Issues dealt with in Interconnection Agreements

To have a successful interconnection, the following issues should be dealt with in the interconnection agreement or by rule or order from the regulatory authority:

Prices and adjustment of prices over time.  This includes the initial level of interconnection charges, a definition of the currency in which interconnection charges are to be paid (this is especially complicated when retail prices are set in a local currency and interconnection is set in another currency), and how prices will adjust over the term of the agreement to account for exchange rate changes and inflation.  The "ownership" of the call must be defined.  For example, in mobile-to-fixed interconnection, one possible mode is for the call to be "owned" by the mobile operator, who sets the retail price and pays for interconnection and billing and collection to the fixed operator.  Another mode would be for the call to be "owned" by the fixed operator, who would set the retail rate and pay the mobile operator an origination charge.  Liability for bad debt and uncollectable bills should be defined.

Points of interconnection.  The physical locations where interconnection will take place and the technical standards to be employed in the interconnection are defined.  A process for requesting and obtaining additional points of interconnection should be established.  This is closely related to the issue of transport charges and traffic routing.

Transport (conveyance) charges and traffic routing.  Some definition must be made for how calls will be routed.  In other words, if there are multiple interconnection points defined, what is the proper routing and hand-off point for each type of call.  Otherwise, higher charges may apply to misrouted calls.  The applicability of transport charges in the receiving network for calls that must be carried beyond the area local to the point of interconnection must be defined.  If one carrier has requested interconnection in a particular area so as to avoid paying the receiving network for transport charges, and the interconnection point is not made available, sometimes a virtual point of interconnection is defined for that location whereby transport charges are not collected to bring calls to that area.

Frequently, incumbent operators desire to offer as few as possible points of interconnection so as to maximize transport revenues.  However, over time, entrants usually wish to build out their own networks and interconnect in more places so as to avoid paying the incumbent's transport charges.

Quality of service standards.  Quality standards are defined, particularly for time to provision circuits and for call blocking levels, and remedies are defined for when those standards are not met.  Often, an incumbent provider is required to provide at least as high a level of quality to interconnecting carriers as he provides to his own retail customers.  Testing opportunities should be provided each party.

Billing and collection.  When and how to collect traffic data, when and how to exchange bills, and when and how to make payment should be specified.  A process for reconciling traffic data and for making inquiries to the other party and for handling claims also should be incorporated.  A procedure for resolving discrepancies is useful, which often involves seeking recourse to arbitration, the regulator, or to the courts.

Traffic measurement and settlement.  Sometimes specific trunk groups are identified to carry different types of traffic so that each type of traffic can be billed for separately.  However, these arrangements can be defeated and traffic will thus end up disguised as the cheapest type of traffic.  The responsibilities of each interconnecting operator to measure traffic are defined, as are settlement procedures for when there are discrepancies over the amount of traffic measured.  Obligations to cooperate in fraud detection and enforcement activities should be specified.

Numbering resources.  Access of each operator to the country's numbering plan and numbering resources must be defined.  It is particularly important that numbers be provided in a timely manner so that potential sales are not blocked.  If number portability may be part of the local regulatory regime and terms of participation should be defined.

Forecasting network needs.  Part of providing interconnection is having the available capacity to deliver and receive the traffic that flows between the interconnecting networks.  To do so, a planning process must be followed between the interconnecting operators so that investment for additional capacity can be agreed, budgeted, and installed in time to meet the forecasted demand.  Procedures to resolve differences over forecasts also must be defined as well as what constitutes a bona fide request for additional interconnection capacity.  At a minimum, a mutual obligation to notify the other party of network changes and upgrades well in advance is needed to avoid disadvantaging one competitor over another.

Access to customer information.  By necessity, when completing calls and billing for them, interconnecting operators pass back and forth considerable information about each other's clients.  Limits on the permitted uses of this information should be defined, particularly regarding the temptation to engage in marketing activities in approaching another operator's clients based on information obtained through interconnection activities.  Safeguards are also necessary to protect customers' privacy.


Learn More