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International interconnection:

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Presentation on theme: "International interconnection:"— Presentation transcript:

1 International interconnection:
Part 1: Trends in international telecom traffic Dr Tim Kelly, International Telecommunication Union (ITU) SSGRR, L’Aquila, 26 Oct 1999 Note: The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its membership. Dr Tim Kelly can be contacted by at 1

2 International Interconnect: A series of three lectures
Part 1: Trends in international traffic Part 2: Managing the transition from revenue- sharing to cost-orientation Part 3: The Internet changes everything

3 Agenda Trends in international traffic Regional breakdown of traffic
Steady growth in voice traffic Higher percentage originating from mobiles Explosive growth of Internet traffic Regional breakdown of traffic Market shares Competitive markets Telecom Italia’s international position ITU/TeleGeography “Direction of Traffic” publication 2

4 Trends in international traffic minutes (billions)
1'200 160 143 Fixed main lines 124 140 1'000 Mobile subscribers 108 120 Total int'l traffic 800 94 100 82 72 Fixed lines and mobile subscribers worldwide (millions) 600 Billions of minutes of international 80 telephone traffic 62 54 48 60 400 44 38 30 40 200 20 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

5 The changing pie: Global telecom service revenue, 1998
Domestic fixed- Other (incl. Internet, leased lines, telex), 10.6% line revenues, 59.3% Mobile service revenues, 21.2% The recent history of our industry is reflected in the shares of revenue which are generated by the different sub-sectors. Fixed-line telephone services still generate around two thirds of total telecommunications revenue worldwide, which was worth more than US$700 billion in The remaining third comes from mobile cellular and other services, such as leased lines, telex and the Internet. International revenues, 8.9% 1998 Telecom service revenue. Total = US$724bn Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

6 Projection of revenue growth (US$bn)
1'000 Actual Projected 900 Other (e.g., Internet, leased lines, telex) 800 700 Mobile service revenues 600 500 Service revenue (US$ bn) 400 International 300 200 But this picture is changing. Revenue generated from domestic and international fixed-line services reached a peak shortly after TELECOM 95, and have subsequently been in decline. By the time of TELECOM 2003, they will contribute less than half of the total. Indeed, were it not for the continuing growth of the Internet and especially of mobile cellular, the industry as a whole would be shrinking rather than growing in value. Domestic fixed-line service revenues 100 Tele-com 1996 1997 1998 Tele-com 2000 2001 2002 Tele-com 1995 1999 2003 Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

7 Growth trends: fixed-lines, mobilephones and estimated Internet users, millions
Fixed-line telephones 1'200 Mobilephones 1'000 Estimated Internet users 800 600 400 200 Forecasting the growth in the fixed-line telephone network is the most straightforward. Today, the number of telephone users worldwide was probably just short of 900 million, up from around 700 million at the last World Telecom. The number of telephone subscribers should have passed the one billion mark before the next Telecom. The development of the mobile market is more difficult to predict. As TELECOM 99 opened its doors, there were probably some 400 million mobile cellular users around the world. Of the five hundred million new users added to the world’s telecommunication networks since TELECOM 95, three hundred million are using mobilephones and two hundred million using fixed-line telephones. The remarkable growth of the mobile market is charted in the ITU’s new World Telecommunication Development Report, published today. Almost every forecast of the growth of mobile cellular market has proved to be an underestimate of its actual growth. At the risk of being proved wrong, I will forecast that there will be more mobile subscribers worldwide by TELECOM 2003 than there are telephone subscribers today. Most difficult of all to measure, let alone forecast, is the growth of the Internet. The most reliable estimates show that there are around 200 million active Internet users today compared with around 50 million four years ago. By TELECOM 2003, the number of users may exceed half a billion, and many of them may be accessing the Internet from mobiles rather than from fixed-line connections. 1995 1996 1997 1998 1999 2000 2001 2002 2003 Note: Columns show actual and projected users at end of year. Source: ITU.

8 100 years of telephones Log scale: 1910-2010 Normal scale: 1990-2010
2'000 1'000 1'500 Fixed Fixed 1'000 10 Mobile Mobile 500 In this presentation, I have taken snapshots of the industry in 1995, 1999 and During that period, mobile communications will have changed from being primarily a complement for fixed-line telecommunications to being a potential substitute for it. The number of mobile subscribers around the globe overtook the number of Internet subscribers in the mid-1980s. In a handful of countries such as Cambodia, Italy, Finland and the Republic of Korea, the number of mobile subscribers is now greater that the number of fixed-line users. By the time we hold TELECOM 2007, there will probably be more mobile subscribers worldwide than fixed-line ones. But we at the ITU have long memories as well as short ones. What is remarkable about the development of the mobile sector is that it will have gone from zero to one billion subscribers within two decades. The telephone industry is more than 130 years old and has still not yet reached that point. The tendency of technological change to accelerate market development augurs well for the development of new services, such as 3G mobile, and also for the extension of those services to all the inhabitants of the world. 1910 20 30 40 50 60 70 80 90 2000 10 1990 2000 2010 Source: ITU, “World Telecommunication Development Report: Mobile Cellular” 1999.

9 Internet outgrowing voice Hongkong SAR, April‘98-July’99, Minutes of user per month, ‘000s
1'200 1'000 Dial-up Internet 800 (via PSTN) 600 Int'l voice/fax 400 (in + out) 200 4 6 8 10 12 2 4 6 98 98 98 98 98 99 99 99 Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

10 Trends in call volume, Deutsche Telekom, 1997-98
86.3% 36.0% 7.2% -7.1% -2.1% Domestic Int'l Local calls Calls to Calls to long- outgoing mobile Internet (T- distance calls networks Online) Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

11 Changing regional shares of global international traffic, 1983 & 1997
Regional share of International traffic, 1983 Africa, 1.9% LAC, 3.6% Europe, 68.0% Asia-Pacific, 9.7% Regional share of int’l traffic, 1997 Africa, 1.9% Europe, 43.0% LAC, 4.1% Asia-Pacific, North America, 18.5% 16.8% By origin, total = 10.2 billion minutes North America, 32.5% By origin, total = 81.8 billion minutes Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

12 Compound annual growth rates in outgoing traffic, 1983-1997
Europe 12.3% Africa 16.0% World 16.1% LAC 17.1% Asia-Pacific 21.6% N. America 21.7%

13 Trends in outgoing traffic, bn minutes
60 50 Developed countries 40 30 20 Developing countries 10 - 1990 1991 1992 1993 1994 1995 1996 1997 Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

14 Trends in incoming traffic, bn minutes
60 50 40 Developed countries 30 20 Developing countries 10 1990 1991 1992 1993 1994 1995 1996 1997 Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

15 Top 10 PTOs by outgoing int’l traffic
Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

16 Selected PTOs, performance 1997/98
% change in traffic % change in int’l rev. -2.1% DT -16.4% -2.9% SwissCom 2.2% 5.9% Telecom Italia 0.6% 8.2% -2.7% AT&T 17.6% MCI WorldCom 21.2% 0.5% Sprint 1.1% 9.7% FT -17.3% 4.5% BT -14.3% Note: Based on 1998 international outgoing traffic and revenue from international operations. For Sprint, MCI WorldCom and AT&T, data relates to The definition of international revenue (gross, net or retail) is tat used by each individual operator. Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

17 Emerging global alliances, shares of int’l traffic market
AT&T/BT, 17.2% Others, 47.3% GlobalOne, 14.3% Total, 1997: 81.2 bn minutes Hand-in-hand with the shift towards private ownership is the trend towards formation of global alliances. While the partnerships continue to change, there appears to be no slow down in the rush to form new alliances and to add new partners to existing ones. The international telecommunications traffic market provides particularly fertile soil for the creation of such agreements between companies. For the moment, the types of service which they provide are fairly conventional, but they are planning a new generation of services which are “global”, rather than merely “cross-border” in nature. As an example of this, AT&T and BT, two of the biggest names in the fixed-line world, are building a new international network, based on Internet Protocols, and have recently extended this co-operation to their mobile activities also. In the satellite world, global operators are emerging that are not bound by terrestrial borders. While the financial difficulties of GMPCS operators have been much publicised, the fact is that they are establishing a new type of venture which is different in nature from today’s primarily national operators. Their closest competitors are likely to be the new generation of private consortia establishing undersea cable networks, such as Project Oxygen or Global Crossing. The undersea cable business began, more than a hundred years ago, with privately-funded ventures and we are now returning to that model. Only the scale of the vision has changed. MCI WorldCom, Telefonica, TP, 11.1% Cable & Wireless, 4.7% Unisource, 5.4% Note: Traffic shares relate to minutes of outgoing traffic from members of each alliance. Source: ITU/TeleGeography Inc. “Direction of Traffic, 1999: Trading Telecom Minutes”

18 Emerging global alliances: Recent developments
WorldCom merges with MCI. Following collapse of BT/MCI merger, BT & AT&T join forces in “Concert” AT&T and Telefonica withdraw from Unisource GlobalOne on point of collapse following purchase of Sprint by WorldCom Deutsche Telekom’s bid for Telecom Italia fails; Olivetti’s succeeds Cable & Wireless re-positioning itself as supplier of data services Telia and TeleNor merge

19 Percentage of outgoing international traffic open to competition
Mono- poly Compe- 85% 74% tition 46% 35% Number of countries permitting more than one operator for international telephony 4 14 29 48 1990 1995 1998 2005 Note: Analysis is based on WTO Basic Telecommunications Commitments and thus presents a minimum level of traffic likely to be open to competitive service provision. Source: ITU, WTO.

20 Level of competition in international services in WTO basic telecoms agreement
Monopoly Competition Source: ITU Telecommunication Regulatory Database.

21 Countries permitting int’l competition
1990 1998 20 Israel 1 Japan 1 Australia 21 Italy 2 New Zealand 2 Austria 22 Japan 3 UK 3 Belgium 23 Korea (Rep.) 4 USA 4 Brunei D. 24 Malaysia 1995 5 Canada 25 Mexico 1 Australia 6 Chile 26 Netherlands 2 Canada (partial) 7 Colombia 27 New Zealand 3 Colombia 8 DPR Congo 28 Norway 4 Chile 9 Denmark 29 Peru 5 Denmark 10 Dominican Rep. 30 Philippines 6 Finland 11 El Salvador 31 Russia 7 Japan 12 Finland 32 Somalia 8 Korea (Rep.) 13 France 33 Spain (after Dec. 1998) 9 Malaysia 14 Germany 34 Sweden 10 New Zealand 15 Ghana 35 Switzerland 11 Philippines 16 Guatemala 36 Uganda 12 Sweden 17 HK-China (after Dec 1998) 37 Ukraine 13 UK 18 Indonesia 38 UK 14 USA 19 Ireland (after Dec. 1999) 39 USA

22 Telecom Italia, int’l traffic trends, billion minutes
3'500 3'000 Incoming traffic 2'500 2'000 Outgoing traffic 1'500 1'000 1994 1995 1996 1997 1998

23 Telecom Italia, revenues from int’l calls In Billion Lire
Actual Forecast 2'605 2'554 2'589 2'511 2'470 2'288 2'193 2'018 1'799 1'751 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Source: Telecom Italia. Forecasts from Salomon Smith Barney.

24 Telecom Italia, revenues breakdown In Billion Lire
Fixed charges, 20.7% billion Lire Other 11.2% Equpt. 5.3% Mobile, 22.1% Fixed charges, 21.5% Other 9.0% Equpt. 6.4% International calls, 6.2% Domestic calls, 34.5% Mobile, 37.0% billion Lire International calls, 4.8% Domestic calls, 39.7% Source: Telecom Italia. Forecasts from Salomon Smith Barney.

25 International traffic trends: Conclusions
Voice traffic continuing to grow, but the main action is now elsewhere Mobile and the Internet will be the major demand drivers for the future Competitive markets will be the norm, monopolistic markets the exception in the future Alliances will continue to be formed, but partnerships are still unstable

26 Other reports launched at TELECOM ‘99
For more information ... For more information ... l Publication launch: 10 October 1999 (TELECOM ‘99) l Available on paper and on- line (PDF format) l Also available with database on CD-ROM l Website : itu . int / ti Other reports launched at TELECOM ‘99 Other reports launched at TELECOM ‘99 l World Telecom Development Report 1999: Mobile Cellular l Trends in Telecom Reform 1999: Convergence & Regulation l Internet for Development (updated with latest data)

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