International
Interconnection
Dr Tim Kelly,
Co-ordinator, Strategies
and Policy Unit, ITU,
Development Symposium
for Regulators,
20-22 November 2000
The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the
ITU or its membership. The author can be contacted at tim.kelly@itu.int.
International Interconnection
Trends in Telecom Reform, Chap 8
l Trends in international telecom traffic and
prices
l From the old world …
ð The bilateral accounting rate system
ð Accounting rate reform
l … to the new world
ð Cost-oriented, facilities-based
interconnection
ð Trading telecom minutes
l Issues for regulators
The International Telecom Traffic
Roller-coaster
Global international telephone calls
Billions of minutes
18%
19%
18%
17%
101
94
86
17%17%
79
17%
16%
71
15%
15%
15%
15%
15%
15%
64
14%
13% 57
13%
Annual change
12%
12%
12%12%
49
11%
11%
43
38
9%
8%8%
33
28
24
21
18
16
14
11 13
10
9
6 8
5
5
4
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00
Source: ITU “Trends in Telecom Reform, 2000/01”
The international call price squeeze
Swiss call prices.
US cents per minute.
74
58
58
Call to USA
43
28
Local call
7
5
5
4
4
4
4
95
96
97
98
99
00
Source: ITU “Trends in Telecom Reform, 2000/01”
The accounting rate regime
unravels
l The bilateral accounting rate regime
ð More than 100 years old
ð Rates negotiated and accounts settled bilaterally
ð Worked well in time of monopolies, state control and
balanced traffic flows
l As market liberalisation increases …
ð Price imbalances and traffic imbalances grow
ð Net settlements increase, creating incentives for
operators receiving more traffic than they send to
keep prices high
l … pressure for a multilateral agreement grows
ð WTO basic telecommunications agreement creates
possibility for direct interconnection, but agreement
avoids discussing accounting rates
Accounting rates are falling; but
not fast enough to avoid by-pass?
1.2
1
World
Settlement rate trends, in SDRs
1.01
1.00
0.98
USA
Asia-Pacific
0.95
0.91
0.87
0.8
Africa
0.85
0.64
0.6
0.4
LAC
0.81
0.67
0.58
0.45
0.49
0.40
0.37
0.35
0.31
0.27
0.2
0.47
0.25
0.49
0.42
0.23
0.37
0.20
0.60 0.54
0.54
0.39
0.39
0.32 0.29
0.15 0.14
0
1990
1991
1992
1993
1994
Source: ITU “Trends in Telecom Reform, 2000/01”
1995
1996
1997
1998
1999
2000
Accounting rates and termination
charges: What differences?
Accounting rates
Termination charges
Normally symmetric
Not necessarily symmetric
(accounting rate split 50/50) (if costs differ)
Bilaterally negotiated
Discriminatory (different
rates with different
correspondents)
Half-circuit regime (not
normally unbundled)
In theory, set unilaterally
(though D.150 requires
bilateral negotiation)
Non-discriminatory (same
interconnect schedule
offered to all carriers)
Full-circuit regime (can be
unbundled)
Increasingly competitive markets
International traffic by carrier type, in
billions of minutes
120
100
80
New carrier in
competitive market
Incumbent carrier in
competitive market
Monopoly
60
40
20
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
Source: TeleGeography, 2001.