Global trends in telecom
development & new challenges
for developing countries
Saburo TANAKA
Seminar in Buenos Aires, June 2005
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: Tim.Kelly@itu.int saburo.tanaka@itu.int
Agenda
l Market trends
ØNetwork evolution
ØParadigm shift
ØTariff evolution
l Challenges for developing countries
ØIP Telephony
ØMobile service
ØInternet issue
A Mobile Revolution
Fixed Lines vs. Mobile Users, worldwide, Million
1'400
Mobile Users
1'200
Fixed Lines
1'000
800
600
400
200
0
1993
1995
1997
Source: ITU World Telecommunication Indicators Database.
1999
2001
2003
5.0%
5.0%
Calling opportunities worldwide
0.3%
7.5%
89.7%
19.9%
1993
52.7%
26.7%
19.9%
1998
Mobile-tomobile
Mobile-tofixed
25.0%
Source: ITU Fixed-Mobile Interconnect website: http://www.itu.int/interconnect
2003
23.4%
Fixed-tofixed
Fixed-tomobile
25.0%
Impact of new technologies
1600
25
1400
Mobile subscribers
20
Internet subscribers
1200
Mobile penetration
1000
15
Internet penetration
800
10
600
400
5
200
0
5
0
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
5
Asia-Pacific international
communications capacity, Gbit/s
70
65
60
Internet
Telephone
50
40
30
20
10
0
11
14
8
9
0
0
0
0
1992
1993
1994
1995
16
18
20
23
30
26
31
8
0.1
1996
2
3
1997
1998
1999
2000
2001
Growth In DSL Subscribers-Regional Division (000s)
1999-2003
20,000
19,000
18,000
17,000
16,000
15,000
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Asia-Pacific
North America
Western Europe
South & South East Asia
Latin America
Eastern Europe
Middle East & Africa
1999
2000
2001
2002
2003
International voice traffic
(in billions of minutes)
180
VoIP
160
PSTN
140
120
As % of total
100
11.8%
80
60
7.4%
40
4.8%
20
Source: ITU /
TeleGeography
0
13.1%
0.2%
0.01%
1997 1998
1.6%
1999
2000
2001
2002
2003
Changing mix of int’l circuits
Rise of international private lines
8
7
Availability and status of international circuits from the
United States (64 kbit/s equivalents, in millions)
Other
6
5
Idle circuits
2002, total = 6.7m
circuits of which
IPL = 29.4%
4
3
2
Source: ITU,
adapted from
FCC Circuit
Status Report.
9
1
0
International
Private Lines
1995, total = 0.26m
circuits of which
IPL = 10.6%
PSTN circuits
2002
1995
9
International voice traffic trends
Revenue (US$bn) and price per min ( cents)
70
60
50
68
63
40
58
51
30
44
39
20
10
Source: ITU
World Telecom
Indicators
Database.
1
0
33
Revenue (US$bn)
Price per minute (US cents)
0
1997
1998
1999
2000
2001
2002
2003
10
Sources of telecom revenue
Worldwide, in US$ billions
Service revenue (US$ bn)
1'200
1'000
Source: ITU
World Telecom
Indicators
Database.
800
19%
Other: Data, Internet, leased
line, etc.
Mobile
600
400
International fixed telephone
200
Domestic fixed telephone
38%
4.5%
38.5%
0
1993
95
97
99
01
2003
Selected rates for call termination
In Euro cents per minute
0.150
Mexico
0.08
0.08
Settlement/RIO
Skype, Mobile
0.140
China
Note: Mobile
and fixed rates
are for
SkypeOut.
Settlement is
from US and
Reference
Interconnect
Offer is for
double tandem.
0.180
India
0.138
0.151
0.019
Germany
0.251
0.017
Source: Skype,
FCC, Analysys.
1
2
Skype, Fixed
0.022
0.022
0.016
France
0.164
0.017
12
The “third coming” of IP Telephony
l 1995-1999:
Ø “Internet phone”, offered primarily over the public
Internet (e.g. FreeWorld Dial-up, DialPad)
l 2000-2002
Ø “VoIP”, offered as discounted telephony over IP-based
networks (e.g. Net2Phone, iBasis)
Ø Collapse of dot.com bubble left many VoIP companies
struggling as incumbent PTOs also offered VoIP services
or acquired VoIP operators (e.g. China Telecom,
Teleglobe)
l 2003-present
1
3
Ø “Voice over broadband”, offered as free or flat-rate chat
plus discounted calls to PSTN/mobile users (e.g. Vonage,
Skype)
Ø “Corporate IP”, as users shift both data and voice to a
unified IP platform
13
Annual growth rates
International voice traffic, in %
10’000%
1’000%
VoIP
100%
10%
Note: Vertical
scale is
logarithmic.
Source: ITU /
TeleGeography
1
4
PSTN
1%
1998
1999
2000
2001
2002
2003
14
Regulatory status of IP Telephony
By region, 2003
100%
1
6
80%
3
2
8
9
6
60%
2
4
29
4
Full
Competition
Partial
Competition
8
40%
No policy for
IP Telephony
6
4
Prohibited
20%
1
2
5
14
5
6
7
Restricted
0%
Africa
Americas
Arab States
Asia-Pacific
Europe/CIS
Note: Based on responses from 132 economies. “Prohibited” means no service is possible. “Restricted” means
only licensed PTOs can offer the service. “Partial competition” means non-licensed PTOs may use either IP
networks or the public Internet. “Full competition” means anyone can use or offer service.
Source: ITU (2005, forthcoming): General Trends in Telecom Reform”
Regulatory dilemmas
Examples of regulatory confusion or inconsistency in
regulation of IP Telephony
Non-licensed
Users are able to
PTOs may offer IP mak e IP phone calls,
Telephony, but not
but no company is
licensed PTOs
licensed to provide it
Brazil
Barbados
Sri Lanka
Suriname
TYFR Macedonia
Licensed PTOs are
All PTOs are allowed to
allowed to offer IP
offer IP Telephony, but
Telephony, but users
users are not allowed
are not allowed to use it
to use it
Aghanistan
Bhutan
Algeria
Congo DR
Antigua & Barbuda
Kyrgyzstan
Indonesia
Togo
Malawi
Mali
Morocco
Oman
Pakistan
Paraguay
Rwanda
Uganda
Note: Based on responses to 2003/04 questionnaire from 132 economies. Only selected responses are shown.
“PTO” = Public Telecommunications Operator.
Source: ITU World Telecommunication Regulatory Database.
IP Telephony in five year’s time
Major technological and regulatory trends
l IP-based traffic indistinguishable from PSTN
Ø Around 100 bn minutes of IP-based international traffic in
2008, or >50% of total
Ø Many carriers will have all IP-networks
Ø A majority of voice traffic will originate on wireless
networks and much of it will be IP-based
l Numbering convergence
Ø ENUM will allow calls to and from IP voice on multiple
different devices
Ø Numbering plan will allow for non-geographic and deviceindendent VoIP numbers
l Voice over IP over mobile
1
7
Ø Voice will increasingly travel over data channel in mobile
networks to provide discounted calling prices
17
Mini case study: IP Telephony in
Japan
l In 2000, Japanese Ministry (now MIC) introduced new
rules on unbundling local loop and co-location
Ø Rapid rise of DSL connections
Ø Very low prices (<US$20 per month)
Ø Service speeds in excess of 26 Mbit/s
l Yahoo BB! Entered marked in September 2001 with
bundled DSL and VoIP
1
8
Ø MIC defined numbering plan (prefix 050) for VoIP,
allowing calls to be received on PCs
Ø November 2002, >7m VoIP numbers allocated to ISPs
Ø VoIP development consortium worked with MIC to
establish standards for QoS, interconnection, tariffs,
number allocation etc.
18
Japanese broadband prices are among the
lowest in the world
Broadband monthly 0sub.500
prices,
1000US$,
1500July
20002004
2500
Source: ITU
Internet Reports
2004: The
Portable
Internet.
1
9
China 1
Lithuania 2
Jordan 3
Slovak Republic 4
Japan 5
Belarus 6
Macao, China 7
Taiwan, China 8
Croatia 9
Australia 10
Sri Lanka 11
Israel 12
Korea (Rep.) 13
Czech Republic 14
Cyprus 15
Ukraine 16
Greece 17
Hong Kong, China 18
Malaysia 19
Brazil 20
Estonia 21
Senegal 22
Netherlands 23
Germany 24
Slovenia 25
French Guiana 26
Mexico 27
New Zealand 28
Barbados 29
Morocco 30
512
256
512
256
1024
512
1500
256
384
256
512
256
2048
512
256
512
256
640
512
300
512
256
512
1000
1024
512
256
400
256
256
0
9.66
13.64
Overall
14.08
14.77
subscription
16.78
17.43 charges are
18.68 important
19.39
21.01
21.13
21.71
23.58
23.93
24.77
25.00
25.00
25.30
25.38
26.05
26.07
26.64
26.92
27.71
27.71
29.57
30.12
30.61
31.21
31.50
32.97
10
20
30
40
Cost 100 kbit/s as % of monthly income
Japan 1 0.00
Sweden 2 0.01
Korea (Rep.) 3 0.02
But factoring in
Taiwan, China 4 0.04
the speed of the
Hong Kong, China 0.04
0.06
United States 6
connection and
0.06
Canada 7
income is the
0.07
Belgium 8
more telling story
0.09
Singapore 9
0.10
Switzerland 10
Germany 11
0.13
Denmark 12
0.15
Norway 13
0.17
Netherlands 14
0.17
Finland 15
0.18
0.18
Australia 16
0.18
Italy 17
0.20
France 18
0.24
Israel 19
0.26
United Kingdom 20
Luxembourg 21
0.28
Slovenia 22
0.29
Austria 23
0.31
Iceland 24
0.38
Ireland 25
0.42
0.43
Bahamas 26
0.55
New Zealand 27
0.86
Czech Republic 28
0.86
Greece 29
0.92
Estonia 30
19
Traditional regime:
Joint provision of service
Country A
Country B
X
X
20
Emerging regime:
Market entry and interconnection
21
Jointly provided circuit
Country A
Country B
X X
X
Circuit provided
by operator B
International simple resale (ISR)
(By- passing accounting rate)
Country A
Operator A
Country B
PSTN
Operator B
Interconnect
IWF
Leased lines
Once a foreign carrier accepts the benchmark rate, it can negotiate ISR
arrangements with US carriers
Telephone service using data transmission
(By-passing accounting rate)
Country A
Country B
VSAT
Operator A
Interconnection
PSTN
É
Voice is packetized = data transmission
Telephone regulations do not apply
IP Telephony
Terminating
Network
PSTN/ISDN
/PLMN
ADSL
IP Network
IW F
Local or distributed
function
Local or distributed
function
IWF
PSTN/ISDN
/PLMN
Call initiated from P S T N / I S D N / P L M N
to P S T N / I S D N / P L M N
Or Call initiated by ADSL
Originating
Network
Call from International Telecommunication Network
(ITN) to another ITN via IP-based Network
T0208500-00
(106147)
Refile and other practices using
accounting rate system
Operator in A sends traffic
to
operator in C under an
arrangement of exclusivity
1
C
in A
Orig ination B
Dest
Operator in C declares
traffic to B on transit
through A
A
C
• Operator in A is a partner
of operator in C
• Settlement rates A/B >
C/B
B
C
B
igin ation
r
O tin
s
De
A
Operator in
B receives
traffic at
settlement
rate C/B
instead of
A/B
2
Operator in C
“re-labels” the
traffic as originated
in C
3
B
4
Mobile tromboning & high mobile
termination charge
International
boundary
Operator X or Operator A’s
facility in another country
Operator A’s
Int’l facility
Operator B’s
Int’l facility
Operator A’s
national network
É
Caller A
12
Operator B’s
mobile network
High
Interconnection
charge
È
Called B
Operator
OperatorB’s
B’s
fixed
fixednetwork
network
É
Called C
Delivering international voice
traffic in 2002
Traditional
Traditional bilateral
bilateral
settlement
settlement rate
rate
system
system
Via
Via a
wholesale
wholesale
carrier
carrier
30%
15%
20%
Origina ting
international
voice traffic
Direct
Direct dealing
dealing
with
with the
the
terminating
terminating
country
country
70%
65%
Refile
Refile via aa
third
third country
country
Sender
Sender keeps all
exchange
exchangeof
oftraffic
traffic
Via
Via aa point
point of
of
presence
presence in
in the
the
terminating
terminating country
country
Falling prices (1)
Average retail price of one minute call to USA.
$2.00
Source: ITU adapted from FCC and
national data (34 countries).
$1.50
Forecast
Mark-up
$1.00
$0.50
Settlement
$0.00
90
92
94
96
98
00
02
04
Falling Price (2):
SwissCom, price per minute of local call and call to US
Swiss call prices.
US cents per minute.
74
58
Source: ITU.
58
Call to USA 43
28
Local call
7
5
5
5
4
4
4
4
3
95
96
97
98
99
00
2001
Infrastructure capacity and costs,
TransAtlantic cables, 1983-2000
10'000
Capacity (voice
paths), growing by
64% p.a.
100'000'000
10'000'000
1'000'000
100'000
1'000
10'000
100
10
1'000
Cost per voice path
(US$), declining by
41% p.a.
1
100
10
1
TAT-7 TAT-8 TAT-9 TAT-10 T-11 T-12/13 Gemini TAT-14
1983 1988 1991 1992 1993 1995 1998
2000
Source: ITU, TeleGeography Inc., FCC.
Note: Voice-path numbers assume a compression ratio of 5:1 to number of circuits.
Capacity (voice paths)
Cost per voice path (US$)
100'000
If distance is dead,
and bandwidth is
infinite …
What do we bill
for?
What do we bill for?
l Bill for network connection
Ø Increasing integration of monthly telephone
subscription and Internet subscription prices
l Bill for privacy/advertising
Ø Privacy-protected customer pays premium
Ø Customer agreeing to receive advertising pays less
l Bill for quality of service
Ø Differentiated by transmission quality, waiting time,
bandwidth on demand, value-added secretarial
support, mail functions etc.,
l Bill for Billing
Ø Customising of billing: by service, by user, by site
Internet, price and service trends
l Towards a flat-rate price structure
Ø All you can eat for US$20.00
l Towards lower service quality
Ø “Best efforts” service delivery at lowest price
l Death of distance
Ø Message to other side of earth costs same as a
message sent next door
l Cross-promotion of Internet and other services
Ø “Free PC” with three year’s ISP subscription
Ø “Free Internet” with residential local loop charges
l Tendency towards industry concentration
Ø AOL’s subscriber base > next ten ISPs added together
Challenges for developing countries
l Service, tariff and technical issues
Ø Alternative calling procedures
Ø Public switched network to IP based network
Ø Challenges related to mobile service
l Regulatory issues
Ø Interconnection rules
Ø Implementation of USO
Ø Tariff Rebalancing
l Internet connectivity in developing countries
Ø Guideline for negotiating IIC
Ø Traffic based negotiation
Declining prices for mobile access,
global average, in US$, 1992-2000
Monthly subscription, in US$
Connection charge, in US$
CAGR, 1992-2000 = -9.2% p.a
CAGR, 1992-2000 = -32.1% p.a.
44.9
38.1
547
34.2
410
31.3
20.2
16.6
231
180
86
1992
1994
1996
1998
1999
75
2000
1992
1994
1996
1998
1999
2000
Note:
CAGR = Compound Annual Growth rate.
Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”
Expenditure per month
Cultivate the high-spenders
14 per cent of highspending customers
generate 53% of
revenue
Average revenue
per user (ARPU)
14%
53%
22%
36%
24%
8%
40%
3%
Customers
Source: Price Waterhouse Coopers, based on Canadian data.
40 per cent of lowspending customers
generate 3% of
revenue
Mobile and Fixed-line ARPU in Japan
Yen 100
300
278
250
252
265
275
284
Fixed line
272
Mobile
230
200
158
150
100
98
98
97
98
99
1990
1991
1992
1993
1994
100
98
96
134
94
127
92
141
91
152
88
160
87
50
0
1995
1996
Years
1997
1998
1999
2000
2001
2002
3
8
Slov
enia
Fran
ce
Swit
zerl
and
Port
ugal
Esto
nia
Mal
ta
Gre
ece
Ital
y
Net
herl
ands
Countries
Ger
man
y
Hun
gary
Belg
ium
UK
Luxe
mbo
urg
Aus
tria
Latv
ia
Spa
in
Pola
nd
Slov
ak R
ep.
Icel
and
Irel
and
Den
mar
k
Swe
den
Czec
h Re
p.
Finla
nd
0.20
Nor
way
Lith
uani
a
Euros
Average Mobile Termination Rate
(European countries, July 2004)
0.25
Peak
Offpeak
Total
0.15
0.10
0.05
0.00
38
Mobile and fixed Settlement rates, Mobile/Fixed ratio
0.18
0.16
15.29
Europe
0.18
0.159
Mobile
0.128
0.14
Mobile/Fixed Ratio
0.12
0.1321
0.12
0.12
0.1
0.1
0.085
0.08
0.08
0.0624
0.06
0.0515
0.055
0.06
5.24
0.04
0.04
0.0229
0.02
0.0104
0.0125
0.02
0.94
1.36
Netherlands
Germany
Chile
Russia
Asia Pacific
0.152
0.16
0.14
Brazil
Jamaica
Africa
0.1385
0.14
0.13
0.12
0.12
0.1
0.1
0.08
1.15
0
0
0.16
0.1525
0.16
Fixed
10.24
0.14
Latin America & the Caribbean
8.94
0.095 0.095
0.08
0.062
0.06
5.7
From FCC data
Notice of Inquiry
October 2004
0.04
0.02
0.017
0.0228
0.0545
0.06
0.0295
0.047
0.04
0.025
0.02
2.23
1.16
1.18
3
9
1.00
0
0
Australia
Japan
Malaysia
South Africa
Zimbabwe
Zambia
39
Network Externality
l Universal Service Obligation Fund = Cross Subsidy
Ø Not recognized as cost
l Network extremity = increase utility of a network to
users
Ø 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
rates
Ø Can be used by the developing countries to enhancing
take-up and roll-out of the network
International externalities
Country A
Customers A
(Calling)
Access network A1
Accounting
Access network A2
International operator A
rate
International operator B
Access network B1
Country B
(Called)
Access network B2
Customers B
Do Customers in A
derive benefit from
more Customers in B?
If so, how much?
Is benefit to calling
operators in A
enough incentive to
agree prices above
cost?
How can we be sure
that an externality will
be passed through to
connect more
customers in B?
Inter-regional Internet connectivity
0.4 Gbit/s
Europe
s
it /
Gb
Latin
America
7
0.7
Asia /
Pacific
USA /
Canada
14
Gb
it /s
it/s
b
8G
.
1
4
162G
bit/s
Africa,
Arab
5
4
.
0
/s
t
i
Gb
0.1 Gbit/s
Note: Gbit/s = Gigabits (1’000 Mb) per second.
Source: ITU adapted from TeleGeography.
Int’l Internet Connectivity (IIC)
l In 2001, for telephony services, settlement
payment to developing countries amount to
around : 5 billion US$
l Now with decrease of accounting rates, they
receive less and because of Internet payment
developing countries pay some 2 billions US$
l SG3 adopted Recommendation D.50 on IIC
Ø Fair sharing of Int’l Internet backbone network
l Barriers to Internet Connectivity
Ø Regulatory Barriers
Ø Economic Barriers
l What need to do?
4
3
Ø Internet Exchange Point (IXP)=cost and service gains
43