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    FMInterconnection LS

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    of 17

    Interconnection between

    Fixed and Mobile Networks

    Lara Srivastava
    Strategies and Policy Unit (SPU)
    International Telecommunication Union

    18 July 2000
    MSU “Telecommunications in Europe”

    Note: The views expressed in this presentation are those of the author and do not necessarily reflect the
    opinions of the ITU or its membership. Lara Srivastava can be contacted at [email protected]
    MSU’s FMI Session
    2

    What is Interconnection?
     Legal, technical and economic arrangements
    between operators
     Several levels of interconnection
     Between domestic networks*
     Between national and international networks
     Between domestic networks & customer terminals
     Cornerstone of a truly competitive market
     Growing importance in an era of convergence
     Why the need to regulate? Is this new?
    MSU’s FMI Session
    3

    Mobile is moving at a rapid pace…


    World Mobile Subscribers (millions) as % of Fixed-line Subscribers

    38%

    27% 318
    20%
    13% 215
    6% 9% 144
    2% 3% 4%
    91
    11 16 55
    23 34
    1990 1991 1992 1993 1994 1995 1996 1997 1998

    Source: ITU
    MSU’s FMI Session
    4

    … And is set to overtake Fixed


    Telephone Subscribers Worldwide, 1910-2010
    Logarithmic Scale Normal Scale
    2'000

    1'000 Mobile voice


    1'500
    Fixed voice
    1'000
    Fixed
    10 voice
    Mobile 500
    voice

    0 0
    1910 20 30 40 50 60 70 80 90 2000 10 1990 2000 2010

    Source: ITU
    MSU’s FMI Session
    5

    Relationship b/w Fixed & Mobile


    is thus being watched closely

     Increase in calling opportunities (and revenues)


    between fixed and mobile networks
     Fixed-Mobile Interconnection (“FMI”)

     Advent of FMC or Fixed-Mobile Convergence


    Solutions
     Pricing of mobile networks converging with
    fixed networks
    MSU’s FMI Session
    6

    FMI refers to both technical and


    pricing arrangements
     Access to Interconnection
     Where and how does M interconnect with F?
     Points of Interconnection (POIs)
     Quality of Service Issues (QoS)
     Commercial Terms
     Who pays what to whom?
     Mobile termination charges (MTC)
     Charges for Interconnecting with the Fixed Network
    MSU’s FMI Session
    7

    A Fixed to Mobile communications


    service requires three main elements

    Calling Called
    Party Call Origination Transit service Call Termination
    Party
    (FIXED) (MOBILE)

    Locating the
    Orig. Access
    Customer
    Core
    Switching Network
    Switching
    Switching
    Authentication
    Term. Access

    Source: Adapted from ECTA


    MSU’s FMI Session
    8

    RPP vs CPP :
    Mobile users don’t always pay to talk
    Receiving Party Pays Calling Party Pays
     Mobile party pays for  Mobile party does not
    incoming calls and pay for incoming calls
    fixed party pays only and fixed party pays a
    local tariff premium to call the
     Often, no interconnect mobile party
    arrangement is  Call termination paid
    negotiated with the by fixed operators is a
    fixed operator for F-M significant part of
    calls. Mobile operators mobile operator
    bill mobile consumer
    revenues
    directly for “airtime”.
    MSU’s FMI Session
    9

    Europe has seen high MTCs in CPP


     Interconnect Regime for Mobile Operators
     All operators: right and obligation to interconnect
     SMP operators : access, information, non-
    discrimination
     EU Termination Charges Consistently > Cost
    0.3
    LRIC +
    0.25 mark-up
    0.2
    0.15 Termination
    charge
    0.1
    0.05

    BE D ES F I NL S UK
    Source: ECTA/Analysys
    MSU’s FMI Session
    10

    MTCs are high because incentives


    to reduce them are lacking

    Market Structure Tariff Opacity

    Inefficient pricing
    MSU’s FMI Session
    11

    Despite the hype about MTCs, the


    situation is not the same everywhere
     MTCs do not exist in all RPP countries
     …and transition to CPP may not always be feasible or
    desirable

     Powerful incumbents can refuse to pay charges


    for connecting to mobile networks
     … and this demonstrates the vulnerability of fledgling
    mobile operators in an unregulated environment
    e.g. let’s look at India
    MSU’s FMI Session
    12

    Case Study India: The Context


     Teledensity 2.2%
     Local market liberalized first
     Mobile Sector opened up
    in 1994
     The Dept. of Telecoms was
    both licensor and incumbent
    operator until late 1999
     Regulator TRAI created 2.4% World’s Surface
    1 billion people or 16.7% of World
    in 1995 34% Poverty
    MSU’s FMI Session
    13

    Case Study India: The Mobile Sector


     34 mobile operators in circles (provinces) and 8
    in metros
     Nearly 2 million subscribers in April 2000
     Growth of > 50% a year since March 1997
     7.25% of total connections (F+M)
     In the circles, mobile network development is
    patchy
     Mobile operators rely on the incumbent (DoT/DTS)
    to carry much of their traffic
     …and incumbents will be launching their own
    mobile services in Metros & Circles this year
    MSU’s FMI Session
    14

    Case Study India: Attempt at CPP


     Interconnection - main stumbling block for
    development of mobile
     Only mobile operators pay to interconnect
     DoT/DTS pays no access charges for F-M calls
     TRAI attempted to introduce CPP Interconnect
    or “revenue-sharing” scheme, but failed
     Delhi High Court found that TRAI lacked jurisdiction
     January 2000: Authority was disbanded & the TRAI
    Act amended
    MSU’s FMI Session
    15

    Case Study India: Technical Matters


     Mobile operators are obliged to use the
    incumbent’s network
     DoT/DTS currently carries all inter-circle
    traffic
     … but have limited access to it
     POIs and SSAs
     Implementation of the TRAI’s 1997 Order

     The “Notional Tax”


    MSU’s FMI Session
    16

    Concluding Remarks
     FMI is a key driver for the Mobile Sector
     Regulation should take into account differences
    in market structure & political context
     e.g. what are the priorities of developing countries
    with powerful State-owned incumbents ?
     e.g. are cost-based interconnect rates a viable
    solution in all cases?
     “Enabling” the Regulator
     International Studies and Benchmarking
    MSU’s FMI Session
    17

    Thanks!

    Case Studies (India, China, Mexico, Finland)


     http://www.itu.int/osg/sec/spu/ni/fmi/case_studies
    Background Resources Website
     http://www.itu.int/interconnect

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