Liberalisation and regulation in the telecommunication sector: Theory and empirical evidence

1. Liberalisation and regulation in the telecommunication sector: Theory and empirical evidence Week 5 Universal Service Obligation

2. Overview of presentation • History of USO. • Which Services. • How is Supported. • What is the Cost of providing USO? • Non profitable areas, users, booths. • The next genaration services and USO. • What next? Β. Μerekoylias

3. History • USO and Competition • The first use of the term Universal Service:‘One system, one policy, universal service’ (Theodore Vail, President, AT&T) • Universal Access Β. Μerekoylias

4. Which services? • Basic POTS • Basic Telephony with standard quality • Free access to emergencies • Catalog services • Card and coin phones • Operator assistance • Reasonable prices • One price list for the entire country • Soft disconnection • Special prices for low usage users • Services for special groups • Special devices for such groups • Special Telephone booths Β. Μerekoylias

5. How is USO supported? • Pay or Play • Balance between extended and basic services • Information Society throughout the country vs. high cost/price Β. Μerekoylias

6. Basic USO Properties • Dynamic concept changing as services extend • Indexes needed for the level of services Β. Μerekoylias

7. USO Cost • USO Cost = Cost of services – Non financial benefits (advertisement, brand name etc.) • Cost of services = Financial benefits – Long run avoidable cost • Non financial benefits • Brand name recognition, reputation • Access to usage data and customers habits • Customer cycle (a non profitable turns to profitable) • Economies of scale Β. Μerekoylias

8. Methodology for recognition of non profitable areas • Classes/Zones of areas based on density • Modeling of a typical customer access line for each area based on: • Mean length of the local loop (“Last mile”) • Type of cables, technologies used • Demographical data • Equipment used for different types of landscape and density Β. Μerekoylias

9. Methodology for recognition of non profitable areas • Network usage cost for each class • Financial benefits for each area for: • Monthly rental • Network usage • Net cost calculation for each class • Adjustment for non financial benefits • Non profitable areas recognition Β. Μerekoylias

10. Methodology for recognition of non profitable users • No data available to model non profitable users in a profitable area. • Calculation based on a rule of thumb Β. Μerekoylias

11. Non profitable telephone booths • Similar methodology with the non profitable areas • Data needed: • Investment cost • Usage statistics for the telephone booths • Operating cost Β. Μerekoylias

12. IP traffic – market structure – network provisioning • IP traffic and multiplexing. Gain as the number of users/customers increase. • Multiplexing and the structure of the market • Vertical Market. • Small number of big ISPs. • Provisioning of services in small cities is unprofitable Β. Μerekoylias

13. Market size, need for aggregation • On – off 1% duty time (max = 100 x average) • No Buffering or 100ms buffering Sources 100 – peak 8,4Mbps – utilization 12% Sources 100 – peak 4,4Mbps – utilization 23% Sources 1000 – peak 30Mbs – utilization 33% Sources 1000 – peak 17Mbs – utilization 59% Sources 10000 – peak 170Mbps – utilization 59% Sources 10000 – peak 120Mbps – utilization 83% • Effective provsioning > 5000 customers (20% on-line) Β. Μerekoylias

14. ISPs Market today • Big number of ISPs • Provisioning to isolated areas, small cities. • Dial-up users => max 56kbps • On – off 30% duty time (max = 3,3 x average) Sources 700 – peal 8,7Mbps – utilization 80% • !!Provisioning is profitable for a small number of customers!! • Income for the ISPs from the regulatory framework. Β. Μerekoylias

15. Introducing xDSL • Access bottleneck removed. The customer – user can have an average of 50kbps with 1Mbps peak (1/20) • New customes. Allways-on, p2p. • How does p2p traffic look like? • Q1 2002 51% of the abilene traffic + 18% unidentified of a total of 157,6Tbytes/week • 60% for the NRNs • Today (2003) 13,82% p2p + 44% unidentified of a total of 271Tbytes/week (new apps, hide p2p apps) • P2P Signaling traffic is NOT Self Similar (good news) Β. Μerekoylias

16. xDSL – Market Structure • 2000 concurrent xDSL users (~10000 customers) for effective provisioning!!!! • Is it possible to provide services in small communities? • Vertical market. • Regulation is needed!!! Where is the Interconnection of xDSL Access with the ISPs taking place? • Cost of national core networks is critical for competition. Β. Μerekoylias

17. What’s next? • Need to understand the traffic characteristics of p2p networks (not only signalling but file transfers too). • A model to calculate the number of customers for effective provisioning. • Scenarios for the interconnection points, cost of core network, regulation initiatives. • Municipality nets. Β. Μerekoylias