DTAC brings access charge dispute
with TOT to a boil
By Jon Fernquest[Introduction|Article]
[Reading Questions|Answers]
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Have you ever wondered exactly what all the wrangling over connect charges between TOT and DTAC is all about?
Today's article provides some answers. First, for some essential background history from Chang Noi's commentary earlier this year on the longstanding inter-connection charge dispute between TOT and non-AIS mobile phone operators:
"In 1990, the two telephone agencies under the Ministry of Communications granted concessions to two private companies to install mobile phone systems. TOT’s client was the AIS company of an unknown, debt-ridden computer salesman, Thaksin Shinawatra. CAT granted the contract to Boonchai Benjarongkul’s UCOM (later TAC, later DTAC), a 30-year-old company with a long track record in the communications business.TOT and CAT were fierce rivals. To give their concessionaire a market advantage, TOT imposed a connection charge on all mobiles calling into a landline phone, but exempted AIS. This little kink gave AIS a guaranteed higher margin, and more funds to blast away competition with saturation marketing. For the next fifteen years, AIS did everything necessary to preserve this unfair advantage." (Mobile phone: a drama in three acts (Bangkok Post, 28 May 2007)
Here is the vocabulary found above:
bring to a boil - heat water until it boils
wrangling - fighting over something
a track record - has a lot of experience
landline phone - old-fashioned phone with a wire, at home or office
exempted - given permission to no follow regulation
a kink - problem
saturation - filled completely, filled to capacity, no more can be added
saturation marketing - "Greater than normal presence in the market, achieved by, for example, providing a store outlet in every neighborhood or advertising so frequently that everyone has heard the message numerous times." (Source)
a concessionaire - someone who owns the rights and permission to do a restricted business like run mobile phone service
Reading Questions
Here are some questions to guide your reading (See answers at end):1. What offer did DTAC make last year to TOT?
2. Why is this offer now being scrapped? (Use inference)
3. What has DTAC been doing with accumulated interconnection charges under this scheme?
4. Is DTAC continuing to accumulate these charges?
5. How is TOT likely to respond to DTAC's withdrawal of its longstanding offer to TOT (that was never accepted by TOT) ?
6. Who is the Mr. Brekke interviewed in the article?
7. Why did DTAC make these offers to TOT a year ago?
8. Under whose authority was the interconnection (IC) framework (regime, system) initiated?
9. Why did TOT not accept the money offered by DTAC? (Use inference)
10. What was the underlying purpose of the interconnection framework created by the National Telecommunications Commission (NTC)?
11. What is the purpose of an interconnection framework (IC system, IC regime)?
12. What is True Move's rank among mobile phone operators in Thailand?
13. Where did the concessions of DTAC and True Move's originate?
14. Where did the AIS concession originate?
15. How do the network access charges that a mobile operator charges depend on where the operator's concession originated?
16. What were the initial reasons for non-AIS operators paying access charges to TOT?
17. Do those reasons still apply?
18. Why does TOT not like NTC's interconnection framework?
19. How has the involvement of TOT in traffic passing between mobile operators changed over the last year?
20. Are TOT and Cat Telecom part of the private sector or the public sector and state ?
21. If DTAC and other mobile operators were forced to pay access charges which mobile operator would gain a competitive advantage?
22. What is the difference between a mobile phone concessionaire paying access charges and paying interconnection charges (IC)?
Bangkok Post Article November 16, 2007
TELECOMMUNICATIONS CELLULAR SERVICES AND SATELLITESDTAC gives up hope of settling access charge dispute with TOT
CHIRATAS NIVATPUMINThe 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.
TOT - a Thai state-owned telecommunications company. Originally established in 1954 and corporatized in 2002, TOT used to be known as the Telephone Organization of Thailand and TOT Corporation Public Company Limited. TOT's main line of business is fixed line telephony, although it has several other businesses, including mobile telephony. (See Wikipedia)
access charge - money paid by all mobile operators (except AIS) to TOT for access to their network
interconnection charges (IC) - charges paid by mobile phone operators under the IC system set up by the NTC
settling - reaching a legal agreement to end a dispute
stepped up - intensified, increased activity in
ongoing - currently happening, not finished yet
interconnection charges -
inter-network traffic - calls that are go from one network to another network (for example, if you call someone's home phone from your mobile phone)
submitted - officially give
scrap - put an end to, throw away
bilateral - between two people (parties)
accrue - amount gradually increases over time
civil court - (the opposite is "criminal court")
case filed - starting a legal case against someone by providing the necessary legal documents
Failed attempts
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.
voluntary - not forced, can choose to do or not to do
framework - system, set of rules for doing something
hint of frustration -
in escrow - money being held in a special account, to be handed over for a special payment in the future
set aside for - not used now, to be used in the future for
refused to - asked to do, but did not do
comply with - follow a law or regulation, do what the law says
National Telecommunications Commission (NTC) - the first independent state telecommunications regulator in Thailand, regulates all telecommunications services, formulates a master plan, sets criteria and categories of telecommunications services, permits and regulates the use of spectrum for telecommunications services, and grants licenses to telecommunications operators (See website and policy)
reform - improve existing system and way of doing things
ultimate - in the end
A fair and just interconnection regime
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.
a regime - a way of running a system or organisation, especially the rules used
dictates - tells what can be done (according to rules or law)
compensated for - paid money for something of value given
traffic - movement through a road, network, river, etc.
termination - at the end of
transit - passing through a place temporarily
originator - the place where it comes from
terminator - the place where it ends
envisioned as - the way that people see it in their imaginations
distortions - innaccuracies, untrue representations of things
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.
True Move - the telecommunications company owned by the CP Group of Thailand (See Wikipedia)
operating concessions -
CAT Telecom - CAT Telecom Public Company Limited is the Thai state-owned telecommunications company that owns Thailand’s international telecommunications infrastructure including its international gateways, satellite and submarine cable networks connections. Until recently, CAT had a monopoly on international telephony and CDMA mobile telephony. CAT partners with sister state-enterprise TOT to provide a GSM mobile service and with Hutchison to provide a CDMA mobile service. Corporatized in July 2003, CAT Telecom used to be known as the Communications Authority of Thailand (See Wikipedia)
obliged to - must do, required to
postpaid number - a mobile phone customer who pays for service with a bill at the end of each month
pre-paid - buying mobile time on a card
the NTC - the National Telecommunications Commission
perspective - viewpoint, opinion
bypass - go around, avoid dealing with
Statistics
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.
Liberalisation or a return to the past
"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.
Answer Key:
1. What offer did DTAC make last year to TOT?
It made an offer for settling inter-network traffic payments.
("...has withdrawn its year-old offers for how inter-network traffic should be settled...Since last year, DTAC has halted paying access charges to TOT in favour of IC.")
2. Why is this offer now being scrapped? (Use inference)
Apparently, because the offer was not accepted.
3. What has DTAC been doing with accumulated interconnection charges under this scheme?
They have been paying them into a fund ("accrue funds").
4. Is DTAC continuing to accumulate these charges?
No, not anymore.
5. How is TOT likely to respond to DTAC's withdrawal of its longstanding offer to TOT (that was never accepted by TOT) ?
Sue DTAC.
6. Who is the Mr. Brekke interviewed in the article?
He is CEO of DTAC, the Thai subsidiary of the Norwegian telecommunications company Telenor and the second largest mobile phone operator in Thailand. His photo with his management team is at the top of this page.
7. Why did DTAC make these offers to TOT a year ago?
Because reaching a voluntary agreement with TOT was required under the "interconnection framework."
8. Under whose authority was the interconnection (IC) framework (regime, system) initiated?
It was initiated under the authority of the National Telecommunications Commission (NTC).
9. Why did TOT not accept the money offered by DTAC? (Use inference)
Apparently, because it would have meant they accepted the offer. (Although this does explain why TOT chose to sue DTAC when they withdrew the offer.)
10. What was the underlying purpose of the interconnection framework created by the National Telecommunications Commission (NTC)?
To reform the telecommunications industry for the ultimate benefit of consumers.
11. What is the purpose of an interconnection framework (IC system, IC regime)?
a. To specify the compensation that an operator receives for traffic that flows through its network.
b. To do so with fairness and without distortions.
12. What is True Move's rank among mobile phone operators in Thailand?
Number three.
13. Where did the concessions of DTAC and True Move's originate?
CAT Telecom.
14. Where did the AIS concession originate?
TOT.
15. How do the network access charges that a mobile operator charges depend on where the operator's concession originated?
a. If the concession originated with CAT Telecom, an access charge was required.
b. If the concession originated with TOT, there is no access charge (e.g. AIS)
16. What were the initial reasons for non-AIS operators paying access charges to TOT?
a. To allow DTAC to access TOT's fixed-line telephone network.
b. To compensate TOT as the telecom regulator for the allocation of new numbers.
17. Do those reasons still apply?
No, because TOT no longer provides these services, according to Mr. Brekke.
18. Why does TOT not like NTC's interconnection framework?
Because under the system mobile operators have established network links between themselves that bypass TOT networks.
19. How has the involvement of TOT in traffic passing between mobile operators changed over the last year?
During the last year this traffic was eliminated presumably by direct links between mobile operators.
20. Are TOT and Cat Telecom part of the private sector or the public sector and state ?
TOT and Cat Telecom are part of the public sector.
21. If DTAC and other mobile operators were forced to pay access charges which mobile operator would gain a competitive advantage?
AIS, because their arrangement with CAT has always exempted them from access charges.
22. What is the difference between a mobile phone concessionaire paying access charges and paying interconnection charges (IC)?
a. Access charges are paid to TOT under the original plan.
b. Interconnection charges are paid to several different parties under the NTC's later IC system, which is however is voluntary, and that is where the problem lies. Only the courts can sort it out now.
