Abstract- This paper illustrates interconnection regulation and policy in Thailand. The development of interconnection policy in Thai telecommunication market is vitally turned into modern regulatory regime. It also discusses context of the interconnection regulation and its impact of the regulation to telecommunication market. Lastly, it points out the current problems of the implementation of interconnection policy in Thai telecommunications market.
I. Introduction
In the last two decades, telecommunications markets around the world have changed dramatically due to privatization and liberalization factors. Traditionally, most telecommunications services were provided and governed by state-owned monopolists, but many countries have begun to privatize and liberalize their telecommunications markets since 1980s. The state monopolies in the telecommunications market have been gradually diluted and the wake of the modern telecommunications regulation that promotes competitive environment has increasingly come into place. The establishment of independent regulatory authorities is also considered the key to success of that approach.
Similarly, the telecommunications industry in Thailand also encountered the same experience since it had been long monopolized by two State-Owned Enterprises – Telephone Organization of Thailand (TOT) and Communications Authority of Thailand (CAT). More specifically, TOT owned a statutory monopoly in domestic telephony sector while CAT had the sole authority over provision of international gateway service and Internet service market. To respond to unavoidably increasing demand and growth of the economy, in 1992 TOT and CAT first awarded concessions to private companies to undertake network development and to provide telecommunications services in terms of Build-Transfer-Operate (BTO) agreement. The concessionaires have obligations to invest in network and share revenue arising out of their operation in exchange for right to operate for a certain period of time. Under this environment, both TOT and CAT had played an important role as regulatory authorities through the concession contract.
The long period of state monopolies legally ended when the National Telecommunications Commission (NTC) was established as a sector-specific independent regulator in October 2004. The NTC is empowered by three main legislations: The Act on the Organizations to Assign Radio Frequency and to Regulate the Broadcasting and Telecommunications Services, B.E. 2543 (2000); The Telecommunications Business Act, B.E. 2544 (2001); and The Radio Communications, B.E. 2498 (1955). Generally speaking, these acts give NTC the authorization to prescribe rules and regulations relating to matters, among other things, such as policies and master plans for the telecommunications businesses, allocate and assign radio frequency, licensing criteria and process, fees and tariff structures, interconnection and use of network, consumer protection, and universal service obligations. The trend towards competitive market liberalization in Thailand just has begun.
II. Basic Principles of Interconnection
In principle, interconnection is a necessary and mandatory requirement in a liberalized telecommunications environment as interconnection regulation aims to create a leveled playing field that ultimately leads to an efficient and competitive telecommunications sector. Two fundamental principles of interconnection regulation are to ensure the possibility for users to call anywhere and the protection against abuse of market power by incumbents. Nonetheless, interconnection agreement negotiation is a complex task that mixes legal, technical and commercial interests. Therefore, intervention of regulatory authority must be appropriate and reasonable because it unavoidably has a significant impact on investment, competition and innovation of telecommunication markets.
The interconnection concept is evidently included in Chapter II of the Telecommunication Business Act. The Telecommunications Business Act lays down a broad regulatory framework for governing access and interconnection of telecommunications network, including roles and duties of the NTC. It grants the NTC an authority to set up a detail framework for interconnection and to provide mechanism to resolve dispute arising out of interconnection negotiation and provision. This implies that the NTC plays an important role in designing regulatory regime of interconnection.
In order to prevent abuse of market powers and promote a leveled playing field in the markets, the Telecommunication Business Act makes a distinction between the operators who own a network and those who do not own a network by means of imposing a set of obligations on a network operator to balance bargaining power of all involved parties in the market. For example, it requires a network provider to allow other operators to use its telecommunications network, except if the capacity of the network is not sufficient for use by other operators or there are technical problems which may cause interferences or obstructions to telecommunications business. If the operator requesting the use of the network is rejected, he can appeal before the NTC and the network provider requested has a burden of proof. In order to facilitate interconnection, the network operator is obliged to disclose technical information necessary for use and interconnection of its network. These principles reflect the concept of enriching competitive market entry, investment and innovation.
With regard to rate of interconnection charges, the Telecommunications Business Act apparently stipulates that such rate must be fair, reasonable, and non-discriminatory. This is one of the cornerstones of modern interconnection regulation since it may seriously cause deterrence or promotion of the innovation and investment in telecommunication market. It is noted that the Telecommunications Business Act leaves certain rooms for the NTC to establish calculating methodology and policy of interconnection charges through prescribing in regulation. Also, it requires an interconnection agreement to be submitted to the NTC for approval and that the NTC has a specific power to order either party to amend undue terms and conditions of such agreement in order to ensure non-discrimination and fair competition as well as to protect consumers. Therefore, interconnection agreement is a regulated contract.
In order to maintain national security or to prevent disaster to the public in general or to conduct any act for the benefit of the public in general, the NTC, upon the request of the government, can require a network operator to allow a governmental agency to use or connect its telecommunications network. Nevertheless, the government use of private network must be temporary.
III. Regulation on Access and Interconnection of Telecommunication Network
In order to fulfill its mandate specified by the laws, the NTC officially promulgated the Regulation on the Access and Interconnection of Telecommunication Network B.E. 2549 (2006) that came into force on 17 May 2006. (Hereinafter called “interconnection regulation”) The interconnection regulation sets forth default rules regarding interconnection negotiation in details and also sets up dispute resolution process arising out of that matter. Notably, the interconnection regulation adopts a negotiate/litigate for dispute model because the NTC regards interconnection as commercial dealing, and therefore; it will not intervene negotiation of interconnection agreements, except for the cases of dispute existence and review of agreement. It suggests that the operators can negotiate interconnection terms without unnecessary regulatory intervention by the NTC.
The interconnection regulation contains comprehensive rules and procedures relating to interconnection negotiation process and dispute resolution. Certain regulatory principles, in particular transparency, non-discrimination and competitive safeguard, are also clearly laid down as a guideline for negotiation. It can be summarized as follows:
A. General Principles
The interconnection regulation expressly confirms all legal principles and concepts specified in the Telecommunication Business Act. It is noted that the interconnection regulation has adopted international standards and norms like WTO Reference Paper or APEC Principles of Interconnection that indicate the strong commitment of the NTC to international practices. Nonetheless, the interconnection regulation does not adopt asymmetric regulation like many other countries that impose more interconnection obligations only on incumbents than other network operators. In other words, the interconnection regulation imposes interconnection obligations on all network providers equally, regardless of network size or market power. The reason is the unique characteristics of telecommunications environment in Thailand, especially concession contract legacy.
Pursuant to the interconnection regulation, the general obligations of network providers that are ensured to create free and fair competition in Telecommunications sector are as follows:
- to provide interconnection under non-discriminatory and transparent terms, conditions, including technical standards and specifications;
- to provide interconnection at non-discriminatory and cost-oriented rates;
- to provide interconnection at any technically feasible point in the network;
- to provide information necessary for access and interconnection of network;
- to share essential facilities and allow collocation with reasonable cost;
- to provide sufficient transmission circuits and equipment that is indispensable for interconnection of the telecommunications network at the points of interconnection;
- to provide good quality of interconnection services as prescribed by NTC.
B. Point of Interconnection and Collocation
The interconnection regulation mandates that the network provider must offer points of interconnection in RIO (Reference Interconnection Offer) and let it be negotiated by the parties. If any disagreement exists, the NTC will consider whether that point of interconnection (POI) is technically feasible and whether it poses undue burden on the person who requests the interconnection. The interconnection regulation also gives examples of technically feasible points of interconnection as follows: local switches, tandem switches, toll switches, international switches, dedicated tandem switches, signal transfer points, transmission stations including submarine cable landing stations, and points of presence of the interconnection. This could imply an open network policy that the detail rules must be more elaborated in the future.
The interconnection regulation also spells out the negotiation process relating to additional point of interconnection. It requires a network provider requested to notify the requesting operator in writing including detail reasons for the refusal within 15 days from the date of receiving the request. The interconnection regulation sets forth provisions of collocation similar to those of point of interconnection. The rate of POI and collocation charges must be cost-based basis and terms and conditions must be reasonable, non-discriminatory, and transparent. The objective of these two principles is to ensure fair and efficient interconnection.
C. Reference Interconnection Offer
Reference Interconnection Offer (RIO) concept is universally used in various countries. The main purposes of RIO are to make available information necessary for interconnection and to compel network provider to commit interconnection agreement without unreasonable delay and discrimination. The contents of RIO consist of technical, commercial and legal information with respect to interconnection that facilitates other operators to negotiate interconnection agreement quickly and efficiently. The transparency is also the gist of RIO notion.
Under this regulatory concept, a network provider has a duty to provide RIO for the use or interconnection of its own network and makes it available to the public. RIO is regarded as a document specifying the intention to offer telecommunications network interconnection service which articulates clear and adequate details of commercial and technical conditions as specified by the regulation.
The interconnection regulation sets forth RIO obligation at the initial stage of license application process. The network provider applicant must submit RIO, together with license application, to the NTC for approval. RIO must not have the following characteristics: (1) containing conditions which discriminate, segregate or impede other licensees; (2) containing unreasonable conditions which may result in monopoly or reduction or limitation of competition in provision of telecommunications services; (3) having the usage or interconnection charge which is unreasonable or so high that may cause an effect on the tariff for users or obstructs market access or does not facilitate fair competition; (4) containing conditions which harm the benefit of the user; and (5) containing other conditions specified by the NTC.
After approval by the NTC, the network provider is obliged to publicly announce its RIO. In addition, the changing or modification of RIO must be approved by the NTC. In case of substantively changing or addition of RIO that may have significant impact on competition or public interests or where it needs to provide special protection for consumers, it may be treated as the new RIO.
D. Negotiation Process
The interconnection regulation provides enough of regulatory guidance for interconnection negotiation in order to facilitate efficient and fair negotiation as well as to ease legal uncertainty. Given duties and burdens of proof of negotiating parties, including negotiation steps and time limitation are manifestly provided by the interconnection regulation. Nonetheless, the negotiating parties still have substantial freedom and flexibility in bargaining the interconnection arrangement.
In requesting the use or interconnection of the telecommunications network, the operator who makes the request must submit a written document showing clear intention to the network operator that he or she wish to interconnect with. The format of requesting document is specified in the regulation. In addition, the requesting operator has a duty to notify such request to the NTC for a record.
The interconnection regulation, however, leaves both negotiating parties to freely negotiate under regulatory framework stipulated by the regulation without intervention from NTC as it is deemed as a commercial dealing that will be governed by the Civil and Commercial Code regarding Contract. However, the negotiation process must be concluded within 90 days. If the negotiation is unsuccessful, either party can initiate dispute resolution proceedings under the regulation. The purpose of the limited period of negotiation is to prevent undue delay of the network provider. During the consideration, the NTC may order that the telecommunications networks be used or connected on a temporary basis according to the rules and procedures determined by the NTC.
When negotiating parties can reach an agreement, the requesting network operator must submit a copy of the agreement to the NTC for approval within ten days as from the date the agreement is signed and also must specify the detail of agreement terms and conditions which are different or additional from its RIO. The NTC will consider whether terms and conditions of such agreement are against the legal principles or conditions prescribed by the law. The NTC has the right to give order to amend the agreement and if the network providers requested ignore or refuses to make amendments to the agreement as requested by the NTC, the Secretary-General of NTC has the power to order such network provider to cease such violation or take corrective, remedial or proper action for compliance. On the other hand, if the requesting operator declines to make such amendments, the agreement will be deemed to be void.
Currently, the interconnection agreements that mutually concluded and already submitted a copy to NTC for approval are as follows:
E. Rate of Interconnection Charges
In relation to interconnection charges, the interconnection regulation addresses that criteria and process of calculating interconnection charges must be transparent, fair and non-discriminatory basis. Rates of interconnection depend on the negotiation of both parties but it must be cost-oriented basis. Likewise, the essential facilities tariffs will employ cost-based basis in order to prevent abuse of market power.
In principle, the NTC will regulate rate of interconnection charge by means of costing methodology. More specifically, the network providers is required to submit rates of interconnection charges together with RIO that must clearly and adequately disclose the calculation basis and method of costing for the use or interconnection charge. The NTC has authority to approve costing methodology that in the regulation expressly elaborates that LRIC concept will automatically be accepted. This implies that the NTC aims to attain economically efficient interconnection for the whole industry. This task may take certain period of time to achieve its goals because cost allocation is a complex, time-consuming activity and requires resources and inputs from throughout the industry. The NTC apprehends this matter, and thus holding a series of seminars and discussions on interconnection policy and practice issues.
The interconnection rates will be reviewed annually and approved by the NTC. In the case of changing of the calculation method for the use and interconnection charges for the telecommunication network, the network provider is obliged to notify other licensees and the NTC of the detail of the new calculation method together with reason for the change for approval of the NTC. When approval for calculation methodology is granted, the network provider must notify other providers at least six months in advance prior to application.
F. Dispute Resolution
In practice, the interconnection is the bilateral issue between two operators to agree on terms and conditions. From the international experiences of interconnection negotiation, most of the cases do not arbitrate or resolve it easily and efficiently because incumbent usually has little incentive to make interconnection agreement. As a result, the regulatory agencies in varied countries provide regulatory intervention for timely and efficient dispute settlement between operators.
The interconnection regulation sets up the Dispute Resolution Committees to perform dispute resolution functions with a comprehensive procedure. The Dispute Resolution Committee comprises nine experts in telecommunications, economics or law. Furthermore, the NTC establishes the Interconnection Institute (ICI) to support the Dispute Resolution Committee and also to be a knowledge center for interconnection in Thailand. This is also regarded a new development in Thailand.
The dispute resolution procedure is a mixture of procedure used in the Administrative Court and arbitration law. Under this regulation, the Dispute Resolution Committee will deliver its recommendation to the NTC for making final decision. However, the decision of the NTC can be appealed to the Administrative Court. That means the legitimacy of NTC’s ruling can be scrutinized by neutral authority.
IV. The Current Problem
As mentioned above, TOT in the past was regarded as the de factor regulator in domestic telephony market because it was authorized the monopoly power to control access to network resources such as numbering, interconnection and right of ways. With regard to interconnection, TOT and CAT created the unique arrangement in term of access charge agreement that governed the whole telecommunications industry. The access charge agreement stipulates network providers under CAT have had to pay access charge to TOT (one way payment) in exchange for access to and utilization of TOT network. It causes the unleveled playing field as the concessionaires from the CAT like DTAC, TA Orange and DPC, have to pay an access charges to the TOT to connect or use its networks, while AIS which was directly granted a concession from the TOT does not pay such an access charge. As a result, the access charge agreement has generated a huge amount of revenue to TOT. The legal argument of the access charge agreement remains unclear.
Otherwise, it is noted that the Telecommunications Business Act expressly prevents the NTC from handling with the essence and integrity of concession contract. The amendment of concession’s conditions will be negotiated by the contracting parties only. The NTC can merely require concessionaires to conform to its regulations on the ground that they own the same rights, duties and responsibilities as the licensees under this Act. The awkward situation continues unsettled. The legal conflict and difficulty have been laid down for challenging.
The concessionaires under the governance of CAT have been always pleading to replace the access charge with interconnection charge stipulated by the interconnection regulation on the ground of fairness. Therefore, this leads to the legal battle in the Administrative Court and before the NTC. The implementation of interconnection regulation is bewildered by investors which way to go in the future. It is obvious that NTC will support the free and fair competition principle thank to its mandate set by law. This chaotic situation hopefully will be resolved soon and the road ahead of liberalization process in Thailand will be brighter and wider.
V. Conclusion
Interconnection is considered one of the most essential issues facing the telecommunications sector today. It is a key to develop effective competition in order to drive growth in telecommunications market by connecting people as one network because it is an elementary element for wholesale market, with the fair and non-discriminatory basis, so as to create attractive and innovative services with the high level of competitive in retail market. Additionally, proper interconnection policy can provide efficient infrastructure and service development and ensure the needs and interests of consumer for access and quality of services.
The emphasis of interconnection regulation designed by the NTC is to create free and fair competition. However, the past legacy of the concession returns to crash interconnection without compromise. The tremor in the liberalization process of the telecommunications market is emerging. The way out of this problem finally will be handed by the judicial authority. This will become an intriguing chapter of long journey from monopoly to competition in Thailand. The episode of interconnection policy development will be written as good lessons learnt for liberalization of other public utility sectors in Thailand.
REFERENCES
[1] The Act on the Organizations to Assign Radio Frequency and to Regulate the Broadcasting and Telecommunications Services, B.E. 2543 (2000).
[2] The Telecommunications Business Act, B.E. 2544 (2001).
[3] Regulation on the Access and Interconnection of Telecommunication Network B.E. 2549 (2006).
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