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TELKOMSELINDONESIATELKOMSELINDONESIA 1 H agency interconnect the most difficult issue for a new operator ? (Indonesia’s Experience) 1997 Cannes, France.

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Presentation on theme: "TELKOMSELINDONESIATELKOMSELINDONESIA 1 H agency interconnect the most difficult issue for a new operator ? (Indonesia’s Experience) 1997 Cannes, France."— Presentation transcript:

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2 TELKOMSELINDONESIATELKOMSELINDONESIA 1 H agency interconnect the most difficult issue for a new operator ? (Indonesia’s Experience) 1997 Cannes, France Koesmarihati Sugondo President Director - Telkomsel February

3 TELKOMSELINDONESIATELKOMSELINDONESIA 2 H agency TELKOMSEL COMPREHENSIVE INTEGRATED SUPPORT  GSM OPERATOR IN INDONESIA  POSITIONING AS “GSM SPECIALIST” AND “MARKET LEADER IN QUALITY & SERVICE” SETCO : INDONESIAN QUALIFIED PRIVATE COMPANY SETCO 5.00% KPN : DUTCH TELECOMMUNICATION CARRIER KPN 17.28% TELKOM : NATIONAL TELECOMMUNICATION CARRIER TELKOM 42.72% INDOSAT : INDONESIAN INTERNATIONAL TELECOMMUNICATION CARRIER INDOSAT 35.00% TTOTAL COMPANY VALUE : US$. 2 BILLION

4 TELKOMSELINDONESIATELKOMSELINDONESIA 3 H agency COVERAGE & CUSTOMERS TELKOMSEL’S COVERAGE 5200 kms 2000kms ALL 27 PROVINCIAL CAPITAL CITIES 200 DISTRICT CAPITALS 306 TOTAL CITIES  current : customers in less than 2 years of operation  aggressive growth : > customers in the year 2000

5 TELKOMSELINDONESIATELKOMSELINDONESIA 4 H agency TELECOMMUNICATION SECTOR OF INDONESIA FIXED-TELMOBILE/CELLULARFUTURE *2 INT’L GATEWAYs*NATION WIDE*PHSs *REGIONAL OPR. ~ RBOC’s-3 GSMs*DCS 1800s - 2 TELKOM’s -1 NMT-450*GMSSs - 5 KSOs *REGIONAL - 1 Fixed Cellular -3 Analog AMPSs *LONG DISTANCE - 1 Div. NET GOVERNMENT : -FUNDAMENTAL TECH. PLAN -INTERCONNECT -REVENUE SHARING -TECHNOLOGY -TARIFF -LICENSES & FREQ. ALLOC. -SUPERVISION METROSELTELESERA KOMSELINDO regional cellular TELKOMSEL GSM MOBISEL NMT-450 SATELINDO GSM EXCELCOMINDO GSM nation-wide cellular DIVRE IIDIVRE V KSO MGTI KSO ARIAWEST KSO ASTRATEL KSO DATA MALINDO KSO BUKAKA SINGTEL RATELINDO regional fixed-tel DIVNET LONG-DISTANCE long-distance operator

6 TELKOMSELINDONESIATELKOMSELINDONESIA 5 H agency MAIN ISSUES INTERCONNECT INTERCONNECT SYSTEM PHYSICALPRICE

7 TELKOMSELINDONESIATELKOMSELINDONESIA 6 H agency WHY INTERCONNECT IS DIFFICULT ? “BIG BROTHER” (PSTN OPERATOR) “LOOSING SHARE”“COMPETITION” “LOOSING TRAFFIC”“IMAGE CHALLENGED” NEW ENTRANCES ARE SEEN AS “THREAT” INSTEAD OF “PARTNERS” WHICH CONTRIBUTE (BRING & CREATE) MORE REVENUE TO PSTN OPERATOR

8 TELKOMSELINDONESIATELKOMSELINDONESIA 7 H agency MARKET DEVELOPED NEW OPERATOR NEW OPERATOR NEW OPERATOR PSTN OPERATOR ORIGINAL TELECOMMUNICATION MARKET LEASED LINES TRAFFIC THE MONEY GO BACK TO FIXED-OPR PSTN OPERATOR SHOULD NOT SEE NEW ENTRANCES AS “THREAT” BUT AS “BIG CUSTOMERS” AND “PARTNERS” WHO CONTRIBUTE (BRING & CREATE) MORE REVENUE TO PSTN OPERATOR

9 TELKOMSELINDONESIATELKOMSELINDONESIA 8 H agency EVOLUTION OF INTERCONNECT ARRANGEMENT 1.INTERCONNECT WITHIN MONOPOLISTIC MARKET PSTN RSA CELLULAR MOBILE C. RS A CELLULAR MOBILE B. TELKOMSEL CELLULAR MOBILE A. INTRA PRICING TELKOM 2.INTERCONNECT BETWEEN LIBERALIZED & MONOPOLISTIC MARKET PSTN CELLULAR MOBILE C. CELLULAR MOBILE B. CELLULAR MOBILE A. PT. TELKOM 3.INTERCONNECT BETWEEN TWO LIBERALIZED MARKETS CELLULAR MOBILE C. CELLULAR MOBILE B. CELLULAR MOBILE A. PSTN B PSTN A PSTN C A B C

10 TELKOMSELINDONESIATELKOMSELINDONESIA 9 H agency MOBILE OPERATOR’S TRAFFIC PROFILE (MINUTES) TRAFFIC INDONESIAGERMANY -MOBILE-MOBILE10 % 5 % -MOBILE-FIXED90 %95 % MOBILE OPR CONTRIBUTION TO PSTN-OPR LEASED LINES 17% INTERCONNECT 60% NET. REV.-USAGE 23% BIG PORTION OF CELLULAR TRAFFIC REVENUE STILL GOES TO PSTN OPERATOR TOTAL TRAFFIC/USAGE REVENUE MARKET IS SUPPORTED BY ATTRACTIVE CUSTOMER GROWTH CELLULAR MOBILE TELEPHONE DEMAND FORECAST (‘2000) -JICA (‘92):230,000 CUSTs. -BOOZ ALLEN (‘94):600,000 CUSTs -GOVERNMENT -ORIGINAL (‘94):400,000 CUSTs -REVISED (‘97): CUSTs -TELKOMSEL : CUSTs

11 TELKOMSELINDONESIATELKOMSELINDONESIA 10 H agency HOW SHOULD THE GAME BE PLAYED ? INTERCONNECT SHOULD BE TREATED AS “SERVICE” SERVICE SUPPLIER (BIG STOCKS) BUYER (BULK PURCHASE) THE PLAYERS PSTN OPERATOR NEW ENTRANCES “WHOLESALE TREATMENT”

12 TELKOMSELINDONESIATELKOMSELINDONESIA 11 H agency BUYER (NEW ENTRANCE) SUPPLIER (PSTN OPERATOR) SERVICE DELIVERY *QUALITY/ RELIABILITY *CAPACITY *PRICE *AVAILABILITY RESPONSIBILITY, RIGHT & OBLIGATION INTERCONNECT SHOULD BE TREATED AS “SERVICE” “SERVICE” SHOULD APPLY “RIGHT & RESPONSIBILITY” DEAL COMMON BUSINESS PRACTICE

13 TELKOMSELINDONESIATELKOMSELINDONESIA 12 H agency 4 MAIN REASONS TO BUILD OWN OVERLAY NETWORK COMMON BUSINESS PRACTICE OWN OVERLAY NETWORK IS JUST LIKE A COMMON INVESTMENT WHICH REQUIRES “HUGE FINANCE” & COSTS “OPERATION & MAINTENANCE HEADACHE” OTHER NETWORK OWN OVERLAY NETWORK 1.QUALITY/ RELIABILITY 2.CAPACITY 3.PRICE 4.AVAILABILITY IF THE SERVICE IS NOT SATISFACTORILY DELIVERED, IT WILL ENCOURAGE THE DEVELOPMENT OF EXCLUSIVE OVERLAY NETWORK WHICH BECOMES IN FACT, A LONG DISTANCE OPERATOR

14 TELKOMSELINDONESIATELKOMSELINDONESIA 13 H agency INTERCONNECTION NEED A PRICE INDONESIA'S SITUATION : INTERIM SOLUTION REVENUE SHARING IS APPLIED AS EACH PARTIES ARE NOT ABLE TO DETERMINE THE PRICE OF EACH “INTERCONNECT BUILDING BLOCK” PSTN CELLULAR X XX X

15 TELKOMSELINDONESIATELKOMSELINDONESIA 14 H agency X XX Customer base Customer acquisition Cost of revenue- collection (RISK) X Mobile operator is eligible for 15 % of long distance tariff ALL KIND OF VALUE ADDED SERVICES AND PREMIUM MAKE REVENUE SHARING EVEN MORE DIFFICULT REVENUE SHARING IS APPLIED ON “USAGE CHARGES” NOT ON DELIVERED ADDED VALUE REVENUE SHARING DOES NOT INCORPORATE ALL SERVICE ASPECTS

16 TELKOMSELINDONESIATELKOMSELINDONESIA 15 H agency INTERCONNECT ARRANGEMENT ? MOBILE-PSTN PHYSICAL POINT OF INTERCONNECT VIRTUAL POINT OF INTERCONNECT USER TARIFF BASIS COST BASIS INTERCONNECT SYSTEM INDONESIA RECOMMENDED

17 TELKOMSELINDONESIATELKOMSELINDONESIA 16 H agency HOW TO MEET THE GOAL INTERCONNECT PRICE BASIS : COST BASIS (ADDED VALUE) COMPONENT OF BUILDING BLOCK “WHOLESALE” BASIS : USER TARIFF RETAIL

18 TELKOMSELINDONESIATELKOMSELINDONESIA 17 H agency AustraliaFinlandJapanNew ZealandUKUS Negotiated/DeterminedN/DNDNN/DD Tariff/Cost basedCTC/TTC/TC Historic/Current costH-H-HH Marginal/Fully allocated costsM-F-FF Actual/Model costsA-A-AA Return on capital allowed (%) INTERCONNECTION ENVIRONMENT Source : “Interconnect”, Ovum, London, 1994

19 TELKOMSELINDONESIATELKOMSELINDONESIA 18 H agency CONCLUSION HOW TO COME TO “WIN - WIN” SITUATION  STEP 1.The connecting parties should see each other as customer and supplier >PROVIDING BEST SERVICE  STEP 2.The network development plan of each parties should be well coordinated >TO ENSURE DELIVERY  STEP 3.The regulator must set “clear rule of the game” and play as “referee” >TO SUPPORT EQUAL TREATMENT  STEP 4.The ”interconnect building block” of the service must be priced >COST ALLOCATION

20 TELKOMSELINDONESIATELKOMSELINDONESIA 19 H agency TELKOMSELINDONESIATELKOMSELINDONESIA

21 TELKOMSELINDONESIATELKOMSELINDONESIA 20 H agency TELEKOMUNIKASI SELULAR INDONESIA


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