{"id":3158,"date":"2012-02-22T09:19:27","date_gmt":"2012-02-22T14:19:27","guid":{"rendered":"http:\/\/www.ict-pulse.com\/?p=3158"},"modified":"2012-02-22T09:19:27","modified_gmt":"2012-02-22T14:19:27","slug":"will-the-jamaican-regulator-be-successful-in-implementing-interim-interconnection-rates","status":"publish","type":"post","link":"https:\/\/ict-pulse.com\/2012\/02\/will-the-jamaican-regulator-be-successful-in-implementing-interim-interconnection-rates\/","title":{"rendered":"Will the Jamaican regulator be successful in implementing interim interconnection rates?"},"content":{"rendered":"

At the best of times, matters related interconnection are contentious in most jurisdictions. The Jamaican telecoms regulator, the Office of Utilities Regulation, is expected to establish interim termination rates in the coming weeks. This post discusses benchmarking, and key factors that should considered when using this approach.<\/em><\/p>\n

\"http:\/\/www.flickr.com\/photos\/68751915@N05\/\"<\/a>In recent days, newspapers in Jamaica have been discussing proposals from the telecoms regulator, the Office of Utilities Regulation (OUR), that Digicel should decrease its mobile termination charges to JMD\u00a05.00 (approximately USD\u00a00.06) \u2013 at least a 50% drop from its current levels. This proposal would be an interim measure, pending completion of a cost study that is currently being conducted to examine the cost of delivering calls (to receiving parties) across a provider\u2019s own network and between different networks.<\/p>\n

As expected, the key affected telcos, Digicel and LIME, have had diverse reactions. Digicel, whose mobile market share is reported to be almost twice that of LIME\u2019s, and would be growing thanks to its acquisition of Claro (formerly owned by America M\u00f3vil), did not appear keen on the proposed decrease, and was quick to point to the process needed to implement the change. On the other hand, LIME was encouraged by the regulator\u2019s position, and even hoped that that the final determination would be lower than JMD\u00a05.00 \u201cso that consumers could reap even greater benefits\u201d<\/em> (Source: Jamaica Observer<\/a>).<\/p>\n

Thanks to a recent amendment of the Telecommunications Act 2000, the OUR is now empowered to establish interim interconnection charges. Equally important, it can rely on a broader set of options to make rate determinations, such as benchmarking.<\/p>\n

However, recognising that interconnection is and has been a highly contentious issue in Jamaica, and the rate structure that has been in place over the past 10 years has generally favoured one player (Digicel) over another (LIME), adjusting those rates will not be an simple matter. This post examines the method the regulator will most likely be using to establish interim termination charges, and factors that would strengthen its proposal, hopefully leading to successful and timely implementation.<\/p>\n

What is benchmarking?<\/h3>\n

Benchmarking is a comparison process, which is useful to set interconnection charges in the absence of a cost study. As discussed in Will the proposed amendments to Jamaica\u2019s Telecoms Act improve LIME\u2019s competitiveness?<\/a><\/em><\/strong>, cost studies are expensive and lengthy to implement, and typically may require data from the telcos for their successful completion. However, some players, particularly those that believe the outcome could be to their disadvantage, often opt to delay the process. Hence benchmarking allows the regulator to examine the rates and charges established in other jurisdictions to provide some indication of what should obtain in their own context. While benchmarks cannot fully replace a well-executed cost study, they can suggest where local rates should fall, and are often use to corroborate the results of cost studies.<\/p>\n

Considerations when using benchmarks for interconnection rate determinations<\/h3>\n

Based on the significance of benchmarks in the regulatory process, it is important that the methodology used can withstand the scrutiny. Many regulators opt to implement benchmarking using simple comparisons to make their determinations. Other approaches, such as those using statistical modelling require considerable granular data that might not be readily available, along with the expertise perform the exercise. Nevertheless, the integrity of the results, regardless of approach used, relies on the sample group established and the methodology used by those countries to produce the elements being compared.<\/p>\n

At the core, benchmarking is a comparison, so it becomes critical that the exercise allows examination of \u201clike with like\u201d. In the case of a mobile termination charge determination, for example, the countries selected ought to have similar characteristics to the country under focus, such as:<\/p>\n