India: New Regulations On Interconnection

Last Updated: 9 January 2018
Article by Harsh Walia, Shobhit Chandra and Piyush Ranjan

Most Read Contributor in India, December 2017

Introduction

The Telecom Regulatory Authority of India (TRAI) has issued The Telecommunication Interconnection Regulations, 2018 (Regulations) on 1 January 2018. The Regulations will come into effect from 1 February 2018.

Importance of interconnection

Interconnection broadly refers to the commercial and technical arrangements under which telecom service providers (TSP) interconnect their equipment, networks and services so that customers of a TSP can have access to the customers, services and networks of other TSPs. In absence of interconnection arrangements between TSPs, the customers of a TSP will not be able to communicate with customers of other TSPs. Therefore, it is a very important concept from a consumer's standpoint.

Background to the Regulation

TRAI had received several representations from various TSPs to review the existing regulatory framework for interconnection. Accordingly, TRAI issued a pre-consultation paper on 14 October 2015 and sought views of TSPs on specific issues.

The key issues discussed during the consultation process included measures to ensure balanced and non-discriminatory terms of interconnection agreements (IAs) between the TSPs; whether only those TSPs who hold significant market power (SMP) should be mandated to publish reference interconnect offers (RIO) and if yes, what should be the criteria to determine whether a TSP is a SMP; details that are required to be furnished by a new TSP at the time of entering into an IA; bank guarantee requirements in an IA arrangement; methods to settle interconnection usage charges (IUC) and delayed payments and circumstances in which a TSP can disconnect a point of interconnection (POI) etc.

Regulatory framework on interconnection prior to issue of the Regulations

The existing regulatory framework requires TSPs to register the IAs (that are executed between them and other TSPs) with TRAI. Further, under Telecommunication Interconnection (Reference Interconnect Offer) Regulations, 2002 (2002 Regulations), a TSP which has an SMP status is required to submit its proposed RIO i.e. technical and commercial conditions of interconnection as prescribed under the 2002 Regulations and publish the same on its website.

In 2005, TRAI issued a direction requiring the TSPs to provide interconnection to interconnection seekers within 90 days, so far as the seeker has made applicable payments.

The obligation to interconnect with the networks of other TSPs at POIs, in accordance with TRAI's framework set out above, is also writ large in the license agreements (such as Unified License, Unified Access Service License, etc) that are entered into between TSPs and the Department of Telecommunication, Government of India (DoT).

As an outcome of the consultation process TRAI determined that the existing framework requires a systemic overhaul. TRAI has taken the view that the 2002 Regulations were premised on the existence of a few TSPs with SMP, which is not relevant and apt in the present-day scenario where the telecom industry is highly fragmented. TRAI has also advocated the need for defining timelines for fulfilling demands for interconnection and providing POIs.

Key provisions of the Regulations

  • Procedure for entering into an IA: The Regulations stipulate that every TSP should enter into an IA, on a non-discriminatory basis, within thirty (30) days of receipt of request from a seeker. Inter alia, the requestor is required to provide details of proposed locations of its POI and the technology to be used at each POI along with the name of the services for which interconnection is sought.
  • Bank guarantee to be furnished, if required: The TSP seeking interconnection will be required to furnish a bank guarantee from the date of establishment of initial interconnection (for a period of six months) to the other TSP who has enabled interconnection if so demanded by the latter. The bank guarantee amounts will be determined and calculated on the basis of the methodology set out in the Regulations, as a multiple of the interconnection usage charge being paid by such requesting TSP. The requirement to furnish subsequent bank guarantees will be determined on the basis a party's obligation to pay IUC charges post adjustment to the other party (if so demanded).
  • Provisioning of ports: Upon entering into an IA, the requesting TSP can request the other TSP to provide such number of ports at POIs that are sufficient to meet the requirement of its outgoing and incoming traffic at the POIs for a period of three months from the date of initial interconnection. A TSP may request for additional ports at a POI if the projected capacity utilisation of the ports at such POI is likely to be more than the threshold prescribed under the Regulations. More importantly, the Regulations prescribe stringent timelines within which the TSP to whom the request is made must provide their acceptance and commence the process of provisioning the POIs.
  • IUC charges: The interconnection charges such as set up charges and infrastructure charges will be mutually negotiated and agreed between the parties subject to TRAI regulations or directions issued from time to time.
  • Disconnection of POIs: The Regulations provide for disconnection of POIs by a TSP for a cause or reason. However, before disconnecting a POI, it will be required to:
    • provide a show cause notice of fifteen working days with reasons for proposed disconnection;
    • if no response is provided to the show cause notice or if the response of counter party is not satisfactory, the TSP will issue a prior notice of fifteen working days specifying the date of disconnection of the POI; and
    • not disconnect the POI before expiry of the period of notice as stipulated in foregoing paragraph.
    • It is to be noted that the Regulations will not be applicable in case the POI is disconnected with mutual consent of parties or in compliance with the direction of TRAI or DoT.

  • Contravention of Regulation and penalty provision: If a TSP contravenes any provision of the Regulations, such breaching TSP will be required to pay an amount, by way of financial disincentive, not exceeding Rupees One lakh per day per licensed service area. The penalty stipulated under the Regulations will be in addition to any penalty which may be imposed on the breaching TSP by virtue of its license agreement with DoT or under the TRAI Act or rules.

Comment

The existing regulatory framework relating to interconnection has often been the bone of contention between the TSPs. In absence of provisions that prescribe timelines and consequences for not adhering to such timelines, TSPs have often pursued litigation to resolve their disputes. The Regulations set out provisions that aim to ensure that interconnection is facilitated between TSPs in a time bound manner. Further, the requirement to furnish bank guarantees may ensure that the cases of outstanding IUC charges and resulting disputes between the parties may lessen in future.

However, the Regulations also comprise provisions which may be stringent for TSPs, especially those which have existed in the market for a considerable time period. In particular, the stringent timelines prescribed under the Regulations may be a challenge for TSPs to comply with. TRAI may need to keep a close watch on implementation of the Regulations and may consider reviewing the Regulations from time to time to provide a level playing field for the TSPs. Nonetheless, effective enforcement of the Regulations will translate into better services for consumers.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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