Interconnection RegulationHavane, 22 October 2001
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.
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ITU activities
Transitional arrangements
Internet Interconnection – IP Telephony
Settlement transaction : 28 billion US $
Net Settlement payment to developing countries amount to around : 5 billion US$
Int’l Infrastructure costs reduction: < 20 %
Annual average traffic increase : 8 %
Average Settlement rate reduction: ? %
US average settlement rates
USA Net settlement payments and Average settlement rates movement (in US$)
2043637207
2384586428
2806358295
3399886361
3491804274
3800320218
4452708191
5081176918
5765497692
5552083803
4922824624
4757556971
Sheet1
Years
US average settlement rates
USA Net settlement payments and Average settlement rates movement (in US$)
Sheet2
Sheet3
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Two different national operators jointly establish an international circuit and decide the revenue they wish to obtain. They then divide that revenue fifty-fifty split.
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Cross border interconnection and the trading of international traffic minutes
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operator in C under an
arrangement of exclusivity
of operator in C
Settlement rates A/B > C/B
Origin A
Destination B
Origin C
Destination B
Operator in C declares traffic to B on transit through A
Operator in B receives traffic at settlement rate C/B instead of A/B
Operator in C
1
2
3
4
*
*
Call-Back


Operator A’s Int’l facility
Operator B’s Int’l facility
Operator X or Operator A’s facility in another country
International boundary
(By-passing accounting rate)
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(By-passing accounting rate)
VSAT
Inter-connection
Call from International Telecommunication Network (ITN) to another ITN via IP-based Network
IP Telephony (by-passing accounting rate)
385.unknown
New Remuneration system
Termination charge system
Settlement rate system
Condition is to reach cost-oriented rate, but
No cost data or model for some administrations Group 3 is developing cost methodologies
SG3 is now developing cost methodologies
Transitional arrangements
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International Interconnection
Annex E to Recommendation D.140 “indicative target rates” by Teledensity (T) Band, in SDR (and US cents) per minute.
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That transit Administrations move towards the indicative target rate (upper limit) of 0.05SDR (0.07US $) per minute.
To negotiate asymmetrical accounting rate (other than 50/50) if both administrations agree to move to below the indicative target rate.
Example:
A and B agree to achieve TAR 0.2SDR (<0.118x2)
A can request settlement rate of 0.09 SDR
B accepts to pay 0.11SDR to A
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Termaination Charge includes
Other costs imposed on carriers by the national regulation
Those components should be separately identified (Unbundled)
Charge applies to all traffic from any source
However if significant variation in costs, charge may vary (volume discount)
Termination charge may be introduced on bilateral agreement basis
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What’ s the difference
Bilaterally negotiation
Discriminatory (different rates negotiated with different correspondents)
Non-discriminatory (same rate for all correspondents)
Half-circuit regime (would not normally be unbundled)
Full-circuit regime (could be unbundled)
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SG3 revised D.93 in year 2000, allowing to negotiate
a separate rate for traffic terminating on a mobile network
however, this is by bilateral negotiation and when the rate is cost orientated
The difference between the two rates should be as small as possible
Many countries now request very high settlement rates (3 – 5 times)
A review is now going on in the SG3
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International Interconnection
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Calling Party Pays (CPP). In US $ per minute.
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non-European countries
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This Internet Interconnection policies have proved increasingly inappropriate in a commercial industry.
Many operator with larger networks often charge smaller ISPs a traffic-based interconnection fee
Many backbone providers have begun offering transit service
networks.
ISP Relationships with customers: usually via a dial-up
ISP-ISP Interconnection: peering or bilateral agreement
Multiple ISP Exchanges when several ISPs need to interconnect in a same city (use of an IXP)
International Regulatory Development
recognizing
the sovereign right of each State to regulate its telecommunication, 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
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Any telephone/mobile user to any other
Main motivation: Accounting rate bypass, market entry for non-facilities-based carriers
Potential service providers include any PTO with settlement payments deficit (e.g., US = US$5.7bn)
Market potential: 1.3 billion telephone/mobile users
Telephone
Telephone
Opportunities
Reduce prices to consumers and the costs of market entry for operators
In terms of volume of traffic carried and level of investment committed
Challenges
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Accounting Rate
PTO in Developed country
Collect US$ 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
+0.25 US$
-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$
Operator check only this line
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How to move to the termination charge
Call terminating on mobile network
RPP against CPP
Fixed-to-mobile
(US cents per min.)
Average retail price of one minute call to USA. US$
Mark-up
Settlement
national data (34 countries).
Call
Average settlement rates movement