Embed Size (px)
Citation preview
Global trends in telecom development & new challenges
for developing countriesSaburo TANAKA
Seminar in Paramaribo, May 2004
The original document is elaborated by Dr Tim Kelly, ITU/SPU. It has completed by Saburo Tanaka. The views expressed in this presentation are those of the authors, and do not necessarily reflect the opinions of the ITU or its membership. Authors can be contacted by e-mail at: [email protected] [email protected]
AgendaAgendalMarket trendsØNetwork evolution ØParadigm shiftØTariff evolution
l Challenges for developing countriesØService issuesØRegulatory issues ØNetwork issuesØ Internet issue
l Some solutions studied in SG3
A Mobile RevolutionA Mobile Revolution
Source: ITU World Telecommunication Indicators Database.
0
200
400
600
800
1'000
1'200
1'400
1993 1995 1997 1999 2001 2003
Mobile Users
Fixed Lines
Fixed Lines vs. Mobile Users, worldwide, Million
Calling opportunities worldwideCalling opportunities worldwide
89.7%
5.0%5.0% 0.3%
1993 52.7%
19.9%
19.9%
7.5%
1998
23.4%
25.0%25.0%
26.7%
2003
Fixed-to-fixed
Fixed-to-mobile
Mobile-to-fixed
Mobile-to-mobile
Source: ITU Fixed-Mobile Interconnect website: http://www.itu.int/interconnect
5
Global trends, challenges and solutions
5
Growth rate in phone subscribersGrowth rate in phone subscribers
21.0
11.0
22.4
6.0 7.0 8.0 9.012.0
14.0
18.010.4
13.6 12.615.0
21.0 22.4
33.1 29.3
0
5
10
15
20
25
30
35
40
45
50
1993 1994 1995 1996 1997 1998 1999 2000 2001
Years
In %
World
TAL
Mobile and Internet: Identical twins born Mobile and Internet: Identical twins born two years apart?two years apart?
0
200
400
600
800
1,000
1992 93 94 95 96 97 98 99 2000 01
0
2
4
6
8
10
12
14
16
18Mobile subscribers
Internet users
Mobile penetration
Internet penetration
Users (millions) and penetration per 100 pop.
AsiaAsia--Pacific international Pacific international communications capacity,communications capacity, GbitGbit/s/s
0 0 0 0 0.1 2 38
26
65
8 9 1114 16 18 20
23
30 31
0
10
20
30
40
50
60
70
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Internet
Telephone
1999 2000 2001 2002 2003
01,0002,0003,0004,0005,0006,0007,0008,0009,000
10,00011,00012,00013,00014,00015,00016,00017,00018,00019,00020,000
Growth In DSL Subscribers-Regional Division (000s)1999-2003
Asia-Pacific
North America
Western Europe
South & South East Asia
Latin America
Eastern Europe
Middle East & Africa
Distribution of mobile and Internet Distribution of mobile and Internet users by region, 2002users by region, 2002
Asia-Pacific,
32%
Europe, 29%
Africa, 1%
Americas, 37%
Asia-Pacific,
38%
Europe, 31%Africa,
3%
Americas, 28%
Estimated Internet users, 600 million
Mobile phone users1’154million
0
100
200
300
400
500
600
700
800
900
1000
90 91 92 93 94 95 96 97 98 99 00 01 02
Ser
vice
rev
enue
(U
S$
bn)
Domestic Telephone/fax
Int'l
Mobile
Other: Data, Internet, Leased lines, telex, etc
Revenue growth (US$bn)Revenue growth (US$bn)
Source: ITU.
39%
39%
14%
8%
X X
Traditional regime:Traditional regime:Joint provision of serviceJoint provision of service
Country A Country B
11
X
Emerging regime:Emerging regime:Market entry and interconnectionMarket entry and interconnection
XXCountry A Country B
Jointly provided circuit
Circuit provided by operator B
12
Country A Country B
Operator A Operator BPSTN
IWF
Interconnect
Leased lines
International simple resale (ISR)International simple resale (ISR)(By(By--passing accounting rate)passing accounting rate)
Once a foreign carrier accepts the benchmark rate, it can negotiate ISR arrangements with US carriers
Country A Country B
Telephone service using data transmissionTelephone service using data transmission(By(By--passing accounting rate)passing accounting rate)
Operator A
PSTN
Voice is packetized = data transmissionTelephone regulations do not apply
VSAT
Inter-connection
É
T 0 2 0 8 5 0 0 - 0 0( 1 0 6 1 4 7 )
I P N e t w o r k
IW F
T e r m i n a t i n gN e t w o r k
L o c a l o r d i s t r i b u t e df u n c t i o n C a l l i n i t i a t e d f r o m P S T N / I S D N / P L M N
t o P S T N / I S D N / P L M N
P S T N / I S D N/ P L M N
IW F
P S T N / I S D N/ P L M N
L o c a l o r d i s t r i b u t e df u n c t i o n
O r i g i n a t i n gN e t w o r k
Call from International Telecommunication Network (ITN) to another ITN via IP-based Network
IP TelephonyIP Telephony
ADSLADSL
Or Call initiated by ADSL
A
C
B
C
B
A
Operator in A sends traffic tooperator in C under anarrangement of exclusivity
• Operator in A is a partnerof operator in C
• Settlement rates A/B > C/B
Origin A
Destination B Origin
C
Destinat
ion B
Operator in C declares traffic to B on transit through A
Operator in B receives traffic at settlement rate C/B instead of A/B
Operator in C “re-labels” the traffic as originated in C
1
2
3
4
Refile Refile and other and other practices practices using using accounting accounting rate systemrate system
Mobile Mobile tromboningtromboning ((using accounting using accounting rate)rate)
É ÈCalled BCaller A
Operator A’s national network Operator B’s
mobile network
Operator A’s Int’l facility
Operator B’s Int’l facility
Operator X or Operator A’s facility in another country
International boundary
High Interconnection
charge
Originating internationalvoice traffic
Traditional bilateralsettlement rate
system
Traditional bilateralsettlement rate
system
Refile via athird countryRefile via athird country
Sender keeps allexchange of trafficSender keeps all
exchange of traffic
Via a point ofpresence in the
terminating country
Via a point ofpresence in the
terminating country
Via a wholesale
carrier
Via a wholesale
carrier
Direct dealing with the
terminatingcountry
Direct dealing with the
terminatingcountry
30%
20%
15%
70%65%
Delivering international voice Delivering international voice traffic in 2002traffic in 2002
Falling prices (1)Falling prices (1)
$0.00
$0.50
$1.00
$1.50
$2.00
90 92 94 96 98 00 02 04
Average retail price of one minute call to USA.
Mark-up
Settlement
Source: ITU adapted from FCC and national data (34 countries).
Forecast
Falling Price (2):Falling Price (2):SwissComSwissCom, price per minute of local call and call to US, price per minute of local call and call to US
57
28
43
5858
74
3444455
95 96 97 98 99 00 2001
Sw iss call prices. US cents per minute.
Source: ITU.
Call to USA
Local call
1
10
100
1'000
10'000
100'000
TAT-71983
TAT-81988
TAT-91991
TAT-101992
T-111993
T-12/131995
Gemini1998
TAT-142000
Co
st p
er v
oic
e p
ath
(U
S$)
1
10
100
1'000
10'000
100'000
1'000'000
100'000'000
Cap
acit
y (v
oic
e p
ath
s)
Cost per voice path (US$), declining by
41% p.a.
Infrastructure capacity and costs,Infrastructure capacity and costs,TransAtlanticTransAtlantic cables, 1983cables, 1983--20002000
Source: ITU, TeleGeography Inc., FCC.Note: Voice-path numbers assume a compression ratio of 5:1 to number of circuits.
10'000'000
Capacity (voice
64% p.a.paths), growing by
If distance is dead, and bandwidth is
infinite …
What do we bill for?
What do we bill for?What do we bill for?l Bill for network connectionØ Increasing integration of monthly telephone
subscription and Internet subscription prices
l Bill for privacy/advertisingØ Privacy-protected customer pays premiumØ Customer agreeing to receive advertising pays less
l Bill for quality of serviceØ Differentiated by transmission quality, waiting time,
bandwidth on demand, value-added secretarial support, mail functions etc.,
l Bill for BillingØ Customising of billing: by service, by user, by site
Internet, price and service trendsInternet, price and service trends
l Towards a flat-rate price structureØ All you can eat for US$20.00
l Towards lower service qualityØ “Best efforts” service delivery at lowest price
l Death of distanceØ Message to other side of earth costs same as a
message sent next door l Cross-promotion of Internet and other servicesØ “Free PC” with three year’s ISP subscription Ø “Free Internet” with residential local loop charges
l Tendency towards industry concentrationØ AOL’s subscriber base > next ten ISPs added together
Challenges for developing countriesChallenges for developing countries
l Service, tariff and technical issuesØAlternative calling proceduresØPublic switched network to IP based networkØChallenges related to mobile service
l Regulatory issuesØ Interconnection rulesØ Implementation of USOØTariff Rebalancing
l Internet connectivity in developing countriesØGuideline for negotiating IICØTraffic based negotiation
The influence of IP Telephony on priceThe influence of IP Telephony on price
l IDC forecasts that “Web Talk”revenues will reach US$16.5 bn by 2004 with 135 billion mins of traffic
l Gartner Group forecast that IP Telephony and competition in Europe will reduce prices by 75%
l IP Telephony as % of all int’l calls in 2004Ø Tarifica forecast 40%
Ø Analysys forecast 25%
l In developing countries, the majority of IP Telephony calls are incoming
Source: IDC.
0.208
16.5
2000 2004
“Web Talk” revenues, US$bn
+0.28 US$
Receives 0.30 US $ for terminating charge
Pays 0.02 US $ for local call.
Retains 0.28 US $
0ISP in Developing
country
-0.53 US$Receives US $ 0.02 local call charge.
Receives US $ 0.55 settlement.
PTO in Developing
country
+0.25 US$
CollectUS$ 1.00 from user
Pays US$ 0.30 to ISP for terminating call.Retains US$ 0.70
Collect US$ 1.00 from user
Pays US $ 0.55 settlement.
Retains US $ 0.45
PTO in Developed
country
DifferenceIP-TelephonyAccounting Rate
ChallengesChallenges
Revenue gain and revenue loss
Declining prices for mobile access, Declining prices for mobile access, global average, in US$, 1992global average, in US$, 1992--20002000
Note: CAGR = Compound Annual Growth rate.Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”
547
410
231
180
86 75
1992 1994 1996 1998 1999 2000
Connection charge, in US$
CAGR, 1992-2000 = -32.1% p.a.44.9
38.134.2
31.3
20.216.6
1992 1994 1996 1998 1999 2000
Monthly subscription, in US$
CAGR, 1992-2000 = -9.2% p.a
14%
22%
24%
40%
53%
36%
8%
3%
Customers
Average revenueper user (ARPU)
Exp
end
itu
re p
er m
on
th
40 per cent of low-spending customers
generate 3% ofrevenue
14 per cent of high-spending customers
generate 53% ofrevenue
Cultivate the highCultivate the high--spendersspenders
Source: Price Waterhouse Coopers, based on Canadian data.
Mobile and Fixed-line ARPU in Japan
278
230
158
878891929496981009998979898
160152141
127134
272284275
265252
0
50
100
150
200
250
300
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Years
Yen 100
Fixed lineMobile
Key Interconnection Rules in the WTO Key Interconnection Rules in the WTO Reference PaperReference Paper
An independent entity (which may be the regulator) must be available to resolve interconnection dispute within a reasonable time frame
Dispute resolution
Agreements of major suppliers’ model interconnection offers must be made public
Transparency
Procedures for interconnection to major suppliers must be made public
Procedure
- At any technical feasible point in the network- In a timely fashion- At cost orientated rates- On non discriminatory and transparent terms- On an unbundled basis - At non-traditional interconnection points if requester pays charges
Interconnection with “Major Supplies”must be available
Regulatory and technical issuesRegulatory and technical issues
l Policy makers must resolve such basic questions as:Ø which carriers are required interconnectionØ How the costs will be calculated and recovered, and Ø At what points in the PSTN interconnection should occur
l Regulatory issues Ø Establishing guidelines in Advance (without it, interconnection
negotiation are frequently protracted, delaying the introductionof competition)
Ø Introducing competition require “dominant carriers” to interconnect with other carriers
Ø Cost orientation: excessive prices deter market entry, hinder competition, end user suffer and can provide a pool of revenue
l Technical issuesØ Points of interconnection: incumbent operators permit inter-
connection with their networks at any technically feasible pointØ Dialling Parity and Pre-selection: Call-by-call customer
selection or Operator pre-selection by pre-subscriptionØ Quality of Interconnection Service
Economic issuesEconomic issues
The economic issues involved in interconnection largely come down to question of cost: cost definition, cost measurement, cost allocation and cost recovery
l How can interconnection costs be measured?Ø Theoretical Frameworks (Historica, Fully Distributed costs,
LRIC)Ø Cost study Approaches (Top-Down, Bottom-Up, Outside-In)
l Interconnection chargeØ Cost based chargesØ Retail-based chargesØ Price CapsØ “Bill and Keep” or “Sender Keeps All”Ø Revenue Sharing
SG3 is uniqueSG3 is unique
l Because of its composition ROAs Administrations
SIOIO
DevelopingCountries
Developedcountries
Ladies
Gentlemen
Dealing purely with nonDealing purely with non--technicaltechnicalstandards and standards and ……
l Tariff/regulatory/Policy related issues
l There are 4 Regional Tariff Groups
l Accounting rate reformØ Transitional arrangements Ø Action to facilitate negotiationsØ Cost MethodologiesØ Network externalities
l Mobile termination chargeØ Differences with fixed network servicesØ Level of termination charges
l International Internet ConnectivityØ Implementation of Recommendation D.50Ø Improving connectivity in LDCs
l Other studies Ø International Telecommunication Regulations
Main study itemsMain study items
Solutions & difficulties Solutions & difficulties
l New Remuneration system (adopted)Ø Termination charge systemØ Settlement rate systemØ Special arrangement
l Difficulty to quickly implement those systemsØ Condition is to reach cost-oriented rate, butØ No cost data or model for some administrations ? SG3
developed principles and TAF, TAS, TAL cost modelsl Transitional arrangements (review at WTSA)
Ø To facilitate staged reduction to cost based rateØ to avoid sudden fall of revenue (smooth transition)
l SG3 developed: Ø Guidelines for negotiation
Termination chargeTermination charge
l Destination operator (or Government) set the chargel Charge should be established based on costsl Termaination Charge includes
Ø International exchangeØ National extension, including local loopØ And if appropriate, international circuitØ Other costs imposed on carriers by the national
regulationl Those components should be separately identified
(Unbundled)l Charge applies to all traffic from any sourcel However if significant variation in costs, charge may
vary (volume discount)l Termination charge may be introduced on bilateral
agreement basis
AnnexAnnex E to E to RecommendationRecommendation D.140D.140““indicative indicative targettarget ratesrates”” by by TeledensityTeledensity (T) (T) BandBand, in SDR/min , in SDR/min ((see also see also : http://: http://wwwwww..ituitu..intint//itudocitudoc//ituitu--t/com3/t/com3/focusfocus/80500./80500.htmlhtml))
T<1 1<T<5 5<T<10 10<T<20 20<T<35 35<T<50 T>50
0.327 SDR
0.251 SDR
0.210 SDR
0.162 SDR
0.118 SDR
0.088 SDR
0.043 SDR
43.7¢ 33.5¢ 28.0¢ 21.6¢ 15.8¢ 11.8¢ 5.7¢
Low income Lower middle Upper middle
High income
Note: The correspondence between teledensity band and income group shown in the bottom row is intended to be approximate, not precise. Source: ITU-T SG3 Report. 1 SDR = US$1.39.
39
FCC : 23 ¢(January2002/2003)
FCC : 19 ¢(January2001) 19 ¢(J.2000)
FCC : 15 ¢(January1999)
(end 2001) (end 2001) (end 2001) (end 2001)
(
end 2001) (end 2001) (end 2001)
Cost model resolves every things?Cost model resolves every things?
l Accounting rate is established by negotiationØRates need to be agreed upon negotiationØMarket-determinde prices put pressure upon
negotiation
l Need to back up its claim for a chargeØBy showing the price of a comparable competitively
offered serviceØOr for monopoly by providing relevant cost data
l “Costs” = tools for negotiation, “costs” do not fix automatically the level of prices
The following non-binding guidelines could be applied when negotiating accounting rates and accounting rates share in the international service:1. Each party should ensure that; i.e., all information to be given to the other party should be credible in order to lead the negotiations into right direction.2. The parties should negotiate freely and make agreements voluntary, any kind of coercion should be avoided.3. Each party should act constructively, any offer, proposal, action, etc. should be directed towards reaching an agreement. Complex concepts should be simplified as much as possible.4. Each party should act time-saving, any delay should be avoided.5. Regular re-negotiations and future amendments should be possible.6. Until such time as an appropriate dispute settlement arrangement may be approved by the ITU with respect to accounting rates, both parties should have the possibility to consult a person or institution for mediation.
Guidelines to facilitate the negotiationGuidelines to facilitate the negotiation
Network ExternalityNetwork Externality
l Universal Service Obligation Fund = Cross SubsidyØ Not recognized as cost
l Network extremity = increase utility of a network to usersØ operators to provide incentives for users to join the
network = this can be added to the usage price or to the monthly subscription fee
l the network externality effect has a solid basis in economic analysis and had successfully – at least with some regulators – been brought to bear by mobile operators on their case for higher termination ratesØ Can be used by the developing countries to enhancing
take-up and roll-out of the network
Country A
(Calling)
International operator A
Country B
(Called)
Access network A2Access network A1
International operator B
Access network B2Access network B1
Customers A
Customers B
Do Customers in A derive benefit from
more Customers in B?
Accounting
rate
How can we be sure that an externality will be passed through to
connect more customers in B?
Is benefit to calling operators in A
enough incentive to agree prices above
cost?
If so, how much?
International externalitiesInternational externalities
International calls terminating International calls terminating on the mobile networkon the mobile network
l SG3 revised D.93 in 2000, allowing to negotiateØ a separate rate for traffic terminating on a mobile
networkØ however, this is by bilateral negotiation and when the
rate is cost orientatedØThe difference between the two rates should be as small
as possible
lMany countries now request very high settlement rates (ten times)ØSG3 revised this situation in modifying D.93
TAL, TAF and TAS average TAL, TAF and TAS average interconnection chargesinterconnection charges
Year Mobile-Mobile
Fixed-Mobile
Mobile-Fixed
Fixed-Fixed
TAFAverage
2003 0.162 0.091 0.145 0.142
2004 - 0.103 0.077TALAverage
2002 0.155 0.141 0.054 0.027
2003 0.141 0.135 0.046 0.025
TAS 2004 0.049 0.136 0.038 0.014
3.2 The accounting rates for international traffic originating or terminating at a mobile station should be cost oriented and should be applied on a nondiscriminatory basis to all relations..
3.7 Where 3.3 b) applies but the difference between the two rates cannot objectively be justified on the basis of costs, the following could be considered:
a) The difference between the rates for calls terminating on fixed networks on the one hand and calls terminating on mobile networks on the other (arrived at by deducting the lower from the higher) should be no greater than the corresponding difference between the average of the available inter-operator rates for national fixed to fixed calls on the one hand and the average of available inter-operator rates for all national calls terminating on a mobile network on the other.
b) If such a comparison is not possible, the difference should be no greater than the corresponding difference between the average of retail rates for a national fixed to fixed call on the one hand and the average of retail rates for a national fixed to mobile call on the other hand.
Modification to Recommendation D.93Modification to Recommendation D.93
InterInter--regional Internet connectivityregional Internet connectivity
Asia /Pacific
LatinAmerica
USA / Canada
Europe
Africa,Arab
162Gbit/s
0.1 Gbit/s
0.77 Gbit /s
Note: Gbit/s = Gigabits (1’000 Mb) per second.Source: ITU adapted from TeleGeography.
41.8Gbit/
s
0.4 Gbit/s
14 G
bit/s
0.45 G
bit/s
Typical ISP cost comparisonsTypical ISP cost comparisons
Commercial & operational
costs
National connectivity
International connectivity
Commercial & operational
costs
National connectivity
International connectivity
<<<Developing countries
OECD countries >>>
ITUITU--T Recommendation D.50 International T Recommendation D.50 International Internet ConnectionInternet Connection
The World Telecommunication Standardization Assembly (Montreal, 2000),recognizingthe sovereign right of each State to regulate its telecommunications, as
reflected in the Preamble to the Constitution,notinga) the rapid growth of Internet and Internet protocol-based international
services;b) that international Internet connections remain subject to commercial
agreements between the parties concerned; andc) that continuing technical and economic developments require ongoing
studies in this area,recommendsthat Administrations involved in the provision of international Internet
connections negotiate and agree to bilateral commercial arrangements enabling direct international Internet connections that take into account the possible need for compensation between them for the value of elements such as traffic flow, number of routes, geographical coverage and cost of international transmission amongst others.Greece and the United States of America have expressed reservations and will not apply this Recommendation.
RapporteurRapporteur Groups meeting in Brussels Groups meeting in Brussels (April 2004) and SG3 meeting (May/June2004)(April 2004) and SG3 meeting (May/June2004)
? study of the effects of peering
? Self-help by smaller networks withlimited traffic
? development of general principles in Recommendation D.50
ANNEX A
GUIDELINES FOR INTERNATIONAL INTERNET INTERCONNECTION NEGOTIATIONS
When Parties involved in the provision of international Internet connections negotiate interconnection between their respective networks, interconnect prices and other commercial arrangements between two correspondent Parties should take account of the following:
1) Network connectivity:2) Traffic flows and peak link capacity:3) Cost of international link capacity and its apportionment:4) Additional customer revenues:5) Service support commitment:6) Service performance:7) Interconnect and other fees:8) Legal liability:
International TelecommunicationInternational Telecommunication Regulations (Regulations (ITRsITRs))
l ITRs elaborated in 1988 Ø Monopoly situationØ Basic services only (Telephony)
l New Market situationØ CompetitionØ New services (Mobile, Internet)
l Need for new ITRs?Ø Redraft ITRsØ Integrate into Constitution and Convention
l Study Group 3 starts reviewing ITRsØ Rapporteur Group on ITR review (tsg3itr)
ChairmanMr. Alaa Fahmy
Coordinator-1 Coordinator-2 Coordinator-3
Sub-Group-1
SecretaryS. Tanaka
SecretaryR. Hill
Sub-Group-2 Sub-Group-3
Sub G1: Analyze past work and contributions submittedSub G2: Examine current ITRSub G3: Examine need for new provisions
Council Working Group on ITRCouncil Working Group on ITR(See: http://www.itu.int/itr)
