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Telecommunications Challenges In Developing Countries: Asymmetric Interconnection Charges For Rural Areas

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Telecommunications Challenges in Developing Countries addresses an important aspect of interconnection—the settings of call termination charges. In rural telecommunications, network costs are known to be high. The traditional consensus has been that many rural areas cannot be connected without subsidies. This paper investigates the possibilities for implementing a geographically de-averaged charge regime indicative of the relative cost differences between urban and rural networks. This could change the business model for rural networks, significantly increasing revenues from incoming calls.

The study investigates historic and current examples of asymmetric charges and user tariffs in fixed-to-mobile interconnection regimes today. It addresses a wide range of related issues and questions: customer affordability; customer education and awareness; numbering plan and billing; whether detailed cost models would be required; and whether asymmetric termination charges, while eliminating current market distortions, would create other distortions. Alternative implementation strategies are also considered, with an eye to practicality for developing countries. It concludes that the concept is feasible, and the study further provides ideas for piloting the concept in a limited number of countries.

Intelecon Research & Consultancy Ltd. was retained by the World Bank to identify and assess issues, precedents, and potential problems with the introduction of a geographically de-averaged, asymmetric interconnection regime that is based on the principle of geographically disaggregated costs for operators serving rural areas in developing countries.

Between fixed network operators, the payment of a higher fee to terminate a domestic telephone call in one direction (into a higher cost area) than in the reverse direction is an uncommon practice, although historically it is well established as a means to ensure the viability of small rural operators in Canada and the United States The importance of considering cost-based interconnection fees in the developing world relates to the challenge of how to provide access to rural communities traditionally understood to be chronically unviable, even while a large, pent-up demand, and need for access and urban-to-rural communication is seen to exist.

Interconnection charges between fixed and mobile networks are already at different levels in most countries, with mobile operators usually receiving higher termination rates. While there is some pressure for regulatory review of the degree of asymmetry required to justify termination costs, precedent already exists for asymmetry itself. However, an interconnection regime that allows geographical de-averaging of rates would require a fundamental movement away from nationally averaged rates. Despite the facts that de-averaged rates would better reflect the cost differences between urban and rural networks and that huge benefits for rural telecommunication development could result, it could place another burden on young regulators. Furthermore, the technical issues relating to numbering plan, call accounting, and interoperator billing might be significant in some countries where older, less feature-rich software and hardware platforms are used.

Even without this, it is well-known that unfair interconnection practices and weak regulation have plagued and hindered the emergence of true multioperator and competitive markets, many of which could have benefited rural areas greatly. This has occurred in markets as widely dispersed as Bangladesh, Czech Republic, Ghana, India, and Poland.
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