NTC to issue new rules on linkup charges

The National Telecommunications Commission (NTC) is set to issue a memorandum circular that will require public telecommunications entities (PTEs) to shift from revenue sharing arrangements when accessing or interconnecting to another PTE to cost-based access and interconnection charges within three years starting January 2001.

At present, interconnected PTEs share their toll revenues collected from customers in such a way that the originating and terminating PTEs get an equal share, while the PTEs providing transmission services get a different percentage share, with the PTEs sharing information relating to their revenue collections each period.

The NTC said that the current arrangements are from cost-based and are not in a form that will allow the industry or the commission to review the retail pricing arrangements and to correctly identify and target the needed industry cross subsidies to foster viable new network rollout into unserved and underserved areas.

It added that the present revenue sharing arrangement is not conducive to the further development of competition in toll and international calls which over time can lead to lower prices and better services for customers.

In its draft guidelines, the NTC noted that at the wholesale level, the PTEs which interconnect with each other should be able to recover the economically efficient costs of providing the access and interconnection services.

The charges, the commission said, should cover a reasonable proportion of each of the maintenance and operating expenses, the return of capital (economic depreciation), and the return on capital (cost of capital times the times the written down replacement costs) for the infrastructure employed to provide access and interconnect services at a particular point.

The NTC suggests that the move to cost-based access and interconnect charges could initially occur by each PTE transitioning from the revenue sharing arrangements through cost reflective wholesale charges (e.g. to an average interconnect charge within each economic region of the country but not necessarily cost based), over a transifition time frame to be established and defined in the guidelines.

When switching and wholesale billing systems are sufficiently developed, a final move to cost-based interconnect charges by the route used for the originate or terminate call to the POI could be utilized, the NTC said.

The NTC said the current revenue sharing arrangements used for national access and interconnect charging purposes are unsustainable for the Philippine telecommunications industry in the near term.

It said sustained pressure from the World Trade Organization and other international bodies, as well as from international competitors, has placed considerable downside pressure on the revenue surpluses that can be expected to be received from international telecommunications services.

"As a result, in order to fund the continuing need for additional national investment in telecommunications infrastructure in a sustainable manner and in order to further the government’s goals of expanding services into unserved and underserved regions, new sources of cross subsidies and internal funding need to be developed," the NTC said.

The retail rebalancing process is designed to resolve some of the prime issues relating to the sources of funding for various cross subsidies.