Regional Seminar on Costs and Tariffs for Member Countries
of the Regional Group for Asia and Oceania (SG3RG-AO)
Beijing, China, 26-27 April 2010
FINAL REPORT ON THE SEMINAR
CARMEN PRADO-W AGNER
TELECOMMUNICATION DEVELOPMENT BUREAU
1. Introduction
The Regional Seminar on Costs and Tariffs for Member Countries of the Regional Group for Asia and Oceania was
organised with the support and cooperation of the Ministry of Industry and Information Technology of China and the
Academy of Telecommunication Research CATR. As usual, the meeting of Study Group 3 followed the seminar in the
afternoon of 27 April 2010. Fifty delegates from 13 countries participated.
Ms. Chen Jiachun, Deputy Director General of the Ministry of Industry and Information Technology of China opened the
seminar and welcomed the delegates, she said that the issues studied by ITU such as telecommunication tariffs, settlement,
and the relevant economic policy have received wide attention by the telecom authorities and the telecom industry of each
country in the region. She presented a very interesting overview of the developments of China’s telecom industry.
Mr. Yang Zeming, President of CATR, expressed the interest of the region in the activities of the Regional Group for Asia
and Oceania. Finally, Mr. Kishik Park, Chairman of Study Group 3, Mr Byoung Nam Lee, Chairman of the Study Group 3
Regional Group for Asia and Oceania (SG3RO-AO) and Ms. Carmen Prado-Wagner of ITU presented their opening remarks
and welcome.
It was remarked that as usual the selection of the subjects treated in this seminar was carried out in coordination with the
Management Team for the Regional Group for Asia and Oceania, in order to serve as guidelines and recommendations for
administrations as well as for the discussions of the Regional Group of the Study Group 3 meeting which followed the
seminar.
The seminar was chaired by Mr. Yu Zhicheng from CATR, China and Mr. Kishirk Park from ETRI, Korea.
2. Results
The agenda comprised subjects requested during the Regional Seminar and Meeting for Asia and Oceania (SG3RGAO) seminar held in Vietnam in 2009, as well as from requests of countries in the region. Discussions focussed on
ITU Telecommunication Development Bureau (BDT) activities, specifically Programme 4 on the basis of the priorities
of the region. This seminar contributed to the work of the SG3RG-AO especially on the subjects of cost methodologies
in the region, mobile termination rates, International Telecommunication Regulations (ITRs) and mobile termination
and mobile roaming issues following requests from the region.
Session 1: What does a regulator require from a robust and transparent cost model?
The presenter explained the actual situation in the Asia and Pacific region regarding cost modeling and regimes
application. It was noticed that ex-ante retail prices and tariffs, and accounting separation are the most common
methodologies applied in the region.
Some concerns were raised about the relation between cost modeling and network externalities (NE) (taking into
consideration the experience of Digicel and Vodafon in Asia), as there are always benefits for users to connect with
other users, by providing low tariffs or cost based tariffs. The speaker explained that cost modeling is the first phase to
define cost based tariffs that will be attractive to users. NE should be calculated later, when a considerable number of
users is registered, taking into account the penetration and utilisation rate of the telecommunication service by users.
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Another concerns was related to the application of the Bill and Keep regime, it was suggested that this could be
applied when traffic is balanced, especially between operators designated as having Significant Market Power (SMPs)
and small and newcomer operators.
Session 2: Cost methodologies in Asia and Oceania
Cost methodologies are used across the board and are likely to be major decision determinants for pricing of services
where social policy considerations are not seen as paramount. Even applying pricing public policies, it is better to
understand costs before acting, because costs will determine the sustainability of the prices imposed.
The Asia and Oceania region is more oriented to Eurocentric tendencies, as these are better described with enough
documentation, and good results. In any case, whatever the source of costing principles and methodologies they need
careful adaptation to the circumstances and context of the Asia and Oceania countries where they are being applied.
When considering cost related models, these are most related to benchmarking as a preferred method (because it is
quicker and cheaper) in some countries. However, it is important to note that benchmarking has strict principles, and
that they must be adhered to if the benchmarking process is to lead to cost related outcomes, such as:
•
Comparison data must be from a published decision of a regulator
•
The other regulator must have employed a cost based approach
•
The cost standards must be those required in the home country - LRIC, FDC / FAC, etc
In addition, most of the time benchmarking is based on poor standards or references that are not really comparable.
Benchmarking needs to be transparent and open to scrutiny by stakeholders, and it is not an automatic mathematical
routine – there are policy judgments to be made at every stage including the selection of the comparison countries,
choice of figures where there are options and where to locate the specific country (mean, median, second quartile,
best practice?).
Session 3: Broadband: WiMax Implementation
The speakers explained that for high speeds, WiMAX is cheaper at low penetration rates but becomes less profitable
for operators than other technologies when the penetration rate rises. This is due to the difficulties that WiMAX
presents when providing high speed to a large number of customers. A comparison with other technologies was
presented, taking into account the different prices, quality of services as well as the importance of the development of
market analysis for regulators to design the SMP in each telecommunication service segment.
Success stories in different countries concerning the application of WiMAX were presented. For the provision of these
services, it is necessary to carry out a spectrum evaluation. A methodology was proposed showing the future demand
for services on mobile devices as the first step in assessing the spectrum. With this information, it is possible to make a
good estimate of the network capacity requirements that an operator requires to provide the telecom service in an
efficient way so that the operational costs are minimized.
A scenario was presented that includes a strong demand for mobile services and involves the allocation of more
frequency blocks since it is necessary to meet the significant bandwidth that users require.
Concerns were expressed about GSM and WiMAX deployment. Indonesia presented their situation regarding the
position of the regulator on deployment of a new technology or maintaining the actual situation and waiting for the next
technology. The speaker proposed that a good position could be the preparation of market analysis to determine the
actual situation of the operators and the services/prices received by users.
Session 4: International Internet Connectivity (IIC)
IIC is one of the subjects discussed by Study Group 3, this presentation is a contribution to the work of SG3RG-AO. The
speaker proposed that the traffic flow element mentioned in D.50 can be measured by using the Border Gateway Protocol
(BGP), that is to say, the traffic flow data provided by the technical layers of BGP can be used as an element in bilateral
negotiations on IIC. This subject was also discussed during the SG3 meeting.
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Session 5: International Telecommunication Regulations (ITRs)
This presentation clarified why it is important to revise the ITRs, as well as outlining the history of these regulations. There
are two views regarding this revision. Some administrations think that it is not necessary and that some of the obsolete
elements applied in this regulation are good or convenient for them at present. Others think that it is very important to revise
it regarding the new services as well as the examples of new issues: for example security, misuse of numbers, application
of ITU-T Recommendations, emergency telecommunications services and telecommunications for disaster relief, taxation,
etc. The ITU Council has already set the dates in 2012 for the organization of the Conference on ITRs and the agenda.
Session 6: Mobile Termination Rates (MTR) – Global Overview
In this presentation, an overview was provided of current MTR regulation regimes in the different regions of the world and to
evaluate the necessity and the scope of such regulation.
In many countries around the world and for a long time, mobile operators were settling mobile interconnection rates through
negotiation and commercial agreements, and the regulator was often only a mediator or arbiter, sometimes settling the
interconnection charges in cases where the parties failed to agree. Regulation of fixed interconnection rates, on the
contrary, has quite a long history. Historically, in many countries, MTRs have been left outside regulation or subject to
“lighter” regulation compared to Fixed Termination Rates (FTR). The liberalization of fixed telephony around the world has
led to an ever increasing number of telephone service providers, which in turn has created a need for regulators to ensure
that any-to-any interconnection is possible and that former monopolies do not abuse their power in a market, so that
newcomers don’t have to pay unreasonably high interconnection rates. Hence, fixed telephony interconnection has been
heavily regulated in many countries, compared to the global mobile telecommunications markets where the regulatory
intervention has had a lighter touch, and where only recently some aspects have come under close scrutiny by regulatory
authorities. One such aspect concerns mobile termination rates (MTRs).
Session 7: Activities of Mobile Termination Rates (MTR) and mobile roaming in the framework of ITU-T Study
Group 3
The related history and the evolution of the works of the MTR Rapporteur Group (2006 to 2009) in charge of this issue was
presented. A questionnaire was developed by ITU-T and sent to all countries. A detailed analysis of the responses was
presented.
For the new Study Group period, from January 2009 a new rapporteur group was established on Mobile Roaming.
Contributions were received from different countries and gathered recent studies on mobile roaming charging arrangements.
A questionnaire has been prepared and distributed to all Member States and Sector Members, and the results have been
made available. In the next SG3 meeting (Seoul, Korea ,17-21 May 2010) results of this study will be presented and the next
steps for the work of this group will be decided based on the findings.
Session 8: Roaming: Tariff aspects and regulatory trends
The experience from Europe was presented on roaming, specifically the regulatory policy to be applied to the setting of
wholesale prices, a key issue for guaranteeing the level playing field for competition in the different markets where the
designated SMP operator is operating. The model followed by the NRAs to set the wholesale tariff services could affect
investment decisions, in this regard, there are at least a couple of questions to be discussed and clarified:
•
Should we apply a bottom up rather than a top down cost modelling approach?
•
Should we recognize symmetric or asymmetric prices?
These questions are part of the debate in Europe regarding the FTR/MTR, and the regulation of bitstream and wholesale
broadband services. It was also explained how the European Commission (EC) is working with all regulators specifically on
the activities related to the creation of an enabling environment to encourage investment in the sector. It was suggested
that roaming should be discussed at regional level with harmonized regulation. The EC has defined a glide path to
determine the wholesale prices on roaming in European countries. The EC has also defined the price of sending a
message (11 Euro cents).
The asymmetry of prices in regard to the SMP operators and new operators was raised.
Regarding convergence, network and service convergence is changing the scope of the telecom sector from different
perspectives:
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(i) competition,
(ii) regulation, and
(iii) customer demand.
In this regard, NRAs should adjust their regulatory framework and revise the boundaries of the defined markets since there
is no longer a direct relationship between the services provided and the markets in which they are commercialized.
Session 9: China’s experience on the regulation of telecom service tariffs
The presenter explained the application of the China tariff process. This is being implemented in three phases, as described
in the presentation. As telecommunication fees are becoming more market-oriented, most telecom service charges are
decided and negotiated by enterprises, and price cap regulation on some basic telecommunication services has been
applied since 2005. As a result of studies, and taking into consideration the influence of purchasing power,
telecommunication service tariffs are lower in developed countries than developing countries, in the case of China, tariffs are
lower than India and Brazil from the BRIC group.
Session 10: Research on the design strategy for integrated full-service package
Under the full-service operating environment, the integrated package is exhibiting more and more development potential.
Whether operators’ package strategies are reasonable and meet users’ expectations is the main factor for the acceptance
and usage of full-service integrated package. Based on the research of the demands of home users and relevant domestic
and foreign package strategies, this paper proposed a model for operators to design a full-service integrated package. The
speaker presented an analysis of different tariff strategies which included the tariff bundling based on service and various
terminals, and made a suggestion of how operators are integrating a full-service package model in accordance with different
levels and contents and combines month calls fees, preferential data value-added services as well as diversified use
terminals based on home users’ different needs.
3. Follow-up activities
The follow-up activities were defined during the seminar and especially during the meeting of the Regional Group for Asia
and Oceania, as follows:
Questions from Contribution C5 relating to Hub Traffic and transit price could be studied and included in the Tariff Policies
Questionnaire for 2010 as a collaboration to the work of the ITU-T Study Group 3 Regional Groups, the person in charge,
Mr. Hutagalung, from Indonesia, will send the set of questions directly to the BDT representative in the appropriate format.
Regarding cost modeling issues, BDT informed that the code source of COSITU is being released and will be available to all
NRAs, as explained last year.
BDT proposed to study the possibility of integrating in the Broadband Study, to be carried out by BDT, the issues mentioned
on Document C006 on “Economic Issue on International Roaming of BWA” proposed by Indonesia.
In the issue related to NGN charging, BDT proposed to contribute with the answers from the Tariff Policies Survey,
specifically section 7 on “Economic aspects of investment projects of Next Generation Networks (NGN)”, as well as to work
with the NGN Group, chaired by Mr. Younsung Choi from Korea, in the development of the questionnaire that will be sent to
all Member States on NGN charging. It was decided to include the new questions on NGN charging in the BDT Tariff
Policies Survey.
It was proposed to hold the next SG3RG-AO BDT Seminar and Meeting in Thailand in February or March 2011.
The final report and presentations of the Seminar on Costs and Tariffs as well as the contributions for the SG2RG-AO
meeting are published on the ITU website:
http://www.itu.int/ITU-D/finance/work-cost-tariffs/events/tariff-seminars/China-10/index.html.
The chairman thanked the host country for its excellent organization and generous support, and the BDT and TSB staff for
their support and their excellent work, and requested BDT to continue with the organization of the seminar together with the
future activities of the SG3 as well as to continue with the synergies for of both sectors to support the Asia and Pacific
region.
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