1 access: from interconnection to convergence yale m. braunstein school of information university of...
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Access:From Interconnection to
Convergence
Yale M. BraunsteinSchool of Information
University of CaliforniaBerkeley, CA 94720 (U.S.A.)
March 2008
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Access has several dimensions
(Physical or geographic) proximity
Possession of needed skills
Economics
For free or fee-based
Connection to (the) network
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History (U.S. Telephony) Competing networks
Bell & Edison in the U.S. Resolved by patent decisions
“The fundamental principle, formulated by AT&T president Theodore Vail in 1907, was that the telephone by the nature of its technology would operate most efficiently as a monopoly providing universal service.”
New technologies & business plans lead to bypass (MCI) and interconnection (role of SS7)
UNEs (unbundled network elements)
More new technologies (now digital)
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Issues are inter-related As new entrants enter a telecommunications
market the problem of interconnection has two dimensions: technical and economic. My focus is on the latter.
Often there is the view that it is in the national interest to encourage the widespread diffusion of the telecom network and to promote access by users who might not be considered economically viable by operators.
Interconnection and universal service are often linked.
Presentation of some of the issues Optional “mini case studies”
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Outline
Interconnection
Interconnection & universal service
Convergence (which has many meetings)
Competition (?)
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The dimensions of interconnection
B.C. (before competition) it was common to see some or all of the following:• Local tariffs were averaged across
customers. In addition, the non-traffic-sensitive portion of the tariff was often kept artificially low.
• The tariffs for trunk calls were sufficiently higher than costs so as to enable the costs of local service to be kept low.
• International rates were many times the cost of service.
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Typical interconnection pricing philosophies
Cost-based
Price-based
“Bill and keep”
Private negotiation
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Additional concerns
Equal treatment and symmetry requirements Whose costs? Possible difference in technologies Legacy customers
Preferences for corporate relatives
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Universal service
Among the possible “definitions” are the following loosely-stated concepts: Basic residential telephone service should be
available to all regions of a country for a common, reasonable monthly fee.
Income and wealth levels should not be significant barriers.
Every village of a certain size should have at least one public telephone.
All local telephone providers should be able to interconnect to the national telephone network at reasonable rates.
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ICX & USO Conclusion The movement toward competition in
telecommunications services has highlighted the linkage between interconnection fees and the funding of universal service.
Changes in one area affect the underlying economics of the other.
One approach is to move interconnection fees toward becoming increasingly cost-based and to make the funding of universal service obligations more explicit.
While it is important to get the prices “right,” it is probably even more important to have the rules clear and fairly enforced.
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What is driving convergence? Parallel, (mostly) ubiquitous networks
Telephone, cable TV, wireless Digital technology (not always)
Important to distinguish between digitized content and digital signaling
“Religious belief” in competition & de-regulation (?)
Key question: What is to be converged? Telephony/cable television Wired/wireless Broadcast/common carriage Circuit-switched & packet-switched networks
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Alternate regulatory approaches
Wait until competition, however defined, is well established
Get out of the way early (leaving things to the anti-monopoly authorities)
“Bright-line” tests of market share How is the market define?
Rely on case-by-case judgment of regulators
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Mobile-to-fixed, fixed-to-mobile, and mobile-to-mobile in
IsraelTable 1: Average Number of Monthly Usage Minutes, Israeli Mobile Operators
Operator 1995 1996 1997 1998 1999
Pelephone 530 430 320 300 295
Partner 427 (Q4)
Table 2: Current & Proposed Incoming Interconnection Rates, Israeli Mobile Operators
Proposed
Operator Current 2000 2001 2002 2003
Pelephone 0.17 0.13 0.12 0.11 0.10
Cellcom 0.12 “ “ “
Partner 0.13 “ “ “ “
Note: All rates are per-minute, given in U.S. dollars at US $ 1 = NIS 4.16
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Free entry and negotiated interconnection in Sweden
Table 3: Fixed-to-fixed and fixed-to-mobile tariffs, Telia of Sweden
Base Plan Bonus Plan
Destination Peak Off-peak Peak Off-peak
Domestic fixed 0.023 0.012 0.021 0.011
To Telia mobile 0.275 0.153 0.250 0.138
To Other mobile 0.301 0.229 0.301 0.229
Note: All tariffs are for residential service, on a per-minute basis, include tax, given in U.S. dollars at US $ 1 = SEK 9.81
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The entry of competition for international calls in Israel
Table 4: Bezeq’s Interconnection Rates
Termination Time of day
Local Urban Toll National Toll
Origination
Peak 1.4 - 2.9 1.5
Intermediate 0.9 - 0.9 0.9
Off-peak 0.6 - 0.6 0.6
EU Benchmarks
0.7-1 1-2 1.7-3
Note: All rates are per-minute, given in U.S. cents at US $ 1 = NIS 4.16
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Calls to the Internet in the U.S.
Table 5: Intra- and Inter-state Carrier Common Line Rates, 1990
State 1990
Highest (Texas) 0.0611
Median of those reporting CCLRs 0.0262
Lowest (South Dakota) 0.0121
Six states 0.0000
Interstate 0.0123
Recent FCC decisions are phasing out these payments
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Financing the USO and current tariffs in India
The Government is committed to provide access to all people for basic telecom services at affordable and reasonable prices. The Government seeks to achieve the following universal service objectives:
• Provide voice and low speed data service to the balance 2.9 lakh [290,000] uncovered villages in the country by the year 2002
• Achieve Internet access to all district head quarters by the year 2000
• Achieve telephone on demand in urban and rural areas by 2002
The resources for meeting the USO would be raised through a ‘universal access levy’ which would be a percentage of the revenue earned by all the operators under various licenses.
--New Telecom Policy of 1999
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Financing the USO & tariffs in India
Table 6: Selected Residential Tariffs in India, 1999
Urban Rural Registration 328.95 657.89 Installation 17.54 17.54 Monthly rentals 5.48 4.17 Per call charges
<125 calls 0.00 126-225 0.01 226-250 0.02 251-500 0.02
above 500 0.03 <75 0.00
76-200 0.02 201-500 0.02
above 500 0.03
Converted to U.S. dollars at U.S. $1.00 = Rs. 45.6
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Financing the USO & tariffs in India
Table 7: Trunk Call Classes and Tariffs
Call Class Tariff Manual – Standard & SVH Rs 5 plus tariff; one minute
minimum Urgent/Demand Rs. 5 plus twice ordinary tariff Lightening Rs. 5 plus 8 times ordinary tariff
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Interconnection Policy in EU States
Local Access Pricing and E-Commerce DSTI/ICCP/TISP(2000)1/FINAL July 2000
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Conclusion The movement toward competition in
telecommunications services has highlighted the linkage between interconnection fees and the funding of universal service.
Changes in one area affect the underlying economics of the other.
One approach is to move interconnection fees toward becoming increasingly cost-based and to make the funding of universal service obligations more explicit.
While it is important to get the prices “right,” it is probably even more important to have the rules clear and fairly enforced.