a user view
|
International Refiling of
Mobile Traffic;
a user view |
A presentation made to the OECD Working Party on Telecommunication and
Information Service Policies (TISP) on 4 December 2000 on behalf of the
International Telecommunications Users Group (INTUG).
The combination of exceedingly rapid evolution and the reticence of regulators to intervene has resulted in the following serious distortions of the mobile telecommunications markets:
In the fixed telecommunications market we have seen a growing number of new entrants. Some of these are based on resale, while others have built their own networks. The massive growth of the GSM networks has created a pressure on these operators to be able to terminate calls to mobile telephones at competitive prices. They have faced a bottleneck in the refusal of the GSM operators either to negotiate lower prices or to permit service-based competition on the mobile networks.
One solution has been the refiling of domestic traffic - tromboning - from a fixed network to a foreign network and back to the mobile network in order to evade the very high mobile termination fees. These fees are often not regulated and are generally inflated well above cost-orientation.
These remarks apply to markets where Calling Party Pays (CPP) is used.
Where the Receiving Party Pays (RPP) the circumstances are very different.
What companies are seeking is:
A key consideration for consumers is the lack of comprehensible tariff
schemes. This is one factor which underlies the very high levels of churn.
Customers are sold services on the basis of cheap on-net and mobile-to-fixed
calls. Whereas, the cost of calls from fixed-to-mobile has frequently been
ignored or it has been blamed on fixed operators.
Incumbents in almost all OECD countries are under a regulatory obligation to provide cost-based prices to consumers. A similar obligation covers the termination on fixed networks of traffic originating from mobile networks. However, in the majority of cases mobile operators can charge the (former) incumbents prices of their own choosing to terminate calls which originate on a fixed network.
It should not be forgotten that these very high high interconnection rates are sometimes being paid between the fixed and mobile networks of the same company. Tromboning which is used to evade the high termination prices is sometimes conducted through a parent company or an affiliate. It is important to determine who all the players are and which games they are playing.
Whatever competition really exists between the mobile operators does not affect the interconnection prices, since they all benefit. None would gain from lowering the charges. This is similar to strong incentive on all players to retain the presently extremely high prices for international roaming, where all operators benefit.
There is an obligation to interconnect networks set out in the Reference Paper in the Fourth Protocol of the General Agreement on Trade in Services (GATS). This requires that interconnection be provided with a major supplier at any technically feasible point in the network under non-discriminatory terms and conditions, including technical standards and specifications. The major supplier will make publicly available either its interconnection agreements or a Reference Interconnection Offer (RIO). Dispute settlement arrangement must also be available. However, the matter has never been tested before a WTO Dispute Panel.
The European Union is presently conducting an inquiry under competition
law into international roaming and has a complaint concerning high termination
prices. The evidence from this is that competition law is a very crude
and blunt instrument with which to attempt to control the mobile operators.
It is much easier to use ex ante regulation, even if this is a message
that is unwelcome. Until now, the European Commission and NRAs have held
back from regulation because they have seen mobile telecommunications operators
as companies to be encouraged and allowed to grow.
Recently we have seen the appearance of a new set of accounting rates, these are for the termination of international calls to mobile networks. It is far from clear why these are necessary. None of these higher termination rates has been subjected to a test of cost-orientation. They seem simply to replicate the bottleneck we see in the domestic market.
A whole new range of issues has arisen by the proposal to apply the accounting rate model to Internet Protocol (IP) interconnection in what has become known as ICAIS, the International Charging Arrangements for Internet Settlement. This is being discussed in a few days at ITU-T Study Group 3. To add to the already existing complexity it seems that a new Internet is being created. The mobile operators, having realised the importance of roaming, are now working on the protocols, accounting rates and billing arrangements to interconnect General Packet Radio System (GPRS) networks through GRXs (GPRS Roaming eXchanges). This is to be seen as a precursor for models for IMT-2000 services.
Where there is any significant volume of traffic, differential accounting
rates for mobile networks will have to flow through into retail prices.
The result is likely to be considerable and doubtless intentional confusion
in an already highly complicated market. Even informed consumers are unlikely
to know the mobile network codes for more than a very few other countries.
(For example, +32-4 for Belgian mobile networks, +31-6 for France and +49-1
for Germany). It is unfair and unreasonable to expect the exercise
of consumer choice in such circumstances. Consequently, it is extremely
unlikely to result in significant competitive pressure to reduce prices.
Rather it extends to foreign callers, the leverage which they obtain from
their domestic mobile telecommunications licence.
The accounting rate system has survived attempts to reform it for more than a decade. Sadly, there is no reason to think it can now be reformed. The best hope is to wait for its demise and hope that it is not too long.
The operators are busy creating their own and largely unregulated arrangements for the interconnection of GPRS and UMTS networks. These developments need to be monitored extremely vigilantly, since the objective appears to be to ensure tight control over customers and revenue streams.
It is not clear how the regulation of interconnection can be sustained
in the long term. Most mechanisms can be by-passed or abused. Therefore
it is important to create appropriate market structures, ones which are
inherently competitive and open to new entrants..
In its early days a little overpricing or cross-subsidy was acceptable while operators were becoming established. That has long since ceased to be acceptable. Users will not tolerate it and will do whatever is necessary to bring to an end the existing oligopolies and market structures. The simplest way to achieve this would be to introduce more and new players into the market. Barriers to market entry must be pulled down. The arrival of the Mobile Virtual Network Operators (MVNOs) has been too long delayed. The imbalance between the mobile incumbents and the potential new entrants and service providers must not be allowed to stifle the development of a competitive market. Competition law and principles of non-discrimination must be applied.
Tromboning results in lower costs for users. However, it is at a cost of the removal of the Calling Line Identification (CLI) and sometimes in a diminution in the quality of the call. These are modest prices which callers will often elect to pay.
To oppose the use of tromboning would require an exceedingly good justification, since it is nothing more than arbitrage. Such arbitrage is to the benefit of markets and consumers.
At all costs, the market must not be allowed to slide into a global
oligopoly.