impact of traffic refile and alternative calling procedures · impact of traffic re-file and...

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TAF GROUP REGIONAL SEMINAR ON COSTS AND TARIFFS

Impact of traffic re-file and alternative calling procedures on

rates, settlements, collection charges and quality of services

Document 4

Guinea, Conakry, March, 27-28 2006 Mohamadou A. SAIBOUITU Consultant

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AgendaI I –– TrafficTraffic rere--file file andand alternative alternative callingcalling proceduresprocedures

II II –– Impact Impact ofof traffictraffic rere--file file andand alternative alternative callingcallingproceduresprocedures

III III –– ITU Works on the subjectITU Works on the subject

IV IV -- APPENDIX: APPENDIX: HowHow VoIPVoIP affect affect incumbentincumbent telcotelcocash cash flowsflows

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I I –– TrafficTraffic rere--file file andand alternative alternative callingcalling proceduresprocedures

II--1 1 –– Introduction to Introduction to AccountingAccounting rate rate systemsystem

II--22-- Refile: Conceptual Refile: Conceptual ApproachApproach

II--33-- OtherOther alternative alternative callingcalling proceduresprocedures

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II--1 1 –– Introduction to Introduction to AccountingAccounting rate rate systemsystem

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Accounting rate – Direct route

• Traditional revenue sharing system based on the ITU model

• ITU Recommendation D.140 • Bilateral negotiations between operators, in

which operator A accepts to pay operator B an amount to terminate operator A’s trafficand vice-versa

• Division– Until recently, accounting rated where divided

50/50 (in most cases)

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• Currency– SDR (Special Drawing rights)– Gold Francs – US$

• Payment method: “NET SETTLEMENT’’• Accounting Method: Direct/Cascade (if transit)


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• Accounting rates must reflect the cost of terminatingthe calls

• Traditionally, accounting rates have been muchhighter than cost

• Accounting rates are gradually aligned with costs:– Termination rates– Unaqual divisions– Volume discounts, various levels

TrendsAccounting rate – Direct route

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Y Z0.08 US$/min

0.12 US$/min

DivisionY settlement: 0.08 US$/minute 40%Z settlement: 0.12 US$/minute 60%TAR: 0.20 US$/minute

Unequal divisions - Example


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Settlements Traffic LevelsA B

1st level of traffic: 0.36 US$/minuteAbove 1st level 0.24 US$/minute 5,000,000 5,000,000Above 2nd level:: 0.15 US$/minute 15,000,000 15,000,000

Volume discounts - ExampleAccounting rate – Direct route

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• To reduce cost of terminating outboundtraffic

• To allow development of more competitivetariffs and become more competitive

• To stimulate incoming and outgoing traffic• To reduce bypass via other lower revenue

generating direct route

Why reduce accounting rates ?Accounting rate – Direct route

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Catégories of countries Target settlements Target year

High revenues

Medium revenuesLow and medium revenuesLow revenues

Very low revenues

0.15 US$/minute

0.19 US$/minute

0.19 US$/minute

0.23 US$/minute

0.23 US$/minute

19992000200120022003

FCC BenchmarkingAccounting rate – Strategies

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A

TransitCentre

BSettlement: 0.45$/min

Connfidential transit fee : 0.15 $/min

Payment to B: 0.45$/minTransit fee: 0.15$/minOutpayment total to B: 0.60$/minInpayment to A: 0.45$/min

Settlement: 0.45$/min

TransitExample

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Fixed lines Termination

►Calls terminated at a local call price• Via PSDN, ISDN, IN platform• Wired or wireless distribution

Source: Clarity Telecom

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Mobiles Termination


• Calls terminated:• directly on mobiles « Mob to Mob »• On fixed network via POI

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• Bypass

• Hubbing

• …

Refile:Terminologies:

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• In the cas of Transit, the carriers of origin, destination and transit have a direct relation and negotiate agreements with all parties involved

• Iin the cas eof refile, the acrrier in the country of destination is not involved and does notknow the country of origin of the traffic

• Refiling carriers take advantage of significantdifferences in accounting rates between originand destination carriers around the world

RefileBasic Principles

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• Types of traffic:– Only IDD– Operator traffic could be detected as refile

• Normaly requires separate facilitiesbetween origin carrier and refilers in order to be billed separatly by the refiler for this traffic

TechnicalRefile

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Refile or hubbing


►The « Refiler » declares O’s traffic to D carrier as if its owntraffic►Destination carrier has no way to know where the trafficorigins

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Low AR

ExampleRefile

Low AR

High AR

A

B

C

Leased circuits

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A

Refiler

BOutpayment: 0.60 $/min

Refile rate: 0.30 $/min Outpayment: 0.20 $/min

Savings A: 0.60 - 0.30 = 0.30 $/minMargin of Refiler: 0.30 - 0.20 = 0.10 $/minLoss for B: 0.60 - 0.20 = 0.40 $/min

Example (cont’)Refile

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• Routing of traffic:– The « Refiler » déclares A’s traffic to B carrier

as if its own traffic

– B carrier has no way to know where the trafficorigins

RefileExample (end)

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The transit operator is « By-passed »

Source: Clarity TelecomForeign operators terminate directly on new entrant’s network

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Termination via national interconnection


International calls terminated via national interconnection

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Tromboning

Traffic between 2 national operators transit in hubbing via abroad

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International leased lines or VoIP

Foreign operator terminates its traffic at a local call price

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Fixed/Mobile details Tariffs Arbitration

Why do i have to paymore when i call a mobile from my fixedline ?

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I stop calling passing through the fixed operator. I call from mobile to mobile or i put a SIMbox at the backof my fixed line.

Substitution

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Why do i pay 8 to call him whereas heonly pays 3 to call me ?

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II II –– 1: 1: EconomicEconomic Macro Macro levellevelII II –– 2: 2: EconomicEconomic Micro Micro levellevel

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II II –– 1: 1: EconomicEconomic Macro Macro levellevel

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• International rate decrease• International currencies decrease• State income tax decrease• Foreign debt decrease• Ajustement of regulatory framework• New business opportunities for some local operators• Universal access and rural connectivity issues• Achievement of the Information Society goals

• Etc..

Impacts:Economic Macro Level

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II II –– 2: 2: EconomicEconomic Micro Micro levellevel

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• Accounting rates are gradually aligned with costs:– Termination rates– Unaqual divisions– Volume discounts, various levels

• Accounting rates reduction– Guarantees of competitiveness– Increases of revenus via traffic commitments– Increases potential refile agreement– Protection against refile– Incentives for new entrant interconnection– Etc.

• New business opportunities for some operators

Sur les taxes de RépartitionImpacts:

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• Operators tariffs rebalancing• Decrease of international tariffs• Increase of outgoing calls• Increase of users• Etc…

On collection taxesImpacts:

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• Settlements reduction• Cost based settlements• Asymetric settlements• Discount volumes/various levels and

agreements• Etc…

On settlementsImpacts:

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• The lack of QoS guarantee is often quoted as the major technical weakness of VoIP.

• This results from the difficulty to combine the qualitylevel with the quantity and the performance of IP network resources to make the call

• Meanwhile, works in IP infrastructure are in progress, , and a number of simulation and verification methodsexist, like at the ETSI and ITU – T.

• Other models give opportunities to analyse more specifically simultaneous voice and data traffics.

On Quality of Service: VOIP ExampleImpacts:

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SEMINAIRE REGIONAL DU GROUPE TAF SUR LES COUTS ET TARIFS


•• WTSAWTSA-- 2004 2004 -- Résolution 29: Alternative Résolution 29: Alternative callingcalling prroceduresprrocedureson international telecommunication networkson international telecommunication networks

•• Main discussions Main discussions ofof the Jan. ’05 Meeting the Jan. ’05 Meeting ofof SG3:SG3:•• Formation Formation ofof a rapporteur Group a rapporteur Group withwith termsterms ofof

referncerefernce as as followsfollows::

1.1. ElaborateElaborate //definedefine the concept the concept ofof AlernativeAlernative callingcalling proceduresprocedures andand identifyidentify itsits

variousvarious formsforms2.2. StydyStydy bothboth the positive the positive andand negativenegative economiceconomic effets effets ofof ACPsACPs withwith specialspecial

attention attention beingbeing givengiven to the impact on to the impact on developingdeveloping countries, countries, particularlyparticularly LeastLeastDevlopedDevloped Countries (LDC)Countries (LDC)

3.3. CollectCollect relevant information (relevant information (egeg. . StudiesStudies, reports, etc.) , reports, etc.) fromfrom outsideoutside sources to sources to help help withwith the the determinationdetermination in 2) in 2) aboveabove

4.4. ReviewReview the the resultsresults ofof the the workwork andand prepareprepare as as appropriateappropriate a a furtherfurther workwork plan for plan for nextnext SG3 meetingSG3 meeting

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IV IV -- APPENDIX: APPENDIX: HowHow VoIPVoIP affect affect incumbentincumbent telcotelcocash cash flowsflows

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• APPENDIX: Impact of VoIP on incumbenttelco cash flows

• Source: Source : Economic and Commercial Impact of VoIP and Broadband in EuropeJohn MoroneyThird ITU European Regional Meeting –Istanbul , 29-30 Novembre 2005

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Market of switched vs. VoIP traffic

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Growth Trends in VoIP Market

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Current Market Trends in VoIP

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Incumbent Operator’s typical income

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Future scenarios

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Incumbent Operator Revenue Losses

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Incumbent Operator’s typical costs

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Net Effect of VoIP on Incumbent Telco Cash flows

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• References:

– ESMT/Clarity Telecom workshop– ESMT/Goulet telecom workshop– ITU seminars and ITU-T resources– OCDE studies

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Thank you for your Attention

Mohamadou A. SAIBOUUIT Consultant ESMT/ITU CoE DakarOffice: +221 869 03 04Portable: +221 635 38 80Fax: +221 824 68 [email protected]@ties.itu.intwww.esmt.sn

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