The STAR learned that the country’s four leading cellular companies, namely Smart Telecommunications, Globe Telecom, Pilipino Telephone Inc. (Piltel), and Isla Communications (Islacom), have asked the National Telecommunications Commission (NTC) to carefully review the potential adverse effects of government’s plan to require them to base their pricing on actual cost.
According to the companies, cost-based interconnection pricing should apply only to the landline business and not to the cellular business, where there is intense competition and where market forces should be allowed to play.
The four cellular mobile telephone service (CMTS) providers emphasized that shifting to cost-based pricing will discourage subsidies, since they will have to reflect the full cost of the service in pricing a particular service.
Right now, because the prices of handsets or cellular phones are still high compared to the price at which the four sell them together with the services, these companies are forced to subsidize the price of the phones by 15 to 30 percent.
The NTC is currently conducting public hearings on the shift to cost-based interconnection charges, which according to the agency is more transparent, reasonable, and has regard to economic feasibility compared to the current set-up.
The following access and interconnect services will be covered by a shift to cost-based access and interconnect charging: local and national long distance calls from one fixed telephone or landline to the other; calls from mobile phones or radios to landlines and vice-versa (both local and international calls incoming and outgoing); and text messaging (mobile short message service).
At present, interconnection charges are determined bilaterally between two companies based on revenue sharing or unit charge arrangements.
Republic Act 7925 or the Telecommunications Policy Act of 1995 mandates the NTC to ensure equity, reciprocity, and fairness in adopting an access charge formula or revenue sharing agreement between interconnecting public telecommunications entities (PTEs).
The NTC is currently conducting public hearings on a set of implementing rules and regulations for the transition to cost-based interconnection charges. The IRR basically establishes and prescribes a specific cost methodology in the form of wholesale pricing principles and guidelines which PTEs should follow.
The basic interconnect service is a fixed network service supplied by local exchange carriers (LECs) which provides the signaling and functionality to connect calls between an end-user and the point of interconnect to another LEC, a CMTS provider, an interexchange carrier (LXC) and/or an international gateway facility (IGF), for voice or data calls in either direction.
Once the new rules take effect, all PTEs are required to renegotiate their interconnect agreements to implement the transition to cost-based interconnect charges.
All PTEs will be required to report their internal access and interconnect costs separately by products or service using the same charging levels applied to external competitors.