Access: From Interconnection to Convergence

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AccessFrom Interconnection to Convergence

• Yale M. BraunsteinSchool of InformationUniversit
  y of CaliforniaBerkeley, CA 94720 (U.S.A.)
• March 2008

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Access has several dimensions

• (Physical or geographic) proximity
• Possession of needed skills
• Economics
• For free or fee-based
• Connection to (the) network

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History (U.S. Telephony)

• Competing networks
• Bell Edison in the U.S.
• Resolved by patent decisions
• The fundamental principle, formulated by ATT
  president Theodore Vail in 1907, was that the
  telephone by the nature of its technology would
  operate most efficiently as a monopoly providing
  universal service.
• New technologies business plans lead to bypass
  (MCI) and interconnection (role of SS7)
• UNEs (unbundled network elements)
• More new technologies (now digital)

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Issues are inter-related

• As new entrants enter a telecommunications market
  the problem of interconnection has two
  dimensions technical and economic. My focus is
  on the latter.
• Often there is the view that it is in the
  national interest to encourage the widespread
  diffusion of the telecom network and to promote
  access by users who might not be considered
  economically viable by operators.
• Interconnection and universal service are often
  linked.
• Presentation of some of the issues
• Optional mini case studies

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Outline

• Interconnection
• Interconnection universal service
• Convergence (which has many meetings)
• Competition (?)

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The dimensions of interconnection

• B.C. (before competition) it was common to see
  some or all of the following
• Local tariffs were averaged across customers. In
  addition, the non-traffic-sensitive portion of
  the tariff was often kept artificially low.
• The tariffs for trunk calls were sufficiently
  higher than costs so as to enable the costs of
  local service to be kept low.
• International rates were many times the cost of
  service.

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Typical interconnection pricing philosophies

• Cost-based
• Price-based
• Bill and keep
• Private negotiation

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Additional concerns

• Equal treatment and symmetry requirements
• Whose costs?
• Possible difference in technologies
• Legacy customers
• Preferences for corporate relatives

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An illustration of the lack of symmetry
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Universal service

• Among the possible definitions are the
  following loosely-stated concepts
• Basic residential telephone service should be
  available to all regions of a country for a
  common, reasonable monthly fee.
• Income and wealth levels should not be
  significant barriers.
• Every village of a certain size should have at
  least one public telephone.
• All local telephone providers should be able to
  interconnect to the national telephone network at
  reasonable rates.

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ICX USO Conclusion

• The movement toward competition in
  telecommunications services has highlighted the
  linkage between interconnection fees and the
  funding of universal service.
• Changes in one area affect the underlying
  economics of the other.
• One approach is to move interconnection fees
  toward becoming increasingly cost-based and to
  make the funding of universal service obligations
  more explicit.
• While it is important to get the prices right,
  it is probably even more important to have the
  rules clear and fairly enforced.

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What is driving convergence?

• Parallel, (mostly) ubiquitous networks
• Telephone, cable TV, wireless
• Digital technology (not always)
• Important to distinguish between digitized
  content and digital signaling
• Religious belief in competition de-regulation
  (?)
• Key question What is to be converged?
• Telephony/cable television
• Wired/wireless
• Broadcast/common carriage
• Circuit-switched packet-switched networks

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Alternate regulatory approaches

• Wait until competition, however defined, is well
  established
• Get out of the way early (leaving things to the
  anti-monopoly authorities)
• Bright-line tests of market share
• How is the market define?
• Rely on case-by-case judgment of regulators

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Case studies
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Mobile-to-fixed, fixed-to-mobile, and
mobile-to-mobile in Israel
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Free entry and negotiated interconnection in
Sweden
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The entry of competition for international calls
in Israel
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Calls to the Internet in the U.S.
Recent FCC decisions are phasing out these
payments
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Financing the USO and current tariffs in India

• The Government is committed to provide access to
  all people for basic telecom services at
  affordable and reasonable prices. The Government
  seeks to achieve the following universal service
  objectives
• Provide voice and low speed data service to the
  balance 2.9 lakh 290,000 uncovered villages in
  the country by the year 2002
• Achieve Internet access to all district head
  quarters by the year 2000
• Achieve telephone on demand in urban and rural
  areas by 2002
• The resources for meeting the USO would be raised
  through a universal access levy which would be
  a percentage of the revenue earned by all the
  operators under various licenses.
• --New Telecom Policy of 1999

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Financing the USO tariffs in India
Converted to U.S. dollars at U.S. 1.00 Rs. 45.6
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Financing the USO tariffs in India
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Interconnection Policy in EU States

• Local Access Pricing and E-Commerce
• DSTI/ICCP/TISP(2000)1/FINAL
• July 2000

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Conclusion

• The movement toward competition in
  telecommunications services has highlighted the
  linkage between interconnection fees and the
  funding of universal service.
• Changes in one area affect the underlying
  economics of the other.
• One approach is to move interconnection fees
  toward becoming increasingly cost-based and to
  make the funding of universal service obligations
  more explicit.
• While it is important to get the prices right,
  it is probably even more important to have the
  rules clear and fairly enforced.