Discussion Papers

Werner Neu

Interconnection of Telecommunications Networks in Australia

Nr. 144 / Januar 1995


For the successful liberalisation of telecommunications, the interconnection of net-works is generally considered to be one of the most central issues. This was recognised by the Australian government when in 1991 it decided to introduce competition into Australian telecommunications. The present paper describes and analyses the Australian experience with interconnection, carrying the analysis until about June 1994. The Australian parliament in 1991 passed a telecommunications act which not only provides for the possibility of licencing other telecommunications operators but also provides for a complete regulatory framework of interconnection between new competitors and the incumbent operator. During the same year the regulatory agency (created in 1988) was commissioned by the government to work out the technical and commercial conditions for interconnection between the incumbent and the new competitor still to be chosen. On the basis of the provision in the act, a licence was issued to the second facilities-based carrier as well as to two new mobile telephony operators (one of them actually being the new fixed-link carrier). Also, based on the set of conditions worked out by the regulatory agency, the government issued a comprehensive set of rules concerning the principles that must underlie the prices for interconnection services. The interconnection agreements between the incumbent and the new operators were greatly facilitated by the set of principles and conditions worked out by the regulator. Once the new fixed-link competitor passed certain market shares, however, it had to negotiate on a commercial basis. This happened during the first half of 1994. There are at least two additional aspects of the Australian regulatory framework regarding interconnection that are of special interest. Prices for interconnection are not structured to include an element to cover the costs of universal service obligations of the incumbent as these are covered by a separately financed fund. Furthermore, while the regulatory authority took strong initial action to bring about interconnection, it has made it clear that it intends to reduce its role to the extent that entrants have established themselves and are in a position to negotiate successfully on their own with the incumbent.

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