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Interconnection Agreement: What is it for?

Written By Louie Diangson
Published • February 28th, 2021
Internet & Telecoms
3 Comments

The country’s major telcos, PLDT, Globe, and new player DITO, have once again become a hot topic online when they announced that they had signed interconnection agreements with the latter. But some of you might be asking, what is an interconnection agreement? What does it mean for regular subscribers like you and me? We’ll try to shed some light on it in this article.

Table of Contents

What does it mean by interconnection?

Interconnection, as defined in the Republic act No. 7925, which became effective in March 1995, is “the linkage, by wire, radio, satellite or other means, of two or more existing telecommunications carriers or operators with one another for the purpose of allowing or enabling the subscribers of one carrier or operator to access or reach the subscribers of the other carriers or operators.”

In other words, interconnection allows a subscriber of one telco to call or send SMS to another subscriber on a different network. If you’re using a Smart SIM, you can call or send SMS to another person using Globe, and vice versa. Without an interconnection, calls and SMS between networks won’t go through, and you will only be able to contact those on the same network as yours.

Back in the day, if you’re a Globe subscriber wanting to contact a Smart subscriber, you’ll need to purchase a Smart SIM, or vice versa. This is not an easy thing to do, considering SIM cards are expensive back then.

What is an interconnection agreement?

It is basically an agreement between two telcos that allow networks to connect and exchange data. When two telcos agree, the subscribers from those two networks can now call and send SMS to each other.

It’s not new though. Before DITO, six of the country’s leading telecommunications companies, including Globe and PLDT, signed interconnection agreements in 2001.

In DITO’s case, it’s obvious that it wants its subscribers to be able to call or send SMS to Globe and Smart subscribers and entered interconnection agreements with both, just in time before its commercial launch. A telco that does not enter an agreement for interconnection with other telcos might find itself and its subscribers isolated.

That’s why it’s logical to settle interconnection agreements before a telco’s commercial rollout. You can expect the same thing to happen if a fourth major telco enters the PH market.

However, interconnection agreements are not simple and easy to implement. It’s not like telcos can simply decide that it wants to interconnect, turn on a switch, and it will happen. Telcos also have to consider interconnection rates, which is the agreed amount that telcos need to pay each other when they’re routing traffic (calls and SMS) to each other’s networks.

It is also worth noting that interconnection rates are also passed on to consumers. That’s why the government has to intervene to lower the rates. In June 2018, the NTC issued a memorandum circular to set the voice call interconnection rate at PHP 0.50 per minute from PHP 2.50, while the SMS rate was set at PHP 0.05 per message from PHP 0.15.

Infrastructure is also a factor. That’s also why the PLDT-DITO interconnection deal announced that PLDT would establish and manage the interconnection facility or hub that will deliver the intercarrier requirements of DITO. As for the reason why, the logical explanation is that PLDT already has a wider and more solid infrastructure in place compared to DITO, which is just starting.

Does this mean that my DITO connection will be as good or bad as PLDT and Globe? Not necessarily, as telcos have requirements that need to be satisfied as mandated by the NTC. In other words, you can expect your calls and SMS to pass through all networks with ease and good quality, regardless if you’re on Globe, PLDT-Smart, or DITO.

Internet connectivity or peering is a different topic altogether, though, and is not part of the interconnection agreement’s scope. But if you need documentary evidence, the NTC recently announced that DITO passed its first technical audit.

Interconnection agreements are compulsory

Telcos in the Philippines cannot opt to decide not to interconnect, thanks to Executive Order No. 59 issued in 1993 by President Fidel V. Ramos.

Section 2 of the EO states that the “interconnection between NTC authorized public telecommunications carriers shall be compulsory.”

RA No. 7925, Section 5 c) also tasks the NTC to “mandate a fair and reasonable interconnection of facilities of authorized public network operators and other providers of telecommunications services through appropriate modalities of interconnection and at a reasonable and fair level of charges which make provision for the cross subsidy to unprofitable local exchange service areas so as to promote telephone density and provide the most extensive access to basic telecommunications services available at affordable rates to the public.”

It’s a balancing act for the government as it has to make sure that interconnection requirements are met while not hurting the telco business and at the same time making the rates affordable for subscribers.

What does this mean for us subscribers?

We have to consider interconnection agreements as good news as it is an announcement that you can call or send SMS to anyone regardless of the network you’re subscribed to. If you’re thinking of switching to DITO, the recent agreement ensures that you’ll still be able to call and text Globe and Smart subscribers.

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Louie Diangson

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3 Comments

jenny lewis says:

3 months ago

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Ricardo Brillantes says:

4 years ago

What is the rate of call and messaging of globe to globe or smart to smart?
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Dylan says:

4 years ago

It is worth noting that there are no more interconnection fees between carriers as per RA11202 hence unlimited call to all networks are now normal.
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