Introduction to the work of the ITU

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Interconnection between Fixed and Mobile Networks
Lara Srivastava Strategies and Policy Unit
(SPU) International Telecommunication Union
18 July 2000 MSU Telecommunications in Europe
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. Lara Srivastava can be contacted at
lara.srivastava_at_itu.int
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What is Interconnection?

• Legal, technical and economic arrangements
  between operators
• Several levels of interconnection
• Between domestic networks
• Between national and international networks
• Between domestic networks customer terminals
• Cornerstone of a truly competitive market
• Growing importance in an era of convergence
• Why the need to regulate? Is this new?

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Mobile is moving at a rapid pace
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And is set to overtake Fixed
Source ITU
5
Relationship b/w Fixed Mobile is thus
being watched closely

• Increase in calling opportunities (and revenues)
  between fixed and mobile networks
• Fixed-Mobile Interconnection (FMI)
• Advent of FMC or Fixed-Mobile Convergence
  Solutions
• Pricing of mobile networks converging with fixed
  networks

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FMI refers to both technical andpricing
arrangements

• Access to Interconnection
• Where and how does M interconnect with F?
• Points of Interconnection (POIs)
• Quality of Service Issues (QoS)
• Commercial Terms
• Who pays what to whom?
• Mobile termination charges (MTC)
• Charges for Interconnecting with the Fixed Network

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A Fixed to Mobile communications service requires
three main elements
Source Adapted from ECTA
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RPP vs CPP Mobile users dont always pay to
talk

• Receiving Party Pays
• Mobile party pays for incoming calls and fixed
  party pays only local tariff
• Often, no interconnect arrangement is negotiated
  with the fixed operator for F-M calls. Mobile
  operators bill mobile consumer directly for
  airtime.

• Calling Party Pays
• Mobile party does not pay for incoming calls and
  fixed party pays a premium to call the mobile
  party
• Call termination paid by fixed operators is a
  significant part of mobile operator revenues

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Europe has seen high MTCs in CPP

• Interconnect Regime for Mobile Operators
• All operators right and obligation to
  interconnect
• SMP operators access, information,
  non-discrimination
• EU Termination Charges Consistently gt Cost

0.3
LRIC mark-up
0.25
0.2
0.15
Termination charge
0.1
0.05
BE
D
ES
I
NL
S
UK
F
Source ECTA/Analysys
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MTCs are high because incentives to reduce them
are lacking
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Despite the hype about MTCs, the situation is
not the same everywhere

• MTCs do not exist in all RPP countries
• and transition to CPP may not always be feasible
  or desirable
• Powerful incumbents can refuse to pay charges for
  connecting to mobile networks
• and this demonstrates the vulnerability of
  fledgling mobile operators in an unregulated
  environment

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Case Study India The Context

• Teledensity 2.2
• Local market liberalized first
• Mobile Sector opened upin 1994
• The Dept. of Telecoms was both licensor and
  incumbent operator until late 1999
• Regulator TRAI createdin 1995

2.4 Worlds Surface
1 billion people or 16.7 of World
34 Poverty
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Case Study India The Mobile Sector

• 34 mobile operators in circles (provinces) and 8
  in metros
• Nearly 2 million subscribers in April 2000
• Growth of gt 50 a year since March 1997
• 7.25 of total connections (FM)
• In the circles, mobile network development is
  patchy
• Mobile operators rely on the incumbent (DoT/DTS)
  to carry much of their traffic
• and incumbents will be launching their own
  mobile services in Metros Circles this year

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Case Study India Attempt at CPP

• Interconnection - main stumbling block for
  development of mobile
• Only mobile operators pay to interconnect
• DoT/DTS pays no access charges for F-M calls
• TRAI attempted to introduce CPP Interconnect or
  revenue-sharing scheme, but failed
• Delhi High Court found that TRAI lacked
  jurisdiction
• January 2000 Authority was disbanded the TRAI
  Act amended

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Case Study India Technical Matters

• Mobile operators are obliged to use the
  incumbents network
• DoT/DTS currently carries all inter-circle
  traffic
• but have limited access to it
• POIs and SSAs
• Implementation of the TRAIs 1997 Order
• The Notional Tax

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Concluding Remarks

• FMI is a key driver for the Mobile Sector
• Regulation should take into account differences
  in market structure political context
• e.g. what are the priorities of developing
  countries with powerful State-owned incumbents ?
• e.g. are cost-based interconnect rates a viable
  solution in all cases?
• Enabling the Regulator
• International Studies and Benchmarking

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Thanks!

• Case Studies (India, China, Mexico, Finland)
• http//www.itu.int/osg/sec/spu/ni/fmi/case_studies
  
• Background Resources Website
• http//www.itu.int/interconnect