Mike Conradi

Telecoms PolicyTelecoms PolicyMike ConradiMike Conradi

Legal Secondee from Baker & McKenzieLegal Secondee from Baker & McKenzie

World Bank, 9 March 1999World Bank, 9 March 1999

michael.conradi@bakernet.com

Mike Conradi

Market InformationMarket Information

Mike Conradi

0

50

100

150

200

250

300

350

400

1986

/87

1987

/88

1988

/89

1989

/90

1990

/91

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1986

/7=

100

Local National International

370

Local, National and International Local, National and International Call volumesCall volumes

Mike Conradi

UK Traffic by RegionUK Traffic by RegionUK Traffic by Region of the World (Jan-March 1998)

0

100

200

300

400

500

600

700

800

900E

U

US

an

dC

an

ad

a

Oth

er

We

ste

rnE

uro

pe

Au

stra

lia/N

Z

Fa

r E

ast

Afr

ica

Fo

rme

rE

ast

ern

Blo

c

So

uth

Asi

a

Mid

dle

Ea

st

Ce

ntr

al a

nd

S A

me

rica

Mil

lio

ns

of

min

ute

s

Outbound

Inbound

Mike Conradi

All OperatorsAll Operators

Local

60%

National

28%

Other

6% Calls to

mobile

2%

International

4%

Retail Call Volumes Q3 97/98Retail Call Volumes Q3 97/98

Mike Conradi

Profits 1997/8

33%

36%

0%

0%

0%

10%

2%

BT’s Retail ProfitsBT’s Retail Profits

Local

National

19%

International

Calls to mobile

Payphone

Private Circuits

Other

DQ

Mike Conradi

Residential Users

0%

20%

40%

60%

80%

100%

1992/93

Sh

are

of

reve

nu

es Others

Cable

CWC

BT

1992/93

Business Users

Market Shares - 1992 to 1997Market Shares - 1992 to 1997

Mike Conradi

Residential Users

0%

20%

40%

60%

80%

100%S

har

e o

f re

ven

ues Others

Cable

CWC

BT

Business Users

1997/981997/98

Market Shares - 1992 to 1997Market Shares - 1992 to 1997

Mike Conradi

Methods of ConveyanceMethods of Conveyance

Mike Conradi

Switch Switch

Handover point

Call Origination International Conveyance

Call Termination

Settlement Rate

Accounting Rate

The Accounting Rate SystemThe Accounting Rate System

NB: Major profits come from incoming calls

Mike Conradi

0

0.1

0.2

0.3

0.4

0.5

Dec-96 Jun-97 Dec-97 Jun-98 Dec-98

Val

ue

(SD

R)

France

Germany

Greece

Spain

Italy

USA

Canada

Netherlands

Accounting Rate TrendsAccounting Rate Trends

EU, USA and Canada

WeightedAverage

Mike Conradi

Rest of the World

Accounting Rate TrendsAccounting Rate Trends

00.20.40.60.8

11.21.41.61.8

Dec-96 Jun-97 Dec-97 Jun-98 Dec-98

Val

ue

(SD

R) South Africa

Turkey

India

Pakistan

Poland

Russia

Israel

WeightedAverage

Mike Conradi

International Simple ResaleInternational Simple Resale

• Allowed in UK since 1994

• Competition but constrained by cost of leased circuit.

• Complaints re: BT’s IPLC prices

• No network competition.

• No return traffic - unlike Accounting Rates.

• Many countries - illegal (deprives incumbent of revenues). OFTEL/DTI “liberalised” list.

• Packaged IPLCs - on SDH rings

Mike Conradi

Competitive Origination

Competitive Transport Competitive Termination

Cross Border Interconnection ModelCross Border Interconnection Model

REGULATION

NB: Profits can arise from either outgoing or incoming calls

Mike Conradi

Policy IssuesPolicy Issues

Mike Conradi

One-Way BypassOne-Way Bypass

1,000,000 minutes

1,500,000 minutes

1,000,000 Minutes

Dodgy

Tel

Dodgy

Tel UK

Mike Conradi

Policy IssuesPolicy Issues

• One-Way Bypass

• Whipsawing

• Asymmetric pricing imposed by monopolist; or

• Other manipulation - depending on balance of traffic

• IFL Licence conditions aim to prevent these:

• Proportionate Return

• Information to DG - no longer “parallel accounting”

• Specifications & Consents

Mike Conradi

• Review of BT’s wholesale IDD pricing:

• Gross pricing replaced by net pricing

• New Guidelines out (very) soon

• BT Retail price control review expected this year

• Monitoring the market:

• Publication of Accounting Rates (Statement on the Collection and Publication of International Call Information - July 1998)

• Detection of breaches

• CWC WEO review - results published February 1999

Policy IssuesPolicy Issues

Mike Conradi

TromboningTromboning

Mobile Interconnect rate: 20p

Int’n mobile term rate: 5p

Settlement rate: 3p

BT’s loss per mobile call: 2p/min

• Solutions:

• Call “gapping” &

• Negotiation of separate rates for calls to mobiles - coming soon!

Mike Conradi

Efforts to Reform Accounting RatesEfforts to Reform Accounting Rates• Study Group 3 - Focus Group.• Target rates according to teledensity• Moves to compensate those who suffer significant revenue losses.• Outcome of last meeting

• Settlements rate “deficit” - 1996, > $5.5bn

• Benchmarking proposal - implementation dates, and target rates, staggered by income.

• Upper Income benchmarks - 1 Jan 1999.

Mike Conradi

Efforts to Reform Accounting RatesEfforts to Reform Accounting Rates

• Investigation begun December 1997

• 7 operators’ charges merit further investigation.

• Also, looking at availability of cross border interconnection. - Implementation of ICD

• WTO Basic Telecommunications Agreement

• Signatories made “offers” detailing stages of liberalisation.

• Offers are binding.

Mike Conradi

Submarine CablesSubmarine Cables

Mike Conradi

Submarine CablesSubmarine Cables• Cases concerning capacity on consortia cables - 1997/87

• Now, three changes:

1. EconomicsCable Date

CompletedCapacity(Gb/s)

Cost($m)

Cost of 1 Gb/s($m)

CANTAT-3 1994 4 300 75TAT 12/13 1996 20 750 38Atlantic Crossing 1998 80 750 9.5TAT 14 2000 640 1500 2.5FLAG-Atlantic - 1 2001 1280 1500 1.3

2. Private Cables - capacity for sale

• Atlantic Crossing, Flag, Flute (dark fibre)

3. Self-owned networks

• Farland (BT), Hermes, Worldcom, Viatel, Esprit CWC, Colt, Unisource & others

Cable DateCompleted

Capacity(Gb/s)

Cost($m)

Cost of 1 Gb/s($m)

CANTAT-3 1994 4 300 75TAT 12/13 1996 20 750 38Atlantic Crossing 1998 80 750 9.5TAT 14 2000 640 1500 2.5FLAG-Atlantic - 1 2001 1280 1500 1.3

Mike Conradi

0

100

200

300

400

500

600

700

Capacity (

curre

nt)

Max Capacit

y

end 2000

Tot

al C

apac

ity

- G

b/s

Pan-European NetworksPan-European Networks

Mike Conradi

WintertonUK-Germany 5UK-Netherlands 14

AldeburghUK-Netherlands 12Farland (1999)

GoonhillyTAT-9UK-Spain 4SEA-ME-WE 3 (mid 99)

FolkestoneUK -France 5

BrightonUK -France 3

BreanPTAT

WidemouthTAT-8

Redcar CANTAT-3

Land’s End(Porthcurno)CELTICRIOJATAT12/13FLAGGemini

BroadstairsUK-Belgium 5

Oxwich BayTAT-11GeminiSOLAS (early 99)

St Margaret’s BayUK Belgium 6UK-France 4Farland (1999)

ScarboroughUK-Denmark 4UK-Germany 6 (3/99)

BT operatedCWC operated

BudeTAT-14 (2000)

HolyheadBT-TE 1

UK Cable Landing StationsUK Cable Landing StationsJanuary 1999January 1999

NB: Excludes self-owned cablesAtlantic Crossing

Mike Conradi

• CWC obligations lifted - February 1999

• Could be significant bottleneck

• Breakout below STM-1 (155 mb/s)

• Backhaul & Cable Station Access

• Conveyance: Switch & Cable Landing Station (CLS)

• CLSs owned, usually by BT or CWC only

• So obligations - re: access to CLSs, publication of backhaul prices & non-discrimination

Submarine CablesSubmarine Cables

Mike Conradi

Telecoms PolicyTelecoms PolicyMike ConradiMike Conradi

Legal Secondee from Baker & McKenzieLegal Secondee from Baker & McKenzie

World Bank, 9 March 1999World Bank, 9 March 1999

michael.conradi@bakernet.com