sion No. 2/2006

16 August 2006


2
Table of Contents

1. PROCEDURAL
HISTORY
3
2.
BASIS OF CHARGES
7
2.1 Digicels
request
7
2.2
Is reciprocal charging required, and if not, is it necessarily impermissible?
11
2.3
Establishing the costs of an efficient operator in Trinidad and Tobago
30
2.4
Are the operators providing the same service under similar conditions?
53
2.5
Would reciprocal charging in the initial period of liberalisation frustrate the
purposes of the Act?
57
2.6
The retail market and non-discrimination
74
2.7 Conclusion
79
3.
INTERIM INTERCONNECTION CHARGES
80
4.
ACCESS DEFICIT CHARGES
83
4.1 Digicels
request
83
4.2
The arguments of the parties
84
4.3
Must ADCs be ruled out of the Interconnection Agreement?
86
4.4 Conclusion
91
5. OTHER
SERVICES
92
5.1
Are the services subject to interconnection obligations?
92
5.2
Should the services be included in the Interconnection Agreement?
98
6. SMS
CHARGES
107
7.
ADVANCE PROVISION OF WHOLESALE SERVICES UNDERLYING NEW RETAIL
SERVICES 109
8.
DIVERSITY OF FIBRE
116
9.
RECOMMENDATIONS TO THE AUTHORITY
119


3

1.
PROCEDURAL HISTORY
The arbitration arises out of negotiations between TSTT and Digicel regarding
the agreement for the interconnection of their networks and services (the
Interconnection Agreement). Several issues have been raised, including
whether the Interconnection Agreement is to provide that the interconnection
charges of the parties shall be reciprocal, whether it is to refer to possible
access deficit charges, and various other matters.
The proceeding was initiated by Digicel by Notice of Dispute on 19 January
2006 under the Procedures for the Resolution of Disputes in the
Telecommunications and Broadcasting Sectors of Trinidad and Tobago (the
Dispute Procedures) issued by the Telecommunications Authority of Trinidad
and Tobago (the Authority). On 20 January 2006, the Authority issued a
Confirmation of Dispute under the Dispute Procedures. Digicel on 27 January
2006 served a Complaint on TSTT (the Complaint) setting out the subject
matters of its complaint, and attaching the draft Interconnection Agreement
then under negotiation. TSTT filed a Response on 10 February 2006 (the
Response), responding to the matters set forth in Digicels Complaint.
Digicel filed a Reply on 20 February 2006 (the Reply).
The Authority issued a Notice of Hearing dated 1 March 2006 and a
preliminary hearing was held with the parties and the Authority on 9 March
2006. Pursuant to that hearing, the panel was engaged by the Authority by
letter from the Authority on 14 March 2006, and was issued the terms of
reference for this arbitration, including the List of Issues agreed by the parties,
together with the Complaint, the Reply and the Response (the Terms of


4
Reference). The Authority issued an Order on 15 March 2006 formally
appointing the panel, referring the dispute to arbitration, and attaching the List
of Issues.
The panel held a procedural hearing with the parties on 31 March 2006 in Port
of Spain, at which Digicel also brought an application for setting interim
interconnection rates, detailed further in section

3 of this decision. The panel
issued Procedural Directions No.1 on 8 April 2006, which it subsequently
amended on 2, 12 and 15 May 2006.
The parties exchanged pleadings, witness statements and expert witness
statements, as well as reply witness statements and reply expert witness
statements. The parties filed pre-hearing submissions on 20 May 2006. The
evidentiary hearing was held in Port of Spain, beginning on 23 May 2006 and
concluding on 26 May 2006.
The parties submitted certain cost information to the panel during the
evidentiary hearing. The panel subsequently engaged a neutral expert, TERA
Consulting, a French consulting firm (the Panel Expert) to assist in reviewing
the cost information submitted by the parties. The panel selected the Panel
Expert after considering submissions of the parties regarding a shortlist of
three candidate consulting firms identified by the panel.
At the panels direction, the parties negotiated terms of reference for the Panel
Expert. Where the parties did not agree on the Panel Experts terms of
reference, the panel determined those terms, as well as adding some
additional terms. The panel issued the terms of reference for the Panel
Expert on 12 June 2006 and amended them on 21 June 2006. The Panel
Experts terms of reference reflected the agreement of the parties that neither
would have sight of the others confidential cost model information. Any


5
questions from and answers to the Panel Expert regarding a partys cost
model would be disclosed to the other party, but the concerned party could
redact confidential information from such questions and answers. Only the
panel and Panel Expert would have the unredacted, confidential versions.
The parties also agreed that the Panel Expert would prepare two forms of
report: an abridged version for the parties excluding confidential information,
and an unabridged version for the panel. This process was followed.
On 14 June 2006, the panel applied under section 2.10.19 of the Dispute
Procedures to the Board of the Authority for an extension of the deadline for
the panels decision due to additional evidence submitted by the parties.
The parties filed closing submissions and reply submissions on 28 June 2006
and 3 July 2006, respectively.
The Panel Expert provided their report on 14 July 2006. A further evidentiary
hearing was held by telephone conference on 19 July 2006. The parties filed
supplemental submissions on 24 July 2006. The panel requested
submissions from the parties on 8 August 2006 which were provided on 9
August 2006. The panel applied on 10 August 2006 to the Board of the
Authority for a further extension to todays date.
The Authority has certain powers under the Telecommunications Act of 2001,
as amended in 2004 (the Telecommunications Act) in relation to
interconnection agreements, and under the Concessions, the Authority may
require a concessionaire to prepare a Reference Interconnection Offer
(RIO). The parties pleadings referred sometimes to TSTTs RIO, and
sometimes to the Interconnection Agreement. For practical purposes, the two
may have become intertwined in the parties negotiations, but they are
conceptually and legally different documents. The matter properly before the


6
panel is the dispute between the parties regarding their failure to enter into the
Interconnection Agreement and not the Authoritys position on TSTTs RIO.


7
2.
BASIS OF CHARGES
2.1
Digicels request
TSTT proposed that the Interconnection Agreement include the following
clauses and Digicel opposed their inclusion:
9.2
[text omitted intentionally] Unless otherwise
stated, Charges payable by TSTT to [Digicel] for a
Service shall be the same as the Charges payable by
[Digicel] to TSTT for the same Service. In the event
that TSTTs Charges for a Service are varied pursuant
to Clause 10, [Digicel] will vary its Charges for the
same Service to ensure they remain the same. [text
omitted intentionally]
9.3
The Parties acknowledge that Charges for the
mobile termination part of the PLMN Terminating
Access Service specified in the Tariff Schedule are
reciprocal.
It is clear from the evidence of both parties that a significant factor in their
negotiation has been their interconnection charges, most particularly charges
for termination of calls on their mobile networks. Each party proposes that its
mobile termination charge be based on its cost model. According to Digicels
cost model, its per minute costs for termination of calls on its network are
TT$1.15 (US 18.3 cents). According to TSTTs cost model, TSTTs
termination costs are TT$0.45 (US 7.2 cents). To put these in perspective,
TSTT estimates its unit cost at 39% of the amount Digicel estimates as its unit


8
cost. Otherwise put, Digicel estimates its unit cost as being 156% over and
above TSTTs estimate of its own unit cost.
TSTT proposed that the parties should have the same, reciprocal charge, and
that it should be based on the results of TSTTs cost model. Lest there be any
confusion, references to reciprocal in this decision means the provision of a
given service from each party to the other at the same price. The parties did
not make the distinction used in some jurisdictions between reciprocal,
meaning each party must pay the other party, and symmetrical, meaning the
price each must pay must be the same.
Digicel argued that requiring reciprocal charging would be contrary to the
Telecommunications Act and the Concessions of each party, each dated 31
December 2005 (the Concessions). Digicels position was that the
Telecommunications Act and Concessions require charges to be based on its
own costs, which are likely to be, and in Digicels submission indeed are,
different. Since the parties costs may differ, the charges may differ. Only if
the parties interconnection costs were the same could their interconnection
charges be expected to be the same.
Termination costs and charges based on such costs are set in relation to
volumes of minute units of usage. Digicel argued that TSTT enjoys
substantial economies of scale in relation to usage, i.e., volumes of call traffic.
Digicel argued that as a new entrant, until the market reaches a steady state
and so long as it does not have the usage volumes at the level of its network
capacity, it would suffer losses if it used TSTTs proposed charge.
Furthermore, TSTT will enjoy