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Mike Conradi
Telecoms PolicyTelecoms PolicyMike ConradiMike Conradi
Legal Secondee from Baker & McKenzieLegal Secondee from Baker & McKenzie
World Bank, 9 March 1999World Bank, 9 March 1999
michael.conradi@bakernet.com
Mike Conradi
Market InformationMarket Information
Mike Conradi
0
50
100
150
200
250
300
350
400
1986
/87
1987
/88
1988
/89
1989
/90
1990
/91
1991
/92
1992
/93
1993
/94
1994
/95
1995
/96
1996
/97
1997
/98
1986
/7=
100
Local National International
370
Local, National and International Local, National and International Call volumesCall volumes
Mike Conradi
UK Traffic by RegionUK Traffic by RegionUK Traffic by Region of the World (Jan-March 1998)
0
100
200
300
400
500
600
700
800
900E
U
US
an
dC
an
ad
a
Oth
er
We
ste
rnE
uro
pe
Au
stra
lia/N
Z
Fa
r E
ast
Afr
ica
Fo
rme
rE
ast
ern
Blo
c
So
uth
Asi
a
Mid
dle
Ea
st
Ce
ntr
al a
nd
S A
me
rica
Mil
lio
ns
of
min
ute
s
Outbound
Inbound
Mike Conradi
All OperatorsAll Operators
Local
60%
National
28%
Other
6% Calls to
mobile
2%
International
4%
Retail Call Volumes Q3 97/98Retail Call Volumes Q3 97/98
Mike Conradi
Profits 1997/8
33%
36%
0%
0%
0%
10%
2%
BT’s Retail ProfitsBT’s Retail Profits
Local
National
19%
International
Calls to mobile
Payphone
Private Circuits
Other
DQ
Mike Conradi
Residential Users
0%
20%
40%
60%
80%
100%
1992/93
Sh
are
of
reve
nu
es Others
Cable
CWC
BT
1992/93
Business Users
Market Shares - 1992 to 1997Market Shares - 1992 to 1997
Mike Conradi
Residential Users
0%
20%
40%
60%
80%
100%S
har
e o
f re
ven
ues Others
Cable
CWC
BT
Business Users
1997/981997/98
Market Shares - 1992 to 1997Market Shares - 1992 to 1997
Mike Conradi
Methods of ConveyanceMethods of Conveyance
Mike Conradi
Switch Switch
Handover point
Call Origination International Conveyance
Call Termination
Settlement Rate
Accounting Rate
The Accounting Rate SystemThe Accounting Rate System
NB: Major profits come from incoming calls
Mike Conradi
0
0.1
0.2
0.3
0.4
0.5
Dec-96 Jun-97 Dec-97 Jun-98 Dec-98
Val
ue
(SD
R)
France
Germany
Greece
Spain
Italy
USA
Canada
Netherlands
Accounting Rate TrendsAccounting Rate Trends
EU, USA and Canada
WeightedAverage
Mike Conradi
Rest of the World
Accounting Rate TrendsAccounting Rate Trends
00.20.40.60.8
11.21.41.61.8
Dec-96 Jun-97 Dec-97 Jun-98 Dec-98
Val
ue
(SD
R) South Africa
Turkey
India
Pakistan
Poland
Russia
Israel
WeightedAverage
Mike Conradi
International Simple ResaleInternational Simple Resale
• Allowed in UK since 1994
• Competition but constrained by cost of leased circuit.
• Complaints re: BT’s IPLC prices
• No network competition.
• No return traffic - unlike Accounting Rates.
• Many countries - illegal (deprives incumbent of revenues). OFTEL/DTI “liberalised” list.
• Packaged IPLCs - on SDH rings
Mike Conradi
Competitive Origination
Competitive Transport Competitive Termination
Cross Border Interconnection ModelCross Border Interconnection Model
REGULATION
NB: Profits can arise from either outgoing or incoming calls
Mike Conradi
Policy IssuesPolicy Issues
Mike Conradi
One-Way BypassOne-Way Bypass
1,000,000 minutes
1,500,000 minutes
1,000,000 Minutes
Dodgy
Tel
Dodgy
Tel UK
Mike Conradi
Policy IssuesPolicy Issues
• One-Way Bypass
• Whipsawing
• Asymmetric pricing imposed by monopolist; or
• Other manipulation - depending on balance of traffic
• IFL Licence conditions aim to prevent these:
• Proportionate Return
• Information to DG - no longer “parallel accounting”
• Specifications & Consents
Mike Conradi
• Review of BT’s wholesale IDD pricing:
• Gross pricing replaced by net pricing
• New Guidelines out (very) soon
• BT Retail price control review expected this year
• Monitoring the market:
• Publication of Accounting Rates (Statement on the Collection and Publication of International Call Information - July 1998)
• Detection of breaches
• CWC WEO review - results published February 1999
Policy IssuesPolicy Issues
Mike Conradi
TromboningTromboning
Mobile Interconnect rate: 20p
Int’n mobile term rate: 5p
Settlement rate: 3p
BT’s loss per mobile call: 2p/min
• Solutions:
• Call “gapping” &
• Negotiation of separate rates for calls to mobiles - coming soon!
Mike Conradi
Efforts to Reform Accounting RatesEfforts to Reform Accounting Rates• Study Group 3 - Focus Group.• Target rates according to teledensity• Moves to compensate those who suffer significant revenue losses.• Outcome of last meeting
• Settlements rate “deficit” - 1996, > $5.5bn
• Benchmarking proposal - implementation dates, and target rates, staggered by income.
• Upper Income benchmarks - 1 Jan 1999.
Mike Conradi
Efforts to Reform Accounting RatesEfforts to Reform Accounting Rates
• Investigation begun December 1997
• 7 operators’ charges merit further investigation.
• Also, looking at availability of cross border interconnection. - Implementation of ICD
• WTO Basic Telecommunications Agreement
• Signatories made “offers” detailing stages of liberalisation.
• Offers are binding.
Mike Conradi
Submarine CablesSubmarine Cables
Mike Conradi
Submarine CablesSubmarine Cables• Cases concerning capacity on consortia cables - 1997/87
• Now, three changes:
1. EconomicsCable Date
CompletedCapacity(Gb/s)
Cost($m)
Cost of 1 Gb/s($m)
CANTAT-3 1994 4 300 75TAT 12/13 1996 20 750 38Atlantic Crossing 1998 80 750 9.5TAT 14 2000 640 1500 2.5FLAG-Atlantic - 1 2001 1280 1500 1.3
2. Private Cables - capacity for sale
• Atlantic Crossing, Flag, Flute (dark fibre)
3. Self-owned networks
• Farland (BT), Hermes, Worldcom, Viatel, Esprit CWC, Colt, Unisource & others
Cable DateCompleted
Capacity(Gb/s)
Cost($m)
Cost of 1 Gb/s($m)
CANTAT-3 1994 4 300 75TAT 12/13 1996 20 750 38Atlantic Crossing 1998 80 750 9.5TAT 14 2000 640 1500 2.5FLAG-Atlantic - 1 2001 1280 1500 1.3
Mike Conradi
0
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600
700
Capacity (
curre
nt)
Max Capacit
y
end 2000
Tot
al C
apac
ity
- G
b/s
Pan-European NetworksPan-European Networks
Mike Conradi
WintertonUK-Germany 5UK-Netherlands 14
AldeburghUK-Netherlands 12Farland (1999)
GoonhillyTAT-9UK-Spain 4SEA-ME-WE 3 (mid 99)
FolkestoneUK -France 5
BrightonUK -France 3
BreanPTAT
WidemouthTAT-8
Redcar CANTAT-3
Land’s End(Porthcurno)CELTICRIOJATAT12/13FLAGGemini
BroadstairsUK-Belgium 5
Oxwich BayTAT-11GeminiSOLAS (early 99)
St Margaret’s BayUK Belgium 6UK-France 4Farland (1999)
ScarboroughUK-Denmark 4UK-Germany 6 (3/99)
BT operatedCWC operated
BudeTAT-14 (2000)
HolyheadBT-TE 1
UK Cable Landing StationsUK Cable Landing StationsJanuary 1999January 1999
NB: Excludes self-owned cablesAtlantic Crossing
Mike Conradi
• CWC obligations lifted - February 1999
• Could be significant bottleneck
• Breakout below STM-1 (155 mb/s)
• Backhaul & Cable Station Access
• Conveyance: Switch & Cable Landing Station (CLS)
• CLSs owned, usually by BT or CWC only
• So obligations - re: access to CLSs, publication of backhaul prices & non-discrimination
Submarine CablesSubmarine Cables
Mike Conradi
Telecoms PolicyTelecoms PolicyMike ConradiMike Conradi
Legal Secondee from Baker & McKenzieLegal Secondee from Baker & McKenzie
World Bank, 9 March 1999World Bank, 9 March 1999
michael.conradi@bakernet.com