Interconnection and Roaming. Interconnection Business interfaces in Internet

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Interconnection and Roaming S-38.041 Networking Business Slide 1 Interconnection Business interfaces in Internet Access ISP Transit ISP 9 4 Peering point/bilateral agreements (Network Access Point, NAP) 5 1 3 Direct peering connection 6 2 7 8 Business interfaces are technically managed via accouncements and withdrawals of destination routes (e.g. Border Gateway Protocol) Two types of agreement bilateral non-transitive peering traffic exchanged without payment transitive transit traffic involving charging (typically per volume) In addition to matchmaker, NAP may also become a bandwidth broker Optimal business choice between peering and transit? Source: Courcoubetis, Weber, 2003 Slide 2 1

Interconnection Charging schemes Calling-party s network pays (CPNP) calling operator pays to called operator for call termination (e.g. telephony) terminating operator is a de-facto monopolist high termination charges lock-in creates an opportunity for disruptive technologies such as IP telephony Sender Keep All (SKA, Bill-and-keep) appears as peering agreements in Internet network effect discouraging to big operators cost sharing e.g. facility-based interconnection cost charging equal customer prices Revenue sharing typically new entrant pays to incumbent (e.g. content provider to operator) simple but potentially anti-competitive Interconnect charges based on retail prices retail prices sometimes used as reference for inter-operator discounts sometimes enforced by regulator Source: Courcoubetis, Weber, 2003 Slide 3 Interconnection Case Finland, April 2004 Impact of regulator s threat (significant market power identification for mobile operators) on termination prices for mobile-to-mobile circuit-switched calls Sonera Mobile 9c/min (earlier 12,78c/min) Elisa Mobile 10c/min (earlier 13,12c/min) Finnet/DNA 11c/min National ISP interconnection is handled via FICIX Non-profit organization (membership and port fees only) Two member classes: full (no peering), supporting (peering needed) Slide 4 2

Roaming Financials Revenue Forecast Roaming is currently c. 2% of mobile operator s traffic c. 10-20% of mobile operator s revenue Slide 5 Roaming Financials Revenue and cost break-down - Generic CDMA operator Source: International Roaming Business Overview: Qualcomm Note: most revenue is from outbound traffic Note: margins are high Note: trust is a key issue (ref. 5% bad debt) Slide 6 3

GPRS Roaming Technical Architecture - Bilateral Source: Renjish Kaleelatzicathu, 2004 Slide 7 GPRS Roaming Technical Architecture Single GRX Slide 8 4

GPRS Roaming Technical Architecture Multiple GRXs Slide 9 GPRS Roaming Business Interfaces between Players IOT Volume Clearing House (optional) Home Network GRX Operator 1 GRX Operator 2 Visited Network Monthly and volume charges Free exchange Roaming charges Volume Monthly and volume charges Bilateral roaming agreements between GPRS operators Settlement of inter-operator tariffs (IOT) via clearing houses Transport agreements via GPRS roaming exchange (GRX) operators Source: Renjish Kaleelatzicathu, 2004 Slide 10 5

GPRS Roaming Business Model Scenarios: Bilateral, Clustered, Centralized Triggers\Models Bilateral Clustered Centralized Number of contracts High Medium Low Complexity of single High High Low? Management structure Distributed Centralized Centralized Vertical bundling Yes Yes Global No? Control of standards spec GSM MoU Operator Non-commercial Competition in roaming No Yes No Price regulations No No Yes? Cost per operator High Medium Low Profit opportunity Medium High Low Bilateral model has dominated so far Clustered model develops together with global operators Centralized model may emerge from regulatory needs Slide 11 WLAN Roaming System Architecture using RADIUS ISP DB User DB User DB Authentication based on RADIUS protocol (DIAMETER) WLAN charging and settlement handled by Clearing House Slide 12 6

WLAN Roaming Public Hotspots Globally per Location 2001 2002 2003 2004 2005 2006 2007 Airports 75 200 400 500 600 650 700 Hotels 520 2,500 9,000 20,000 30,000 40,000 45,000 Retail outlets 320 12,000 44,000 60,000 75,000 85,000 90,000 Enterprise Guesting Areas 84 600 1,000 4,000 5,000 6,000 8,000 Transportation (trains, planes) 100 600 2,000 14,000 23,000 30,000 Community Hotspots 1 300 3,000 5,000 8,000 9,000 12,000 Others 300 1,000 1,500 2,400 3,350 4,300 Total number of hotspots 1,000 16,000 59,000 93,000 135,000 167,000 190,000 Source: Gartner Note: status per 01-Jul-2003 estimated at 10,000 of which 12,000 in South Korea Slide 13 WLAN Roaming Public Hotspots per Region # of Hot Spots 2001 2002 2003 2004 2005 2006 2007 Europe 50 1,000 5,000 9,400 17,700 24,000 28,200 Americas 750 4,000 18,000 30,000 45,000 55,000 62,000 Far-East 100 10,500 25,000 51,500 69,000 83,000 93,000 ROW 500 1,000 2,100 3,300 5,000 6,800 Total 900 16,000 49,000 93,000 135,000 167,000 190,000 Growth Total 1678% 206% 90% 45% 24% 14% Growth Europe 1900% 400% 88% 88% 36% 18% Source: IDC + various other sources Note: Europe is catching up this year Slide 14 7

WLAN vs. GPRS Roaming GPRS roaming being deployed based on home-network routing (cmp. GSM) WLAN roaming being deployed based on visited network routing (direct local acces to Internet) strong trust required between operators Roll-out of WLAN in handsets is likely to increase the use of SIM/HLR authentication for roaming GRX enables end-to-end quality of service (QoS) control MMS uses GRX for both interconnect and roaming traffic Voice-over-IP on public WLAN could use GRX for QoS Slide 15 Roaming Agreements Case: Sonera in April 2004 International roaming coverage GSM in c. 100 countries (c. 220 operators) GPRS in c. 50 countries (c. 90 operators) WLAN (GSM Association IR.61) in 16 countries (3500 hotspots) Sonera GRX service connects e.g. all Finnish mobile operators to each others and to foreign networks Sonera builds own public WLAN coverage in Finland no national WLAN roaming agreements so far Unified roaming tariffs announced within Europe (11 countries, GSM voice call 0.95e/min) Slide 16 8