Telecoms wholesale services Berlin

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The competition among telecom operators is intensifying in retail markets. This requires telcos to consider other options in wholesale markets. Ahmad Nadeem Syed discusses such avenues in his presentation at IIR forum in Berlin

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Telecoms wholesale services Berlin

  1. 1. Telecoms Wholesale Ahmad Nadeem Syed Director Interconnect & Regulatory Economics Mobilink, Pakistan Ahmad.n@mobilink.net Ansyed56@gmail.com Meeting The Threats From Increased Retail Competition And Embracing New Wholesale Opportunities IIR’s Conference at Berlin June 24-28, 2007
  2. 2. 2 Site Map ● Market Review ● Wholesale Service Opportunities ● Operator’s Challenges ● Role of the Regulator
  3. 3. 3 Deregulation – A Bird’s Eye View ● Benefits - Increased teledensity - Multiple operators providing right of choice to consumers ● Aftershocks - Lowering ARPUs - Increasing Opex - Declining Profitability ● Combating aftershocks - Finding new avenues - Optimising cost
  4. 4. 4 Market Potential
  5. 5. 5 Demography Source: ITU World Telecommunication Indicators 2006 4,050 511 719 381 39 252 490 26 4,620 525 943 439 54 246 560 29 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 Million 2005 2015 Population Asia Europe Africa South America Arab Stats Russian and Cent. States USA & North America Australasia 951 206 140 100 6 85 168 10 1154 227 190 135 9 92 200 12 0 200 400 600 800 1000 1200 Million 2005 2015 Households Asia Europe Africa South America Arab Stats Russian and Cent. States USA & North America Australasia Based on 5 Years Growth Rate (2000-2005)
  6. 6. 6 Fixed & Mobile Growth Source: Actual from ITU World Telecommunication Indicators 2005 2015 Asia Europe Africa South America Arab Stats Russian and Cent. States USA & North America Australasia13 14 230 251 61 92 7 9 69 101 23 47 242 227 613 1,154 Fixed/WLL Million Subs 2005 2015 Asia Europe Africa South America Arab Stats Russian and Cent. States USA& North America Australasia24 29 302 532 153 184 25 52 166 329 114 330 484 525 910 2,310 Mobile Million Subs
  7. 7. 7 Traffic Growth Source: ITU World Telecommunication Indicators 2006 307 699 502 520 38 104 143 262 74 144 64 83 428 630 29 35 0 100 200 300 400 500 600 700 BillionMinutes Asia Europe Africa South America Arab Stats Russian and Cent. States USA & North America Australasia 2005 2015 Long Distance 32 60 13 6 7 12 32 5 72 62 35 11 13 15 47 6 0 10 20 30 40 50 60 70 80 Asia Europe Africa South America Arab Stats Russian and Cent. States USA & North America Australasia BillionMinutes 2005 2015 Incoming International 490 140 234 154 5,580 22 4,353 508 385 428 297 8,212 27 1,914 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Asia Europe Africa South America Arab Stats USA & North America Australasia BillionMinutes 2005 2015 Local Traffic
  8. 8. 8 International Market Segmented Category A (Matured) ● Europe ● USA & North America ● Australasia ● Asian Segment (Japan, Korea, Hongkong, Singapore) Category B Upcoming ● Asia (Excl.Japan, Korea, Hongkong, Singapore) ● Russia & Central States ● Southern America ● Arab States Category C Following up Fast ● Africa
  9. 9. 9 Wholesale Services Opportunities
  10. 10. 10 Wholesale service is not an explicitly defined term, however, it is normally referred to as a service for the purposes of resale being complementary to retail services
  11. 11. 11 Wholesale Service Opportunities On the Platter ● Call origination ● Call termination ● International Voice (Incoming & Outgoing) ● Bandwidth ● Transit Services ● Leased lines (E1 & STM) ● MVNO In the Oven ● Transit Services ● Dark Fiber/Wavelength - λ ● Interconnect Exchange ● Bulk SMS
  12. 12. 12 Size of the Cake in 2015 Regions λ Long Distance* Minutes – Billion Transit Service** Traffic Minutes – Billion SMS*** Billion Asia 699 635 693 Europe 520 148 409 Africa 104 73 59 South America 262 87 119 Arab Stats 144 58 37 Russian and Cent. States 83 16 133 USA & North America 630 1,080 383 Australasia 35 10 21 Total 2,477 2,107 1,854 ***Source: Worked out based on Mobile Data Association report April 2006*Projected based on ITU Telecom Indicator Data 2006 ** Worked out based on ITU Telecom Indicator Data 2006
  13. 13. 13 Demand Potential Services Category A Category B Category C Transit Services Dark Fiber / Wavelength - λ Interconnect Exchange Bulk SMS
  14. 14. 14 Transit Service ● Growing demand because of - Increasing number of small LDI and WLL operators - Increasing traffic because of lower tariffs - Direct interconnection may not be possible in all cases ● Not defined as relevant market in many countries ● Incumbents (Fixed line) have monopoly in general ● Mobile operators becoming are potential competitors ● Issues: - Terms & conditions in the RIO - Tripartite billing & settlement - Quality of Service issues – Fixing the responsibility
  15. 15. 15 Dark Fiber/Wavelength - λ Dark Fiber ● Incumbents may not be interested due to limited No. of available pairs ● May be an opportunity for new entrants in backbone business Wavelength - λ ● Advent of DWDM technology has enabled the incumbents to offer this service on optic fiber ● The mobile operators are the major potential customers ● Easy means of acquiring high capacity for new entrants ● Pricing may be based on opportunity cost ● Dependence on incumbent for Quality of Service as first level control always with the network owner ● Regulatory framework does not exist generally
  16. 16. 16 Interconnect Exchange ● Multiplicity of operators demands simple interconnection solutions ● Direct interconnection may not be feasible for small operators because of: - Cost involved - Network Complexities - Distance from POIs of major players ● Incumbent operator is in perfect position to offer this service ● Pricing could be based on opportunity cost ● Danger of abuse of position by incumbent is there ● Regulatory framework is not present in general
  17. 17. 17 Bulk SMS ● Market is growing because of growth in - Mobile sector - WLL sector ● SMS based value added services like telemarketing becoming popular ● Small WLL operators & content providers prefer to deal with one aggregator than multiple operators ● Incumbent’s can provide services as aggregator ● Low cost high premium service ● Billing and accuracy could be an issue ● The market is unregulated
  18. 18. 18 Challenges for the Operators
  19. 19. 19 New Entrants - Build vs Buy ● Issues faced by new entrants - High cost of wholesale services - Competing the incumbent against its “economies of scale” advantage in retail market - Build vs Buy decision ● Why should new entrant go for build? - To lower operating cost - Independence - Prospective revenue stream ● Challenges of Build Strategy - High O&M cost in the initial period - Hitting back by incumbent in case of long buildup period
  20. 20. 20 Incumbent’s Strategy ● Recognizing threats of new entrant’s build strategy - Loss of revenue - Emergence of competition - Idle capacity ● Capitalize on its position to offer wholesale services ● Optimal utilization of excess capacity ● Take competition an opportunity not a threat ● Keep the new entrant in state of indecision with respect to Build vs Buy ● Keeping new entrants dependent ● Ensure that new entrant does not become competitor in wholesale market
  21. 21. 21 Role of the Regulator
  22. 22. 22 Key Responsibilities of The Regulator ● Watching Consumer’s Interest ● Ensuring Fair Competition
  23. 23. 23 Regulatory Framework ● Regulatory Framework (RF) is dependent upon - market maturity - regulator’s competence ● Relatively virgin area w.r.t RF ● The need will soon arise for Regulator to: - conduct market study for identification of relevant markets - Determining SMP - Imposing obligations on SMP ● Because: the larger the demand/dependence, larger the chance of margin squeeze by the service provider Category A Category C Category B
  24. 24. 24 Challenges for the Regulator ● Wavelength - Developing framework for cost based pricing for wavelength - Implementation of Service Level Agreement - Developing dispute resolution mechanism related to SLA ● Transit Traffic - Developing dispute resolution mechanism mainly related to billing & settlement - Ensuring Quality of Service ● Interconnect Exchange - Mandatory or voluntary connectivity by all operators - Determining cost of services - Ensuring non-discrimination ● Bulk SMS - Protecting consumers interests against spamming - Protecting terminating operator’s interests - Identification of relevant market - Determining cost of termination
  25. 25. 25 Thank You !

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