TARIFF ISSUES FOR CONVERGED SERVICES

Document Sample
TARIFF ISSUES FOR CONVERGED SERVICES Powered By Docstoc
					                    SQ 3.2


      TARIFF ISSUES & METHODS
                     FOR
         CONVERGED SERVICES
                      IN
             APT COUNTRIES


                 Presented to
           APT 23rd Study Group
            Date: June 3 – 6, 2003



     Rapporteur : Dr. Roopa R. Joshi, India
               trai01@bol.net.in
Telecom Regulatory Authority of India, New Delhi


   Vice- Rapporteur: Mr. N.V. Dung, Vietnam
     TARIFF ISSUES & METHODS FOR CONVERGED SERVICES IN APT

                                          COUNTRIES




       The focus of this paper is to provide APT countries with the framework for

understanding the intrinsic features of tariffs for converged services given that most

countries in the APT region are at the threshold of an advanced digital age with varying

degrees of convergence being already witnessed both in products and services all over to

a wide and increasingly growing number of subscribers. The paper is an attempt to

provide APT countries a background of the conceptual issues. The main outcome of the

paper is to provide a platform for learning and discussion for policy makers, regulators

and perhaps end subscribers on pricing/tariff issues in a framework of convergence. The

structure of the paper is as follows: -



       Section I looks at the framework of convergence itself and provides a background

of the competitive aspects of the market in converged products/services. The attempt

would be to examine traditional paradigms of tariff analysis and move towards a more

comprehensive framework for understanding the economics of information goods.



       Section II looks at the so called economics of bits and whether standard

paradigms such as switching costs, network effects are equally applicable in this domain.




                                             1                      trai01@bol.net.in
       Section III puts together a survey framework so as to provide APT countries with

a comprehensive understanding of tariff issues and methods for converged services for

the region in future.

       SECTION I:

       The present paper should therefore be seen as an information paper that updates

and informs member countries regarding tariffing for information goods and converged

services in particular. The gamut of information goods is wide, but for purposes of this

paper it is taken to mean digitized information, encoded as a stream of bits, which can

merge content in text, sound and image. Thus the possibilities with the range of

converged services are immense and any understanding of their base characteristics are

required before e and examination of their “costing “ and tariffing is concerned.

       A key to understanding the tariff dynamics of converged services is that its

characteristic, namely packetization allows for efficient use of commucations lines.

Because of the shared nature of dynamic routing a packets path across a network may be

programmed in efficient ways so as to combine least cost and time saving principles. The

two most important costs for the backbone network and the expenses /investments for

circuits and routers. Both in the international context, the equipment cost of these

network elements have dramatically declined. The switch, the circuit and the router costs

have led to significant economies of carriage and processing costs relatively lower than it

was a number of years ago.

       We now discuss issues in relating to pricing of packet switched information good.

Two key costs drivers in the costing for packet-based goods are equipment costs as listed

above and equally significant are congestion costs. It may be borne in mind that the costs




                                             2                        trai01@bol.net.in
of congestion are not so much borne by service providers as by the users, particularly in

respect of delays. Its impact on cost is illustrated below. If there is a congestion in the

network, it might well be that the routes of the packets themselves are rerouted

/redelivered leading to a different configuration for cost implications

       Most of the foregoing discussion would become clearer if we were to conceive of

the use of the Internet. While it may be conceivable to monitor a customer’s usage and

bill by the packet or byte, pricing by the unit packet may not be feasible as the marginal

cost of a packet is nearly zero. Thus another aspect of interpreting tariffs for converged

services is to look at aspects of network usage itself; these vary from time of day to

different priorities based demand patterns for usage. Yet another guide is whether the

priced network would lead to an optimal usage for capacity usage and capacity

expansion.

       Most tariff principles use some allocation principle to quantify “usage of network

elements so as to derive a reasonable cost based benchmarks for tariffs. Thus for example

minutes is the suitable allocation barometer for voice services, others could be the

number of bytes, number of text messages Yet another aspect that needs to be taken into

account is that non voice services do not predominantly use switching equipment

alternative methodologies need to be developed to quantify their use of different

components. Whether this needs to be done in a comparable way with PSTN services or

whether these may be seen as stand-alone is an issue that regulators/policy makers may

require to see.




                                             3                            trai01@bol.net.in
       SECTION II

               The key therefore in any discussion for tariffs for converged services is to

recast conventional frameworks of tariff methodologies hitherto followed. A scan of tariff

and regulatory issues with respect to the accessibility of telecommunications has now

taken upon itself a much larger possibility. Traditional paradigms of analysis have

concentrated mainly on voice specific derivations categorizing costs by traffic sensitive

and traffic non-sensitive components and thus qualifying for a charge translated into

connections and usage. This has meant that tariffs are either quoted as airtime charge or

call charges. If possibilities do arise for text messages, and multimedia delivery of

services these would call for a gradual transitioning to other options for tariffing and

pricing available to consumers. The question therefore e for policy makers is to see the so

called dominance of the term value added services over the “plain old voice Services’.

Thus increasingly in future, the differentiation between a voice and non voice service

would be lessened. The dominance therefore of applications is likely to increase

substantially. This calls for a relook at the one of the key dilemmas facing some APT

countries where teledensity is low is the degree to which teledensity can be measured

itself by access to wire line and voice dominated telephony only. If the ability to provide

access through other innovative means exists, it might well be that traditional models of

measuring the so-called access deficit itself will need to be recast. Not only would this

lead to a restatement of the issue of access deficit, this would also lead to a rethink other

traditional aspects such as pricing below cost based rentals.




                                             4                         trai01@bol.net.in
              The diagrams below provide an understanding of the element based costing

       approach to packet switching as contrasted to circuit switching, the latter being

       predominantly used in the realm of voice calls.

                                              Figure 1
                             Configuration of Data Telecommunications

Configurations
      U                  O               M                T              I                   N


1.   
2.
                                                                                         Internet




3.
     
     User             Originating    Tandem            Terminating     ISP
                      Service        Office            Service
                      Provider                         Provider


       Configuration 1: Traditional dial-up
       Configuration 2: Leased Line
       Configuration 3: Telecom operators has packet switched at originating & tandem end and
       connecting directly to Internet (Future scenario)

       The element based costing; particularly cost elements and configuration are given below




                                                   5                         trai01@bol.net.in
                Table 1.1: Cost elements and drivers for Configuration 1 in figure 1
    Cost                                           Cost Driver
  Element         Users costs incurred by the TO        ISP’s            ISP’s own Costs
                                                        Costs
                                                      Incurred
                                                       by the
                                                         TO
                 Fixed      Peak Peak        Peak      Fixed     Fixed Peak Peak         Peak
                monthly     CA      MOU packets monthly monthly CA MOU packets
    Loop          UO                                     TW
  Line-side        O                                      T
  switching
    Ports
     Call                 O,M,T                                                         W
 processing
 Inter-office                      OM,                                                 WN
transmission                       MT
 Trunk-side                        O,M                                          W       W
  Switching
    Ports
  Signaling                OM,                                                         WN
                           MT
    Call                                                                W
 answering

       U: User
       O: Originating service provider
       M: Tandem Office
       T: Terminating service provider
       W: Internet service provider
       N: Internet

       CA: Call attempts
       MOU: Minutes of Use
       UO: Link between user and originating service provider
       OM: Link between originating service provider and tandem office
       TW: Link between terminating service provider and Internet service provider
       WN: Link between Internet service provider and Internet




                                            6                      trai01@bol.net.in
                Table 1.2: Cost elements and drivers for Configuration 2 in figure 1
    Cost                                           Cost Driver
  Element         Users costs incurred by the TO        ISP’s            ISP’s own Costs
                                                        Costs
                                                      Incurred
                                                       by the
                                                         TO
                 Fixed      Peak Peak        Peak      Fixed     Fixed Peak Peak         Peak
                monthly     CA      MOU packets monthly monthly CA MOU packets
   Loop           UO,
                  TW
  Line-side
  switching
    Ports
     Call                                                                               W
 processing
 Inter-office     OM,                                                                   WN
transmission      MT
 Trunk-side                                                     W                       W
  Switching
    Ports
  Signaling                                                                             WN
     Call
  answering

       U: User
       O: Originating service provider
       M: Tandem Office
       T: Terminating service provider
       W: Internet service provider
       N: Internet

       CA: Call attempts
       MOU: Minutes of Use
       UO: Link between user and originating service provider
       OM: Link between originating service provider and tandem office
       TW: Link between terminating service provider and Internet service provider
       WN: Link between Internet service provider and Internet




                                            7                       trai01@bol.net.in
                Table 1.3: Cost elements and drivers for Configuration 3 in figure 1
    Cost                                           Cost Driver
  Element         Users costs incurred by the TO        ISP’s            ISP’s own Costs
                                                        Costs
                                                      Incurred
                                                       by the
                                                         TO
                 Fixed      Peak Peak        Peak      Fixed     Fixed Peak Peak         Peak
                monthly     CA      MOU packets monthly monthly CA MOU packets
    Loop          UO
  Line-side        O
  switching
    Ports
     Call                                  O,M
 processing
 Inter-office                              OM,
transmission                               MN
 Trunk-side                                O,M
  Switching
    Ports
  Signaling                                OM,
                                           MN
    Call
 answering

       U: User
       O: Originating service provider
       M: Tandem Office
       T: Terminating service provider
       W: Internet service provider
       N: Internet

       CA: Call attempts
       MOU: Minutes of Use
       UO: Link between user and originating service provider
       OM: Link between originating service provider and tandem office
       TW: Link between terminating service provider and Internet service provider
       WN: Link between Internet service provider and Internet




                                            8                      trai01@bol.net.in
       It is relevant to note that major cost advantages while not being substantial are

indeed significant given the fact that packet switching involves lesser “ per line dedicated

costs “ and to that extent, the network costs as well. The principle advantage of packet

switching is that as points and transmission facilities are occupied only while packets are

actually being transmitted. In addition, with multiple streams of packets, the cost savings

can be substantial.

       SECTION III

       Given the above it may be opportune to understand whether the framework s

discussed above are in fact being utilized, for which it may be necessary to initiate a

dialogue within the APT region as to the methods in existence or being developed.

       To this end , the questionnaire below would provide an initial feedback on how to

go forward in understanding this area , not so much form its existence today, but its

potential for tomorrow

QUESTIONAIRE

 No.      Question                                                          Answers
 1        What is the licensing framework for converged services
 2        Please list the services licensed to various operators
 3        How do you determine the price of the domestic
          telecommunication services you provide (Voice & Non-voice)
              - set by state
              - One the basis of revenue requirements, having regard
                  to company overheads
              - On the basis of the individual costs of each service.
 4        If you use a tariff model, please indicate the type of costs on
          which it is based.
              - Historical costs
              - Current costs
              - Long-run market-based benchmark costs
              - Not applicable
 5        Are the tariffs to be specified/reported to the regulator?
 6        How are your universal service costs financed?
              - cross subsidies between international and national


                                             9                        trai01@bol.net.in
                 services
             - Reflection of the access deficit in the calculation of
                 interconnection charges
             - Revenues from non-voice/data services
             - Any other
 7       Is element based costing followed by the operator w.r.t. new
         licensing? If so, please specify the details.
 8       If you use a cost-based tariff model, please indicate the type of
         costs on which it is based
             - Cost model developed by the company itself
             - Cost model acquired on the market
             - Cost model of a regional/international organization
             - None
 9       Which concept do you use as the basis for calculating
         telecommunication service tariffs?
             - fully distributed costs
             - Incremental costs
             - Unspecified
 10      How are your domestic tariffs approved?
             - Board of Directors
             - Simple notification of the authority
             - Regulatory authority
             - Approval by the ministry
             - Tariffs calculated by the ministry
             - Government Act
             - Council of Ministers
             - Parliamentary approval
             - Unspecified
 11      What suggestions do you have to offer for tariffing principles
         for converged services in the future?

       Conclusion: The prime purpose of this study group paper was to allow APT

countries a Study Group paper as an information document that could initiate a process of

discussion & further following for greater dissemination & understanding. Any feedback

may be given at trai01@bol.net.in.




                                            10                        trai01@bol.net.in

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:5
posted:2/22/2010
language:English
pages:11