Fixed-Mobile Interconnection
Briefing Paper
ITU Fixed-Mobile Interconnection Workshop
Geneva, 20 September 2000
Objectives
• Lay bare some key issues for discussion by
workshop
• Identify contribution ITU can make to
improve performance of this dynamic and
innovative sector
Importance of Fixed-Mobile
Interconnection is increasing
Worldwide calling opportunities: Among mobile and fixed-line users (1993, 1998 and forecast 2003)
5.0%
5.0%
F-M
7.5%
0.3%
Mob-to
Mob
M-F
19.9%
Mobile-to
Fixed
Fixed-to-Fixed
Fixed-to-Fixed
52.7%
Fixed-to
F-to-Mobile
Mobile
Fixed-to-Fixed
Fixed-to-Fixed
19.9%
1993
1998
89.7%
23.4%
26.7%
Mobile-tomobile
Mobile-tofixed
Fixed-tofixed
Fixed-tomobile
25.0%
25.0%
2003
Source: ITU
Call Termination
• Calling parties seek to terminate calls at specific
addresses (numbers) that are controlled by specific
operators
– No practical alternative but specific operator
• Operator controlling more valuable (or larger set
of) addresses has incentive to refuse
interconnection or price high
• “Primary interconnectivity rule”: SMP operator
shall interconnect at cost
Call Termination
• Unintended consequence: Smaller operator
may overprice
• Exacerbated by CPP environment
– where fixed customer pays
– where fixed operator may have incentive to
cross-subsidize mobile
• Some customer interests not represented in
bilateral negotiations by operators
Call Termination
• Lack of transparency of charges does not
allow customers to exercise informed
choice
• Increased competition in the form of
additional licensees does not affect
termination charges, though improving
performance in other aspects
Interconnection Rates in
Selected CPP and RPP Countries
Per minute in $US
Costa Rica
Malaysia
Guatemala
Mexico
Cambodia
Dom. Rep.
Philippines
Botswana
Antigua
CPP countries
0.017
0.017
0.034
0.034
0.047
0.047
China
Mobile-to-fixed
interconnect rate
Canada
Fixed-to-mobile
interconnect rate
HK SAR
0.026
Singapore
0.064
0.050
0.070
Sri Lanka
0.042
0.007
0.000
0.008
Mobile-to-fixed
interconnect rate
Fixed-to-mobile
interconnect rate
0.008
0.008
0.000
0.009
0.000
0.020
0.020
USA
0.078
RPP countries
0.002
0.001
0.051
0.205
0.052
RPP
0.208
0.293
0.293
Source: ITU Regulatory Survey 2000, FMI Case Studies
CPP
Average
0.009
0.005
0.056
0.092
Interconnection Rates in
European Countries
European fixed-to-mobile interconnect charges, (US$/min)
Norway
0.156
UK
0.16
Denmark
Fixed-tomobile
0.17
Netherlands
0.18
Belgium
0.18
Spain
0.20
France
0.20
Finland
Sweden
Mobile-to-fixed
DOUBLE
TRANSIT
0.22
0.23
Italy
0.23
Best-practice
(20%) guideline
Highest
Mobile-to-fixed
LOCAL
0.24
Switzerland
Lowest
Mobile-to-fixed
SINGLE
TRANSIT
0.21
Austria
Germany
EU, range of interconnect rates, (US cents per min.)
0.30
0
Source: Compiled from ITU Regulatory Survey 2000
, European Union, ECTA
5
10
15
20
25
30
F-M & M-M Termination Charges
• Absence of cost orientation indicated by
– Wide range of fixed-to-mobile charges in
Europe
– Mobile-to-mobile charges being generally
lower than fixed-mobile charges
Physical Links
• Where regulator is not involved, charges for
physical links may be set to burden mobile
operator
• Incumbent may have incentive to limit
points of interconnection
– In some cases, with effect of increasing charges
– Increasing vulnerability of mobile network to
congestion
Regulating F-M Interconnection
• Some NRAs subject to overarching
principles
– Signatories to GATS Protocol 4, Regulatory
Reference Paper
– European Union directives
• Includes principle of cost-oriented, nondiscriminatory interconnection by major
suppliers/ operators with SMP
Regulatory Process
• Current practice is to require commercial
negotiation, with regulatory intervention as
backstop
• Regulators face serious resource limitations
– Bilateral relations increase with higher number
of operators
– Cost studies, especially of mobile termination,
may be problematic and time-consuming
Regulatory Process
• Prioritizing intervention
– Conventional market share
– Based on calling opportunities
• Prevent lock-in of outcome at moment of
entry by mobile operator
• Reducing complexity (and workloads)
– “Most Favored Nation”
– Require/encourage/allow clustering
Regulatory Process
• Alternative Dispute Resolution may be of
value
– Mediation, backstopped by formal proceedings
– Arbitration
• Conventional
• “Final offer”
• Other
Cost Studies
• Generally accepted that mobile termination
costs may be higher than fixed, because of
additional mobile network elements
• Higher proportion of joint and common
costs in mobile than in fixed
• Rapid rates of technological change and
cost reductions cause difficulties
• 3G licensing exacerbates costing problems
Benchmarking
• Difficulties and delays associated with
formal costs studies may be sidestepped by
benchmarking, i.e.,
– EU best practice guidelines: upper limit of
lowest three rates
– ITU-T draft recommendation on settlements:
average of lowest 20 percent of rates
Mobile Internet
• Current minute-based interconnection
arrangements may have to be revised
because of
– Messaging in the context of “always on”
mobile networks
• SMS as precursor?
• Message or volume-based or flat-rate?
– Information retrieval, with asymmetric flows
Mobile Internet
• Possible lessons from
– Internet interconnection, peer vs client?
– Canadian two-tier mobile interconnection
system?
• Studies needed
Role for the ITU?
• NRAs require knowledge of
– Best practices on all aspects of fixed-mobile
interconnection
– Simple and easy to implement cost
methodologies
– Benchmarks, possibly ranges of acceptance
– Challenges of the mobile Internet
Role for the ITU?
• ITU is well positioned because of its broad
membership
• Publication of rates and related information
can have beneficial effects on behavior of
both regulators and operators
• Provide virtual (www.itu.int/interconnect)
and face-to-face spaces for sharing
knowledge/ resolving problems