interconnection cover

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interconnect
the most difficult issue for a new operator
?(Indonesias Experience)1997 Cannes,
FranceKoesmarihati SugondoPresident
Director -TelkomselFebruary 1997
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W O R L D
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CONGRESS
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TELKOMSEL COMPREHENSIVE INTEGRATED SUPPORT

• GSM OPERATOR IN INDONESIA
• POSITIONING AS GSM SPECIALIST AND MARKET
  LEADER IN QUALITY SERVICE

• TOTAL COMPANY VALUE US. 2 BILLION

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COVERAGE CUSTOMERS
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TELECOMMUNICATION SECTOR OF INDONESIA
GOVERNMENT - FUNDAMENTAL TECH.
PLAN - INTERCONNECT - REVENUE
SHARING - TECHNOLOGY - TARIFF - LICENSES FREQ.
ALLOC. - SUPERVISION
FIXED-TEL MOBILE/CELLULAR FUTURE
2 INTL GATEWAYs NATION
WIDE PHSs REGIONAL OPR. RBOCs - 3
GSMs DCS 1800s - 2 TELKOMs - 1
NMT-450 GMSSs - 5 KSOs REGIONAL -
1 Fixed Cellular - 3 Analog AMPSs LONG
DISTANCE - 1 Div. NET
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MAIN ISSUES INTERCONNECT
PHYSICAL
PRICE
INTERCONNECT SYSTEM
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BIG BROTHER (PSTN OPERATOR)
LOOSING SHARE
COMPETITION
LOOSING TRAFFIC
IMAGE CHALLENGED
NEW ENTRANCES ARE SEEN AS THREAT INSTEAD OF
PARTNERS WHICH CONTRIBUTE (BRING CREATE) MORE
REVENUE TO PSTN OPERATOR
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THE MONEY GO BACK TO FIXED-OPR
PSTN OPERATOR SHOULD NOT SEE NEW ENTRANCES AS
THREAT BUT AS BIG CUSTOMERS AND PARTNERS
WHO CONTRIBUTE (BRING CREATE) MORE REVENUE TO
PSTN OPERATOR
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EVOLUTION OF INTERCONNECT ARRANGEMENT

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MOBILE OPR CONTRIBUTION TO PSTN-OPR
MARKET IS SUPPORTED BY ATTRACTIVE CUSTOMER
GROWTH CELLULAR MOBILE TELEPHONE DEMAND FORECAST
(2000) - JICA (92) 230,000 CUSTs. - BOOZ
ALLEN (94) 600,000 CUSTs - GOVERNMENT - ORIGIN
AL (94) 400,000 CUSTs - REVISED (97)
1.200.000 CUSTs - TELKOMSEL 4.000.000 CUSTs
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HOW SHOULD THE GAME BE PLAYED ?
INTERCONNECT SHOULD BE TREATED AS SERVICE
SERVICE
BUYER (BULK PURCHASE)
SUPPLIER (BIG STOCKS)
THE PLAYERS PSTN OPERATOR NEW ENTRANCES
WHOLESALE TREATMENT
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SERVICE SHOULD APPLY RIGHT RESPONSIBILITY
DEAL COMMON BUSINESS PRACTICE
INTERCONNECT SHOULD BE TREATED AS SERVICE
BUYER (NEW ENTRANCE)
SUPPLIER (PSTN OPERATOR)
SERVICE DELIVERY
QUALITY/ RELIABILITY CAPACITY PRICE AVAIL
ABILITY
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4 MAIN REASONS TO BUILD OWN OVERLAY
NETWORK COMMON BUSINESS PRACTICE
OWN OVERLAY NETWORK IS JUST LIKE A COMMON
INVESTMENT WHICH REQUIRES HUGE FINANCE
COSTS OPERATION MAINTENANCE HEADACHE
OTHER NETWORK
OWN OVERLAY NETWORK
1. QUALITY/ RELIABILITY 2. CAPACITY 3. PRICE 4. A
VAILABILITY
IF THE SERVICE IS NOT SATISFACTORILY DELIVERED
, IT WILL ENCOURAGE THE DEVELOPMENT OF EXCLUSIVE
OVERLAY NETWORK WHICH BECOMES IN FACT, A LONG
DISTANCE OPERATOR
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INTERCONNECTION NEED A PRICE INDONESIA'S
SITUATION INTERIM SOLUTION
REVENUE SHARING IS APPLIED AS EACH PARTIES ARE
NOT ABLE TO DETERMINE THE PRICE OF EACH
INTERCONNECT BUILDING BLOCK
PSTN
CELLULAR
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REVENUE SHARING DOES NOT INCORPORATE ALL SERVICE
ASPECTS
X
X
Mobile operator is eligible for 15 of long
distance tariff
ALL KIND OF VALUE ADDED SERVICES AND PREMIUM
MAKE REVENUE SHARING EVEN MORE DIFFICULT REVENUE
SHARING IS APPLIED ON USAGE CHARGES NOT ON
DELIVERED ADDED VALUE
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INTERCONNECT ARRANGEMENT ? MOBILE-PSTN
PHYSICAL POINT OF INTERCONNECT
USER TARIFF BASIS
COST BASIS
VIRTUAL POINT OF INTERCONNECT
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HOW TO MEET THE GOAL INTERCONNECT PRICE
BASIS USER TARIFF RETAIL

BASIS COST BASIS (ADDED VALUE) COMPONENT OF
BUILDING BLOCK WHOLESALE
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INTERCONNECTION ENVIRONMENT
Australia Finland Japan New
Zealand UK US Negotiated/Determined N/D N
D N N/D D Tariff/Cost based C T C/T T
C/T C Historic/Current cost H - H - H H
Marginal/Fully allocated costs M - F - F F
Actual/Model costs A - A - A A Return
on capital allowed () 16.80 - 5 - 15 11.25
Source Interconnect, Ovum, London, 1994
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CONCLUSION HOW TO COME TO WIN - WIN
SITUATION

• STEP 1. The connecting parties should see each
  other as customer and supplier
• gt PROVIDING BEST SERVICE
• STEP 2. The network development plan of each
  parties should be well coordinated
• gt TO ENSURE DELIVERY
• STEP 3. The regulator must set clear rule of the
  game and play as referee
• gt TO SUPPORT EQUAL TREATMENT
• STEP 4. The interconnect building block of the
  service must be priced
• gt COST ALLOCATION

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T E L K O M S E L I N D O N E S I A
THANK YOU ... for your attention TELKOMSEL Land
mark Center Bld. Tower A, 19th Fl. Jl. Jend.
Sudirman No. 1 Jakarta 12910 - Indonesia Tel.
62-21 5200811, 5272930 Fax. [phone],
5711324 kartuHALO 62-811100908
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TELEKOMUNIKASI SELULAR INDONESIA