulators are also developing specialized adjudication procedures to resolve interconnection disputes. Nigeria, for instance, has instituted a two-stage inquiry into interconnection disputes. During a preliminary inquiry stage, the Nigerian NCC gathers information to determine whether cause exists to advance to the second stage: a full investigation. The latter stage is designed to gather more detailed information and analysis.

Finally, where regulators lack information and expertise, they are increasingly turning to international benchmarking and outside expert consultants for assistance. Such is the case, for example, of the Guatemalan Superintendencia de Telecomunicaciones which, when faced with an interconnection dispute, hires an expert to advise the regulator on resolving it. Although the regulator ultimately rules on the merits of the dispute, it is expected to decide based upon the expert’s analysis and recommendations.

Learn More