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TSM & Termination rates

TSM & Termination rates. Eric Debroeck AR/ DRG. 2006/06/30. Agenda. Interconnection between fixed telecommunications networks Interconnection rate for fixed legacy networks CPS sunset Towards symmetric interconnection prices in a NGN environment

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TSM & Termination rates

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  1. TSM & Termination rates Eric Debroeck AR/ DRG 2006/06/30

  2. Agenda • Interconnection between fixed telecommunications networks • Interconnection rate for fixed legacy networks • CPS sunset • Towards symmetric interconnection prices in a NGN environment • Interconnection services provided by Mobile Networks • Mobile call termination issues : • Market development • Usage prices • Impact of MVNOs

  3. 1 • Interconnection between fixed telecommunications networks

  4. Fixed access networks interconnection (1) • Termination Rate (TR) Asymmetry in fixed interconnection • Throughout Europe : asymmetric TR between incumbent and new entrants • From the regulatory perspective, entry assistance due to : • Volume asymmetry • Interconnection points covering greater zones • Infancy concept • Higher TR could be recovered via higher retail price / asymmetry level has no material effect on the incumbent economic equilibrium • From an incumbent perspective • Technologies deployed by competitors are more cost effective than those of legacy network • Asymmetric TR distort retail markets • Incumbent customers de facto subsidize entrants’ customers • There is no clear case for a TSM in the narrowband market • narrowband vs broadband ?

  5. Fixed access networks interconnection (1) • TR Asymmetry in fixed interconnection Alternative fixed operators’ TR

  6. Fixed access networks interconnection (2) • France Télécom starts (at best) on the same footing as efficient competitors from a Voice over Broadband costs perspective : • No legacy infrastructure (apart from ducts and poles) • Lower volumes (incumbents switch later than new entrants from narrowband to broadband access) • Remedies applicable after recent market analysis of legacy termination market should not apply to NGN terminations services : • Same obligations for incumbents and new entrants on NGN Termination Rates • Non excessive rates • Identical costs + identical obligations => symmetrical rates

  7. Towards the end of carrier selection • Carrier selection (CPS) + Wholesale Line Rental (WLR) are substitutes of direct access on legacy fixed networks • Enduring dominant position on copper access justify specific remedies on access : • ULL & BSA for broadband services • WLR & CPS for remaining narrowband access on NGN • Those obligations allow vibrant competition on the retail market • Carrier selection on NGN networks would lead to costly, cumbersome and socially inefficient developments • Carrier selection on BB access and stand alone carrier selection on POTS are no longer justified. Outdated remedy, such as CPS, should not apply to NGN networks

  8. 2 • Interconnection services provided by Mobile Networks

  9. Mobile termination issues (1) : global market development • Mobile termination prices have historically favoured the great success of GSM services throughout Europe • GSM development had a positive impact on European customers, operators and industry • Clear TSM case • Today’s challenge is to repeat this success with UMTS services • Mobile termination prices may help : is it wise to abandon such a tool ?

  10. Mobile termination issues (2) : usage prices • GSM services reached very high mass-market penetration, thanks to a combination of low handset and access prices with initially high usage prices • Once penetration objective reached, commercial and regulatory attention focussed at usage prices : • The market currently manages to develop low marginal prices • Convergence and NGN will strengthen this trend • Inappropriate regulatory intervention should be avoided as it could destroy market value, investment incentive and lead to retail price increase

  11. MVNOs • Within a year, MVNOs brought : • Strong brands (Virgin, M6, Tele 2, …) • Competitive convergence (F&M) offers • New prices models • Service innovation (“Ten” with integrated SMS and IM services, “Beautiful Phone” from 9) • The outcome of commercial negotiations, not of regulatory intervention : • Commercial dynamics are strong and regulatory intervention would slow and distort them.

  12. Conclusions • Fixed NGN • Symmetric terminations between FT and Alternative Operators • No carrier selection • Mobile interconnection • Operator’s strategy is to lower mobile usage prices • MVNOs based on commercial agreements intensify competition and bring innovations on the market • Inopportune regulatory intervention would lower market value and jeopardise 3G development

  13. Thanks

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