Transcript Presentation 10

NGN Interworking Workshop
TRIS – TISPAN: 18th January 2006
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1
Group Public Policy
Agenda
 Review of ECC Model for interconnection of IP based networks
 Examples of market-based approaches to interworking
 International MMS interworking
 International premium services interworking
 Summary
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Review of ECC Model for interconnection of IP based networks
 IP based interworking arrangements are developing: regulators should not pre-empt
these by attempting to favour particular commercial models in advance of the market.
 There are strong incentives among firms to secure effective interworking in order to
benefit from the resulting network effects – notably increasing service value to
customers.
 Multiple retail and wholesale charging models will exist and interworking arrangements
will be required to support a variety of different retail service models.
 Vodafone seeks to charge in units that make sense to our customers: per minute, per
message, per ring-tone, per track, per game etc.. Charges are not generally capacity
based.
 Instead service-based charging is designed to meet customers’ needs for
transparency and allow discrimination between services supporting affordable price
levels.
 We see this approach as both desirable and sustainable faced with substantial
investment to provide 3G data services on mobile.
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International MMS interworking
4
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SMS and MMS interworking
Nationally
Internationally
 SMS services typically directly
 SMS services typically directly
interconnected
 Bulk offers also available to third
parties through aggregators or directly
 MMS services have followed same
 Question was should MMS follow the
same route?
 If so substantial cost and complexity in
models
=> National SMS and MMS
interworking available in a range of
forms
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interconnected based on pre-existing
roaming relationships
terms of making service available.
 May make “thin” routes unviable
=> International SMS widely available,
but MMS international access
stalled
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MMS hubs work on a concatenated basis with a hub
provider connecting to multiple operators
Bilateral Model
Hub Model
Potentially 100s of connections to be setup, tested and managed
Single connection and contract
with hub
Vodafone Operator
Non-Vodafone Operator
Hub provider
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So what are incentives on Vodafone to use MMS hubs?
Bilateral Model
Hub Model
Advantages
Advantages
 Familiar from national interworking
 Simplicity of single connection and
(and an acceptable solution for high
volume national routes)
Disadvantages
 Isolated from variations in MMSCs and
many connections
their configurations
 Highly resource intensive (MMS is
inherently more complex than SMS)
 Technically acceptable, but not cost
 Slow to deploy
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 Quick to deploy
 Low resource requirement
 Need to set-up, test and manage
effective for international routes
contract
 Continues effective spam control
Disadvantages
 Risks associated with the hub being a
new system
Group Public Policy - 7
International premium service interworking
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Group Public Policy
Starting point: typical PRS voice market structure
Content
Provider
TO1
TO2
Content Provider. Typically
many in a national market.
TO3
TOx
Transit provided by fixed
incumbent. Typically 1.
Transit provider
ONO1
ONO2
ONOy

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Terminating operators linked to
transit provider. Typically 30-50
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Originating Network Operators:
Fixed incumbent, Cable Cos,
MNOs. Typically 6-8 (main) ones.
Retail customers
In contrast: typical premium SMS market structure
Content
Provider
AGG1
AGG2
MNO1
AGG3
MNO2
 
Content Provider. Typically
many in a national market.
AGGm
MNOn

Aggregators linked to all MNOs.
Typically 5-10.
Mobile Network Operators.
Typically 3-5.
Mobile Customers
NB: Ignores vertical integration and FNO entry which are also present.
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Moving forward: content is delivered by differentiated
operator brand, 3rd party brand and content gallery routes
Content
Provider
VF
Live!
3rd
party
portal
VF
MNO2
 
Content Provider. Typically
many in a national market.
Content
gallery
MNOn

NB: See also dominance of branded portals in the internet space
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Portals and galleries provide
heterogeneous and overlapping
routes to market for content
providers.
Mobile Network Operators.
Typically 3-5.
Mobile Customers
How is value chain tension (mainly) resolved in models?
Traditional premium rate voice
Premium rate SMS / new content
 Motives of content providers vary
 Motives of content providers vary
 Rigid roles of ONO, transit and TO
 Roles of players more fluid with opportunities
 ONOs driven by total end customer
to adopt different roles
profitability (to which PRS is a minor
 ONOs still driven by total customer
contributor <5%) and high costs to acquire
profitability and high costs to acquire
 End customer satisfaction (& so retention)
vital to profitability
vital to profitability
 Transit provider reluctant seller – many
would exit this business if they could
 TO profitability driven by content provider
 Aggregators provide link between ONOs &
content providers. Contract mechanisms
(incentives and penalties) align values
 ONO and 3rd party branded portals face
business volumes
parallel pressures to ONOs so also align
 Some proportion TOs marginal
=> Tension endemic in model and must be
resolved through economic regulation
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 End customer satisfaction (& so retention)
=> Tension resolved through market
structure development and / or
commercial contract
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International PRS – voice based model
Country A
TO1
ONO1

Country B
TO1
TOx
Transit provider1
ONOy
Content
Provider
Transit provider2
Transit provider3
ONO1
=> Like national PRS, but worse!
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TOt
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ONOV
Content Providers
active internationally:
up to n x many (?)
Terminating operators
linked to far end
transit provider.
1 near end, 1 far end
and 2-3 (?) international
transit providers.
Originating Network
Operators: n x 6-8
(main) ones.
Retail
customers
International PRS – aggregator / hub based model
Country A
Country B
Content Providers active
internationally: up to n x
many (?)
Content
Provider
AGG1
ONO1
AGGt
ONOy
AGG1
ONO1

AGGt
ONOy

Aggregators active
internationally (as at
present) but subject to
national consumer
protection / PRS regulation
in each country where they
offer services.
Originating Network
Operators.
Retail
customers
=> Sustain national commercial & regulatory environment
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Comparing these approaches
International PRS voice model
International aggregator model
 More participants in the value chain and
 Content can be created and distributed from
very many more potential PRS call
“routes” create much greater complexity
 Consumer protection and fraud prevention
issues greater than national PRS
 Operators’ and regulators’ ability to deal
with international fraud and customer
protection will be challenged
 Cost of regulation spread over industry
and consumers
 Model can only be brought into existence
and sustained by regulation indifferent to
conflict between players and of additional
risk to customers
=> Extending national voice models will
not provide a sustainable basis for
international premium services
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anywhere within EU
 But it must be sold subject to the national
consumer protection / PRS / content
regulation in country where services offered.
 Cost of regulation and enforcement of
international PRS service will be internalized
in aggregator business models
 No formal roles for players, but a more fluid
entrepreneurial model with opportunities to
adopt different roles
 Aggregators provide link between ONOs &
content providers. Contract mechanisms
(incentives and penalties) align values
=> Tension resolved through commercial
contracts and/or application of national
consumer / PRS regulation
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So, in summary
 Rather than attempt to assemble a single interworking model we expect different (and
overlapping) models will emerge.
 In the near term the range of retail and wholesale commercial models will become
more heterogeneous.
 Success or otherwise of different approaches will be tested in the market and market-
based solutions will emerge. This is an iterative process and it remains to be seen
which models will prove most compelling for customers.
 This may include the approach set out in the ECC paper or other approaches.
 But regulated models should not pre-empt market decisions – as they may be inferior.
 Commercial success will depend on a range of factors such as:

–
customer response;
–
ability to successfully monetize investments;
–
level of cost / complexity of service operation compared to functionality offered;
–
overall service environment.
Expect [economic] regulation to diminish as customer choice grows.
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