Eugene Louppov

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Prospects of the utilization of MVNO business
model in the development and commercialization of
the 3G mobile services
Eugene Louppov Peoples Mobile
Telephone Chairman Vladimir Shulga Peoples
Mobile Telephone Director General
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Contents

• MVNO definition and classification.
• Brief overview of MVNO business in the world.
• Experience in the implementation of MVNO business
  model in Russia
• 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
• MVNO business regulation in the market of mobile
  telecom services
• Infocommunication Union plans to implement MVNO
  business models in Russia

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Definition of Mobile Virtual Network Operator
(MVNO)
OFTELs 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

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Business model of the classic mobile operator
Operator of the public networks
Operator provider of services
Operator international partner
Operator international partner
Subscribers users of services
Content providers
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Business model of the 1-st and 2-nd level MVNO
Host operator
MVNO Provider of services
Subscribers users of services
Content-providers
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Business model of the 3rd (high) level MVNO
operator
Host operator of standard ? network
Host operator of standard B network
Operators of the public networks
MVNO Provider of services
Operator national partner
Operator international partner
Subscribers users of services
Content providers
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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

• License (permit) to utilize the radio-frequency
  spectrum is not required
• Commercial agreement with at least one acting
  host mobile operator is required
• Simultaneous operation with several host
  operators (of the same or different standard) is
  feasible
• As a rule, the provided services are
  complimentary (additional) to the services of the
  acting host operators
• Activity is centered on marketing, sales, billing
  and customer service
• 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 Json Partners
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Number of MVNOs in the world, August 2006
Source Json Partners
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Number of MVNO customers in the world (mln),
August 2006
Source Json Partners
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Business model of the 3rd (high) level MVNO
operator lamented at the Pilot Zone of Peoples
Mobile Telephone in Russia
Host operator of the standard A network
Host operator of the standard B network
Operators of the public networks

MVNO Provider of services
Operator national partner
Operator international partner
Operator EPSS
Local operator of the fixed services
ISP
Subscribers users of services
Content providers
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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

MVNO core MSC/HLR, GGSN, billing, VAD services
platform, service broker
GSM/EDGE
Packet - Switched network
UMTS core network (MSC, HLR, SGSN, GGSN
WCDMA/HSDPA
Circuit- switched network
Other cellular operator
Other, WiMAX, WLAN
Core network
Radio Access network
External network
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Options for the evolution of the acting mobile
operators to the 3G services on the basis of MVNO
business model
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
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Major characteristics of the specialized 3G
radio access network

• Has the permit to utilize the frequencies in the
  UMTS range to install the base station all over
  the country
• 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
• Main business - to provide the radio access
  services to MVNO operators
• Operators 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
  users 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

• 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).
• Opportunity to connect many MVNOs across the
  country becomes available
• 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
• 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 Regulators 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
Peoples 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 Peoples 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!
???. 7 [phone], 7 (095)
500-54-98 E-mail Vladimir.Shulga_at_vita-service.ru