Cost-Modelling

Bangladesh Telecommunication Regulatory Commission
Interconnection Cost Modeling, PSTN, Mobile Interconnection Cost Modeling BTRC, 09 Feb 2012
Interconnection Cost Analysis
1

Interconnection Cost Modeling, PSTN, Mobile
2
Pricing issues is the largest single lever affecting the industry
Source, McKinsey, A Case Study in Assessing and Managing the Impact of Telecommunications Deregulation, Brussels December 2000 and windsor-place consulting

Legacy Model : 1 : Sender Keeps All
In this model, originating operator does not pay any compensation to the terminating operator for using its network.
This model is used in countries where the subscriber market share is generally equally (or close to equal) distributed.
In such a model, the processing cost outweighs the amount receivable.
Interconnection Settlement: Legacy Models
3

Legacy Model : 2 : Peak / Off – Peak Differentiation
Peak Hour Tariff
Off – Peak Hour Tariff
Settlement charges for peak hour (received by the terminating operator from the originating operator) was fixed at BDT 0.90 per minute.
Settlement charges for off – peak hour (received by the terminating operator from the originating operator) was fixed at BDT 0.66 per minute.
4

Legacy Model : 3 : Flat Charging Method
No Peak / Off – Peak hour differentiation.
Settlement charges are applicable at a flat rate (received by the terminating operator from the originating operator) and the rate is fixed at BDT 0.40 per minute.
Based on international best practices, the interconnection charge is always ‘how much you pay’ connecting the terminating network.
That indicates BDT 0.18 + BDT 0.04 = BDT 0.22 being the Interconnection charge. The off-net charge can’t go beyond that.
5

Current Model : Flat charging method through ICX
We introduced ICX (Interconnection Exchange) in February, 2008, to work as a transit operator for receiving and distributing calls from different operators as well as to ensure revenue sharing appropriately and also to ensure central monitoring of nationwide off net calls of different operators.
In this method all off net calls go through different ICXs and the settlement charges are distributed in two parts
ICX receives an amount of BDT 0.04 per minute from the originating operator.
Terminating operator receives BDT 0.18 per minute from the originating operator.
Interconnection Settlement: Current Model
6

Present Minimum Tariff status:
For Mobile & PSTN
On – Net : 0.25 / min (BDT)
Off – Net : 0.65 / min (BDT)
For IPTSP
On – Net : 0.00 / min (BDT)
Interconnection Settlement Charges:
For Terminating Operator
0.18 / min (BDT)
For ICX
0.04 / min (BDT)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Mobile
PSTN
IPTSP
Tariff in BDT
Mobile
PSTN
IPTSP
On - net
0.25
0.25
0
Off - net
0.65
0.65
0.4
Tariff Regime: Present Scenario
7

Current Model : Flat charging method through ICX
Cost : A : Cost of the originating operator to transmit the call from the originating subscriber to ICX.
Cost : B : Cost of the terminating operator to transmit the call from the ICX to the terminating subscriber end.
Cost : C : Cost of the ICX operator (call transit cost).
Cost : D : Additional Cost, not used in cost modeling.
D
B
C
A
0.25
0.18
0.04
0.18 Cost Components of an Inter-operator Call
8

Interconnection Cost Modeling, PSTN, Mobile Interconnection Settlement: Cost Components
9

For On – Net calls:
Present Tariff Limit (X) = 0.25 (BDT per
minute)
Total cost (Y) = Origination cost (A) + Termination cost (B)
= 0.18 + 0.18
= 0.36 (BDT per minute)
Total Retainable Amount = X – Y
= 0.25 – 0.36
= -0.11 (BDT per minute)
D
B
C
A
0.25
0.18
0.04
0.18
Analysis on present Tariff rate : On – Net Calls
10

For Off – Net calls:
Present Tariff Limit (X) = 0.65 (BDT per
minute
Origination Cost (A) = 0.18 (BDT per minute)
Termination Cost (B) = 0.18 (BDT per minute)
Transit cost (C) = ICX cost
Total Extra Amount = X – A – B – C
= 0.65 – 0.18 – 0.18
– 0.04
Analysis on present Tariff rate : Off – Net Calls
D
B
C
A
0.25
0.18
0.04
0.18
11

Cost Components: PSTN / IPTSP Operators
PSTN Operator to Mobile Operator Off – Net Tariff : 0.65 BDT / min
IPTSP Operator to Mobile Operator Off – Net Tariff : 0.40 BDT / min
12

Operators & Services:
Mobile Operators : Prime service with full mobility
PSTN Operators : Basic service with limited/no mobility
IPTSP Operators : Voice layered service
Interconnectivity and Gateway
ICX Operators : Nationwide call transit service
IGW Operators : International call transit service
Operator Types and Services
13

Interconnection Cost
Modeling, PSTN, Mobile
14
Common and Overhead Costs
Shared Network Costs
Service A
Direct Costs
Service B
Direct Costs
Common and Overhead Costs
Shared Network Costs
Service A
Direct Costs
Service B
Direct Costs
Common Overhead Cost + Shared Cost

15
Service
A
Cost
Volume
Fixed, common costs
LRIC of B
LRIC
Cost
FAC
Service
B Service
A
Service
B
FAC A FAC B
V Volume A VB VA VB

16
LRIC of B
Cost
TS LRIC
Service
A
Service
B
Fixed and
Common
Costs
V Volume A VB

Proposed Tariff Rates:
For Mobile Operators
On – Net : 0.25 / min (BDT)
For PSTN & IPTSP Operators
On – Net : 0.00 / min (BDT)
Cost Modeling Proposal : 1
-0.1
6E-16
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Mobile
PSTN
IPTSP
Tariff in BDT
Mobile
PSTN
IPTSP
On - net
0.25
0
0
Off - net
0.65
0.4
0.4
17

On – Net : 0.25 / min (BDT)
On – Net : 0.00 / min (BDT)
Cost Modeling Proposal : 2
-0.1
6E-16
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Mobile
PSTN
IPTSP
Tariff in BDT
Mobile
PSTN
IPTSP
On - net
0.25
0
0
Off - net
0.5
0.4
0.4
18

-0.1
6E-16
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Mobile
PSTN
IPTSP
Tariff in BDT
Mobile
PSTN
IPTSP
On - net
0.4
0
0
Off - net
0.6
0.4
0.4
On – Net : 0.40 / min (BDT)
On – Net : 0.00 / min (BDT)
Off – Net : 0.40 / min (BDT) Cost Modeling Proposal : 3
19

0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
Present
Proposal - 1
Proposal - 2
Proposal - 3
On – Net Tariff in BDT per minute
Mobile
PSTN
IPTSP
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Present
Proposal - 2
Off – Net Tariff in BDT per minute
Mobile
PSTN
IPTSP
Proposal Summary
20

Interconnection Cost Modeling, PSTN, Mobile Thank You Lt Col Rakibul Hassan rhassan@btrc.gov.bd
21

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