Leased lines. Ewan Sutherland x.06, LINK Centre 1

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1 Leased lines Ewan Sutherland x.06, LINK Centre 1

2 Contents Introduction Issues OECD European Union South Africa Conclusions 11.x.06, LINK Centre 2

3 Basic building blocks Users for private networks Operators to compete with incumbent Mobile operators to link base stations ISPs, IXPs and IIC E-commerce Many of the problems are now addressed through unbundling of the local loop x.06, LINK Centre 3

ISPs, IXPs and IIC E-commerce Many of the problems are now

4 Monopoly & dominance Charging excessive prices, far in excess of cost Failing to replace older, more expensive and obsolete technologies Discrimination against new entrants to the advantage of the incumbent operator s own commercial operations in terms of: provisioning times repairs quality of service wholesale prices 11.x.06, LINK Centre 4

the advantage of the incumbent operator s own commercial operations in terms of:

5 ITU-T T D.1 intn l leased lines Article 1.3 requires member states to ensure that administrations do not enjoy unfair advantage over other service providers using IPLCs to provide services Article 6.1 charges should generally be cost-oriented Little evidence that member states have undertaken studies to determine whether or not prices are cost-oriented 11.x.06, LINK Centre 5

service providers using IPLCs to provide services Article 6.

6 International routes 2Mbit/s Bahrain - Muscat Dubai - Muscat Bahrain - Riyadh Bahrain - Jeddah Dubai - Riyadh Dubai - Jeddah Bahrain - Dubai London - Frankfurt London - Paris London - Geneva London - Milan London - Brussels London - Dusseldorf London - Vienna 0 3,000 6,000 9,000 12,000 15,000 18,000 Source: INTUG, per month 11.x.06, LINK Centre 6

London - Geneva London - Milan London - Brussels London - Dusseldorf London - Vienna 0

7 OECD 30 developed countries Communications Outlook 2005 (next in 07) Specific studies of leased lines Comparisons amongst 30 member states Communications Outlook 2003, page 17:... liberalisation has curtailed tremendously the monopoly rents extracted from long distance services, international services and leased lines x.06, LINK Centre 7

.. liberalisation has curtailed tremendously the monopoly rents extracted from long distance

8 Broadband access for business Broadband access to networks is important for economic growth and development In many OECD countries the level of competition is insufficient and is having a negative effect on business users Local leased line prices remain of concern where there is insufficient competition OECD governments should work together to produce comparable benchmarking data for pricing and provisioning The most efficient way would be for regulators to require major operators to report data on prices and performance Source: OECD/DSTI/ICCP/TISP(2002)3/FINAL 11.x.06, LINK Centre 8

competition OECD governments should work together to produce comparable benchmarking data for pricing and provisioning The most efficient way would be

9 OECD price trends Source: OECD x.06, LINK Centre 9

10 National 2Mbps leased lines 2004 Source: OECD x.06, LINK Centre 10

11 European Union Concern about leased lines from the early 1980s Cross-border prices varied strangely: Brussels to Milan and Marseilles similar distances, but one was twice the price PTTs supplying leased lines restricted: use of multiplexers interconnection with PSTN Concern about the viability of PTTs in the face of competition 11.x.06, LINK Centre 11

PTTs supplying leased lines restricted: use of multiplexers interconnection with PSTN

12 1990 legislation Directive required member states to ensure provision to all operators and users Application of non-discriminatory supply: pricing provisioning quality of service fair distribution of capacity (if scarce) 11.x.06, LINK Centre 12

non-discriminatory supply: pricing provisioning quality of

13 1992 legislation Non-discriminatory supply Provision of information to users and operators Provision of a minimum set of leased lines throughout each member state: voice bandwidth 64 kbits/s 2 Mbits/s NRAs were required to collect and to report data to EC for comparisons 11.x.06, LINK Centre 13

member state: voice bandwidth 64 kbits/s 2 Mbits/s NRAs were required to

14 Continuing complaints Lack of high capacity leased lines Disparity: USA 700,000 private networks EU 14,000 private networks Bangemann report called for urgent adjustments in prices 11.x.06, LINK Centre 14

14,000 private networks Bangemann report called for

15 User data INTUG survey in late 1990s Compared national and international leased lines: international half-circuit both of the same length 200% to 500% more expensive! helped the EC to act on prices 11.x.06, LINK Centre 15

both of the same length 200% to 500% more expensive!

16 2Mbit/s international/national in percentage of domestic price NL FR UK ES DK SE BE IT DE NO PT CH AT 11.x.06, LINK Centre 16

250 200 150 100 50 0 NL FR UK ES DK SE BE IT

17 Yet more legislation 1997 Directive obliged SMP operators to provide interconnection at cost-oriented prices 1998 Recommendation set price ceilings 1999 Review 2002 Directives 11.x.06, LINK Centre 17

cost-oriented prices 1998 Recommendation set price

18 1999 Recommendation Price ceilings for leased lines part circuits Benchmarking EU-15 Taking third cheapest prices 64 kbit/s up to 5 km, is 80 per month 2 Mbit/s up to 5 km, is 350 per month 34 Mbit/s up to 2 km, is 1,800 per month up to 5 km, is 2,600 per month 11.x.06, LINK Centre 18

80 per month 2 Mbit/s up to 5 km, is 350 per month 34 Mbit/s up to 2 km,

19 2005 delivery ceilings 64 kbit/s 18 calendar days 2 Mbit/s unstructured 30 calendar days structured 33 calendar days 34 Mbit/s leased lines 52 calendar days 11.x.06, LINK Centre 19

20 2005 price ceilings 2 km 5 km 15 km 50 km One-off 64k M M M x.06, LINK Centre 20

1112 34 M 892 963 1597 2539 2831 155 M 1206

21 Annual cost for 2Mbits/s 200 km ES IT GR PT UK FI IE NL BE DE AT DK SE 0 10,000 20,000 30,000 40,000 50,000 60, x.06, LINK Centre 21

22 34 Mbps per year, excl VAT 450, , , ,000 2 km 200 km 250, , , ,000 50,000 0 IE ES UK IT FR PT HU AT EL SL EE DE BE DK CY LT LU 11.x.06, LINK Centre 22

23 155 Mbps per year, excl VAT 900, , ,000 2 km 200 km 600, , , , , ,000 0 UK IT IE FR EL PT AT HU BE SL DK DE LT 11.x.06, LINK Centre 23

24 64 kbps half-circuit 40,000 35,000 30,000 near EU country far EU country 25,000 20,000 15,000 10,000 5,000 0 UK BE AT IT ES IE EL DK NL PT FI FR LU LT CZ HU CY LV PL SK MT EE SL 11.x.06, LINK Centre 24

25 2 Mbps half-circuit 450, , ,000 near EU country far EU country 300, , , , ,000 50,000 0 LV PL LT HU MT CY EE SL SK CZ DK LU IE FI NL PT EL BE IT FR AT ES UK 11.x.06, LINK Centre 25

26 Half circuits to the USA 450, , , , , , , ,000 50, kbps 2 Mbps UK ES AT FR IT EL BE PT NL LU IE FI DK MT CZ SK SL CY EE PL LV H LT 11.x.06, LINK Centre 26

27 European Commission annual leased lines report: delivery period service availability repairs data gathered by national regulatory authorities compiled by EC 11.x.06, LINK Centre 27

28 Delivery period 64kbps (days) all national EU average AT IE EL LT EE HU SE MT DK NL UK- BT IT LU CZ PT FI UK- KC ES DE SK FR LV BE CY 11.x.06, LINK Centre 28

29 Service availability kbps 34 Mbps 155 Mbps Mean long-term recorded unavailability ratio (%) 0.00 HU MT DK GR FI DE LT IE CY SK PT EE ES BE FR CZ UK NL AT LU 11.x.06, LINK Centre 29

30 Asia-Pacific Some policy work in APECTEL No secretariat Quite limited data gathering Some very wide price discrepancies Especially when compared with price reductions in undersea cables 11.x.06, LINK Centre 30

31 2,500 2,000 1,500 1, kb/s 2048 kb/s Australia Hong Kong, China Republic Of Korea Malaysia Singapore Chinese Taipei 11.x.06, LINK Centre 31

32 Monthly rental 155Mb/s access circuit 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Australia Hong Kong, China Republic Of Korea Malaysia Singapore Discounted Chinese Taipei - Un-discounted 11.x.06, LINK Centre 32

33 Asia vs. Europe and the U.S.A Prices for 2 km Leased Lines Australia Hong Kong China Republic Of Korea Malaysia Singapore Chinese Taipei France 64 kb/s 2 Mb/s Germany Iceland Spain UK USA ,000 1,200 1,400 1,600 US$ per month 11.x.06, LINK Centre 33

34 India Pressure from ISPs Pressure from outsourcing and call centre operators Analysis of the prices Comparisons with other countries Drastic cuts imposed on international and long distance leased lines 11.x.06, LINK Centre 34

35 South Africa Very slow to liberalise the provision of infrastructure Users and competitors reliant on access to national and international leased lines from Telkom SA Neotel will, in time, bring a duopoly, if not competition High ADSL prices help to protect leased line revenues 11.x.06, LINK Centre 35

36 South Africa 2Mbits/s R 18,000 R 16,000 R 14,000 annual installation fee R 12,000 R 10,000 R 8,000 R 6,000 R 4,000 R 2,000 R Source: Telkom x.06, LINK Centre 36

37 Conclusions An essential input for competition A long hard struggle Difficult to determine the real costs, requires sophisticated cost accounting Operators had to rebalance their tariffs Requires international benchmarking In competitive markets it is being overtaken by other policy tools 11.x.06, LINK Centre 37

38 Thank you Ewan Sutherland 3wan 3wan.net skype://sutherla 11.x.06, LINK Centre 38

Broadband Coverage in Europe Final Report 2009 Survey Data as of 31 December 2008. DG INFSO 80106 December 2009 IDATE 1

Broadband Coverage in Europe Final Report 2009 Survey Data as of 31 December 2008 DG INFSO 80106 December 2009 IDATE 1 Table of contents 1. Methodological notes...5 2. Executive summary...7 3. European