Wednesday 8 February 2012

Contents of module

Type II Type II

Type II Type II interconnection is distinguished in the TA’s Statement from Type I Type I as interconnection at points in the local loop. (See Statement 8 Point of Interconnection, 5 June 1995).

Type II Type II

Interconnection takes place at “A” on the customer side of the main distribution frame at the local exchange, or at “B” the street level distribution point, or at “c” the customers’ premises main distribution frame.

In other jurisdictions this is known as unbundling of the local loop. Several reasons exist for mandating local loop unbundling, or Type IIType II interconnection, but behind them all is customer choice and the improved standards and range of service that results.

  1. Customer access may be restricted by “bottleneck” facilities, for example where a residential building cannot accommodate additional subscriber equipment or access inbuilding wiring.
  2. Customers in remote locations may never be served directly by a second network, but may nevertheless wish to use the services of second network.
  3. A customer may wish to use one network for certain services but another network for other services.
  4. Indirect access can represent an efficient use of the existing infrastructure without the disruption of road digging.
  5. Competition is likely to be more effective if local loop unbundling is required.

But just as with Type IType I interconnection, there is the risk that local loop unbundling, or indirect customer access, may remove the incentive to build competing direct customer access networks.

Facilities-based competition empowers new entrants to offer new types of services not always available over the incumbents network. But new technologies also shift the reference points.

For example, wireless local loops, fixed wireless networks and even satellite networks can become effective alternatives, as can mobile cellphones. Broadband technologies in particular offer alternatives, such as cable networks.

The policy in Hong Kong has been enabling, that is to say, FTNS operators have the choice to request type IItype II interconnection if they want to provide access to customers not directly on their networks. ‘Over time all FTNS operators are each expected to have become the direct access provider for significant numbers of customers’ was the view of the TA in Statement No.1 in March 1995.

But by the time the three-year exclusivity period for FTNS licences was up for review in 1998 this still showed little signs of happening. There were two main reasons.

First, the international interconnection arrangement between HKTI and the FTNS, known as the Delivery Fee mechanism, was the main source of revenue for the FTNS operators who resorted extensively to callback to capture market share. (The Delivery Fee mechanism is looked at in Part Five).

Second, domestic business and residential tariffs remained unbalanced, or below cost. There was little incentive therefore for the FTNS to invest heavily in the local loop when they could capture the main revenue source — IDD traffic — through indirect customer access codes (007 – 009). Predictably they focused local investment in the central business districts.

Broadband

When the initial period of exclusivity for the FTNS licences expired OFTA agreed to extend it to 2003 in exchange for their agreement required them to undertake additional rollout commitments, and at the same time local tariff rebalancing was introduced. This followed upon HKTI negotiating the end of exclusivity for their international facilities and voice licence, and the government introducing international simple voice resale (ISVR) from January 1999. ISVR has knocked the bottom out of the profitability of the IDD market, (Ure2 provides an analysis) and as a consequence all FTNS are looking for revenues from other sources.

The advent of broadband technologies in particular is driving them to re-focus on the domestic customer base, and to roll out broadband access. Competition coming in the form of cable TV modems, direct-to-home TV and Internet satellite and third generation (3G) mobile cellphones is accelerating this process. Broadband interconnection policy will be discussed in Part Six.

Capacity at Points of Interconnection (POI)

The TA Statement No. 8, Points of Interconnection, 10 June 1995 sets out policy as follows

  1. With type IItype II interconnection, POI shall be at any technically feasible point in a network as requested by the operator asking for interconnection.
  2. With type IItype II interconnection, POI is possible on the customer side of the main distribution frame at the local exchange, at the street level distribution point or at the main distribution frame located in the customer’s premises.
  3. Dimensioning a network is not an easy task, and estimating traffic flow through a POI is no exception. In case of a disagreement, the requesting party’s estimate should prevail, but the TA can intervene to require the requesting party to pay the full cost of any unused capacity.