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Activities of Study Group 3. Saburo TANAKA Councellor, TSB/ITU. Seminar in Guatemala City, November 2002. http://www.itu.int/ITU-T/othergroups/tal/index.html. - PowerPoint PPT Presentation
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Activities of Study Group 3Activities of Study Group 3
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.
Saburo TANAKACouncellor, TSB/ITU
http://www.itu.int/ITU-T/othergroups/tal/index.html
Seminar in Guatemala City, November 2002
2Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
AgendaAgenda
Is SG3 different from other SGs? SG3 is unique But not different
What are the hot issues studied in SG3? For Int’l Telephone services For INTERNET For Mobile Termination Service
What are the concerns of administrations and how do they react?
3Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
International International Telecommunication UnionTelecommunication Union
A UN Specialized Agency Intergovernmental organization, governments
represented through their telecommunication Administrations (constitutional Members)
Other entities (Recognized Operating Agencies, Scientific Industrial Organizations, regional and international organizations) admitted as Sector members
“Basic Law” = Convention and Constitution, to be modified by Plenipotentiary Conferences
4Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
ITU-T Membership (End 2001)ITU-T Membership (End 2001)
Member States: 189
Sector Members: 179 ROAs234 SIOs39 others (including ISOC,
regional, International organizations, etc.)
30 Associates
New applicants: 2001: 712000: 66
1999: 171998: 57
5Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
ITU-T missionITU-T missionITU-T's mission is to ensure an efficient
and on-time production of high quality standards covering all fields of telecommunications.
Standardization work is carried out by the ITU-T Study Groups in which representatives of the ITU-T membership develop Recommendations for the various fields of international telecommunications.
More than 2800 Recommendations currently in force.
Task Force
IETF
IntergovernmentITU
(ITU-T and ITU-R)
NGOsISO,IEC,
IEEE, ETIS,ETSI, ECMA,TTC,Committee T1,ARIB, TIA, SCTE
Forums & Consortia
1394TA 3GPP 3GPP2 AIM AMF AMI-CAOEMA AOW ATMF BINTERMS Bluetooth Cable ModemsCBOP CDG CIF CII CommerceNet
CommerceNet JCOS CTFJ DHF DISA DOPG DSLFECE ECHONET ECOM ECTF EDIFICE EEMAEIDX EMA EMF ERTICO EWOS FCIAFCIA-J FIPA FRF FSAN GSM Assoc. HNFHome API HomePNA HRFWG IDB Forum IFIP IFSAIMTC IMWA IrDA ITS America ITS UK JAVAJCTEA JECALS JEDIC JEMA JICSAP JIMMJMF LONMARK MCPC MDG.org MITF MMCFMobile Web MOPA MPLSF MSForum MWIF OASISODVA OIF OMG OSGi PCCA PCISIGPCMCIA PHS MoU PICMG POF Salutation SCFSDR SSIPG STA TINA-C TMForum TOGTSC UMTS USBIF UWCC W3C WAPWDF Web 3D WfMC WIN Forum WLIF XTP Forum
ITU positioning
………
7Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
SG3 is uniqueSG3 is unique
Because of its composition
ROAsAdministrations
SIOIO
DevelopingCountries
Developedcountries
Ladies
Gentlemen
8Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
Dealing purely with non-technicalDealing purely with non-technicalstandards and …standards and …
Tariff/regulatory/Policy related issues
There are 4 Regional Tariff Groups
9Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
ITU–T SG 3 Major achievementsITU–T SG 3 Major achievements
New Remuneration system Termination charge system Settlement rate system Special arrangement
Difficulty to quickly implement these systems Condition is to reach cost-oriented rate, but No cost data or model for some administrations
Regional Tariff Groups developed cost models SG3 is now developing cost principles and
guidelines for negotiation Transitional arrangements
To facilitate staged reduction to cost based rate to avoid sudden fall of revenue (smooth transition)
Annex E to Recommendation D.140 Annex E to Recommendation D.140 “indicative target rates” by Teledensity (T) “indicative target rates” by Teledensity (T) Band, in SDR (and US cents) per minute.Band, in SDR (and US cents) per minute.
T<1 A
1<T<5 B
5<T<10 C
10<T<20 D
20<T<35 E
35<T<50 F
T>50 G
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¢
Low income Lower middle Upper middle
High income
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.
10
FCC : 23 ¢(January 2002/2003)
FCC : 19 ¢(January 2001) 19 ¢(J.2000)
FCC : 15 ¢(January 1999)
(end 2001) (end 2001) (end 2001) (end 2001)
(
end 2001) (end 2001) (end 2001)
11Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
Annex E Recommends alsoAnnex E Recommends also That transit Administrations move towards the
indicative target rate (upper limit) of 0.05 SDR (0.07US $) per minute.
To negotiate asymmetrical accounting rate (other than 50/50) if both administrations agree to move below the indicative target rate. Example: Operator A belongs to teledensity band EOperator B belongs to teledensity band FA 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
T<1 A
1<T<5 B
5<T<10 C
10<T<20 D
20<T<35 E
35<T<50 F
T>50 G
0.137 SDR
0.130 SDR
0.128 SDR
0.117 SDR
0.107 SDR
0.081 SDR
0.025 SDR
43.7¢ 33.5¢ 28.0¢ 21.6¢ 15.8¢ 11.8¢ 5.7¢
Low income Lower middle Upper middle
High income
Resolution 41Resolution 41
Updated “indicative target rates” by Updated “indicative target rates” by Teledensity (T) (Year 2002)Teledensity (T) (Year 2002)
13Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
Termination chargeTermination charge Destination operator (or Government) sets the charge Charge should be established based on costs Termination Charge includes
International exchange National extension, including local loop And if appropriate, international circuit Other costs imposed on carriers by the national regulation
These 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 a bilateral
agreement basis
Accounting rateAccounting rate Termination chargeTermination chargeNormally symmetric(50/50) Not necessarily symmetric
(if cost differs)
Bilaterally negotiation In theory, set unilaterally (need agreement to implement)
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)
Accounting rates and Termination Charges
What’ s the difference
15Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
International call terminating on International call terminating on mobile networkmobile network
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 SG3
16Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
Interconnection with mobile Interconnection with mobile networksnetworks
key regulatory issues involving interconnection with mobile networks. These issues include:
The role played by market structure and competition in setting mobile interconnection rates;
The asymmetry of retail prices for fixed-to-mobile and mobile-to-fixed calls, stemming in part from asymmetrical interconnection rates;
Difficulties in obtaining technical interconnection, including quality-of-service problems;
The lack of transparency in setting prices for fixed-to-mobile and mobile-to-fixed calls; and
The design of appropriate interconnection arrangements for Short Messaging Services (SMS) and General Packet Radio Service (GPRS)—and emerging mobile Internet access in general.
Countries with an Interconnection regulatory framework, by region
Source: ITU Telecommunications Regulatory Database.
0
5
10
15
20
25
30
35
40
Africa Americas ArabStates
Asia-Pacific
Europe
Countries
Countries imposing regulatory obligations
Source: ITU Telecommunications Regulatory Database.
0
10
20
30
40
50
60
Incumbent(fixed) only
Fixedoperators
SMP
All fixedoperators
All mobileoperators
Mobileoperators
SMP
Other
Countries
Interconnection in EuropeInterconnection in Europe
Existing regulatory frameworkMany different sector-specific directives, notably
Interconnection Directive (97/33/EC)Two parts: Recommendations on Interconnection pricing
and accounting separationMethodology for identifying “best practice” pricing
Lowest 20% of published interconnection offers in 15 EU Member States at local (0.9 €/100), single transit (1.5 €/100) and double transit (1.8 €/100)
New technologically-neutral regulatory frameworkAccess to, and interconnection of, electronic
communications networks and associated facilitiesFirst reading in European Parliament on 4 July 2001Amended proposal available at: http://europa.eu.int/information_society/topics/telecoms/regulatory/new_rf/com2001-369en.pdf
Fixed-to-mobile interconnect rate
Mobile-to-fixed interconnect rate LOCAL
Mobile-to-fixed interconnect rate SINGLE
TRANSIT
Mobile-to-fixed interconnect rate DOUBLE
TRANSIT
Austria 0.23 0.017 0.017 0.022
Belgium 0.18 0.008 0.014 0.018
Denmark 0.17 0.008 0.011 0.016
Finland 0.21 0.013 0.013 0.024
France 0.20 0.006 0.012 0.018
Germany 0.24 0.008 0.017 0.021
Greece n.a. 0.018 0.018 0.025
Italy 0.23 0.009 0.015 0.021
Ireland n.a. 0.010 0.015 0.021
Luxembourg n.a. 0.015 0.015 0.015
Netherlands 0.18 0.009 0.013 0.016
Portugal n.a. 0.009 0.015 0.024
Spain 0.20 0.009 0.015 0.028
Sw eden 0.22 0.008 0.011 0.015
UK 0.16 0.005 0.007 0.016
Sw itzerland 0.30 n.a n.a 0.020
Norw ay 0.156 n.a n.a 0.018
Average 0.21 0.010 0.014 0.020
Interconnection Rates in selected European countries under CPP (in US $ / minute, end year 2000)
In 2001, there is an estimate indicating that the average of Fixed-mobile decreased to 0.136 and mobile to fixed has not changed
Range of Interconnection rates in EU, US$ per Range of Interconnection rates in EU, US$ per minuteminute
0 5 10 15 20 25 30
Mobile-to-fixed LOCAL
Mobile-to-fixed SINGLE
TRANSIT
Mobile-to-fixed DOUBLE
TRANSIT
Fixed-to-mobile
Lowest
Best-practice(20%) guidelineHighest
Source: ITU, compiled from ECTA/Analysys, EU Interconnection Tariffs in Member States, ITU Regulatory Survey 2000.
Selected European interconnect and Selected European interconnect and settlement rates, settlement rates, US cents per min, 2000US cents per min, 2000
0
2
4
6
8
10
12
14
Spain Italy France Germany Nether-lands
UK
Double transitinterconnect
SettlementRate to USA
Sources: ITU, EU, FCC.
InterconnectionInterconnectionRegulatory and technical issuesRegulatory and technical issues
Policy makers must resolve such basic questions as: which carriers require interconnection How the costs will be calculated and recovered, and At what points in the PSTN interconnection should occur
Regulatory issues Establishing guidelines in advance (without it, interconnection
negotiations are frequently protracted, delaying the introduction of competition)
Introducing competition requires “dominant carriers” to interconnect with other carriers
Cost orientation: excessive prices deter market entry, hinder competition, end user suffers and can provide a pool of revenue
Technical issues Points of interconnection: incumbent operators permit inter-
connection with their networks at any technically feasible point Dialling Parity and Pre-selection: Call-by-call customer
selection or Operator pre-selection by pre-subscription Quality of Interconnection Service
Key Interconnection Rules in Key Interconnection Rules in the WTO Reference Paperthe 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
Dispute resolution
An independent entity (which may be the regulator) must be available to resolve interconnection dispute within a reasonable time frame
Economic issuesEconomic issues
The economic issues involved in interconnection largely come down to question of costs: cost definition, cost measurement, cost allocation and cost recovery
How can interconnection costs be measured? Theoretical Frameworks (Historica, Fully Distributed costs,
LRIC) Cost study Approaches (Top-Down, Bottom-Up, Outside-In)
Interconnection charge Cost based charges Retail-based charges Price Caps “Bill and Keep” or “Sender Keeps All” Revenue Sharing
OBJECTIVES
BUSINESS DECISIONSUPPORT
•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
REGULATORYCOMPLIANCE
•Set D.140 as globally acceptable standard
•Rationalize tariff charges
•Derive TAR, USO
MARKETING
•Minimize opportunity for arbitrage
•Generate more revenue by increased traffic
TECHNOLOGY
•Enhancement towards global technology
•Long term cost/benefit of technology and options
•Impact of technology on global relations
Cost Model
Costing Methodologies
METHODOLOGIES
ACCOUNTING CONVENTION
COSTING APPROACH
HISTORICALCOST
ACCOUNTING
CURRENTCOST
ACCOUNTING
FULLYDISTRIBUTED
COST APPROACH
INCREMENTALCOST
APPROACH
•Actual costs incurred
•Cost of today of providing service
•Mirrors competitors potential cost
•All costs areallocated to services
•Incremental costs only
•Often long-run incremental costs only
28Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
Not many differences if…Not many differences if…Current cost accounting is used
FDC=Historical Cost is no more relevant Costs of efficient services provision are used
this should be the aim of all operators spare capacity (legitimate if transparency) Disagreement on time horizon to achieve this
Principle of cost causality is applied (ABC) Common cost must be attributed to the service on
the basis of the causality priniple However an exhaustive application of an ABC
approach may be very costlyNeed for cost recovery realised appropriately
IC approach should contain a markup
Principle of open availability of information: The open availability of information used in the cost deviation process used to substantiate rate claims. Alternatively, if prices from competitive environments are used as guides/proxies for actual cost data, the open provision of this price data and information (regarding the competitiveness of these market environments).
Principle of practicability : The ability to implement a costing methodology with reasonable demands being placed on data availability anddata processing in order to keep the costing exercise economical, yet still useful.
Principle of cost causality : The demonstration of clear cause-and-effect relationship between service delivery on the one hand and the network element and other resources used to provide it on the other hand, taking into account the relevant underlying cost determinants.
Principle of contribution to common costs : Costing methodologies should provide for mutually agreed reasonable contribution to common cost as defined in Recommendation D.140.
Principle of economic provisioning : The use of a costing methodology that reflects the principle of economic provision of services taking into consideration all the reasonable circumstances that affect the conditions in each country, for instance, macro-economic conditions, network size and teledensity levels, etc. and recognizes the need for a better combination and use of resources over time.
Agreed General principles
Los cinco principios :Los cinco principios :Cualquier metodología para la fijación de costos propuesta debería incorporar, como mínimo, el siguiente conjunto de principios:
Principio de libre disponibilidad de la información; La libre disponibilidad de la información utilizada en el proceso de cálculo de costos para justificar las pretensiones de tasas. Alternativamente, si se utilizan precios aplicados en entornos competitivos como guía u orientación para los datos de costos reales, la provisión libre de estos datos e información de precios (en relación con la competitividad de estos entornos de mercado).
Principio de practicabilidad: Aptitud para aplicar una metodología de cálculo de costos, imponiendo exigencias razonables en lo que respecta a la disponibilidad y el procesamiento de datos, para que el ejercicio de fijación de costos siga siendo económico y útil.
Principio de causalidad: Demostración de una relación clara de causa y efecto entre la prestación del servicio, por un lado, y los elementos de la red y otros recursos utilizados en dicha prestación, por otro, considerando los factores pertinentes que determinan los costos implícitos.
Principio de la contribución a los costos comunes: Las metodologías de cálculo de costos deben asignar una contribución razonable a estos costos, tal que se definen en la Recomendación D.140.
Principio de prestación de servicios económica: Utilización de una metodología de cálculo de costos que refleje el principio de prestación de servicios económica teniendo en cuenta todas las circunstancias razonables que afectan a las condiciones en cada país, por ejemplo las condiciones macroeconómicas, el tamaño de la red y los niveles de densidad telefónica, y reconozca la necesidad de una mejor combinación y utilización de los recursos en el tiempo.
Top Down(Total Company costs)
Bottom UP(Facility, operating cost
inputs)
Outside In(Proxy inputs results)
Service Unit cost
Results
Cost Study Methodologies
32Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
Cost model resolves everything?Cost model resolves everything?Accounting rate is established by negotiation
Rates need to be agreed upon in negotiation Market-determinde prices put pressure upon
negotiation
Need to back up its claim for a charge By showing the price of a comparable
competitively offered service Or for monopoly by providing relevant cost data
“Costs” = tools for negotiation, “costs” do not fix automatically the level of prices
33Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
Guidelines for negotiation of Guidelines for negotiation of Accounting rates and Code of Accounting rates and Code of conductconduct
See Recommendation D.140, Annex CSee TAL Temporary Document, Section 2
The importance of interconnectionThe importance of interconnection Key to developing competitive markets
Interconnection is the main driver of growth and innovation in telecom market, it promote efficient infrastructure development
But constructing a sound interconnection framework is no easy task
Approaches to Interconnection Policy National approach – by 2000 101 countries had established
interconnection regulatory framework Regional Approach – European Union (interconnection directive),
CITEL (Guidelines and Practices for Interconnection Regulation), APEC (Recommended Principles for interconnection), TRASA(proposed interconnection guidelines)
WTO Reference Paper on Regulatory Issues Puts forward a series of interconnection commitments:
- provide interconnection at any technically feasible point
- non discrimunatory terms, conditions and rates
- in a sufficiently unbundled and timely fashion
- calls for transparency
Internet Interconnection Internet Interconnection
Internet Interconnection has slightly different meaning. Historically Internet interconnection has involved simply different Internet networks.
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.
Different type of Interconnection Arrangements 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
Inter-regional Internet Inter-regional Internet connectivityconnectivity
Asia /Pacific
LatinAmerica
USA / Canada
Europe
Africa,Arab
162Gbit/s
0.1 Gbit/s
0.77 Gbit/s
Note: Gbit/s = Gigabits (1’000 Mb) per second.Source: ITU adapted from TeleGeography.
41.8Gbit/s
0.4 Gbit/s
14 G
bit/
s
0.45 Gbit/s
Recommendation D.50Recommendation D.50
The ITU-T,recognizingthe sovereign right of each State to regulate its telecommunication, as
reflected in the Preamble to the Constitution,notinga) 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; andc) 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.
The TAL region Digital DivideThe TAL region Digital Divide
1.0%
1.4%
1.7%
2.7%
5.3%
8.0%
11.9%
20.0%
39.0%
0% 10% 20% 30% 40% 50%
Cuba
Paraguay
Guatemala
Colombia
Venezuela
Argentina
Urguay
Chilie
Bermuda
Internet users as % of population2001
Source: ITU.
Typical ISP cost comparisonsTypical ISP cost comparisons
Commercial & operational
costs
National connectivity
International connectivity
Commercial & operational
costs
National connectivity
International connectivity
<<<TAL countries
OECD countries >>>
Internet retail pricing Internet retail pricing
$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100
Av. America
GuyanaColombia
Mexico
Trind & TobEl Salvador
Nicaragua
St VincentArgentina
ISP chargeTelephone usageTelephone rental
30 hours of Internet access, US$, End 2001Source: ITU adapted from ISPs / PTOs
OECD average
Lowinternational
Internetconnectivity
Littleinterest of
privateinvestors
Highconnectivitycharges for
ISPs
Low demandof Internet
services
No growth ininfrastructure,
limitedInternet
connectivity
No exploitation ofeconomies of scale
Low bargainingpower of ISPs
Lack of competition
High end-usercharges
Internet vicious circle
ITU IP Connectivity Project
Liberalisationof the Internetmarket
Market growth
Bargaining powerof ISPs
Economies of scale
Interest in investing Lower costs
Higherdemand
Higherinternational
Internet connectivity
Virtuous circle
IP-TelephonyIP-Telephony
Telephone to Telephone to telephone (fax to telephone (fax to fax) via Internetfax) via Internet
Any telephone/mobile user to any otherMain motivation: Accounting rate bypass, market
entry for non-facilities-based carriersPotential service providers include any PTO with
settlement payments deficit (e.g., US = US$5.7bn)
Market potential: 1.3 billion telephone/mobile users
Telephone TelephonePublic Switch
Internet
Phone Gateway Computer
Phone Gateway Computer
44Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
IP TelephonyIP TelephonyOpportunities and challengesOpportunities and challenges
Opportunities Reduce prices to consumers and the costs of market entry for
operators In terms of volume of traffic carried and level of investment
committed
Challenges Undermine the pricing structure of the incumbent Public
Telecommunication Operators (PTOs) Transition to IP-based networks also poses significant human
ressource development challenges
Accounting Rate IP-Telephony Difference
PTO in Developed
country
Collect US$ 1.00 from user
Pays US $ 0.55 settlement.
Retains US $ 0.45
CollectUS$ 1.00 from user
Pays US$ 0.30 to ISP for terminating call.Retains US$ 0.70
+0.25 US$
PTO in Developing
country
Receives US $ 0.55 settlement.
Receives US $ 0.02
local call charge.-0.53 US$
ISP in Developing
country0
Receives 0.30 US $ for terminating charge
Pays 0.02 US $ for local call.
Retains 0.28 US $
+0.28 US$
ChallengesChallenges
Revenue gain and revenue loss
ISP
PSTN
Operator
Switch
How the operators in developping countries stop IP-Telephony
Operator check only this line
Users can call ISP but ISP is unable to call users
47Activities of ITU-T Study Group 3Activities of ITU-T Study Group 3
For additional informationFor additional information
Please visit:Please visit:http://www.itu.int/ITU-T/studygrhttp://www.itu.int/ITU-T/studygroups/com03/index.aspoups/com03/index.asp
Or contact:Or contact:[email protected]@[email protected]@itu.int