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