Interconnection. Regulatory Issues

image of Interconnection. Regulatory Issues

The Report's purpose is to examine some of the regulatory issues posed by Interconnection. This critical subject is examined not from a technical viewpoint but recognizing that effective interconnection is vital to competition. The Regulatory Colloquium itself, and the preparation of the Briefing Report, were funded by the World Bank. The principal author is Michael Tyler. The views expressed are those of the author alone.



Overview of interconnection issues

Consider the situation where ordinary telephone service in a country, or a region of a country, is supplied solely by a single PTG (as was the case almost everywhere before 1970 and remains the case in most countries today), but that the country's government has decided to introduce competition into the market and has proceeded to licence one or more entrants. No such entrant could hope to compete with the single pre-existing PTO (the "incumbent PTO" in our terminology) unless it were able to interconnect its network with the incumbent PTO's network. In practically all countries, the investment need to duplicate the incumbent PTO's network would be colossal, and the risk of loss would be daunting. Accordingly, an entrant would choose to limit its initial investment and the attendant risk by duplicating only part of the incumbent PTO's network. For that reason the earliest entrants in the US, UK, and Japan were enterprises that built long-distance facilities only, and initially only in relatively restricted parts of their countries. But in order to attract customers they had to be able to provide them with "universal connectivity", by linking the entrants' long-distance lines to the local networks which alone could enable end-users to originate and terminate calls, and those local networks (comprising local exchanges and local loops to subscribers' premises) belonged to the incumbent PTG. In short, interconnection was, and is, an essential prerequisite of competition.


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