INTERNATIONAL TELECOMMUNICATION UNION TELECOMMUNICATION DEVELOPMENT BUREAU Document: 11 GLOBAL SYMPOSIUM FOR REGULATORS Geneva, Switzerland, 8-9 December 2003 INTERCONNECTION DISPUTE RESOLUTION MINI CASE STUDY 2003: JORDAN Dispute Resolution and Consensus Building in Interconnection International Telecommunication Union (ITU) JJoorrddaann MMiinnii--CCaassee SSttuuddyy 22000033 DDiissppuuttee RReessoolluuttiioonn aanndd CCoonnsseennssuuss BBuuiillddiinngg iinn IInntteerrccoonnnneeccttiioonn International Telecommunication Union This mini case study was conducted by Robert Bruce and Rory Macmillan of Debevoise & Plimpton, London U.K. with the active participation of country collaborators Massoun Shocair and Muna Nijem. The views expressed in this paper are those of the authors, and do not necessarily reflect the views of ITU, its members or the government of Jordan. The authors wish to express their sincere appreciation to the Telecommunications Regulatory Commission for its support in the preparation of this mini case study. This is one of five mini case studies on interconnection dispute resolution undertaken by ITU. Further information can be found on the web site at http://www.itu.int/ITU-D/treg. © 2003 ITU International Telecommunication Union Place des Nations CH-1211 Geneva, Switzerland Jordan Mini-Case Study: Dispute Resolution and Consensus Building in Interconnection I. Introduction to the Market, Regulatory Regime and Interconnection Jordan has a population of about 5.3 million and a GDP of about JD 6.6 billion (JD 1.00 = US$ 1.41). It has nearly 675,000 fixed lines, a teledensity of about 12.7%, and about 1,220,000 mobile subscribers, a penetration rate of about 22.9%. Jordan’s telecommunications sector has been undergoing a staged pace of liberalization since its Telecommunications Law (the “Law”) was enacted in 1995 and amended in 20021. The Law established the Telecommunications Regulatory Commission (the “TRC”) as the regulatory body for the telecommunications sector. Incumbent operator Jordan Telecom was initially partially privatized in 2000. The commencement of mobile services under a license issued to private operator Fastlink in 1995 introduced interconnection as a regulatory matter. The entry into the mobile services market in 2000 by MobileCom, a subsidiary of Jordan Telecom, has increased the focus on interconnection regulation. Jordan Telecom is scheduled to lose its monopoly over fixed line services at the end of 2004 and Fastlink and MobileCom’s duopoly is scheduled to end at the end of 2003. New entrants requiring interconnection with Jordan Telecom’s network – and the networks of the mobile operators – are expected to make interconnection a crucial priority for liberalization. The TRC has taken initiatives in 2002 and 2003 which offer interesting insights into the development of interconnection regulation and dispute resolution which will be of interest to other countries whose telecommunications sectors are in the process of liberalization and which are developing dispute resolution processes. Given the importance to dispute resolution of the presence in the regulatory environment of consultative and consensus building processes, this case study describes the consultative process initiated by the TRC for interconnection, the TRC’s resulting decision on interconnection as well as the TRC’s subsequent interconnection dispute process. Notable in particular is the clarity and transparency of the TRC’s public statements on interconnection, including an Explanatory Memorandum in support of the Decisions of the TRC concerning interconnection charges and related retail prices, dated June 2003 (the “Explanatory Memorandum”)2 and its Interconnection Disputes Process, dated July 2003 (the “Interconnection Disputes Process”)3, both of which are particularly commendable reading. They are Annexes 1 and 2, respectively, to this case study. The TRC is responsible under the Law for regulating interconnection, although the primary tool for such regulation is the interconnection provision in each of the licenses of Jordan Telecom, Fastlink and MobileCom. Jordan’s fixed and GSM license agreements are attached as Annexes 3 and 4, respectively, with this case study. These set forth the core regulatory principles of interconnection, which must be provided: 1 Available from the TRC’s website at: http://www.trc.jo/Static_English/telecommunications1.shtm 2 Available from the TRC’s website at: http://www.trc.jo/Static_English/New Stuff/TRC Decision 300603 Final.pdf 3 Available from the TRC’s website at: http://www.trc.jo/static_english/new stuff/interconnection disputes process.pdf - 1 - 09.09.2003 “in a timely fashion on terms, conditions (including technical standards and specifications) and cost-based rates that are transparent, reasonable, having regard to economic feasibility, and sufficiently unbundled so that the interconnecting party does not pay for network components or facilities that it does not require for the service to be provided. In this context, cost-based rates means rates comprised of the long run incremental costs of providing interconnection plus a reasonable share of the common costs of the Licensee’s operations.” (License Article 6.2.1.3)4 That the licenses themselves already enshrine the principle of using long run incremental costs (LRIC) as the basis for setting rates is in itself interesting since this sets this choice over other approaches, such as fully allocated costs (FAC), for the full period of the licenses. These license provisions, however, only really became developed substantially as the TRC turned its regulatory focus to interconnection in 2002. II. Consultative Forum for Interconnection The TRC approved guidelines on interconnection (the “Interconnection Guidelines”)5 in November 2002, which are attached with this case study as Annex 5. In some detail, the Interconnection Guidelines address operators’ joint interconnection committees, the provision of interconnection services, technical aspects of interconnection, and commercial aspects such as charges, payments and billing. Upon issuing the Interconnection Guidelines, the TRC launched a consultative process with sector participants with the purpose of implementing the Interconnection Guidelines, which permitted an implementation period of twelve months. The TRC established an Interconnect Steering Committee (the “ISC”), chaired by the Chairperson and CEO of the TRC and included participants from Jordan Telecom, Fastlink and MobileCom, other licensed operators and the TRC to oversee implementation of the Interconnection Guidelines. The ISC established working groups for: the designation of licensees which would be subject to the Interconnection Guidelines; producing cost and charge methodologies for fixed and mobile networks; reviewing changes to existing licenses; commercial and technical terms of reference interconnection offers (“RIOs”); and legal aspects of RIOs. The ISC established a plan to set cost-based charges by the end of June 2003 and in December 2002 issued guidance papers to operators as to cost allocation in fixed and mobile networks. The ISC’s process was conducted in the context of an on-going interconnection dispute between Jordan Telecom and Fastlink in 2002 and 2003. III. The June 2003 Decision on Interconnection As it became apparent that the ISC’s working groups were not proceeding in a manner that gave the TRC confidence in meeting the timetable for establishing cost-based interconnection charges, the ISC in March 2003 began contemplating the interim use of benchmarking charges from July 1, 2003 should cost-based charges not be established by then. Consequently, the TRC commenced an international benchmarking exercise, using 16 (unidentified) countries whose interconnection rates were set on the basis of cost-based methodologies. These international benchmark charges were then translated to apply to Jordan, taking into account Jordanian labor costs, for example, resulting in the TRC’s own benchmark model results. When the TRC was not satisfied by the cost models provided by Jordan Telecom, Fastlink and MobileCom – the TRC stated that they were provided late and contained inappropriate cost 4 Fixed License Agreement available from the TRC’s website at http://www.trc.jo/Static_English/doc/Fixed%20Lic1.pdf Jordan Telecommunications Company Public Mobile Telephone (Cellular) License Agreement available from the TRC’s website at http://www.trc.jo/Static_English/doc/Mobile%20GSM.doc 5 Available from the TRC’s website at: http://www.trc.jo/Static_English/doc/Interconnection Guidelines Final.doc - 2 - 09.09.2003 allocations and assumptions – the benchmarking exercise became the basis for the TRC’s decision on June 30, 2003 (the “June Decision”). The June Decision set the domestic and international mobile call termination rates, Jordan Telecom’s fixed network termination rate and the discount from Jordan Telecom’s retail tariff for international transit rates charged by Jordan Telecom. The box below from the June Decision’s Explanatory Memorandum summarizes its conclusions on interconnection charges: Table 1. Benchmark, Model and Approved Interconnection Charges International TRC Benchmark Operators Cost TRC Decision Service Pre 1st July 2003 Benchmark Model Results Model Results 1st July 2003 charges Fixed 25 fils/min peak 6.5-11 fils/min peak 11.5-13 fils/min CONFIDENTIAL 15.8 fils/min Termination 20 fils/min off 3-6.5 fils/min off blended (unique blended peak peak peak and off-peak rate) Mobile 120 fils/min peak