Tackling Telecoms Operators’ Interconnect Indebtedness

20 Dec 2012

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NCC CEO, Eugene Juwah

The increasing level of interconnect indebtedness among telecoms operators is giving the telecoms regulatory body a hard challenge to contend with, writes Emma Okonji

The Nigerian telecoms regulatory body, the Nigerian Communications Commission (NCC), is worried over the increasing rate of interconnect indebtedness among telecoms operators, which has risen to over N20 billion in 2012.

Before now, NCC had tried to manage the situation through the establishment of six interconnect clearing houses whose mandates were to settle all disputes of interconnect indebtedness and develop a platform through which networks could interconnect their voice traffic. They were also mandated to accept payments of interconnect bills, and settle all financial claims relating to such bills. Although the six interconnect clearing houses were operational, there was little they could do to reduce the indebtedness, which kept pilling, because most telecoms operators did not sign up with them in the first instance, and among the few that agreed to sign up, some of them kept accumulating their bills, thus making it difficult to reduce interconnect indebtedness in the telecoms sector.

Disturbed by the ugly situation, the NCC decided to go into dialogue with concerned operators, aimed at understanding what their challenges could be.
Unsatisfied with the outcome of the dialogue, the NCC, last week, organised a public regulatory forum on interconnect indebtedness, where it invited experts in mediation and arbitration, including experts in dispute resolution, to proffer the right solution that would address the situation.

Interconnection Indebtedness

In technical parlance, interconnection is the physical link of networks through a channel, where traffic generated from one network is terminated on another network at a determined rate. It is a process by which calls from one network is terminated on another network. It is the basis by which telecommunications’ subscribers are enabled to call other subscribers, regardless of the networks in which they are domiciled.

The interconnect indebtedness in the industry has resulted in the urgent calls for a review of interconnect rates in the past one year. The debt is put at over N20 billion with the bulk of the debt owed to GSM operators. As at June 2005, Vmobile (Airtel) said that between NITEL and other Code Division Multiple Access (CDMA) operators, it was owed more than N4.2 billion. While NITEL had claimed it was being owed more than N4.5 billion in interconnect debt as at June 2005.

MTN, the network with the highest number of subscribers also claimed it was owed close to N5 billion in interconnect debts. The indebtedness, which was allowed to accumulate over the years, has grown to over N20 billion, according to a recent report. More worrisome is that in most cases, the capitalisation of some of the companies that owed was not up to 10 per cent of their indebtedness making it a very bad case for the creditor networks. Unfortunately some debtors have either been bought over or have gone out of business.

Reasons for Interconnect Indebtedness

The large volume of the interconnect debts in the Nigerian telecommunications sector is often linked to the sharp difference in revenue sharing ratios between GSM operators and other operators such as CDMA operators and fixed wireless operators. The feeling in the industry is that if the situation persists whereby GSM companies are better favoured than the fixed and wireless operators, such a situation will continue to lead to interconnectivity debt, or breakage. The revenue sharing formula differs from between the ratio of N14:N6 and N12:N8. While the CDMA operators pay GSM operators N14 for every call generated from CDMA network and terminates on the GSM network, the GSM operators pay N6 to CDMA operators for every call generated on the GSM network and terminates on the CDMA network. The disparity in the billing system is being contested by CDMA operators, who are calling for a uniform interconnect billing rate. They are asking that parity be introduced with growing argument that all network face equal challenges.
Industry experts have argued that about 60 per cent of the total indebtedness was in dispute, as some operators blamed the huge indebtedness on poor billing system among some telecoms operators.

Between Roaming and Domestic Agreement

Stakeholders are worried that GSM operators sign roaming agreement with international traffic carriers on interconnect rates and they do not default as they pay their bills as and when due. They argued that if GSM operators in Nigeria could pay roaming interconnect rates to international carriers, there was no reason for refusing to pay the interconnect rates to domestic carriers within the country.
They suggested immediate disconnection of the networks of debtors, while some argued that disconnection of indebted operators should be the last resort in solving the challenge, owing to its implication.

NCC’s Worry over Interconnect Indebtedness

Addressing a large audience at the interconnect indebtedness forum held in Lagos recently, Executive Vice Chairman of NCC, Dr. Eugene Juwah, who said that the telecoms industry had achieved so much in the past years, as a result of sincere collaboration among all stakeholders, but raised, raised some fears that the current interconnection indebtedness could turn out to a major source of conflict and challenge that could destabilise the success already recorded in the sector. The issue of interconnect indebtedness is peculiar to Nigeria as it has been observed that the challenge does not exist in other countries, Juwah said.
According to him, “the commission put in place, regulatory measures to guide the process, but some operators took advantage of the provisions of the guidelines on procedure for granting of approval to disconnect telecommunication operators by deliberately refusing to promptly discharge their financial obligations towards their interconnect partners.”
He said the commission noted that the challenge continued to escalate, and that the current accumulative debt profile in the industry was becoming worrisome.

Effect on Indebtedness on Subscribers, Operators

According to former Executive Commissioner at NCC, Stephen Bello, customers would suffer poor service quality, as creditors may reduce interconnecting facilities to debtors, thus leading to lower number of completed calls, as well as the inability to make outgoing calls in cases where NCC grants permission for partial disconnection of the debtor’s network.

Bello said it could cause emotional disturbance to subscribers due to inability to contact associates or family members, and that it would also bring some forms of inconveniences to them, in changing numbers and in informing business or family members about the change.
On the part of operators, Bello said it would lead to loss of revenue as a result of poor service quality, leading to loss of subscribers, as well as loss of revenue from originating traffic due to partial disconnection, and a total loss of revenue in case of full disconnection.

Legal Solution to Interconnect Indebtedness

In proffering solution to the challenge, an arbitrator in dispute settlement with the Lagos State Government, Abimbola Akeredolu, called for the strengthening of the role of NCC in managing the situation.
According to her, “NCC has a major role to play in ensuring that interconnect clearing houses are carrying on their duties according to set down regulations; in order to eliminate any duplication of administrative and bureaucratic procedures in settlement of usage charges.”

She explained that proper regulation was necessary to eliminate any form of fraudulent amendment to usage billings or payment of fees.

She equally called for establishment of an asset management company that would solve the problem of interconnection indebtedness by buying up the debts of any telecoms operator that is not able to pay or refuses to pay its debts to other interconnection partners.

“This option at the moment may be the best way out as it will buy up current debt and create a fresh slate to all operators,” Akeredolu said. She also suggested the immediate disconnection of every operator that owed other network operators.
Chairman, Dispute Resolution Committee, Nigerian Bar Association, Olasupo Shasore, called for the establishment of mediation and arbitration panel that would handle debt settlement among telecoms operators.

Tags: Business, Nigeria, Featured, Telecoms Operators

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