The Future of Interconnection, why you will continue to pay for Voice
When will accounting and paying per minute will stop<br />The Future of Interconnection<br />Rudolf van der Berg<br />Logica Management Consulting<br />Rudolf.firstname.lastname@example.org<br />+31 6 13414512<br />http://internetthought.blogspot.com<br />
One would expect that because of the rise of data we wouldn’t have to pay for voice anymore, this won’t happen<br />With data overtaking voice even on mobile networks, one would expect that soon we don’t pay for voice anymore<br />We accept paying by the minute because voice is highly valued and it is a familiar way of billing<br />The way voice interconnection is paid for in Europe is the reason we are stuck with paying by the minute<br />Only when the current interconnection model is removed will voice be ‘free’ <br />
With data overtaking voice even on mobile networks, one would expect that soon we don’t pay for voice anymore<br />Last week Mary Meeker (Morgan Stanley) reported a 50x growth of mobile data on AT&T since 2006. <br />Vincent Dekker (Trouw) reported that on KPN Mobile data traffic now equals voice with a 30x growth since 2006. <br />T-Mobile NL indicated the average iPhone user uses 640MB per month (= 1000-4000 minutes)<br />In 2012 voice will be 1-5% of mobile traffic in 2015 <0.16%<br />If mobile networks are just bits/hertz/sec/km2, why would voice still be the dominant billing method? Let them talk!<br />
We accept paying per minute because voice is highly valued and it is a familiar way of billing<br />Most consumers think they understand paying by the minute, most marketeers know better<br />Voice communication is also the most important form of communication between two people. We value it (too) high<br />So weirdly enough, because we value it so high, we allow for it to become a high priced, scarce good<br />But this isn’t enough to explain why paying by the minute will not just go away. <br />Note: Flat fee is still accounting by the minute!<br />
The way voice interconnection in Europe is paid for is the reason we are stuck with paying by the minute<br />In Europe for every incoming call the receiving network receives a termination fee. (US ≈ no termination fee)<br />This model is called Calling Party Pays. <br />The wholesale fee is regulated because of termination monopolies: €0.01 for fixed/VoIP and €0.02 - €0.14 for mobile<br />It is the asymmetry between fixed and mobile that generates billions in revenue for all (example on next slide)<br />It is these billions in revenue that will keep voice a paid for service for a long time.<br />
It is the asymmetry between fixed/VoIP and mobile that generates billions in revenue (Example NL)<br /><ul><li>Everybody makes money on mobile termination
A minute to fixed/VoIP retails for €0.02, to mobile for €0.17
ISP’s and Carrier Pre Select make 10 million per 1 million mobile subs
Why change a deal that even increases ISP’s ARPU by 10% </li></ul>Per million mobile subs/per year, based on 20 minutes incoming per mobile sub per month. Avg. MTA<br />
Only when the current interconnection model is removed will voice be ‘free’ <br />Removing Calling Party Pays would leave so called Bill and Keep, or better said, Peering and Transit. ( gotoArsTechnicafor an explanation)<br />In this model voice providers can, but aren’t obliged to interconnect and/or pay a fee to each other. <br />Providers are obliged to make all numbers reachable, either direct or via a transit provider. <br />Because a voice bit is just as easy as a Youtubebit, the prices will converge<br />Only then will telcos not care whose voice you’re using as long as you are their customer (too) <br />
Bonus: Some regulatory and other initiatives<br />Ms. Reding want mobile termination fees down to 2 cents by 2013. <br />European Regulators Group has just published a document on the topic. Meeting on November 4. Open for comments<br />In Britain there is an initiative known as Terminate the Rate, sponsored by BT and 3<br />In India the termination rate in any direction (fixedmobile, mobilefixed) was lowered to 0.3 cents per minute. <br />Indians have 400+ minutes of use at an ARPU of €6-8 <br />But GSMA members fight tooth and nail. Even arranging a meeting with 5 CEO’s and 3 EU commissioners<br />
Rudolf van der Berg<br />Logica Management Consulting<br />Rudolf.email@example.com<br />+31 6 13414512<br />http://internetthought.blogspot.com<br />
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