IP Pricing and Interconnection in Korea

1
IP Pricing and Interconnection in Korea

• by Inho Chung
• Korea Telecom
• (The views in this slide do not necessarily
  represent the views or policies of Korea Telecom)

2
The Trend of Internet in Korea
3
The structure of Internet Service Markets in Korea

• Access Service Providers
• Dial-up, ADSL, CATV, ISDN, Private line, B-WLL,
  Satellite, Wireless Phone,Wireless Internet
• Internet Service Providers
• IP/CPs

4
Structure of Internet Networks
CP
CP
ISP
ASP
ISP
ASP
End User
End User
IX
ISP
ASP
ISP
ASP
End User
End User
CP
CP
5
Pricing in Korean Internet Markets

• ASP
• Different flat rate per month by speed
• Premium, Lite
• ISP
• Flat(All you can eat)
• IP/CP
• Free, flat rate, usage rate, mixed
• Internet advertisement
• Use infoshop service for billing and collecting
  fees

6
The Comparison of Internet Access Services in
Korea (at the end of 2000)
7
The Interconnection Arrangements in IP

• Peer-to-peer bilateral
• Hierarchical bilateral
• Third-party administrator
• Cooperative Arrangements

8
Two Conditions for Peering to Function Efficiently

• Equal level of connectivity between networks
• Volumes of traffic or numbers of subscribers
• The costs of processing traffic less than the
  costs of developing a payment scheme

9
Developments in Peering

• In Oct. 1999 Digex Inc. and AGIS cut off their
  peering connections due to a dispute
• In 1997 UUNet, MCI, and BBN left the CIX router
• 4 largest networks including above 3 controlled
  8595 of backbone traffic by 1997

10
Peering to TransitUUNet

• Allows peering only to large ISPs
• To qualify for peering ISPs have to have more
  than four backbone networks of DS-3
• Supplier-Supplier Relationship

• Forces small ISPs to make transit contracts
• Pay 2,000 per month for interconnection service
• Customer-Supplier Relationship

11
The Bright and Dark Sides of This Trend

• Bright side
• Induces large ISPs to invest their own network
• Improves the service quality and realize economy
  of scale

• Dark side
• Discourages new ISPs to enter into markets
• Possibility of large ISPs abuse of market power
  and balkanization of internet

12
Characteristics of Interconnection in Korean IP
Markets

• Indirect Interconnection through IX gt direct
  interconnection between ISP
• Mainly two types of interconnection arrangements
• Peering
• Supplier-customer relationship
• No dominant system of settlement between ISPs

13
Legal Principles in IP Interconnection in Korea

• Major common carriers are required to provide
  interconnection to every other service providers
  by law
• Settlements for traffic
• Voice network data network
• No settlements
• Data network data network
• Pay accounting rates for traffic

14
Payment of Interconnection Line Costs between
Networks
15
Settlement between ISPs

• ISPs mainly rent lines from common carriers and
  pay for line rental
• No settlement between ISPs for traffic in
  principle
• The large ISPs who are themselves common carriers
  charge for their service
• KT charge 1.2 times of line rental costs to ISPs
  for delivering their traffics

16
Who should Pay for Delivering Traffic?

• Difficult to distinguish which party gets more
  benefit from the traffic over internet
• E-mail or web-searching?
• The party who initiates the traffic should pay
  for the delivery cost
• This is the case in delivering a telephone call
  even with existence of externality

17
Which way to go?

• Do governments need to regulate interconnection
  in IP markets?
• No public position on this issue
• Cyber Korea 21
• sharing of carriers revenue with ISPs for their
  contribution to traffic increase
• Do we need to move from peering to transit?
• Need more sophisticated settlement system