Presentation on theme: "Malaysia: Mobile-Fixed-Mobile Interconnection Case Study"— Presentation transcript:
1 Malaysia: Mobile-Fixed-Mobile Interconnection Case Study John UreDirector of the Telecommunications Research ProjectUniversity of Hong Kong
2 Demographics of Malaysia Most developed ASEAN economy after SingaporePopulation = around 21 millionTowns of Peninsular Malaysia most densely populated, from Johor Bahru in the south to Penang in the north, and especially around the capital city of Kuala Lumpur and along the Klang Valley to the port city of KlangEastern Malaysia (Sabah & Sarawak) still quite rural and many forests
3 Telecoms in Malaysia Teledensity today: 4.5 million fixed direct exchange lines = 22 per cent penetration4+ million mobile cellular subscribers = 19 per cent penetrationSeven cellular operators, each with their own trunk networks and international gateways = highly competitive
4 Cellular Operators in Malaysia Cellular Company and dial code Technology Transmission ModeTelekom Malaysia (TMB) NMT 450 AnalogueTM Touch (TMB) PCN DigitalMobikom (TMB) AMPS 800 AnalogueMobikom (TMB) AMPS 800 DigitalCelcom ETACS 900 AnalogueCelcom GSM 900 DigitalMaxis GSM 900 DigitalDigi.com PCN 1800 DigitalTime.com PCN 1800 Digital
5 Development of Telecoms Policy in Malaysia Decision taken in 1980s to liberalize telecoms as a stimulant to national development of the information sector = a strategy of development as past of Vision 2020!MultiMedia Super Corridor (MSC) from KL south to new KL International Airport designed to attract IT and multimedia company investment = flagship of the development strategyTelekom Malaysia (TMB) partially privatized in 1987Jabatan Telekom Malaysia (JTM) ceased to be the operator and became the regulator in 1984
6 Telekom Malaysia Berhad (TMB) Telekom Malaysia (TMB) began life as Syarikat Telekom Malaysia when telecoms was incorporated in 1984JTM became the regulator responsible to the policy-making Ministry of Energy, Telecommunications and Posts (METP)Finance Ministry remains TMB’s largest shareholderTMB has the universal service obligation and the sole right to provide the optical fibre ring in the MSCRemains the dominant fixed network operator and service provider today - so cellular have to interconnect to TMB!
7 Telecoms Reforms in Malaysia 1996: fixed line Equal Access - for customer selection for IDD1996: General Framework for Interconnection and Access (GFIA) - sets out principles to govern interconnection between fixed-fixed, and fixed-mobile networks1998: Multimedia Commission Act - replaces JTM as regulator with the Malaysian Commission for Multimedia Communications (MCMC) and embraces convergence of telecoms, IT and broadcasting1998: Communications and Multimedia Act - overhauls the telecoms licensing regime and establishes an Industry Forum among operators
8 Commercial Agreement between TMB and Celcom, 1990 For all calls destined for TMB’s network, Celcom paid TBM the full PSTN rate. (Note: untimed local calls, which retailed at 10¢, made up 70 per cent of traffic.)For all calls destined for Celcom’s network, TMB paid Celcom 5¢ for every 20-second block.The nett account paid by Celcom = (2.3.1 – 2.3.2)/2Celcom to establish a point of interconnection (POI) in every area code.Celcom to bear the cost of both incoming and outgoing circuits, and the associated POI hardware and software costs.Note: Celcom also operated an international gateway, so only a small percentage of its international traffic passed through TMB’s gateway
9 Commercial Agreement between TMB and Mobikom, 1994 For all calls destined for TMB’s network, Mobikom paid TMB 13¢ plus 5¢ per minute (this payment in respect of the USO)For all calls destined to Mobikom’s network, TMB paid Mobikom 13¢ per minute.For international calls, Mobikom paid TMB a discounted retail rate (less 10%) for carrying such calls.Note: Mobikom receives a lower payment than Celcom and has a smaller network. Unlike Celcom, Mobikom also has no international gateway.
10 Commercial Arrangement between TMB and Celcom, 1995 - basis of general agreement ScopeInterconnecting TM’s network to the facilities of the other partySupplying requested telecommunications services to the other partyMaking available to the other party the services, facilities and information as required by law or as specified in the licences.Includesa) Point of Interconnection (the cost of establishment bundled into the interconnection feeb) Delivery of calls depending upon whether they involve near-end or far-end handover.c) Interconnection capacity in terms of circuits made available measured in 2 Mbps unitsd) Access by TMB to the premises of mobile operator to establish the connection.
11 Special discounted rate for interconnection capacity Commercial Arrangement between TMB and Celcom, basis of general agreementCommercialRevenue sharingNear-end and Far-end handover of calls (mobile operator keeps 35 per cent of revenue for near-end handover of long-distance calls; the terminating party keeps 30 per cent of revenues for far-end handover of calls; the long-distance carrier receivers 35 per cent of revenue.)Special discounted rate for interconnection capacity
12 Billing and Settlement Commercial Arrangement between TMB and Celcom, basis of general agreementBilling and SettlementBilling period is on a monthly calendar basisDue date is 30 days after relevant invoiceDispute notification period expires 30 days after date of invoiceInvoice date is the date on which the invoice is dispatchedPayment to be by electronic transfer or exceptionally by cheque is agreed by the invoicing carrierBilling disputes procedure (these could arise from glitches in software, and mostly involved customer disputes over international calls and call charges).
13 Commercial Arrangement between TMB and Celcom, 1995 - basis of general agreement OtherInterconnection terms and conditions, which are commercially agreed bilaterally, should be on a non-discriminatory basis.Interconnection agreements with mobile operators would remain confidential, but available to the regulator. (This allows the regulator to ensure the terms and conditions are non-discriminatory).Disputes resolution provides for a committee representing TMB and the Other Licensed Network Operators (OLNOs) to resolve issues, backed up by the Arbitration Act No.93 (Revised 1972) of Malaysia. (Most disputes arise over billing issues, and none has ever required the use of the Arbitration Act, nor reference to the regulator.)
14 Commercial Arrangement between TMB and Celcom, 1995 - basis of general agreement
15 Commercial Arrangement between TMB and Celcom, 1995 - Analysis Why the agreement? - Celcom had no trunk backbone at that timeWhy a revenue-sharing agreement? -quick and easy method of establishing interconnection that offered gains for both sides and compensated TMB for provisioning POIsCelcom’s network still immature; Celcom needed early interconnectWhy not cost-based? - attributed costs largely unknown at that time; knowing them would involve time and expense, and may disputesDid it work? - yes, it was subsequently adopted by Mutiara (Digi)
16 General Framework Agreement for Interconnection and Access (GFIA) - 1996 ObjectivesAll network operators should contribute towards the achievement of the national objective of extending the availability and usage of telecommunications services and the provision of quality services which meet the diverse needs of all Malaysians;All network operators should be encouraged to deploy high quality and advanced telecommunications infrastructure to serve the diverse needs of different customer groups in an environment of strong growth and demand for advanced telecommunications products and services within a high growth economy;
17 General Framework Agreement for Interconnection and Access (GFIA) - 1996 ObjectivesThe deployment and optimum usage of the sector’s infrastructure and resources should be directed towards the development of an economically efficient telecommunications industry, and should not only minimize the uneconomic duplication of infrastructure facilities but encourage the shared usage of common infrastructure facilities.All network operators should fulfill the national and public service obligations as stipulated in their Licences; andClarity, stability, and transparency in the interconnection relationship between network operators must be established in order to ensure that users enjoy the full benefits of competition, including choice, convenience, and a variety of high quality services at the lowest possible prices.”
18 GFIA - Technicalcompliance, wherever feasible, with international standards and recommendationsoffering technical and operational interconnection facilities on the basis of suitably unbundled system components, in accordance with general practice In the industryensuring that all network operators’ switching and transmission facilities have the capacity to interconnect with other networkspreserving network integrity and securityreasonable lead times in network provisioning for interconnectionprovisions and requirements for the national numbering planallowances for differences in the interconnecting networksthe application of good engineering principles and practicestimely and efficient deployment of sufficient numbers and capacity links to support the required grades of service for customers
19 GFIA - CommercialThe fundamental principle is that all licensees should be fairly compensated for the cost incurred in the provision of interconnection.The structure and level of charges should be related to the direct costs incurred by each network operator. Charges should generally be in proportion to the extent and nature of the interconnection service or facility being supplied, within the total economics of the delivery of an end-to-end service.Where charges are determined in relation to direct cost components, these cost elements must be capable of being objectively identified and allocated against specific activities. The costs must be consistent with, and capable of reconciliation against, an overall Chart of Accounts for the licensee based on standardized cost allocation rules.Cost based charges should be based on the directly attributable costs of the interconnection service or facility in question.
21 Introduced shift towards cost-based interconnection charges JTM document TRD 006/98 Determination of Cost-Based Interconnection Prices and Cost of University ObligationIntroduced shift towards cost-based interconnection chargesFixed networks would more “closer to fully allocated costs” - TMB’s cost structure taken as the reference point by the consultantsMobile networks will be set “closer to long run incremental cost” - Celcom’s costs structure taken as a reference point by the consultants
22 JTM document TRD 006/98 Determination of Cost-Based Interconnection Prices and Cost of University ObligationSingle tandem termination: when the called and calling parties are in the same Exchange area – used for terminating all calls (fixed to fixed, mobile to fixed, incoming international) - in the case of cellular this includes MSC to Base Station Controller (BSC) and/or Base Transceiver System (BTS)Double tandem termination: This applies when the called and calling parties are in different Exchange areas – used for terminating all calls (fixed to fixed, mobile to fixed, incoming international) - two MSCs in the case of a cellular system.All interconnection agreements were reviewed by the end of 1998 towards compliance with the Determination for cost-based charges to be introduced from January 1999.
23 Universal Service Contribution Each fixed and mobile carrier contributes to the USO according to their proportion of the industry’s total revenue as determined by the formula:A x local revenuesB x Long distance and international revenuesC x mobile revenuesD x other revenuesWhere: A = 0, B = 1, C = 0.5, and D = 1.
24 Interconnection Charges per Minute: Mobile-Fixed; Fixed-Mobile; Mobile-Mobile Peak Off PeakCall attempt from a POI within ¢ 6 ¢the same Automatic Telephone (3.42 ¢US) (1.58 ¢US)Using Radio (ATUR) exchangeareaCall attempt from a POI outside ¢ 8 ¢the same Automatic Telephone (4.7 ¢ US) (2.11 ¢US)Using Radio (ATUR) exchange area
25 Mobile - mobile retail tariffs @10¢ per unit Peak (7am - 7pm) Off-peak (7pm-7am)Seconds Price Seconds Price perper unit per unit per unit unitSame area ¢ ¢Adjacent Area ¢ ¢Non-adjacent area 4 RM ¢
26 Interconnection charges per minute Fixed-Fixed Peak Off-PeakLocal Termination ¢ ¢Long-distance using transmitting ¢ ¢ through a single tandemLong-distance using transmitting 18 ¢ ¢through a doubled tandemLong-distance using transmitting ¢ ¢through a double tandem andsubmarine cable
28 Conclusions?GFIA part of a shift in philosophy towards industry self-regulation, regulatory transparency and international best practiceRevenue-sharing worked well as a cost-effective interim solution while mobile networks were still in their infancyRole and authority of the regulator is well established in lawJTM/MCMC has tried to build a basis for consensus in face of competitive rivalries
29 Conclusions?Use of consultants to provide benchmarking - regulator needs financial resources to pay for thisBenchmark interconnection prices used to assist private commercial agreements, not designed as heavy interventionInterconnection agreements not comprehensive - number of areas not coveredHow will the move to LRAIC be undertaken?How will broadband issues be handled?
30 Index:1. Kelantan, Pahang & Terengganu2. Sabah & WP labuan3. Sarawak4. Melaka & Negeri Sembilan5. Johor6. Perak7. Kedah & Perlis8. Pulau Pinang9. Selangor10. WP Kuala Lumpur