Global trends in telecom development & new challenges for developing countries Saburo TANAKA Seminar in Yaoundé, April 2004 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 Ø Network evolution Ø Paradigm shift Ø Tariff evolution l Challenges for developing countries Ø Service issues Ø Regulatory issues Ø Network issues Ø Internet issue l Some solutions studied in SG3 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% Growth rate in phone subscribers 30% Africa 25% 20% 15% 10% Source: ITU Asia-Pacific Telecom Indicators, 2003 World 5% 0% 1993 1994 1995 1996 1997 1998 1999 2000 01 02 Regional share of the world’s phone subscribers Africa & Arab States 100% 80% Americas 60% Europe 40% Source: ITU Asia-Pacific Telecom Indicators 20% Asia-Pacific 0% 1991 1996 2002 Mobile and Internet: Identical twins born two years apart? Users (millions) and penetration per 100 pop. 1,000 18 Mobile subscribers 16 Internet users 800 14 Mobile penetration 12 Internet penetration 600 10 8 400 6 4 200 2 0 0 1992 93 94 95 96 97 98 99 2000 01 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 Distribution of mobile and Internet users by region, 2002 Estimated Internet users, 500 million Americas, 28% Africa, 3% Asia-Pacific, 38% Europe, 31% Americas, 37% Asia-Pacific, 32% Europe, 29% Mobile phone users 1’154million Africa, 1% Revenue growth (US$bn) 1000 900 Service revenue (US$ bn) 800 700 600 500 14% Other: Data, Internet, Leased lines, telex, etc Mobile 39% Int'l 400 8% 300 200 100 Domestic Telephone/fax 39% 0 90 91 92 93 94 95 96 97 98 99 00 01 02 Source: ITU. Traditional regime: Joint provision of service Country A Country B X X 1 1 Emerging regime: 1 Market entry and interconnection2 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 IP Network IW F Local or distributed function Local or distributed function IW F 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 PSTN/ISDN /PLMN Originating Network Call from International Telecommunication Network (ITN) to another ITN via IP-based Network T0208500-00 (106147) 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 $0.00 90 92 94 96 98 00 02 04 Falling Price (2): SwissCom, price per minute of local call and call to US Sw iss call prices. US cents per minute. 74 58 Source: ITU. 58 Call to USA 43 28 Local call 7 5 5 5 4 4 4 4 3 95 96 97 98 99 00 2001 Delivering international voice traffic in 2002 Traditional Traditional bilateral bilateral settlement settlement rate rate system system Via Via aa wholesale wholesale carrier carrier 30% 15% 20% Originating international voice traffic Direct Direct dealing dealing with with the the terminating terminating country country 70% 65% Refile Refile via via a third third country country Sender Sender keeps keeps all all exchange exchange of of traffic traffic Via Via aa point point of of presence presence in in the the terminating terminating country country Infrastructure capacity and costs, TransAtlantic cables, 1983-2000 10'000 Capacity (voice paths), growing by 64% p.a. 100'000'000 10'000'000 1'000'000 100'000 1'000 10'000 100 10 1'000 Cost per voice path (US$), 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$20.00 l Towards lower service quality Ø “Best efforts” service delivery at lowest price l Death of distance Ø Message to other side of earth costs same as a message sent next door l Cross-promotion of Internet and other services Ø “Free PC” with three year’s ISP subscription Ø “Free Internet” with residential local loop charges l Tendency towards industry concentration Ø AOL’s subscriber base > next ten ISPs added together Challenges for developing countries l Service, tariff and technical issues Ø Alternative calling procedures Ø International Internet connectivity Ø Public switched network to IP based network Ø Challenges related to mobile service l Regulatory issues Ø Interconnection rules Ø Implementation of USO Ø Tariff Rebalancing l Internet connectivity in developing countries Refile and other practices using accounting rate system Operator in A sends traffic to operator in C under an arrangement of exclusivity 1 C in A Orig nation B i Dest Operator in C declares traffic to B on transit through A A C • Operator in A is a partner of operator in C • Settlement rates A/B > C/B B C B igin ation r O tin s De A Operator in B receives traffic at settlement rate C/B instead of A/B 2 Operator in C “re-labels” the traffic as originated in C 3 B 4 Alternative calling procedures Call-Back 7 Country A Call-Back 1.2$ 1.0$ 0.8$ 1.5$ 2.0$ Country B 4.5 $ Country C 3.5$ Interconnection of two outgoing calls in country A Mobile tromboning (using accounting rate) Operator X or Operator A’s facility in another country International boundary Operator A’s Int’l facility Operator B’s Int’l facility Operator A’s national network É Caller A Operator B’s mobile network High Interconnection charge È Called B The influence of IP Telephony on price l IDC forecasts that “Web Talk” revenues will reach US$16.5 bn by 2004 with 135 billion mins of traffic l Gartner Group forecast that IP Telephony and competition in Europe will reduce prices by 75% by 2002 l IP Telephony as % of all int’l calls in 2004 Ø Tarifica forecast 40% Ø Analysys forecast 25% l In developing countries, the majority of IP Telephony calls are incoming 16.5 “Web Talk” revenues, US$bn 0.208 2000 Source: IDC. 2004 Challenges Revenue gain and revenue loss Accounting Rate IP-Telephony PTO in Developed country Collect US$ 1.00 from user Pays US $ 0.55 settlement. Retains US $ 0.45 Collect US$ 1.00 from user Pays US$ 0.30 to ISP for terminating call. Retains US$ 0.70 PTO in Developing country Receives US $ 0.55 settlement. Receives US $ 0.02 local call charge. -0.53 US$ 0 Receives 0.30 US $ for terminating charge Pays 0.02 US $ for local call. Retains 0.28 US $ +0.28 US$ ISP in Developing country Difference +0.25 US$ 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 Mobile generations: Hong Kong, China (million users) 7 6 5 4 Analogue 2.5G users Other prepaid "Activated" prepaid users PCS 1.7/ 1.8 GHz 3 Source: ITU Asia-Pacific Telecom Indicators. 2 Digital, 800/900 MHz 1 OFTA 0 1995 1996 1997 1998 1999 2000 2001 2002.8 Key Interconnection Rules in the WTO Reference Paper Interconnection with “Major Supplies”must be available - At any technical feasible point in the network - In a timely fashion - At cost orientated rates - On non discriminatory and transparent terms - On an unbundled basis - At non-traditional interconnection points if requester pays charges Procedure Procedures for interconnection to major suppliers must be made public Transparency Agreements of major suppliers’ model interconnection offers must be made public An independent entity (which may be the Dispute resolution regulator) must be available to resolve interconnection dispute within a reasonable time frame Regulatory and technical issues l Policy makers must resolve such basic questions as: Ø which carriers are required interconnection Ø How the costs will be calculated and recovered, and Ø At what points in the PSTN interconnection should occur l Regulatory issues Ø Establishing guidelines in Advance (without it, interconnection negotiation are frequently protracted, delaying the introduction of competition) Ø Introducing competition require “dominant carriers” to interconnect with other carriers Ø Cost orientation: excessive prices deter market entry, hinder competition, end user suffer and can provide a pool of revenue l Technical issues Ø Points of interconnection: incumbent operators permit interconnection with their networks at any technically feasible point Ø Dialling Parity and Pre-selection: Call-by-call customer selection or Operator pre-selection by pre-subscription Ø Quality of Interconnection Service Economic issues The economic issues involved in interconnection largely come down to question of cost: cost definition, cost measurement, cost allocation and cost recovery l How can interconnection costs be measured? Ø Theoretical Frameworks (Historica, Fully Distributed costs, LRIC) Ø Cost study Approaches (Top-Down, Bottom-Up, Outside-In) l Interconnection charge Ø Ø Ø Ø Ø Cost based charges Retail-based charges Price Caps “Bill and Keep” or “Sender Keeps All” Revenue Sharing Cost Study Methodologies Top Down (Total Company costs) Outside In (Proxy inputs results) Service Unit cost Results Bottom UP (Facility, operating cost inputs) Cost model resolves every things? l Accounting rate is established by negotiation Ø Rates need to be agreed upon negotiation Ø Market-determinde prices put pressure upon negotiation l Need to back up its claim for a charge Ø By showing the price of a comparable competitively offered service Ø Or for monopoly by providing relevant cost data l “Costs” = tools for negotiation, “costs” do not fix automatically the level of prices Tariff Rebalancing l Erosion of traditional system of accounting rates for exchange of international traffic Ø Domestic interconnect fees will be dominant mode l Major price cuts in international calls Ø Availability of new infrastructures Ø Impact of Internet pricing model (distance and duration independent) l Competition is there Ø Cost based tariff, if not “cream skimming” Ø No subsidy allowed Cost Methodology and Benchmark are the best way to implement tariff rebalancing. Barriers to Internet connectivity in LDCs l Regulatory barriers Ø Many LDCs retain a monopoly telecom carrier, including for data and Internet traffic Ø Some LDCs restrict market entry by ISPs l Economic barriers Ø High costs for int’l leased lines in some markets, esp. those without infrastructure competition Ø For LDCs with only low levels of IP demand, unit bandwidth costs are higher than for countries with higher levels of demand (economies of scale) Ø Many countries are not served by international cables (e.g., landlocked countries, small islands) Bandwidth begins with “B” International Internet Bandw idth per capita (bit/s) Per person, Belgiumbps, 2001 Brazil 36 Botsw ana 9 Bahamas 7 Bulgaria 5 Belize 2 Bolivia 1.0 Bangladesh 0.1 Benin 0.04 0.04 Burundi 8014 Source: ITU World Telecommunication Development Report, 2002: Reinventing Telecoms Total (Mbps) 81'426 6'069 14 2 44 .512 8 16 .256 .256 Typical ISP cost comparisons <<<Developing countries Commercial & operational costs International connectivity International connectivity National connectivity National connectivity OECD countries >>> Commercial & operational costs Something should be done … l Feasibility study to look at an international project to increase IP connectivity in LDCs l Look at regulatory, economic and commercial issues and examine evidence for market failure l Could VSATs provide a solution? Ø Evidence from Uganda and Nepal suggests opening VSAT market could make big difference Ø But, VSATs are expensive l How could such a solution be delivered? Ø Providing a “subsidy” without interfering with the operation of market forces (avoiding creating dependency on foreign donors) Ø Working with ISPs rather than end-users Issues for discussion l Is there a problem? Ø Is IP connectivity more expensive and more scarce in LDCs? Ø Do higher connectivity prices feed into higher access prices? l Can it be solved? Ø What can be done by LDCs? (e.g., liberalizing VSAT markets, liberalizing ISP markets) Ø What can be done by the international community? l How to structure the project? Ø Which donors, which agencies, which players? Ø How to involve DOT Force, UN ICT Task Force etc? SG3 is unique IO SIO Administrations ROAs l Because of its composition Ladies Gentlemen Developed countries Developing Countries Dealing purely with nontechnical standards and … l Tariff/regulatory/Policy related issues l There are 4 Regional Tariff Groups Main study items l Accounting rate reform Ø Ø Ø Ø Transitional arrangements Action to facilitate negotiations Cost Methodologies Network externalities l Mobile termination charge Ø Differences with fixed network services Ø Level of termination charges l International Internet Connectivity Ø Implementation of Recommendation D.50 Ø Improving connectivity in LDCs l Other studies Ø International Telecommunication Regulations Accounting rates, what’s the problem? l Accounting rates are the traditional way of sharing revenues from int’l services Ø BUT, creates incentives among recipient countries to sustain rates at high level Ø Accounting rate system not well-adapted to competitive market environment l Strong pressure to move towards a cost-oriented system Ø BUT, a cost-oriented system would be asymmetric Ø US want cost-oriented but reject asymmetric charges for call termination Movement of Settlement Rates (According Recommendation D.140, Annex E) 0.350 0.327 T>50 0.302 0.300 35<T<50 20<T<35 10<T<20 0.250 0.263 0.251 5<T<10 0.245 1<T<5 T<1 0.225 0.200 TAF 0.215 0.210 0.184 0.171 0.165 0.162 0.150 0.118 0.100 0.142 0.139 0.088 0.137 0.115 0.083 0.116 0.122 0.108 0.099 0.115 0.102 0.074 0.061 0.050 0.129 0.113 0.101 0.114 0.084 0.102 0.104 0.085 0.058 0.085 0.075 0.068 0.043 0.039 0.038 0.038 0.039 0.028 0.021 0.000 1998 1999 2000 2001 2002 2003 Solutions & difficulties l New Remuneration system (adopted) Ø Termination charge system Ø Settlement rate system Ø Special arrangement l Difficulty to quickly implement those systems Ø Condition is to reach cost-oriented rate, but Ø No cost data or model for some administrations ? SG3 developed principles and TAF, TAS, TAL cost model s l Transitional arrangements (review at WTSA) Ø To facilitate staged reduction to cost based rate Ø to avoid sudden fall of revenue (smooth transition) l SG3 developed: Ø Guidelines for negotiation Termination charge l Destination operator (or Government) set the charge l Charge should be established based on costs l Termaination Charge includes Ø Ø Ø Ø International exchange National extension, including local loop And if appropriate, international circuit 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 source l However if significant variation in costs, charge may vary (volume discount) l Termination charge may be introduced on bilateral agreement basis Economic issues The economic issues involved in interconnection largely come down to question of cost: cost definition, cost measurement, cost allocation and cost recovery l How can interconnection costs be measured? Ø Theoretical Frameworks (Historica, Fully Distributed costs, LRIC) Ø Cost study Approaches (Top-Down, Bottom-Up, Outside-In) l Interconnection charge Ø Ø Ø Ø Ø Cost based charges Retail-based charges Price Caps “Bill and Keep” or “Sender Keeps All” Revenue Sharing Cost Model OBJECTIVES BUSINESS DECISION SUPPORT •Pricing and Product Planning •Investment evaluation •Economics of direct/transit routing FINANCIAL CONTROL •Monitor actual performance and compare with plan and past trends •Cost control •Identify Cross Subsidy REGULATORY COMPLIANCE •Set D.140 as globally acceptable standard •Rationalize tariff charges •Derive TAR, USO MARKETING TECHNOLOGY •Minimize opportunity for arbitrage •Enhancement towards global technology •Generate more revenue by increased traffic •Long term cost/benefit of technology and options •Impact of technology on global relations Costing Methodologies METHODOLOGIES ACCOUNTING CONVENTION HISTORICAL COST ACCOUNTING •Actual costs incurred CURRENT COST ACCOUNTING •Cost of today of providing service •Mirrors competitors potential cost COSTING APPROACH FULLY DISTRIBUTED COST APPROACH •All costs are allocated to services INCREMENTAL COST APPROACH •Incremental costs only •Often long-run incremental costs only No much differences if… l Current cost accounting is used Ø FDC=Historical Cost is no more relevant l Costs of efficient services provision is used Ø this should be the aim of all operators Ø spare capacity (legitimate if transparency) Ø Disagreement on time horizon to achieve this l Principle of cost causality is applied (ABC) Ø Common cost must be attributed to the service on the basis of the causality priniple Ø However an exhaustive application of an ABC approach may be very costly l Need for cost recovery realised appropriately Ø IC approach should contain a markup Cost Study Methodologies Top Down (Total Company costs) Outside In (Proxy inputs results) Service Unit cost Results Bottom UP (Facility, operating cost inputs) Cost Models TAS Cost model: http://www.itu.int/ITU-T/othergroups/tas/index.asp TAF Cost model: http://www.itu.int/ITU-T/othergroups/taf/index.asp ITU Cost Calculation tool: http://www.itu.int/ITU-D/finance/COSITU/index.html Cost model resolves every things? l Accounting rate is established by negotiation Ø Rates need to be agreed upon in negotiation Ø Market-determinde prices put pressure upon negotiation l Need to back up its claim for a charge Ø By showing the price of a comparable competitively offered service Ø Or for monopoly by providing relevant cost data l “Costs” = tools for negotiation, “costs” do not fix automatically the level of prices Annex E to Recommendation D.140 “indicative target rates” by Teledensity (T) Band, in SDR (and US cents) per minute. T<1 1<T<5 5<T<10 10<T<20 20<T<35 35<T<50 T>50 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¢ (end 2001) (end 2001) (end 2001) Low income FCC : 23 ¢ (January 2002/2003) (end 2001) Lower middle FCC : 19 ¢ (January 2001) end 2001) Upper middle 19 ¢(J.2000) (end 2001) (end 2001) High income FCC : 15 ¢ (January 1999) 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. 5 8 Guidelines to facilitate the negotiation The following non-binding guidelines could be applied when negotiating accounting rates and accounting rates share in the international service: 1. Each party should ensure that; i.e., all information to be given to the other party should be credible in order to lead the negotiations into right direction. 2. The parties should negotiate freely and make agreements voluntary, any kind of coercion should be avoided. 3. Each party should act constructively, any offer, proposal, action, etc. should be directed towards reaching an agreement. Complex concepts should be simplified as much as possible. 4. Each party should act time-saving, any delay should be avoided. 5. Regular re-negotiations and future amendments should be possible. 6. Until such time as an appropriate dispute settlement arrangement may be approved by the ITU with respect to accounting rates, both parties should have the possibility to consult a person or institution for mediation. Addition to Recommendation D.140 1 accountingnrates for international telephone services should be cost-orientated and should take into account relevant cost trends; 2 each Administration should apply the above principle to all relations on a non-discriminatory basis; Accordingly, international calls should not be treated any less favorably than comparable national calls. Alternative proposal from Vietnam: Accordingly, under normal circumstances (where tariff rebalancing has been effectively achieved) international calls should be treated any less…. Changes to Annex A of Recommendation D.140 A.1.3 National extension …. • national transmission facilities; • national switching facilities; • the local delivery facilities to the extent that their costs vary depending on volume; and • the local delivery facilities, in particular for developing countries and countries having a low teledensity rate, by bilateral or multilateral agreement to the extent that their costs do not vary depending on volume. A.2.1 Direct costs Direct costs derive from the provision of the relevant services and consist of • ……. A.2.2 Indirect costs These are costs, which could be identified as having a direct causal relationship to more than one service, which would normally require further analysis to determine each service’s cost, and for which a general allocation mechanism is used instead. These may include but are not limited to: • costs of network management and planning; • costs of relevant frequency spectrum, rights of way and operational licenses ; • costs of interoperator billing and interoperator customer management. A.2.3 Common costs … … . These may include but are not limited to: … … 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? International calls terminating on the mobile network l SG3 revised D.93 in 2000, allowing to negotiate Ø a separate rate for traffic terminating on a mobile network Ø however, this is by bilateral negotiation and when the rate is cost orientated Ø The difference between the two rates should be as small as possible l Many countries now request very high settlement rates (ten times) Ø SG3 revised this situation in modifying D.93 Interconnection Rates in Selected European Countries Calling Party Pays (CPP). In US $ per minute. European fixed-to-mobile interconnect charges, (US$/min) Norway 0.156 UK 0.16 Denmark Fixed-tomobile 0.17 Netherlands 0.18 Belgium 0.18 Spain 0.20 France 0.20 Finland Mobile-tofixed DOUBLE TRANSIT 0.22 Austria 0.23 Italy 0.23 Sw itzerland Lowest Best-practice (20%) guideline Mobile-tofixed SINGLE TRANSIT 0.21 Sweden Germany EU, range of interconnect rates, (US cents per min.) Highest Mobile-tofixed LOCAL 0.24 0.30 0 5 10 15 20 25 30 Interconnection rates in selected non-European countries Calling Party Pays (CPP) vs. Receiving Party Pays (RPP). In US$ per minute. China RPP countries 0.0096 0.0012 0.007 0.000 0.008 HK SAR 0.008 0.008 Singapore Canada Mobile-to-fixed interconnect rate Malaysia Fixed-to-mobile interconnect rate Guatemala Mexico 0.000 0.009 Sri Lanka 0.000 USA Costa Rica Cambodia 0.020 0.020 Dom. Rep. Philippines RPP CPP CPP countries 0.017 0.017 Mobile-to-fixed interconnect rate 0.034 0.034 0.047 0.047 0.026 0.20 0.050 0.070 0.042 0.078 0.051 0.205 Average 0.010 0.005 Botswana 0.056 0.105 Antigua Fixed-to-mobile interconnect rate 0.052 0.208 0.293 0.293 TAL and TAS average interconnection charges TAF Average TAL Average Year MobileMobile Fixed-Mobile Mobile-Fixed Fixed-Fixed 2002 0.162 0.091 0.145 0.142 2003 - 0.103 0.077 2001 0.155 0.141 0.054 0.027 2002 0.141 ).135 0.046 0.025 Modification to Recommendation D.93 3.2 The accounting rates for international traffic [originating or] terminating at a mobile station should be cost oriented and should be applied on a nondiscriminatory basis to all relations, and international calls should be treated no less favorably than comparable national calls. 3.7 Where 3.3 b) applies but the difference between the two rates cannot objectively be justified on the basis of costs, the following could be considered: a) The difference between the rates for calls terminating on fixed networks on the one hand and calls terminating on mobile networks on the other (arrived at by deducting the lower from the higher) should be no greater than the corresponding difference between the average of the available interoperator rates for national fixed to fixed calls on the one hand and the average of available inter-operator rates for all national calls terminating on a mobile network on the other. b) If such a comparison is not possible, the difference should be no greater than the corresponding difference between the average of retail rates for a national fixed to fixed call on the one hand and the average of retail rates for a national fixed to mobile call on the other hand. The Internet continues to grow … Internet users, million, and growth rate in % 109% Change 59% 67% 498 66% 55% 230 311 35% 37% 149 34 1995 Source: ITU. 54 1996 90 1997 1998 1999 2000 2001 Inter-regional Internet connectivity 0.4 Gbit/s Latin America /s bit 7G 0.7 Asia / Pacific 162Gb it/s USA / Canada 14 Gb it /s /s t i b G 8 41. Europe 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. ITU-T Recommendation D.50 International Internet The World Telecommunication ConnectionStandardization Assembly ( Montreal, 2000), recognizing the sovereign right of each State to regulate its telecommunications, as reflected in the Preamble to the Constitution, noting a) 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; and c) 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 of elements such as traffic flow, number of routes, geographical coverage and cost of international transmission amongst others. Greece and the United States of America have expressed reservations and will not apply this Recommendation. Rapporteur Groups meeting in Brussels (April 2004) and SG3 meeting (May/June2004) ? study of the effects of peering ? Self-help by smaller networks with limited traffic ? development of general principles in Recommendation D.50 ANNEX A GUIDELINES FOR INTERNATIONAL INTERNET INTERCONNECTION NEGOTIATIONS When Parties involved in the provision of international Internet connections negotiate interconnection between their respective networks, interconnect prices and other commercial arrangements between two correspondent Parties should take account of the following: 1) 2) 3) 4) 5) 6) 7) 8) Network connectivity: Traffic flows and peak link capacity: Cost of international link capacity and its apportionment: Additional customer revenues: Service support commitment: Service performance: Interconnect and other fees: Legal liability: International Telecommunication Regulations (ITRs) l ITRs elaborated in 1988 Ø Monopoly situation Ø Basic services only (Telephony) l New Market situation Ø Competition Ø New services (Mobile, Internet) l Need for new ITRs? Ø Redraft ITRs Ø Integrate into Constitution and Convention l Study Group 3 starts reviewing ITRs Ø Rapporteur Group on ITR review (tsg3itr) Council Working Group on ITR (See: http://www.itu.int/itr) Chairman Mr. Alaa Fahmy Secretary S. Tanaka Secretary R. Hill Coordinator-1 Coordinator-2 Coordinator-3 Sub-Group-1 Sub-Group-2 Sub-Group-3 Sub G1: Analyze past work and contributions submitted Sub G2: Examine current ITR Sub G3: Examine need for new provisions