Assessing the Value of Roaming over Mobile Networks

1. Assessing the Value of Roaming over Mobile Networks K.R.Renjish Kumar, Heikki Hämmäinen { renjish@netlab.hut.fi ; heikki.hammainen@hut.fi } Networking Laboratory Helsinki University of Technology Finland Renjish Kumar/Heikki Hämmäinen

2. Outline • Introduction • Definitions • Value model • Impact analysis • Discussion • Conclusions Renjish Kumar/Heikki Hämmäinen

3. Introduction • Drivers for mobile roaming • A major source of revenue for mobile service operators. (15 to 25% in some cases) • Convergence of services over multiple access. Renjish Kumar/Heikki Hämmäinen

4. Content SP Clearing House MNO/SO Subscriber MVNO GRX SP Roaming value chain evolution • New players, additional value Renjish Kumar/Heikki Hämmäinen

5. Definitions • Mobile roaming: the ability of a subscriber A to reach or be reached by subscriber B.The value of fixed Internet is attributed to connectivity among networks, while roaming adds value to mobile communications. • Bilateral roaming model: an agreement between two operators. This model is currently widely seen in mobile industry. • Clustered roaming model: two or more operators form alliances or clusters. • Centralized roaming model:all the operators come under one single alliance that may be administered by a non-partisan authority. • Convergence: seamless service provisioning over multiple-access technologies Renjish Kumar/Heikki Hämmäinen

6. Subscribers Subscriber Plane Agreements Agreement Plane Transport, Services Technology Plane Key elements for roaming • Interoperability at the transport and service layers. • Triggers agreements • Results in increasing number of roaming subscribers. Renjish Kumar/Heikki Hämmäinen

7. Value Interoperability Inter-operator Agreements Population coverage Positive Feedback Mobile roaming dynamics Roaming leads to positive feedback Renjish Kumar/Heikki Hämmäinen

8. Assumptions • Every mobile network has the same number of roaming subscribers. • Every network supports the same average number of interoperable services. • A network is part of one and only one cluster. • Only one agreement is needed for an operator to be part of a cluster. • Members of a cluster can make one or more bilateral agreements with those not included in the cluster. • The roaming ARPU parameter (inbound and outbound) includes revenue from both mobile originated (MO) and mobile terminated (MT) services. • The transaction costs include CAPEX and OPEX. Renjish Kumar/Heikki Hämmäinen

9. Roaming parameters Renjish Kumar/Heikki Hämmäinen

10. Roaming Model • Value of roaming for a service operator, Vroam= Vin + Vout - Croam • For Nnet + 1 number of networks, • Value from inbound subscribers = Vin = (Nnet*Nin)(S*Ain) • Value from Outbound subscribers = Vout= Nout (S*Aout*Nnet) • Cost of roaming incurred by an operator = Croam = CT*Nagree*S Vroam = (Nnet*Nin)(S*Ain) + Nout (S*Aout*Nnet) - CT*Nagree*S Renjish Kumar/Heikki Hämmäinen

11. Impact Analysis • Case Bilateral: • Nnet = Nagree Vbilat = Nagree*S [(Nin*Ain + Nout *Aout) - CT] Condition for profitability: CT (Nin*Ain + Nout *Aout) Renjish Kumar/Heikki Hämmäinen

12. Impact Analysis • Case Clustered: • Nagree < Nnet • Ncagree = Nagree - mclust*1 Vclust = Nnet*S [Nin*Ain + Nout *Aout] - CT* S*Ncagree Condition for profitability: CT  (Nnet[Nin*Ain + Nout *Aout])/Ncagree where Ncagree > 0 Renjish Kumar/Heikki Hämmäinen

13. Impact Analysis • Case Centralized: • Nagree = 1 Vcentre = Nnet*S [Nin*Ain + Nout *Aout] - CT* S Renjish Kumar/Heikki Hämmäinen

14. Subscribers Subscribers Agreements Agreements Transport, Services Transport, Services Subscribers Agreements Transport, Services Value comparison Centralized Clustered Ccentre Cclust Cbilat 1  (Nagree – m*1)  Nagree Bilateral Renjish Kumar/Heikki Hämmäinen

15. Vbilat Bilateral -∆V3 +∆V1 -∆V2 Clustered Vclust Vcentre Centralised +∆V2 Value dynamics • BilateralClusteredCentralized (at Equilibrium) • Equilibrium conditions: • Convergence •  innovations at the application layer • Stabilisation of roaming technology •  lack of differentiation at the roaming layer Renjish Kumar/Heikki Hämmäinen

16. Discussion: Role of pricing • Roaming pricing models to get complicated with new mobile content services. • Adds complexity to C&B • Adds cost per service • Requirements for pricing: • Operator: Cost reduction, higher profitability • subscriber: lower price, lower complexity • Solution: • A simple roaming pricing model • How? • Clustered or centralised model • promotes a unified and standardized pricing Renjish Kumar/Heikki Hämmäinen

17. Discussion:Role of regulators • Clusters based on operators’ market power • creates significant market powers (SMPs) in roaming sector. • Assymetric roaming agreements among clusters • Higher switching cost for subscribers of SMPs. • Regulatory functions • Maintain competitiveness in the roaming market. • International cooperation among NRAs Renjish Kumar/Heikki Hämmäinen

18. Discussion: Inter-access technology roaming • Need for interoperability on the rise due to • packet-switched data services • convergence • Handsets with multiple access interfaces • Increases NnetIncreases roaming subscribersIncreases roaming ARPU Renjish Kumar/Heikki Hämmäinen

19. Conclusions • A simple roaming value model to understand the international roaming dynamics • the bilateral model (which is in majority now) will evolve in to a cluster-based model. • clusters to benefit from such alliances in: • reducing the roaming costs incurred • procuring mobile handsets at lower costs • standardisation in the area of services and pricing. • centralized roaming model will exist at equilibrium providing maximum value to an operator, subject to certain conditions. Renjish Kumar/Heikki Hämmäinen

20. Suggestions for operators • Increase the roaming population and area coverage • Increase interoperability of access/core technology and services • Increase the number of services offered • Reduce transaction and agreement costs by adopting a clustered or centralized model. • Adopt simple and uniform roaming pricing models. • Enable inter-access technology roaming by introducing multi-access mobile handsets. Renjish Kumar/Heikki Hämmäinen