1. Slide 1 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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

2. Slide 2 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Outline Introduction Definitions Value model Impact analysis Discussion Conclusions

3. Slide 3 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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.

4. Slide 4 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Roaming value chain evolution MNO/ SO MVN O GRX SP Conten t SP Subsc riber Cleari ng House New players, additional value

5. Slide 5 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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

6. Slide 6 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Key elements for roaming Interoperability at the transport and service layers. Triggers agreements Results in increasing number of roaming subscribers. Subscribers Agreements Transport, Services Subscriber Plane Agreement Plane Technology Plane

7. Slide 7 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Mobile roaming dynamics InteroperabilityInter-operator Agreements Population coverage Value Positive Feedback Roaming leads to positive feedback

8. Slide 8 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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.

9. Slide 9 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Roaming parameters ParameterDescription N net Total number of roaming networks. SAverage number of interoperable services per network. A in Roaming ARPU for inbound subscribers per service per network A out Roaming ARPU for outbound subscribers per service per network N in Number of inbound subscribers per network N out Number of outbound subscribers per network N agree Number of basic roaming agreements per network. CTCT Total transaction cost incurred per service m clust Number of members in a cluster N cagree Number of agreements to be made by an operator within a cluster.

10. Slide 10 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Roaming Model Value of roaming for a service operator, V roam = V in + V out - C roam For N net + 1 number of networks, –Value from inbound subscribers = V in = (N net *N in )(S*A in ) –Value from Outbound subscribers = V out = N out (S*A out *N net ) –Cost of roaming incurred by an operator = C roam = C T *N agree *S V roam = (N net *N in )(S*A in ) + N out (S*A out *N net ) - C T *N agree *S

11. Slide 11 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Impact Analysis Case Bilateral: –N net = N agree V bilat = N agree *S [(N in *A in + N out *A out ) - C T ] Condition for profitability: C T  (N in *A in + N out *A out )

12. Slide 12 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Impact Analysis Case Clustered: –N agree < N net –N cagree = N agree - m clust *1 V clust = N net *S [N in *A in + N out *A out ] - C T * S*N cagree Condition for profitability: C T  (N net [N in *A in + N out *A out ])/N cagree where N cagree > 0

13. Slide 13 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Impact Analysis Case Centralized: –N agree = 1 V centre = N net *S [N in *A in + N out *A out ] - C T * S

14. Slide 14 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Value comparison Transport, Services Subscribers Agreements Subscribers Agreements Transport, Services Subscribers Agreement s Transport, Services Bilateral Clustered Centralized C centre  C clust  C bilat 1  (N agree – m*1)  N agree

15. Slide 15 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Value dynamics Bilatera l Clustered Centralised V bilat V clust V centre +∆V 1 +∆V 2 -∆V 2 -∆V 3 Bilateral  Clustered  Centralized (at Equilibrium) Equilibrium conditions: Convergence  innovations at the application layer Stabilisation of roaming technology  lack of differentiation at the roaming layer

16. Slide 16 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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

17. Slide 17 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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

18. Slide 18 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen Discussion: Inter-access technology roaming Need for interoperability on the rise due to –packet-switched data services –convergence Handsets with multiple access interfaces –Increases N net  Increases roaming subscribers  Increases roaming ARPU

19. Slide 19 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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.

20. Slide 20 06/09/2004 Networking Laboratory Helsinki University of Technology Renjish Kumar/Heikki Hämmäinen 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.