LIME s Response to the St. Lucia NTRC s. Guidelines for Colocation & Infrastructure. Sharing (C/IS) - Published February 3, 2014

Transcription

1 LIME s Response to the St. Lucia NTRC s Guidelines for Colocation & Infrastructure Sharing (C/IS) - Published February 3, 2014 March 17,

2 Table of Contents 1. Executive Summary LIME s Comments on Part 1: Introduction LIME s Comments on Part 2: Infrastructure Sharing LIME s Comments on Part 3: Colocation LIME s Comments on Part 4: General Rules for C/IS LIME s Comments on Part 5: The Role of the Commission Concluding Comments

3 1. Executive Summary 1.1. CWI Caribbean Limited, on behalf of its affiliate Cable & Wireless (St. Lucia) Limited, trading as LIME ( LIME ), is pleased to respond to the St. Lucia NTRC s paper on Colocation and Infrastructure Guidelines (C/IS) and published February LIME expressly states that failure to address any issue raised in this guideline paper does not necessarily signify its agreement in whole or in part with the Commission s position. LIME reserves the right to comment on any issue raised in the consultation at a later date LIME s view is that colocation arrangements between parties should be arrived at by negotiations which result in mutually agreed commercial arrangements LIME considers that such agreements should be subject to a separate contract and not form a part of an operator s Reference Interconnection Offer (RIO) 1.4. In LIME s view the information presented by the NTRC in no way justify its proposed role to intervene into colocation negotiations and impose a colocation agreement between the parties, should there be a dispute LIME s comments have been presented in keeping with the content headings presented in the NTRC s document LIME s failure to comment on any issue in full or in part does not mean that LIME agrees with the proposal as represented by the consultation document. LIME reserves its right to comment on any or all of the NTRC s proposals at a later date All responses to this document should be sent to Charles Douglas, Regional Regulatory Advisor, LIME, at charles.douglas@time4lime.com. 2. LIME s Comments on Part 1: Introduction 2.1. LIME appreciates the NTRC s efforts to outline the background, objectives and guidelines on which it seeks to rely to introduce a regulatory policy on colocation and infrastructure guidelines Thoroughness is required to ensure that the objectives and guidelines are compatible, as opposed to working at cross purposes, in which case the telecommunications industry and ultimately consumers will be harmed. Essentially, colocation and infrastructure regulation is a form of economic regulation and is best pursued after robust economic analysis determines that it is an appropriate remedy to facilitate competition and not as an end in itself. The fact is that infrastructure based competition (appropriately incentivized) can deliver superior and more sustained benefits to consumers. This this reality ought to be taken into account and influence any regulatory remedy to be determined. 2

4 2.3. In LIME s view, promoting fair competition does not automatically require colocation and infrastructure sharing but may require it, upon analysis of market conditions LIME supports the principle that Access Providers and Access Seekers ought to have liberty to negotiate C/IS arrangements in accordance with mutually agreed terms. However, this principle is likely to be undermined by the Commission seeking to establish itself as arbiter, absent well thought out arrangements. Seeking to effectively mandate collocation and infrastructure sharing is not the same as a framework which allows parties to enter into a C/IS agreement based on mutually agreed terms The NTRC s intent to outline a predetermined C/IS framework to remove uncertainty and create an environment for better co-operation within the market is critical. However, this uncertainty is not simply related to whether or not C/IS is supported by the NTRC but rather material uncertainty arises with respect to an entity s ability to recoup a reasonable return on its investment (and its investment) over a reasonable period of time. Uncertainty also arises around how investments in new technologies will be incentivized, such that they will in fact be made. Essentially, telecommunications entities exist to satisfy their customers while making a reasonable return on their investments. It is by ensuring that this environment is created, where equally efficient operators can compete for customers, that best delivers value to customers and cooperation between competitors within the market. The NTRC states that its objective is to (a) Ensure that the incidence of unnecessary duplication of infrastructure is minimized or completely avoided. Thus the NTRC is correctly signaling that there are conditions where the duplication of infrastructure is necessary. LIME posits that the conditions that need to be considered are; a. physical b. technical c. economic and d. environmental. Simply mandating that C/IS arrangements and tariffs be embedded in all reference interconnection agreements fails to acknowledge the above reality and is likely to be prejudicial to one or more entities The Commission s role in achieving the most efficient use of facilities amenable to sharing needs to be clarified and set out in more detail. Simply stating that the Commission will resolved disputes in not helpful to operators and creates regulatory uncertainty and risk The NTRC C/IS guidelines state that operators should pursue a cost-oriented policy in its C/IS arrangements and adds that such a policy ought to deliver a reduction in tariffs charged to consumers. Given that costing methodologies vary, LIME asks the NTRC to clarify its expectations regarding costs. Why does the NTRC presume that any collocation charges (which would be in the wholesale market) that are agreed to between parties, should necessarily result (absent any analysis presented) in lower retail rates to consumers? Such positioning from the Regulator suggests that it has already drawn conclusions on the issue. The NTRC needs to clarify its comments for the benefit of the Industry (especially since the NTRC seeks to be the arbiter to settle disputes between negotiating parties). 3

5 3. LIME s Comments on Part 2: Infrastructure Sharing 3.1. The NTRC appropriately acknowledges that (1) Infrastructures amenable to sharing are those that can be shared without an attendant risk of lessening competition. However, it fails to expand on this important point by not sharing with the Industry its view of what lessening competition means. Given its cursory treatment, one could be forgiven if they were to conclude that the NTRC has allowed its objective to mandate C/IS to supersede it. This is a cause for concern since the framework of economic regulation (on which we rely) needs to be taken into account This begs the question as to whether or not the NTRC has conducted a market analysis of the market condition(s) in St. Lucia, accessing the existing level of competition, emerging technologies and the potential for additional telecommunications investments in the market. To the extent that this analysis has been done, LIME asks that it be shared with the Industry. If it has not been done, then such a study should be done before seeking to implement a C/IS regulatory policy. Otherwise, any such policy, though well intentioned, could have the deleterious effect of lessening completion (and investment in infrastructure) in the medium to long term, an outcome which harms consumers The Commission s intent to add to the list of infrastructure that can be shared absent market demand, is a cause for pause and hints that the Commission seeks to pursue its own agenda rather than be facilitating the market. Such an approach is likely to lead to inefficient outcomes that harm the market In seeking to facilitate C/IS the NTRC must take all reasonable steps to refrain from establishing guidelines that inserts itself into the commercial and engineering management decision making of companies that enter into mutually agreed colocation arrangements. The affected parties and not the NTRC are best placed to establish timelines to replace a shared facility, in fact these timelines will vary from circumstance to circumstance. Furthermore what is an emergency for a given operator, may not be considered as such by the NTRC. The timelines suggested are subjective and are best removed The NTRC states that an operator provide capacity on its infrastructure to other operators on a first-come, first served basis, determined in accordance with the order in which it receives requests for infrastructure sharing. The likely intent is to avoid prejudicial treatment of any operators seeking access to a colocation facility. LIME agrees that this objective be met, however it considers that the condition referenced is too simplistic and could harm an efficient operator that provides the colocation facility. For example, questions worth considering are why should an inefficient, less reliable and/or less financially viable entity be given access ahead of an efficient, reliable and more financially viable operator simply because it made a request ahead of the other? How does this redound to the economic benefit of the colocation facility provider, given the financial risks it may assume to provide capacity on its network (than it would not have otherwise 4

6 provided) to facilitate the colocation arrangement? What if an entity with significant market power requested colocation ahead of a new entrant, would it not lessen competition in the market to facilitate the SMP ahead of such a new entrant? LIME asks that the NTRC reconsider its approach and share it with the Industry The Industry would be greatly benefited by the NTRC providing an explanation of what it considers to be actual costs that the provider of a colocation facility would be allowed to charge a colocation seeker, as the current reference is vague. Whereas LIME accepts that the charges related to a mutually agreed colocation commercial arrangement between parties should be fair and not exploitative, a question arises regarding how much information the colocation provider is required to share with the colocation seeker. Given that some of the information in question may be commercially sensitive and if shared could compromise the competitive advantage (e.g. future plans) of the colocation provider. Perhaps, in such cases a neutral third party acceptable to both parties could be asked to attest to the reasonableness of the information shared. 4. LIME s Comments on Part 3: Colocation 4.1. The NTRC is seeking to mandate colocation in a manner that is neither helpful nor likely to incentivize adequate investment in infrastructure by operators. By seeking to mandate that an offer for colocation facilities be included in the Reference Interconnection Offer (RIO) of every major operator, the NTRC has in LIME s view, completely undermined its stated objective to have willing parties negotiate in good faith, mutually agreed commercial colocation arrangements, which allow them to recover their actual costs The actual costs to facilitate colocation is likely to vary from situation to situation and from year to year based on the requirements of the applicant and the capacity available by the provider. Therefore placing a hypothetical list in the RIO is not likely to be helpful but instead prejudicial to the colocation provider. If such arrangements were to be included into the RIO (and LIME does not agree that it should be) then the charges would best be represented as bespoke. Furthermore, by indicating that the operator desirous of interconnecting with another operator is at liberty to choose the type of colocation suitable for its operation the NTRC introduces a measure of bias in favor of the colocation seeker, to the disadvantage of the colocation provider. How do these proposed conditions regarding price and the type of colocation facility enable negotiations that would result in a mutual agreement between parties? LIME posits that they do not achieve this necessary objective. 5

7 5. LIME s Comments on Part 4: General Rules for Colocation/Infrastructure Sharing 5.1. LIME considers that this section of the Guidelines is premature and prejudicial to colocation providers. The NTRC ought not to progress with this approach until all of the concerns raised in LIME s and other responses are addressed As indicated in 4.2 above the terms and conditions outlined greatly compromise the so called negotiation between parties. In principle and practice, operators negotiate and agree on their RIO with the Regulator and not their competitors. This is because the Regulator has the role of a neural party seeking the welfare of all in the Industry and has no special interest. Also confidential information shared with the Regulator is to be kept confidential and not used to compromise the competitive advantage of the operator making its RIO available. LIME does not consider it appropriate to be requiring RIO providers to be seeking their competitor s approval for any component of their RIO(s). LIME suggests that this concept is flawed and needs to be revisited There should be no requirement for an operator to share confidential and commercially sensitive information that would compromise its competitive advantage or future plans with its competitors LIME does not agree that a standard price list is appropriate, see comments in 4.2. LIME can see no reason why the mutually agreed colocation commercial agreements cannot be properly subject to a contract separate from the RIO between parties The NTRC s thinking about how the charges for any colocation arrangement is to be arrived at is at best vague and unhelpful. The NTRC is asked to clarify its position The issues of the terms by which the capacity of an operator investing in its own network infrastructure is allocated to the network of another operator that has not so invested is a serious one The NTRC must take into account the current harsh economic realities in the Caribbean, from which St. Lucia s telecommunications operators are not exempt. Due to anemic economic growth and contracting economies and falling rates, telecom operators have had to be reducing their staff and rationalizing facilities, that are not be earning their keep, so as to remain financial viable ( which actions are intrinsic to commercial entities). Against this background, the idea that it be mandated that capacity on the owner s network is to be reserved for its competitor for a period of three (3) months when capacity is scare a novel one. LIME considers that the NTRC should explain the legal basis for this right which it seeks to establish for colocation seekers. It is LIME view that any such accommodation (if made at all) should be determined by the colocation provider 6

8 in their negotiations with the colocation seeker and not mandated by the Regulator. The NTRC s proposed general rules for the reservation of capacity, gives a sense that The NTRC has formed the view that a commercial entity s investment in its network (in the order of millions of dollars) is for the primary purpose of facilitating new entrants and other operators that have not invested in network infrastructure. The proposal that no more than 50% of available capacity can be reserved appears arbitrary and prejudicial to the colocation provider. The same is true of the proposal for the cessation of the ability to reserve capacity for a period exceeding two (2) years. How were these figures arrived at? What is the demand for capacity in St. Lucia and how was such demand arrived at? Who will compensate the colocation provider for capacity that it is required to make perpetually available and be able to utilize or plan for? Absent a properly presented vision for the development of telecommunications Industry as analyzed by the NTRC, these guidelines and rules appear extremely prejudicial to colocation providers. LIME would be grateful for the NTRC to share the market information that is has See comments made above in 3.5 for comments on the proposal that applications be made on a first come first served basis LIME strongly objects to any regulatory approach which would allow the Commission to impose an infrastructure sharing arrangement on the parties that are unable to enter into a mutually agreed commercial arrangement. LIME considers that in such circumstances the NTRC is not best placed to decide. Furthermore, the NTRC has not shared any procedure(s) and consideration(s) that would inform or constrain its power The NTRC s proposed rules/guidelines regarding the redevelopment/relocation of its network facilities are a cause for concern. The basic premise that an operator provides commercial services to consumers for profit needs to be taken into account. This means that an operator will only re-develop or re-locate its network facilities in response to market conditions, namely the needs of its customers and its need to remain viable. Given the rapid changes in the telecommunications area the changes required may be quite dramatic and sudden as compared to other sectors. The idea that an operator would increase its capacity simply to make such capacity available to its competitors is a novel one. In fact, inappropriate colocation and infrastructure regulation is likely to achieve the very opposite, a reduction of investment in infrastructure capacity to the industry as a whole LIME considers the timelines for an operator to commence any redevelopment or re-location at any facility to be arbitrary and prejudicial, namely six (6) months in the case of re-development and twelve (12) months in the case of re-location LIME maintains that negotiations should result in mutually agreed commercial arrangements for colocation arrangements. Such arrangements would necessarily include separation of equipment, maintenance, cleaning, 7

9 safety, emergency and security arrangements. Such arrangements among others ought not to be the prerogative of the Regulator. 6. LIME s Comments on Part 5: The Role of the Commission 6.1. If the telecommunications industry is a market. The proper functioning of a market requires the application of appropriate regulatory remedies, based on sound economic principles, backup by credible and robust empirical analysis. Hence of paramount importance is not the power of the NTRC to intervene in colocation negotiations, but the proper justification for its doing so and its ability to make evidence based decision(s). Otherwise, well intentioned or not, the market will be harmed and consumers will be worse off. 7. Concluding Comments 7.1. LIME accepts that the NTRC would like to improve the competitive landscape in St. Lucia. Notwithstanding, an issue such a collocation and infrastructure sharing requires the application of economic principles based on data to be implemented properly and not stifle investment in and the roll out of new networks by existing infrastructure providers. It is not inconceivable that if inappropriate regulations are mandated, one or more operators could close facilities that are loss making due to the existence of minimal consumer demand in those areas Besides, the NTRC should strive to ensure that the interests of all stakeholders are taken into account and those of colocation providers are not prejudiced LIME maintains that negotiations should result in mutually agreed commercial arrangements for colocation arrangements and that the NTRC should not seek to mandate colocation arrangements LIME looks forward to the NTRC s response to its concerns, as well as the comments of other Industry participants. LIME will also provide its further comments in its further response on April 8, End 8