International Internet C onnectivity

1. International Internet Connectivity Internet Governance Forum Athens, Oct. 30 ~ Nov. 2, 2006 Kishik PARK / ETRI, Rep. of Korea Chairman, ITU-TStudy Group 3

2. Agenda • Current trends • The International Accounting Rate System • International Internet Connectivity (IIC) • Impact on Developing Countries • The Role of ITU

3. Telephone and Internet Users World, Millions Number of Telephone Users has more than quadrupled since 1990! • Fixed-line networks have more than doubled in size • Mobile phone networks have grown from 11 million users in 1990 to 2.2 billion in 2005 • Mobile phones overtook fixed lines during 2002 • Only 27 countries had a direct Internet connection in 1990; now all have one

4. Internet penetration, 2005 (Internet users per 100 inhabitants) 32.6 30.2 10.5 7.2 2.5 Americas Europe Asia-Pacific Arab States Africa Internet Penetration Trails in the Developing World Source: ITU World Telecommunication Indicators and World Telecommunication Regulatory Databases.

5. International Internet Bandwidth (1000 Mbps, end of 2004) Mbps Source: ITU World Telecommunication Indicators and World Telecommunication Regulatory Databases.

6. What are accounting and settlement rates? Collection charge The amount charged to the customer by the Public Telecommunication Operator (PTO) Accounting rate Internal price between PTOs for A jointly-provided service Settlement rate Payment from one PTO to another. Normally, half the accounting rate

7. What the accounting rate covers Country International Transmission Facility X International Switching Facility (Gateway) Call Termination

8. Traditional regime:Joint provision of service X X

9. Trade-based regime:Market entry and interconnection X X X

10. Accounting rates and international interconnection rates: What Differences?

11. Status of Accounting Rate System (ARS) Today: Alive, but not very well • Only 20% of international traffic today still uses the accounting rate system • Developing Country Developing Country • Developing Country Developed Country • No traffic between developed countries uses the ARS

12. What’s Wrong with this Picture?Developing Countries Now Pay $3 billion to Developed Countries Developing countries used to receive $5 billion in settlement payments

13. What happened? • Accounting rates became more cost-oriented as international traffic was opened to competition • Internet traffic from many developing countries to internet backbone providers not “eligible” for peering • Instead developing countries pay internet backbone providers full circuit • VoIP only last nail in the coffin

14. International internet connectivity completely different from ARS • Where traffic between ISPs is more or less balanced, “peering”, or sender keeps all is applied. Either no payments made or arrangements negotiated • Tier 1 ISPs in developed countries peer to exchange traffic • Where traffic between ISPs is unequal, initiating provider pays for the whole connection with the other country (full-circuit cost) • Many developing countries pay for the whole connection

15. ITU Efforts to Balance the Payments • ITU-T Study Group 3 Recommendation D. 50 calls for arrangements to be negotiated and agreed upon on acommercial basis when direct Internet links are established internationally. • It requires only that the two providers involved reach amutual agreement. It does not prescribe any particular formula or system, thus leaving to providers the freedom to determine the forms or methodologies to be used in implementing the principle. http://www.itu.int/rec/recommendation.asp?type=folders&lang=e&parent=T-REC-D.50

16. Not everyone agreed • Recommendation D.50 is voluntary, and suggests that parties involved take into account the possible need for compensation for elements such as traffic flow, number of routes, geographical coverage and the cost of international transmission among others when negotiating such commercial arrangements. • In addition, the WTSA agreed that while international Internet connections remain subject to commercial agreements between operating agencies, there is a need for on-going studies in this area.

17. Not everyone agreed(Cont’d) • The Chairman recalled that the decision made in Montreal provided a framework for future discussions and was therefore only the beginning of a process where issues would be further analyzed. • Two countries - the US and Greece - made reservations and stated that they would not apply it in their international charging arrangements.

18. Current System Hard on Many Developing Countries • ITU-T Study Group 3 has agreed that the high costs of the international circuitfor Internet connectivity between least developed countries and the Internet backbone networks remains a serious problem for these countries. • Solutions include efforts to facilitate the creation of traffic aggregation within localities, countries or within regions in developing countries in order to avoid sending this traffic over satellite or cable links used for intercontinental traffic, for example between Africa and Europe or North America. • This effort would aim to maximize the retention of local and national traffic within these regions and thus reduce the dependence on international communications links.

19. Solutions to IIC Problem for Developing Countries • Self-provide – a few countries have succeeded here, most developing countries can’t afford • Increase internet volume: • Promote competition • Drive demand through local content and low-cost internet access devices • Promote migration to all IP networks and NGN • Aggregate traffic through IXPs • Explore new avenues of negotiation

20. ITU Development Bureau (BDT) Issued a report on IXPs in 2004 Increasingly African countries are creating IXPs to keep local traffic local. In the absence of IXPs emails between African users often transit through Europe or North America, adding to costs http://www.itu.int/ITU-D/treg/publications/index.html

21. Thank you!

22. Average settlement rate is only 1/15th of what it was in 1998! It’s dropped by nearly 50% since 2001 Average settlement rates in Special Drawing Rights (SDRs): 1 SDR = $1.48 (September 2006)

23. 1'200 1'000 Data and other 800 600 Mobile 400 International fixed telephone 200 Domestic fixed telephone 0 1993 95 97 99 01 2003 Sources of telecom revenueWorldwide, in US$ billions Source: ITU World Telecom Indicators Database.

24. Growth of Competition, selected services Number of countries that permit competition in international services is twice as many as in 1997 Source: ITU Telecom Regulatory Database.

25. Level of Competition in Selected Services and Networks, World Source:ITU World Telecommunication Regulatory Database.