TSTT Claims Victory for Consumers as Arbitration Panel Rejects Digicel Interconnection Plan

August 2006

Arbitration hearings on the interconnection dispute between TSTT and Digicel concluded yesterday (August 16th, 2006) with the panel rejecting Digicel’s proposal on how interconnection rates between TSTT and Digicel should be established. The interconnection rate is the charge operators pay to each other to enable their respective customers to make and receive calls between each others network.

The networks of the two operators were physically interconnected on the 31st March 2006, as promised by TSTT. The parties began negotiations on interconnection rates in early January but Digicel eventually referred the matter to the Telecommunications Authority of Trinidad and Tobago (TATT) when they failed to get an agreement with TSTT. The main point of contention was whether both companies should pay the same interconnect rate for the same service or whether TSTT should pay Digicel a higher mobile termination rate than what Digicel would be paying TSTT.

The Panel found on balance that the situation does not require or justify the development and use of separate efficient costs based on the stage of network build-out and customer acquisition.

“TSTT’s interconnect rate proposal was based on the outputs of TSTT’s costing model which was reviewed by an independent expert in the proceedings. That expert concluded that TSTT’s mobile termination costs were that of an efficiently operated network” says Lisa Agard Vice President of Legal, Regulatory and Carrier Services at TSTT. She said that economic efficiency was a key objective of a liberalized telecommunications environment. This would ensure that customers do not pay for inefficiency.

The interconnect proposal from Digicel, if accepted by TSTT, would have meant that TSTT would have had to increase the rates that it currently charges both its fixed line and mobile customers who make calls to Digicel. While the Panel did not set interconnection rates it determined that mobile termination rates should be within a range comprised of TSTT’s cost model, a New Zealand Benchmark study and Digicel’s cost at a stage of static efficiency. That provides a narrow range for those rates.

Agard said that TSTT’s interconnect proposal established a good benchmark in Trinidad and Tobago for the efficient operating of a mobile network. “TSTT and Digicel operate similar GSM systems so there should not be any disparity in their costs versus ours.”

Agard expressed the view however that the arbitration panel’s decision to establish a common rate for both was more a victory for the public who have supported the liberalization process all along. “There was a very real possibility that the benefits of liberalization in Trinidad and Tobago would not have materialized with the implementation of a differential interconnect rate. The tribunal’s decision will ensure that operators strive to achieve maximum efficiency and not make the public shoulder the burden of any inefficiency in their operations.”