bordeaux, december 12, 2005 halldor matthias sigurdsson ( [email protected] )
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The Cost of Universal Service Obligations in PSTN and VoIP For further information: www.viskan.net. Bordeaux, December 12, 2005 Halldor Matthias Sigurdsson ( [email protected] ). Research Interest. In this paper: Analysing the current Universal Service Legislation - PowerPoint PPT PresentationTRANSCRIPT
Center for Information and Communication Technologies
The Cost of Universal Service Obligations in PSTN and VoIP
For further information: www.viskan.net
Bordeaux, December 12, 2005Bordeaux, December 12, 2005
Halldor Matthias Sigurdsson ([email protected])
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 2
Research Interest
Next Steps:
Is broadband becoming a commodity which everyone should be entitled to? Should Universal Service Obligations be extended to include broadband? Which methods exist to ensure widespread broadband? What is the cost?
In this paper:
Analysing the current Universal Service Legislation
How does the transformation from PSTN to VoIP affect current or future USO
Estimate the cost and extent of Universal Service Obligations in PSTN
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 3
Context
Techno-Economic Studies
BREADhttp://www.ist-bread.org
ECOSYShttp://www.celtic-initiative.org/Projects/ECOSYS/default.asp
TONIChttp://www-nrc.nokia.com/tonic/
TETRAhttp://www.telenor.no/fou/prosjekter/tera/
Economic Theory
Laffont and Tirole, 2000Competition in Telecommunication
Bijl and Peitz, 2002Regulation and Entry into Telecommunications Markets
M.Cave et al., 2002Chapter 10, Handbook of Telecommunications Economics
Extending Universal Service
P.Xavier, 2003Should Broadband be part of universal service obligations
García-Murillo and Mckninght,2005Internet Telephony: Effects on the Universal Service Program in the United States
Center for Information andCommunication Technologies
Danish Technical University
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 4
Paper Structure
PSTN Structure– Cost Components– PSTN in rural areas
VoIP Structure– Cost Components– PSTN in rural areas
Universal Service– Universal Service Obligations– Universal Service Fund
Case Study: Iceland– Cost simulation model– Cost of USO in Iceland
Paper is available on-line at: www.viskan.net/phd/publications.php
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 5
Universal Service
Universal Service– Availability, Accessibility and Affordability– Currently only basic voice telephony– Implemented differently by each member state– Defined in EU’s New Regulatory Framework from 2002
Universal Service Obligation– Burden, usually put upon incumbent operator
Universal Service Fund– Compensation for fulfilling USO– Different approaches: UK and US
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The Cost of Universal Service Oblications Page 6
VoIP & Universal Service
Literature suggest– Redistribution through taxation rather than subsidies
[Laffont and Tirole, 2002]
– Inefficiency of USF ($1 raised costs $1.8)– [Laffont and Tirole, 2002]
Effect of VoIP on USF– García-Murillo and Mckninght simulate that contributions to the fund be reduced by 45% in the
next 15 years, if VoIP operators are exempted for contributions to the Universal Service Fund– If VoIP operators are demanded to contribute to the Universal Service Fund, contributions will
increase. But this is not enough to meet the increasing demands for its services
Extenstion of Universal Service– Xavier and now EU concludes that there is no need to introduce new legal requirements for
mobile and high-speed internet services under the EU's universal service rules at the moment.
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The Cost of Universal Service Oblications Page 7
PSTN
Public Switched Telephone Network
Local LoopRemote Subscriber StagesLocal and Transit ExchangesTransmission SystemControl and signalling systemSwitching system
Internal ServicesHousingSwitching
Transmission
12%
20%
46%
18%
Cost
Com
ponents
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 8
VoIP
Voice over IP
Softswitch / Gateway
CPE Customer Premises Equipment
ATA- An Analogue Termination Adapter
The InternetATA ATA
Internet
CPE
SoftswitchGateway CPE
PSTN
12%
20%
46%
18%
Internal ServicesHousingSwitching
Transmission
Cost
Com
ponents
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 9
Comparing the two
Overlay ServiceUses the InternetBroadband = Urban Service10 % Penetration
ATA ATA
Internet
CPE
SoftswitchGateway CPE
PSTN
Infrastructure ServiceCostly TransmissionUSO = Rural Service90% Penetration12%
20%
46%
18%
12%
20%
46%
18%
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 10
The Case - Iceland
Facts:
Inhabitants: 280.000 Arial: 103.000 km2
70% in capital 92% in towns 2,5 Gb/s fibre ring connecting all
towns
Status:
Not a EU member Member of EEA High broadband penetration 128 Kb/s minimum enjoyed by
all (apart from 72 farms)
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 11
Hypothesis
No. of users pr. location
Co
st p
r. u
ser
Reference Level
Cost of remote structures and operation is distributed
but related to customer number
The Cost of USO can be calculated and
aggregated
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 12
Actual Cost
Remote Structures and Operation< 500 customers
R2 = 0,7734
0
5
10
15
20
25
30
35
0 50 100 150 200 250 300 350 400 450 500
Th
ou
san
ds
Number of Customers
Co
st p
r. C
ust
om
er
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 13
Approach
Pareto Analysis of Total Cost of Operation for Iceland Telecom (the incumbent) for 2002
Chapter 4Problem Analysis
User
User Interface
Program
Algorithms for Optimisation
CORE
Microsoft Excel
VBA ENGINE
Subroutines for constructing reports
Distance Database Feasibilitycalculations
Spreadsheet
Badwidthallocation
Spreadsheet
Operationalcost calculations
Spreadsheet Spreadsheet
Database / Spreadsheets
User
User Interface
Program
Algorithms for Optimisation
CORE
Microsoft Excel
VBA ENGINE
Subroutines for constructing reports
Distance Database Feasibilitycalculations
Spreadsheet
Badwidthallocation
Spreadsheet
Operationalcost calculations
Spreadsheet Spreadsheet
Database / Spreadsheets
User
User Interface
Program
Algorithms for Optimisation
CORE
Microsoft Excel
VBA ENGINE
Subroutines for constructing reports
Distance DatabaseDistance Database FeasibilitycalculationsFeasibility
calculations
Spreadsheet
Badwidthallocation
Spreadsheet
BadwidthallocationBadwidthallocation
Spreadsheet
Operationalcost calculations
Spreadsheet
Operationalcost calculations
Operationalcost calculations
Spreadsheet Spreadsheet
Database / Spreadsheets
VBA Model for cost components that can be
calculated
Remote Structure and Operation< 500 customers
R2 = 0,5526
0
500
1.000
1.500
2.000
2.500
0 50 100 150 200 250 300 350 400 450 500
Th
ou
san
ds
Number of Customers
To
tal
Co
st p
r. l
oca
tio
n
Regression Analysis for fixed cost components
1 2 3
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 14
The Cost of USO
Remote Structures and Operation< 500 customers
R2 = 0,7734
0
5
10
15
20
25
30
35
0 50 100 150 200 250 300 350 400 450 500
Th
ou
san
ds
Number of Customers
Co
st p
r. C
ust
om
er
Remote Structure and Operation< 500 customers
R2 = 0,5526
0
500
1.000
1.500
2.000
2.500
0 50 100 150 200 250 300 350 400 450 500
Th
ou
san
ds
Number of Customers
To
tal
Co
st p
r. l
oca
tio
n
Level of Urbanisation
0
10.000
20.000
30.000
40.000
50.000
60.000
70.000
City Town Rural
Acc
um
ula
ted
nu
mb
er o
f cu
sto
mer
s w
ith
in g
rou
p
0
10
20
30
40
50
60
70
80
90
100
Acc
um
ula
ted
nu
mb
er o
f te
rmin
atio
n p
oin
ts w
ith
in g
rou
pCustomers
Termination Points
Population Sparcity
0
20000
40000
60000
80000
100000
120000
140000
160000
100 200 300 400 500 600 700 800
Distance from Capital [Km]
Acc
um
ula
ted
nu
mb
er o
f cu
ost
mer
s w
ith
in g
rou
p
0
10
20
30
40
50
60
Acc
um
ula
ted
nu
mb
er o
f te
rmin
atio
n p
oin
ts
customers
Number of RSS
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 15
Conclusion
VoIP is a disruptive technology, has different cost structures and greatly reduces barrier to entry
Difference between PSTN and VoIP– Infrastructure vs. Overlay– Costly transmission vs. Internet– Rural vs. Urban– 90% penetration vs. 10%
1,5% of customers require 33% of all locations
Loss of € 199 pr. non-profitable users requires € 2,96 subsidy pr. PSTN user
Center for Information and Communication Technologies
The Cost of Universal Service Oblications Page 16
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