Transcript Trouble in Paradise

Trouble in Paradise
Challenges to international
telephone traffic
Michael Minges
[email protected]
International Telecommunication Union
The views expressed are those of the author and may not
necessarily reflect the opinions of the ITU or its members.
A quarter century of talking
Global international telephone calls, billions of minutes
Growth (right axis)
Paradise period:
Growth tied to
globalization & fax
25%
Party
over?
101
94
86
20%
79
71
64
Early period:
49
43
Growth tied to
38
33
network expansion
28
24
& global GDP
18 21
16
13 14
11
10
9
8
4 5 5 6
15%
57
10%
5%
0%
75 77 79 81 83 85 87 89 91 93 95 97 99
Note: Traffic over public telephone network.
Source: ITU.
Just not the business
it used to be
• Flat to declining
international
revenue
• Inelastic demand
• Statistical
aberrations
• Liberalization
• The Internet
• New market
segments replace
international as star
of telecom industry
Revenue from fixed calls
UK. Millions of pounds.
450
International
400
376
339
350
335
300
250
200
150
Calls to Mobiles
100 99
50
0
J- J- J- J- J- J94 95 96 97 98 99
Source: OFTEL.
Convergence
Average of one-minute call
to USA. Retail price. US$.
$2.00
Forecast
Swiss call prices.
US cents per minute.
74
$1.50
$1.00
58
58
Call to USA
Mark-up
43
28
$0.50
Local call
$0.00
Settlement rate
90
94
98
'02
Source: ITU adapted from FCC and national
data (34 countries).
5
5
95
96
4
4
4
7
4
97
98
99
'00
Source: Swisscom.
How come my traffic
is not growing?
Telephone traffic, millions of minutes
2'500
United Kingdom
6'000
Calls to Mobiles
2'000
5'000
1'500
4'000
International
1'000
3'000
500
2'000
0
1'000
M98
S98
M99
Source: OFTEL.
S99
M00
0
1996
Sweden (Telia)
Internet
International
1997
1998
Source: Telia.
1999
The Internet Way
• Technical,
financial & social
challenge to
circuit switched
international
telephone traffic
• Anyone can be a
telco
Winners and Losers
Example of call from USA to developing country
Accounting rate system + terminated by an ISP,
per minute
Traditional
New
Change
Developed
country PTO
Receives
US$ 1.35 retail
tariff.
Pays 84 US cents
settlement.
Gain 51 cents.
Receives
US$ 1.35 retail tariff.
Pays 40 US cents to
ISP for terminating call.
Gain 95 US cents.
+ 44 US
cents
Developing
country PTO
Receives 84 US
cents settlement.
Receives 2 US cents
local call charge.
- 82 US
cents
0
Receives 40 US cents
for terminating call.
Pays 2 US cents for
local call.
Gain 38 US cents.
+38 US
cents
Developing
country ISP
Lets chat
“4.4 billion
messages in June
2000”
“A world with a billion mailboxes—
outnumbering televisions and phone
lines—is probably only two years away”
Show me the money
Quarterly results, June 2000, US$ millions
Who’s not making
money
Revenue Profit
Who is
Revenue Profit
578
-317
270
65
19
-16
1’929
338
Source: ITU adapted from country reports.
The New PTO
• Access
– SingNet
– SingTel Magix
– mysingtel
– e-ideas
• Infrastructure
– NCS Media Hub
– Consumer Connect
– SingTel IX
– ID.Safe
• Content
– Lycos Asia
– SESAMi.com
Internet initiatives
Transition
“The Group’s highest
revenue growth segment
was Public Data &
Private Network...
Revenue growth from
Internet related activities
was particularly strong.
There has been a
substantial increase in
demand for …services in
areas like e-business
consulting, network
management, Internet
solutions and web
hosting.” –SingTel
commenting on recent
results
Singapore Telecom
Share of revenue (%)
45
43
41
38
International
34
22
15
10
10
95
96
18
Data
97
98
Source: Singapore Telecom.
99
And in the End…
• People will always have a need to
communicate internationally…
• …But, international voice is becoming a lowvalue commodity like apples, traded on
exchanges like corn or oil…
• …Value is in network infrastructure and
services, strength is your network expertise
and brand…
• Build international IP connectivity, originate
and terminate Internet calls, become an ISP
and develop services with partners.
“Companies that succeed as an Internet provider,
and as a supplier of IP-based services, will win in the
end.”—Telia (Sweden)
“In 1999, Swisscom launched a series of
projects which have the aim of evolving
Swisscom’s fixed-line networks away
from the current circuit-switched
infrastructure optimized for narrow-band
voice traffic toward a packet-based
infrastructure designed for broadband
data traffic and highly efficient
transmission of voice traffic. The core of
the infrastructure of this next generation
network will be based on IP technology.”
—Swisscom 1999 Annual Report
More info
www.itu.int/
ti/publications/DOT99/index.htm
www.telegeography.com/
Publications/tg00.html