Bangkok Post (16 November 2007)
The mobile operator DTAC has stepped up its ongoing fight with state-owned TOT Plc over interconnection charges by announcing it has withdrawn its year-old offers for how inter-network traffic should be settled. DTAC, the country's second-largest mobile operator, submitted a letter to TOT on Nov 8 announcing that it would scrap its offers proposed last year to establish a bilateral interconnection agreement.
DTAC would also no longer accrue funds for interconnection charges (IC) to TOT based on the original offers. IC would only be accrued from the date that both DTAC and TOT reached an agreement.
Since last year, DTAC has halted paying access charges to TOT in favour of IC.
TOT is expected to sue DTAC for payment in Civil Court, with the case filed possibly as early as today.
Sigve Brekke, the chief executive officer of DTAC, said the company had made numerous attempts to reach a voluntary agreement with TOT as required by the interconnection framework.
''We have done all that we can do. What else can we do?'' he said with a hint of frustration.
Mr Brekke said TOT had refused to accept DTAC's IC payments since the beginning, leading the company to hold the accrued payments in a separate account in escrow. Over 1.9 billion baht in funds have been set aside for IC payments to TOT.
He said TOT had repeatedly refused to comply with the interconnection regime as set by the National Telecommunications Commission and was only frustrating efforts to reform the industry for the ultimate benefit of consumers.
The interconnection regime dictates how different operators should be compensated for traffic flowing to their networks. The operator of the caller is obliged to pay a termination rate to the operator of the receiver of the call. A transit payment is made to operators whose networks handle traffic between the originator and the terminator.
Interconnection has been envisioned as eliminating one of the largest distortions among the mobile operators, the question of access-charge payments.
DTAC and third-ranked True Move, whose operating concessions come from CAT Telecom, have historically been obliged to pay an access charge of 200 baht per month per postpaid number and 18% of pre-paid revenue to TOT Plc. Mobile leader Advanced Info Service, whose concession is with TOT, does not pay the access charge.
Mr Brekke said access charge was initially made for two factors. First, to allow DTAC to access TOT's fixed-line telephone network. Second, to compensate TOT as the telecom regulator for the allocation of new numbers.
''But TOT no longer provides these services. We receive our numbers from the NTC, and pay a charge of one baht per number per month to the NTC,'' Mr Brekke said.
But from TOT's perspective, the IC system is clearly to their disadvantage, particularly since the mobile operators have established clear network links among each other to bypass TOT networks.
DTAC's net IC payments to TOT were 9% of total cost of services in the first quarter, or around 1.01 billion baht. By the third quarter, net IC payments to TOT had fallen to 2% of total service costs, or 214 million baht.
''At the beginning of the year, 20% of our calls to AIS and True Move numbers were in transit through TOT. Now, there is none, and the IC only reflects traffic that is going directly to TOT fixed line numbers,'' Mr Brekke said.
He said for DTAC, the company had been a net payer of IC to True Move and AIS in the first nine months, balancing out any benefits gained from savings in access charges. But IC was influenced by the size of each operator's subscriber base and promotional packages, and Mr Brekke indicated that IC for the fourth quarter was more in balance overall.
DTAC's third-quarter telephone service revenues , with IC from other private operators but excluding TOT, totalled 16.1 billion baht, up 35.7% from the year before. Without IC, revenues were 12.46 billion baht, up 4.9% from the year before.
On the expense side, cost of telecom services with IC was 11.06 billion in the quarter, up 48.3% year-on-year, compared with 6.9 billion without IC, down 7.7% year-on-year.
''If you ask, does DTAC benefit or not from IC, the answer is no. We pay more to AIS and True Move now,'' Mr Brekke said.
''And overall, the state _ TOT and CAT Telecom _ receive about the same from all the operators. We pay 40 billion baht today to the state, essentially a cost that is borne by customers.''
TOT's loss from access charges was essentially CAT Telecom's gain, Mr Brekke said, as its revenue sharing agreements with DTAC and True Move would no longer include access-charge fees.
''My hope is that the new government understands that for the TOT, the issue isn't really about access charges for TOT, but rather what it's business model going forward should be,'' Mr Brekke said.
''The NTC is moving forward with liberalisation and opening up competition. But TOT is continuing to fight for the past.''
Mr Brekke said lower regulatory costs would mean lower costs for the public.
''Competition will ensure that any cost savings are passed on the consumers,'' he said.
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