Alternatives to an Inefficient International Telephony. Settlement System

Transcription

1 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem Alterntve to n Ineffent Interntonl Telephony Settlement Sytem Koj Domon Shool of Sol Sene Wed Unverty -6- Nh-Wed Shnjuku-ku Tokyo JAPAN Tel/Fx: E-ml: domon@mn.wed..jp Omu Okoh Fulty of Eonom Hrohm Unverty - Kgmym home Hgh-Hrohm JAPAN Tel: Fx: E-ml: okoh@p.hrohm-u..jp Otober 00 Abtrt: Conernng ettlement for network e provon n nterntonl teleommunton between developed nd le developed ountre there onflt reultng from dfferene n demnd nd ot funton. We hll onder two lterntve to the urrent ettlement ytem termed the nterntonl ountng rte ytem: non-reprol ymmetr ountng rte ytem nd voluntry ountng rte heme. Frt we how by multon how the frt ytem work when the ot dfferene gret nd the demnd dfferene mll nd tht ontrrly when the demnd dfferene gret how the urrent ytem effetve no mtter wht the ot dfferene. Next we demontrte how the voluntry ubdy heme more workble thn the urrent ytem. Key Word: Ae Prng; Aountng rte; Interntonl Teleommunton JEL Clfton number: L5; L3; L96

2 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem. Introduton Interntonl teleommunton rrer hve negotted for n nteronneton ettlement ytem ne they begn upplyng erve. Sne they do not or nnot hve ther own network n foregn ountre nterntonl nteronneton re neery. The nteronneton ettlement ytem tht h developed n uh tuton lled the nterntonl ountng rte ytem relyng on reprol e prng whh n need of overhulng. Sne the begnnng of the 990 the US Federl Communton Common FCC h ponted out the hortomng reultng from n mblne of trff between developed ountre nd le developed ountre. Aymmetr tuton ued by dfferene n demnd nd ot funton undermene the ytem. Hkm nd Lu 993 nd Domon nd Kyono 999 foued on nly under reprol ountng rte ytem. Cve nd Donnelly 996 ondered the non-reprol ountng rte ytem by ung Nh brgnng model. Frj nd Vlbone 00 ompred the reprol to the non-reprol ountng rte ytem nd onluded tht the reprol one w better. In the rel world between the Interntonl Teleommunton Unon ITU nd the FCC t h been debted to how to reve the ytem. They foued on the level of the trget reprol ountng rte below whh ountre wth vrou teledenty hd to operte. 3 Whle polymker onderton hve been bed on the reprol ytem nd foued on remede under tht there nother opton: 4 non-reprol ymmetr ountng rte ondered by Cve nd Donnelly 996 nd Frj nd Vlbone 00. In mple model we mke t ler tht non-reprol rte re more effent thn ymmetr one between developed nd le developed ountre only when ot dfferene lrge nd demnd dfferene mll whle n other e the urrent reprol one better hoe. We frt onder the effet of thee two dfferene reltng to developed nd le developed ountre. Then we llutrte wth mple model how the voluntry ountng rte heme ung the reprol ountng rte ytem preented by Domon nd Kyono 999 work more effently thn the urrent ytem. Th pper proeed follow: In Seton we et up lner model nd onder the The nterntonl ettlement ytem one of e prng ytem. For ummry nd generl onderton ee Armtrong 00 nd Lffont nd Trole 000. See Johnon 989/99 regrdng the FCC frt reton to trff mblne. In thoe dy no one envged the dffuon of the Internet whh now replng the publ wthed telephone network. 3 Regrdng ummry on reent movement of ITU ee Yoho 000 nd ITU homepge Tkng nto ount the beneft to le developed ountre ITU trget ountng rte re more moderte thn the FCC. Th reult from the ft tht ome porton of ettlement revenue from developed ountre hve been ued for ther domet nfrtruture nd ro-ubdzton. 4 See Melody 000.

3 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem non-reprol ountng rte ytem. In order to mke t ler to how ymmetry ffet effeny of ettlement ytem we mke ue of multon. In Seton 3 we llutrte n lner model how the voluntry ubdy heme work. In the fnl eton we ummrze the outome preented n th pper.. Reprol v. Non-reprol Aountng Rte We ume the followng demnd nd ot funton of developed ountry ndted DC nd developng ountry ndted LDC: p β = = ; β > 0 C = C = > 0 where nd p repreent repetvely the mount nd the pre of n nterntonl teleommunton erve. To tke nto ount tul tuton we ume > < = = ε. ε > 3 In th model ε vrble repreentng the level of ymmetry. An verge nd mrgnl ot for le developed ountre hgher thn tht of developed ountre. Inree of ε men expnon of the ot dfferene. Proft funton exept for nterntonl ettlement re defned follow: = p = p 4 nd the jont proft funton =. We frt obtn oluton under the reprol ountng rte ytem. Proft funton nludng ettlement defned follow: j =. j = ; j 5 Nh eulbrum gven = β = ε β. 6 3

4 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem The optml ountng rte mxmzng jont proft ε * =. 7 Th rte mot effent 5 but we uppoe tht th not obtnble n negotton ne the lowet level determned by n tul negotton =. 6 We ume the rte n the followng multon. 7 We next obtn oluton under the non-reprol ountng rte ytem. Eh ountry deploy Nh ompetton under the followng modfed welfre funton: j j ˆ =. j = ; j 8 Nh eulbrum gven ˆ = β ˆ = β 9 nd the ub-gme perfet Nh eulbrum obtned follow: ˆ ε = ˆ = ε. 0 We demontrte how effeny depend on ymmetr ftor. We ue two numerl exmple 8 expreng tuton n DL nd LDC. The frt one = 0 = 0 β = nd = where demnd dfferene mll. The eond one hnge = 0 to = 40 nd expree lrge demnd dfferene. In the numerl exmple we n obtn effet of ot dfferene on the level of effeny of the two ytem. The ot dfferene prmeter ε mut 5 The frt-bet ountng rte for both rrer nd polymker n n ymmetr e obtnble under the non-reprol ountng rte ytem nd the level of the rte eul to mrgnl ot for provdng n e erve. 6 Polymker often menton ot-orented or ot-bed rte. Gven the reprol ountng rte ytem nd the ot dfferene thee rte re evluted n relton to le developed ountry ot. 7 For n urte theoretl onderton we n mke ue of Nh brgnng oluton. The oluton depend on thred pont whh re gven outde the model. It eem tht thee pont nd ymmetr ftor brng bout the ft:. 8 Generl ompron of reult between two dfferent model dffult. Therefore t helpful to 4

5 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem vry under the ontrnt of mrgnl ot nludng n e ot le thn potve proft. Tht the upper level ε = 3. nd wth Πε Λε ε * Πε nd Λ ε repreent repetvely ε nd ˆ ε. Fgure : = 0 = 0 ε Πε Λε ε Fgure : = 40 = 0 3 In Fgure the ε expree the rtl level of ymmetry n n verge ot = mrgnl ot. Beyond ε the ymmetr ountng rte ytem nnot be more effent thn the ymmetr one. It explned follow: The dfferene between prvte nd globl optml rte exmne them by ung multon bed on rel tuton. 5

6 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem of DC nd LDC expnd the ymmetry nree wth the reprol ountng rte determned between thee rte. Th reult n devlung of the reprol ountng rte ytem. Beyond ertn rtl level of the ymmetry the lo from tht ytem beome greter thn tht under the non-reprol one under whh ountng rte re monopoltlly determned by eh ountry. 9 Wht doe th multon mply? We note tht n tul negotton n ountng rte hgher thn determned beue t bove mrgnl ot of LDC. Th men tht the rtl level of ymmetry beome mller thn we umed. Therefore n rel tuton the re n whh the non-reprol ountng rte ytem effetve beome lrger. Compred to Fgure we ume lrger demnd dfferene between LDC nd DC n Fgure. It noteble tht the reprol ountng rte ytem preferred n ll rnge of ot ymmetry whh ugget tht demnd dfferene gretly ffet the uperorty of the ytem. Although not llutrted t turn out tht ε nree long wth the demnd dfferene. Fgure how u one reon why the reprol ytem h perted n pte of ot dfferene. To judge effeny of ettlement ytem demnd dfferene re mportnt ot dfferene. 3. A Voluntry Subdy Sheme The prevou eton explned how the urrent ettlement ytem ble to urvve f demnd dfferene onderbly hgh tkng ple between DC nd LDC. However re there ny ytem mprovng the eonom welfre of eh ountry? In th eton we demontrte how the voluntry ubdy heme degned n generl model by Domon nd Kyono 999 work wth the mple model utlzed n the prevou eton. The heme eer to mplement ne eh DC nd LDC rrer h trtegy tht n be determned ordng to t own nteret. After greeng to mplementton of the ubdy heme there no need to negotte. The heme repreented the followng gme. The totl mount of the ubdy from the DC to LDC S =. Here ubdy to unt deree from the urrent ountng rte level. In the frt tge of the gme the DC rrer determne the level of. In the eond tge the LDC rrer determne the level of. In the thrd tge eh rrer determne the untty of n nterntonl teleommunton erve gven the other ountry untty. The ub-gme perfet Nh eulbrum of th gme obtned follow ee Appendx: 9 When the objetve funton we mxmze beome eonom welfre funton we obtn mlr property of the model. 6

7 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem * = 3 * = * = 4β 4β * =. 4β In th gme the urrent ountng rte level gven nd the mot onevble e tht mn between nd mx whh mxmze repetvely proft of DC nd LDC rrer mn = mx =. nd n prtulr. The reultnt outome from th heme re follow: Remrk : The DC rrer h n nentve to dopt the ubdy heme f nd the LDC rrer lwy h n nentve whtever. Proof. See Appendx. Even f rrer proft nree under the ubdy heme t not n pproprte heme from polymker pont of vew when the ol welfre of ether ountry deree by mplementng t. However uh problem doe not ext n the ubdy heme. Before ompron of ol welfre onumer urplu heked follow: Remrk : Conumer urplu of both ountre under the ubdy heme greter thn tht under the urrent ountng rte ytem f. Proof. See Appendx. From Remrk nd Remrk the followng propoton obtned: Remrk 3: Sol welfre of both ountre under the ubdy heme greter thn tht under the urrent ountng rte ytem f. Thee ugget tht both rrer nd polymker hve nentve to mplement the ubdy heme wthout domet onflt between them. Thee outome re ttrtve. An obtle the feelng of DC polymker to why they ubdze LDC rrer whle hnderng hevement of ot-orented nd ot-bed ountng rte. If they undertnd the mportne of trteg behvor nd nentve omptblty then the heme beome ttrtve to them. 7

8 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem 4. Conludng Remrk In th pper we took two-tep pproh n exmnng the urrent ountng rte ytem. The frt tep w to expln why the ytem h urvved n pte of t hortomng. Wthout nterntonl polymker eh rrer or ountry nnot be regulted n order to mxmze globl welfre. Tkng ount of th ft we onluded tht when demnd dfferene lrge tht ourrng between DC nd LDC the urrent ymmetr ountng rte ytem more effent thn n non-reprol one lthough t n led to globlly frt-bet oluton when nterntonl polymker ext. The eond tep w to onder remedy bed on the urrent ytem: voluntry ubdy heme. The mple nd nentve omptble heme turned out to be promng lterntve. We hould menton the reent trend of nterntonl telephony. The mot trkng one IP Internet Protool telephony. 0 Wth no onept of ntonl border on the Internet voe nd dt whh hd been rred on the publ wthed telephone network but now n be rred through pket wthed network owned by ISP wll drtlly nree. Although t urrently tkng ple mnly mong DC t wll eventully pred to other ountre. The eond bout how muh we need to repr the urrent ytem tht ddtonl regultory ot. When we employ the voluntry ubdy heme the ot mut not exeed beneft from t mplementton. Tht poblty hgh when demnd dfferene lrge between le developed ountry nd the US. The le developed ountre need money for domet teleommunton whh ubde from developed ountre n ontrbute to well mprovng effeny. Fnlly we refer to the poblty of non-reprol ountng rte or termnl fee. The mot mportnt thng when onderng them whether eh ountry polymker n beome oopertve. Certnly the ITU help them ooperte but t very lmted. If they fl n ooperton the reultnt outome ould be wore thn t preent n prtulr between le developed nd developed ountre. 0 See ITU New 00. 8

9 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem 9 Aknowledgement Th pper h been prtly upported by Wed Unverty Grnt for Spel Reerh Projet 00A-4 Appendx Clulton of SPNE. Proft funton under the ubdy heme re defned follow: = β = β. Nh eulbrum t the thrd tge 6. At the eond tge the LDC rrer mxmze wth repet to nd the oluton β ' =. At the frt tge the developed ountry rrer mxmze ' wth repet to nd the oluton β 4 * =. By nertng * nto ' * obtned. And by nertng * nto * obtned. Proof of Remrk. When n ountng rte gven Nh eulbrum under the urrent ountng rte ytem re obtned 6. Proft under the urrent ountng rte ytem n be denoted j. Therefore ondton for ndvdul rtonlty re obtned follow: { } * * * * = 0 mn > > 0 * * * * =. Q. E. D.

10 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem Proof of Remrk. If * = 4β 0. Therefore the erve untty under the ubdy heme n both ountre greter thn tht under the preent ountng rte ytem. Th men tht onumer urplu beome greter by mplementng the ubdy heme. Q. E. D. 0

11 Alterntve to n Ineffent Interntonl Telephony Settlement Sytem Referene Armtrong M. 00. The Theory of Ae Prng nd Interonneton forthomng n the Hndbook of Teleommunton Eonom North-Hollnd ed. by Cve M. Mjumdr S. nd Vogelng I. Cve M. nd Donnelly M. P The Prng of nterntonl Teleommunton Serve by Monopoly Opertor. Informton Eonom nd Poly 8:07-3. Domon K. nd K. Kyono 999. A Voluntry Subdy Sheme for Aountng Rte Sytem n Interntonl Teleommunton Indutre Journl of Regultory Eonom Frj G. D. nd Vlbone P. 00. Revenue Shrng Rule for Interntonl Telephony Journl of Regultory Eonom Hkm S. M. nd Lu D Monopolt Settlement Agreement n Interntonl teleommunton. Informton Eonom nd Poly 5: ITU New 00. Informton Seon on IP telephony -4. Johnon L. L. 989/9. Delng wth Monopoly n Interntonl Telephone Serve: A U. S. Perpetve. Informton Eonom nd Poly 4: Lffont J. J. nd Trole J Competton n Teleommunton MIT Pre. Melody W. H Teleom Myth: the Interntonl Revenue Settlement Subdy Teleommunton Poly 4: 5-6. Yoho U Movng beyond Interntonl Aountng Rte Teleommunton Poly 4: 5-8.