Understanding of competitive interconnect agreements will be the key to effective competition, according to researcher Ovum Ltd’s latest study, Interconnect: The Key To Effective Competition. The report is based on six detailed case studies of fixed and mobile interconnect agreements in Australia, Finland, Japan, New Zealand, the UK and the US – countries where operators compete to provide telecommunications services. A number of guidelines on best practice have been drawn from an analysis of the different ways in which the six countries studied have introduced competition. Ovum says that setting up the right regulatory framework is vital to give new entrants a fare interconnect agreement. The study highlights issues that are central to any interconnect agreement between competing operators. Most important was the setting of interconnect charges, which are said to constitute 40% to 50% of the operating costs of a new entrant. The study shows that the range of charges made was narrow and that new entrants needed to get interconnect charges down 10 cents for a three minute call, or lower, to have a viable business. The study also shows that mobile operators pay two to three times as much as fixed network operators to have calls delivered. Another finding is that access deficits, where the revenue from access lines is less than the cost of providing them, are a problem in all the countries studied. Finland and Japan are contemplating remedying the deficit by allowing the provider to raise line rentals. The problem is that governments are reluctant to raise line rentals as the policy is a vote loser. Australia, the UK and the US add contributions to interconnect charges to compensate the incumbent. This policy has however caused an uproar in the UK as contributions are at levels four to 10 times higher than in Australia and the US, says Ovum. The report costs $4,625 from Ovum.
