Eugene Louppov People’s Mobile Telephone Chairman Vladimir Shulga People’s Mobile Telephone

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АССОЦИАЦИЯ ОПЕРАТОРОВ СЕТЕЙ СВЯЗИ ТРЕТЬЕГО ПОКОЛЕНИЯ 3G

PMT – Mobile Monday Ukraine –Kiev- March, 2007.

Infocommunication Union Telecommunication Networks Operators Union

Eugene LouppovPeople’s Mobile Telephone

Chairman

Vladimir ShulgaPeople’s Mobile Telephone

Director General

Prospects of the utilization of MVNO business model in the development and commercialization of the 3G

mobile services

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Contents:

1. MVNO definition and classification.

2. Brief overview of MVNO business in the world.

3. Experience in the implementation of MVNO business model in Russia

4. Prospects in the development and commercialization of the new services within the framework of MVNO business model and 3G host operator networks of UMTS and WiMax standards

5. MVNO business regulation in the market of mobile telecom services

6. Infocommunication Union plans to implement MVNO business models in Russia

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Definition of Mobile Virtual Network Operator (MVNO)

OFTEL’s definition (OFTEL - British regulator in the field of telecommunication)

MVNO –

is the operator that offers subscription to the mobile services and the services themselves but does not own radio-frequency resources that are necessary for this purpose

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MVNO classification by criteria of the central infrastructure availability

• Level 1 MVNOs

Have no central infrastructure at all (innovative operators or service providers)

• Level 2 MVNOs

Have some central infrastructure of their own (at least, the billing), market the services under their own brand

• Level 3 MVNOs

Have substantial central infrastructure (comparable to the classic mobile operator except for the base stations) – full MVNOs or the operators of the “ classic type”

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Options for the mobile telecom services provisioning

Host operator

radio infrastructure

Host operator network

elements

(MSC, HLR, MNC,

billing ect .)

MVNO operator network elements

(MSC, HLR, MNC, billing etc)

- full MVNOs

MVNO subscribers

Host operator subscribers

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Operator – provider of services

Subscribers – users of services

Content providers

Operator – international partner


Operator of the public networks

Business model of the classic mobile operator

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MVNO – Provider of services


Content-providers

Host operator

Business model of the 1-st and 2-nd level MVNO

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MVNO – Provider of services


Content providers

Operator – national partner


Host operator of

standard А network

Host operator ofstandard B network

Operators of the public networks

Business model of the 3rd (high) level MVNO operator

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Options for the reimbursement of the host operator services provided to MVNO

Option 1 :• Direct reimbursement of expenses - reimbursement of

expenses of the host operator for the MVNO network support combined with the certain remuneration as the fixed fee non-related to MVNO revenue

Option 2 :• Reverse reimbursement of expenses - reimbursement of

expenses of the host operator for the MVNO network support combined with the certain remuneration as the percentage of the revenue generated by the sales of services

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Major characteristics of MVNO

1. License (permit) to utilize the radio-frequency spectrum is not required

2. Commercial agreement with at least one acting host mobile operator is required

3. Simultaneous operation with several host operators (of the same or different standard) is feasible

4. As a rule, the provided services are complimentary (additional) to the services of the acting host operators

5. Activity is centered on marketing, sales, billing and customer service

6. In the hierarchy of the mobile operators find the place nearest to the end users

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Number of MVNOs in the world, August 2006

Source: J’son & Partners

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Number of MVNOs in the world, August 2006


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Number of MVNO customers in the world (mln), August 2006


1425.451207.41

1666.211897.48

109.97

195.44

62.72

32.6

0

500

1000

1500

2000

2500

2003 2004 2005 2006

MNO subscribers MVNO subscribers

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MVNO –

Provider of services


Content providers

Operator – national partner


Host operator of the standard A network

Host operator of the standard B network

Operators of the public networks

Local operator of the fixed services

ISP

Operator EPSS

Business model of the 3rd (high) level MVNO operator lamented at the Pilot Zone of People’s Mobile Telephone in Russia

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Н ар о дн ы й М о б и ль н ы й

Т елефо н

Контент- и сервис-

провайдеры

Content Pay Centre

Абоненты НМТ

Услуга «АЗС»

Услуга«Парковка»

Биллинговая система «Беркут»

Mainframe

Mainframe

Э П П С С

Approbation of the new VAS at the pilot zone of PMT

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Value added services of MVNO on the basis of EPPSS• Purchase of goods at the point of sale,• Purchase of goods at the automated trade kiosk,• Payment of the transportation services or other standard

services,• Payment of parking,• Purchase of gas (petrol),• Household services payment,• Purchase of tickets,• Payment of Road police penalties and other state agencies

penalties,• Bank services, express mini loans,• Lotteries, award games, gambling,• Enforcement of mobile content sales

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Conclusions based on the international MVNO experience and the results of the pilot zone research of PMT

• Establishment of MVNOs enables the growth of competition and the development and implementation of the new services (in parallel with the decrease of the prices for these services)

• MVNO of the 1st and 2nd level are the most popular but the MVNOs of the 3rd (high) level are the least dependent of the host operators

• The activity of MVNOs is primarily focused at the provisioning of the value added services

• Legal framework existing in Russia today could be applied to regulate the activity of the high level MVNOs (with the full central infrastructure)

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MVNO cooperation with interstandart host networks.• MVNO based on GSM,

EDGE radio access networks:Goals - VAS, unique services

• MVNO based on 3G radio access networks: Goals – capacity sensitive services: Mobile TV, Mobile games and ect. All market players can use common radio-frequency resource.

• MVNO based on WiMAX networks: Goals – Voice and Internet services at countryside, Voice over IP, medicine services, advertising services

Packet -Switched network

Circuit-switched network

Other cellular operator

UMTS core network(MSC, HLR, SGSN, GGSN

WCDMA/HSDPA

Other, WiMAX, WLAN

MVNO coreMSC/HLR,

GGSN, billing, VAD services platform,

service broker

Radio Access network

Core network

External network

GSM/EDGE

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Acting

mobile operator

Acquisition of the license for MVNO activity

and utilization of the host operator network

Acquisition of the license

for MVNO activity

and utilization of

the specialized 3G network

Options for the evolution of the acting mobile operators to the 3G services on the basis of MVNO business model

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Major characteristics of the specialized 3G radio

access network1. Has the permit to utilize the frequencies in the UMTS range to install

the base station all over the country

2. Has the license to provide the radio access services to MVNO operators all over the country but has no license to provide 3G services directly to the end users

3. Main business - to provide the radio access services to MVNO operators

4. Operator’s revenue is generated by means of providing the radio

access services to MVNO operators

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Two stage technological process of providing mobile services of the 3rd generation

•First stage (preliminary business process)

To make feasible the radio access of the end user’s terminal to the public network•Second stage (final business process)

To implement the full scope of business processes to provide directly the mobile services of the 3rd generation by means of the MVNO operators

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The advantages to the MVNOs of the scenario of the utilization of the specialized 3G radio access network

1. Lack of difficulties to connect MVNO to the host network (the operator of the specialized network of 3G radio access does not provide directly the mobile services and must connect MVNO to the host network).

2. Opportunity to connect many MVNOs across the country becomes available

3. MVNOs can participate in the rollout of the network in their local area on the basis of the agreement with the operator of the specialized 3G radio access network

4. Opportunity to build a combined network (MNO- GSM and MVNO – UMTS) becomes available. The existing code of the network (MNC) and numbering could be maintained

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Stages of the implementation of the scenario of using for MVNO of the specialized 3G radio access network

•First stage: set up of the operator company to utilize and maintain the specialized 3G radio access network•Second stage: Regulator’s approval for the set up of the pilot zone for the specialized 3G radio access network including the fragment of the network of the regional MVNO operator. Implementation of the pilot zone and tests•Third stage: participation in the contest of the Regulator to obtain 3G license and frequencies to implement the specialized 3G radio access network •Fourth stage: acquisition (by the regional operators) of the licenses to act as an MVNO services and execution of the agreement to be connected to the specialized 3G radio access network

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Plans of the Infocommunications Union and People’s Mobile Telephone, Ltd. to implement high level MVNO business model in Russia on the basis of UMTS and Wi-MAX host

networks• First stage: work with the Regulator to define and approve the legal

grounds for the operation of high level MVNO operators in Russia• Second stage: Extension and upgrade of the MVNO pilot zone of

People’s Mobile Telephone, Ltd. to implement the tests of MVNO interaction with UMTS and Wi-Max host networks

• Third stage: Commercial operation of MVNOs to provide mobile services of the third generation on the basis of UMTS and Wi-Max host networks

• Fourth stage: Foreign mobile services markets entry on the basis of high level MVNO business model

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Thank you for your attention!

Тел. +7 (095) 330-32-11, +7 (095) 500-54-98E-mail: [email protected]

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Eugene Louppov People’s Mobile Telephone Chairman Vladimir Shulga People’s Mobile Telephone