| dc.description.abstract | Interconnection is not only a major competition issue per se, it is also a critical element of the basic telecommunications
agreement of the WTO. An important issue in interconnection regulation is interconnection charging especially in the
context of a dominant incumbent. Most regulators in developing countries face challenges in setting interconnection prices
in the absence of market information on the incumbent’s or entrant’s costs, competition or demand and models suited for
developing countries that also adhere to the WTO guidelines. There are few papers that illustrate the challenges faced by
regulators in such a context. This paper attempts to bridge the gap by highlighting the nature of interaction between the
regulator, incumbent, judiciary and the political environment, the role of formal models in setting interconnection charges
and the implications of rapid technological changes in a developing country context through a case study of India.
The case study highlights the point that besides independence, it is important to vest enforcement powers in the
regulatory agency for it to be credible. Incorporating the WTO interconnection guidelines within a developing country
context has implications for network growth and poses challenges to the regulatory processes.
Although Telecommunications Regulatory Authority of India (TRAI) started with a distortionary, inefficiently priced
network providing low coverage and quality, it has meandered its way to a more reasonable network access pricing regime.
The decreasing cost of technology and increasing incomes in India and political interventions in regulation have put
pressure on TRAI to provide lower interconnection charges and faster telecom growth. Thus, it is pragmatic for regulators
to start with a ‘‘quick and dirty’’ estimate, provided that they can signal the downward trend in interconnection pricing,
rather than wait for the ‘‘correct’’ estimates.
Adoption of future looking strategies (interconnection exchanges), use of a variety of formal models, and strengthening
of regulatory capacity are all necessary steps in fostering a competitive environment. Interconnection regimes set up early
in the reform process require a review. For successful competition, effective dispute resolution mechanisms and institutions
are also important. | |
