Interconnection in the fixed network
Termination and transit at the highest network level

TKK took its first landmark decision in interconnection proceedings still initiated in 1997 (Z 1/97). These proceedings were ended by Notice of TKK on 09.03.1998. Subject matter of these proceedings was the determination of mutual charges and charge conditions for the termination and transit of calls between the fixed networks of Telekom Austria and the alternative network operators. On the basis of its own calculations, but within European limits, TKK determined the interconnection charges (see Table 8) and ruled that billing was to be done on a per second basis. Moreover, according to TKK's decision, the principle of reciprocity applies to the charges. This means that on the basis of the fact that the interconnection services are provided mutually by the respective parties the charges are ordered in the same amount also for both traffic directions

Origination, emergency calls and access to 0800

The decisions of TKK in the proceedings Z1, 3, 4 and 5/98, initiated in July 1998, subsequently, were of fundamental importance for opening and intensifying competition in telecommunications. Subject matter of the proceedings was the determination of the conditions according to which calls can be conveyed to the carrier network operator in the course of interconnection at the highest hierarchical network level of the Telekom Austria network; furthermore, the petitioners demanded rulings with regard to access to freephone numbers (0800 numbers) and emergency services in the Telekom Austria network.

Supported by extensive technical and cost accounting expert opinions, TKK took decisions on these requests by Partial Notices of 5 and 29.10.1998, which are to be considered landmark decisions on interconnection.

According to these decisions, the obligation is imposed on Telekom Austria to convey calls to carrier network operators who are selected by their end-users on a call-by-call basis by means of a four-digit code. The origination charges ordered were slightly higher than those for termination (see Table 8)

Interconnection at a low network level

While the above mentioned orders each regulated interconnection at the highest hierarchical network level in the network of Telekom Austria, Notice Z 14/99 of 03.11.1999 defines the conditions with regard to interconnection at lower hierarchical network levels (local switches). This unbundled network access leads to a reduction of the load of the Telekom Austria network and also to a drop in the interconnection charges to be paid to Telekom Austria by the alternative network operator. This decision is expected to further intensify local competition.

Access to these services was regulated in the proceedings Z 10/99, Z 11/99 and Z 16/99. Pursuant to the Charges Ordinance [Entgeltverordnung EVO], for these number ranges the end-user tariff is determined by the service providing network together with the service provider. For the set-up of the connection from the calling end-user to the point of interconnection the service providing network will pay an origination charge that covers the transport service. The service charge paid by the end-user will be forwarded by the access network operator to the service providing network, deductions for billing or the collection risk being provided.

For technical reasons, the number of available tariff levels for these service areas is still limited. Corresponding values have been laid down in the order. Another critical issue are the installation costs of service numbers in the Telekom Austria network. In this respect, however, a satisfactory solution for the service providers was found by using number ranges that were assigned to the individual tariff levels in advance.

Access to private networks and personal services

Access to these services was regulated in the proceedings Z 12/99 and Z 13/99.

Because of the vicinity to calls to geographical and/or mobile subscribers and the international availability which is absolutely required for these number ranges, TKK defined an origination network scenario for these kinds of services. In an origination network scenario the end-user tariff from the respective access network is determined on the basis of the termination charge agreed on with the service providing network. In the field of private networks ((0)5), a uniform termination charge was determined; in the field of personal services different termination charges were determined for different service classes (different share in mobile termination) ((0)720, (0)730, (0)740). The only exception are personal services in the range (0)710 for which a fixed end-user charge of ATS 1.-- was determined in EVO, which suggested to use a termination network scenario, as is the case for value-added services.

Currently valid interconnection charges

The following table shows the interconnection charges of 1998 and 1999 as well as the current amounts for 2000 (exclusive of VAT on a per minute basis). In determining the interconnection charges for 2000 (Z 30/99 of 27. 03. 2000) for the first time both cost accounting models (bottom-up and top-down) described in the previous sections were used. The calculations carried out in the proceedings resulted in a considerable reduction of the charges for all services and a differentiation between peak and off-peak tariffs, taking into account the workload.

Interconnection in the mobile network

On 11.11.1999, TKK for the first time decided on the interconnection conditions between a fixed network operator (UTA) and a mobile network operator (Mobilkom). This decision was preceded by Mobilkom being determined as operator with significant market power in the market for the provision of interconnection services in Austria, which took legal effect by the Notice of 23.07.1999.

One essential point at issue was if indirect interconnection by way of transit can be subsumed under the concept of interconnection as laid down in TKG and if ordered charges thus also apply to contract parties not directly interconnected.

In this connection TKK considered that interconnection is a central prerequisite for the creation of competition and liberalisation of the telecommunications market and that the concept of interconnection does not only refer to the direct connection of two telecommunications networks but also to linking more than two telecommunications network in order to allow users connected to different networks to communicate indirectly, i.e. where appropriate, also via a so-called transit network.

An important item in the decision was the amount of the interconnection charge for termination in the mobile network and for origination to free services (0800 numbers) from the mobile network. In practice, this decision led to a gradual reduction of the interconnection charges for calls from the fixed network to the mobile network. With the reduction for mobile termination to ATS 1.90 per minute (exclusive of VAT) as of 1 April 2000 the termination charges in the mobile networks of Mobilkom as SMP operator are at the lower European level. All charges were determined after a detailed review of Mobilkom's costs. The experts of TKC consulted in the proceedings had calculated the above interconnection costs for an efficient mobile network operator on the basis of a cost calculation according to the FL-LRAIC approach. In order to avoid disruptive regulatory intervention, to allow the operators to adjust to this situation and to enable all market players to plan their costs carefully, TKK refrained from immediately reducing the interconnection charges to ATS 1.90 and determined that the cost oriented charges be gradually adopted, which is also current international practice.

III.2.2.2.4 Outlook: the effects of convergence on interconnection

As described in the previous section, during the first two years of liberalisation major decisions were taken in the field of interconnection. The fundamental issues of network access, such as termination, origination, transit, access to services, local interconnection and access to mobile networks, were decided.

For the future work of the regulatory authority two major factors will be decisive. On the one hand, all orders have been issued for a limited period so that corresponding follow-up decisions are required. On the other hand, current market developments in the field of telecommunications have direct or indirect consequences for interconnection and will lead to further decisions in this field. These developments can be summarised under the term "convergence" (see section IV.1.2.2). Both convergence of mobile and fixed networks as well as convergence of services¹ will have a long-term effect on interconnection.

Convergence of mobile and fixed networks suggests that the amounts charged for interconnection with mobile networks will greatly gain in importance in the future. Therefore extensive cost studies are expected to be carried out also for mobile networks. Initial studies in this field have already been conducted in the UK and also in Austria (e.g. TKK decision Z8/99).

Convergence of data and voice telecommunications networks will cause an increase in the importance of broadband interconnection and interconnection with or between packet-oriented networks and will directly affect the tariff and cost structures in the telecommunications networks. The relevant cost accounting models, too, will have to be adapted to the new requirements. Previous models have mainly considered narrowband circuit switched services like voice telephony service. Upgrading of the models to meet the new requirements will further increase their complexity.

In the USA network operators, e.g. AT&T, have already started to migrate parts of their core networks to an IP based packet-switched network.