Botswana: Interconnection Dispute Resolution

Editor’s Note: This note draws on the document “Botswana Mini-Case Study 2003: Recent Experience in Interconnection Disputes”, and the Botswana Telecommunications Authority’s (BTA’s) Ruling (No. 1 of 2003) on an interconnection charging dispute between Botswana Telecommunications Corporation (BTC), and Mascom Wireless (Pty) Limited.

The mid 1990s onward saw progressive liberalization of the telecommunications sector in Botswana. Liberalization began (in 1996) with the repeal of BTC’s monopoly and establishment of BTA as the independent body to regulate the sector. One of the BTA’s core functions is adjudication of disputes between operators.

Background to the Dispute

In February 1997 BTA issued GSM cellular licences to Mascom Wireless (Pty) Limited and Vista Cellular Limited (now Orange). One of the stipulations of their licences is for Vista and Mascom to enter into an interconnection agreement with each other and with BTC. BTC is the sole fixed line provider in Botswana. On August 13, 1999 BTC executed its first interconnection agreement with Mascom Wireless (Pty) Limited. The agreement contained standard terms and conditions for interconnection, including provisions for review, amendment and termination of the agreement.

In March 2001 Mascom and BTC commenced negotiations to review the charges for terminating calls on their respective networks. BTC proposed reduced rates for terminating calls on cellular networks and increased charges for terminating calls on its own fixed network. Mascom objected to the proposed changes on the basis that the existing rates were set by BTA in a previous Ruling (No. 1 of 1999) and based on the revenue share model used in neighbouring African countries. Thus, the rates should remain unchanged. Table 1 (below) provides a comparison of BTC’s offer and Mascom’s counter-offer.

Table 1: Proposed Interconnection Rates (BW Pula per minute)

  Operator Mascom (Rates in effect at time of dispute) Rates proposed by BTC

 Termination on BTC Network

Peak

Off-Peak

 24.00

19.10

 35.00

25.00

  Termination on Mascom Network

Peak

Off-Peak

 96.00

 76.90

 75.00

 58.00

Note: BW Pula 1.00 = US$0.20

The negotiations ended in deadlock and, on 5 July 2002, BTC and Mascom separately filed an interconnection dispute with BTA.

BTA’s Approach to Interconnection Dispute Resolution

BTA outlined in detail the procedures it intended to follow in dealing with the dispute and communicated them to the parties. The procedures allowed for both companies to present their arguments individually and jointly by giving written and oral submissions before the Authority. This afforded the parties the opportunity to make rebuttals, and to put forward alternative models for resolving the dispute. The process allowed BTA to test the veracity and reasonableness of the parties’ respective arguments, and to obtain clarification on areas that may be in doubt.

BTA’s Ruling on Call Termination Charges

BTA handed down its Ruling in February 2003. The Ruling imposed new fixed and mobile termination rates based on EU benchmarks (see Table 2 below). The Ruling stipulated termination rates, for both parties, significantly below those that prevailed at the start of the dispute. The BTA therefore imposed a transitional period to allow both operators time to adjust to the new charges.

Table 2: BTA’s Ruling (BW Pula per minute)

  OperatorBTA’s Ruling (up to February 29, 2004) BTA’s Ruling (from March 1, 2004)

 Termination on BTC Network

Peak

Off-Peak

 15.00

12.00

 11.00

8.80

  Termination on Mascom Network

Peak

Off-Peak

85.00

 68.00

 75.00

 60.00

Note: BW Pula 1.00 = US$0.20

BTA’s Benchmarking Methodology

Forward-looking costing was the BTA’s preferred method for the determination of Interconnection Usage Charge (IUC). However, due to time constraints it was neither feasible nor desirable for the BTA to implement a forward looking long run incremental cost (LRIC) model within the context of the dispute. The BTA saw benchmarking as a practical alternative to estimating efficient network and termination charges.

The BTA chose not to use neighboring African countries as a sample for the development of benchmarks. BTA had no information on whether any African country had implemented an LRIC methodology for calculating termination rates. Also, the BTA was not confident that liberalization in other African countries was sufficiently developed to ensure efficient interconnection charges.

Instead, the BTA used rates from a sample of EU countries to develop benchmarks for interconnection charges. Six EU member countries had already introduced forward looking LRIC methodologies for setting termination charges. Other members were in the process of implementing LRIC methodologies.

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