Global trends in telecom development and Int’l Interconnection Seminar in Arusha, April 2002 The original document is elaborated by Dr Tim Kelly, ITU/SPU. It has completed by Saburo Tanaka and by Pape-Gorgui Toure. The views expressed in this presentation are those of the authors, a nd do not necessarily reflect the opinions of the ITU or its membership. Authors can be contacted by e -mail at: [email protected][email protected][email protected].
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Global trends in telecom development and
Int’l Interconnection
Seminar in Arusha, April 2002
The original document is elaborated by Dr Tim Kelly, ITU/SPU. It has completed by Saburo Tanaka and by Pape-Gorgui Toure. 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][email protected].
Global trends in telecom Global trends in telecom developmentdevelopment
l The state of the industryl The state of the marketl Situation in the Regions
l Paradigm shiftl Examining market realityl ITU-T SG3 activities
ð Transitional arrangementsð New remuneration systems
l Int’l Interconnection with mobile networkl Internet Interconnection – IP Telephony
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
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
enu
e (U
S$
bn
)Actual
Projected
Domestic Telephone/fax
Int'l
Mobile
Other: Data, Internet, Leased lines, telex, etc
Projection of revenue growth (US$bn)Projection of revenue growth (US$bn)
Intern’l TelephoneIntern’l Telephone revenue : 54 billion US $revenue : 54 billion US $
Settlement Settlement transaction : transaction : 27 billion US $27 billion US $
Net Net Settlement paymentSettlement payment to to developingdevelopingcountries countries amountamount to to aroundaround : 5 billion US$: 5 billion US$
Interconnection of two outgoing calls in country A
Call-Back
Using ARCALL BACK using Accounting Rates
Mobile tromboning (using accounting 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
Country A Country B
Operator A Operator BPSTN
IWF
Interconnect
Leased lines
International simple resale (ISR)(By-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 transmission(By-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 Telephony (by-passing accounting rate)
ITUITU––T SGT SG--3 Major achievements3 Major achievements
l New Remuneration systemð Termination charge systemð Settlement rate systemð Special arrangement
l Difficulty to quickly implement those systemsð Condition is to reach cost-oriented rate, butð No cost data or model for some administrations Group
3 is developing cost methodologies
l SG3 is now developing cost methodologies l Transitional arrangements
ð To facilitate staged reduction to cost based rateð to avoid sudden fall of revenue (smooth transition)
AnnexAnnex E to E to RecommendationRecommendation D.140 D.140 “indicative “indicative targettarget rates” by rates” by TeledensityTeledensity (T) (T) BandBand, in SDR (, in SDR (andand US cents) US cents) perper minute.minute.
T<1 A
1<T>5 B
5<T<10 C
10<T<20 D
20<T<35 E
35<T<50 F
T>50 G
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.
38
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)
Annex E Recommends alsoAnnex E Recommends also
l That transit Administrations move towards the indicative target rate (upper limit) of 0.05SDR (0.07US $) per minute.
l To negotiate asymmetrical accounting rate (other than 50/50) if both administrations agree to move to below the indicative target rate. Example: Operator A belong to teledensity band EOperator B belong to teledensity band FA and B agree to achieve TAR 0.2SDR (<0.118x2)ð A can request settlement rate of 0.09 SDRð B accepts to pay 0.11SDR to A
Termination chargeTermination charge
l Destination operator (or Government) set the chargel Charge should be established based on costsl Termaination Charge includes
ð International exchangeð National extension, including local loopð And if appropriate, international circuitð Other costs imposed on carriers by the national regulation
l 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
Full-circuit regime (could be unbundled)
Half-circuit regime (would not normally be unbundled)
Non-discriminatory (same rate for all correspondents)
Discriminatory (different rates negotiated with different correspondents)
In theory, set unilaterally (need agreement to implement)
Interconnection Rates in selected European countries under CPP (in US $ / minute)
In 2001, there is an estimate indicating that the average of Fixed-mobile decreased to 0.136 and mobile to fixed has not changed
Internet Interconnection Internet Interconnection
l Internet Interconnection has slightly different meaning. Historically Internet interconnection has involved simply different Internet networks.
l This Internet Interconnection policies have proved increasingly inappropriate in a commercial industry.ð Many operator with larger networks often charge smaller ISPs
a traffic-based interconnection feeð Many backbone providers have begun offering transit service
networks.
l Different type of Interconnection Arrangementsð ISP Relationships with customers: usually via a dial-upð ISP-ISP Interconnection: peering or bilateral agreementð Multiple ISP Exchanges when several ISPs need to
interconnect in a same city (use of an IXP)
l International Regulatory Development
Recommendation D.50Recommendation D.50
The ITU-T,recognizingthe sovereign right of each State to regulate its telecommunication, 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,Recommends that
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 ofelements such as traffic flow, number of routes, geographical coverage and cost of international transmission amongst others.
Lowinternational
Internetconnectivity
Littleinterest of
privateinvestors
Highconnectivitycharges for
ISPs
Low demandof Internet
services
No growth ininfrastructure,
limitedInternet
connectivity
No exploitation ofeconomies of scale
Low bargainingpower of ISPs
Lack of competition
High end-usercharges
Internet vicious circle
ITU IP Connectivity Project
Liberalisationof the Internetmarket
Market growth
Bargaining powerof ISPs
Economies of scale
Interest in investing Lower costs
Higherdemand
Higherinternational
Internet connectivity
Virtuous circle
IPIP--TelephonyTelephony
Telephone to Telephone to telephone (fax to telephone (fax to fax) via Internetfax) via Internet
l Any telephone/mobile user to any otherl Main motivation: Accounting rate bypass, market
entry for non-facilities-based carriersl Potential service providers include any PTO with
settlement payments deficit (e.g., US = US$5.7bn)
l Market potential: 1.3 billion telephone/mobile users
Telephone TelephonePublic Switch
Internet
Phone Gateway Computer
Phone Gateway Computer
IP TelephonyIP TelephonyOpportunities and challengesOpportunities and challenges
l Opportunities ð Reduce prices to consumers and the costs of market
entry for operators ð In terms of volume of traffic carried and level of
investment committed
l Challenges ð Undermine the pricing structure of the incumbent
Public Telecommunication Operators (PTOs)ð Transition to IP-based networks also poses significant
human ressource development challenges
+0.28 US$
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
ISP
PSTNOperator
Switch
How the operators in developping countries stop IP-Telephony
Operator check only this line
Users can call ISP but ISP is unable to call users
Conclusion and Recommendation Conclusion and Recommendation
l Erosion of traditional system of accounting rates for exchange of international trafficð Domestic interconnect fees will be dominant mode
l Major price cuts in international calls ð Availability of new infrastructuresð Impact of Internet pricing model (distance and duration
independent)
l Mobiles exceed fixed-line phones worldwide ð Introduction of “third generation” mobiles after 2001ð Generational shift, as new users reject fixed-lines