Trouble in Paradise
Challenges to international telephone traffic Michael Minges minges@itu.int International Telecommunication Union
The views expressed are those of the author and may not necessarily reflect the opinions of the ITU or its members.
A quarter century of talking Global international telephone calls, billions of minutes
Growth (right axis)
Paradise period: Growth tied to globalization & fax
Early period: 49 43 Growth tied to 38 33 network expansion 28 24 & global GDP 18 21 16 13 14 11 10 9 8 4 5 5 6
57
25%
Party over? 79 64
86
101 94
71
20% 15% 10% 5% 0%
75 77 79 81 83 85 87 89 91 93 95 97 99 Note: Traffic over public telephone network. Source: ITU.
Just not the business it used to be • Flat to declining international revenue • Inelastic demand • Statistical aberrations • Liberalization • The Internet • New market segments replace international as star of telecom industry
Revenue from fixed calls UK. Millions of pounds. 450 International 400 376 339 350 335 300 250
200 150 Calls to Mobiles 100 99 50 0 J- J- J- J- J- J94 95 96 97 98 99 Source: OFTEL.
Convergence Average of one-minute call to USA. Retail price. US$.
$2.00
Forecast
Swiss call prices. US cents per minute. 74 58
$1.50 $1.00
58
Call to USA
Mark-up
43 28
$0.50 $0.00
Local call
Settlement rate 90
94
98
'02
Source: ITU adapted from FCC and national data (34 countries).
5
5
95
96
4
4
4
7 4
97
98
99
'00
Source: Swisscom.
How come my traffic is not growing? Telephone traffic, millions of minutes 2'500
United Kingdom 6'000
Calls to Mobiles
2'000
5'000
1'500
4'000
International
1'000
3'000
500
2'000
0
1'000
M98
S98
M99
Source: OFTEL.
S99
M00
0
1996
Sweden (Telia)
Internet
International 1997
1998
Source: Telia.
1999
The Internet Way • Technical, financial & social challenge to circuit switched international telephone traffic • Anyone can be a telco
Winners and Losers Example of call from USA to developing country Accounting rate system + terminated by an ISP, per minute Traditional
New
Change
Developed country PTO
Receives US$ 1.35 retail tariff. Pays 84 US cents settlement. Gain 51 cents.
Receives US$ 1.35 retail tariff. Pays 40 US cents to ISP for terminating call. Gain 95 US cents.
+ 44 US cents
Developing country PTO
Receives 84 US cents settlement.
Receives 2 US cents local call charge.
- 82 US cents
0
Receives 40 US cents for terminating call. Pays 2 US cents for local call. Gain 38 US cents.
+38 US cents
Developing country ISP
Lets chat
“4.4 billion messages in June 2000”
“A world with a billion mailboxes— outnumbering televisions and phone lines —is probably only two years away”
Show me the money Quarterly results, June 2000, US$ millions
Who’s not making money Revenue Profit
Who is Revenue Profit
578
-317
270
65
19
-16
1’929
338
Source: ITU adapted from country reports.
The New PTO • Access – SingNet – SingTel Magix – mysingtel – e-ideas • Infrastructure – NCS Media Hub – Consumer Connect – SingTel IX – ID.Safe • Content – Lycos Asia – SESAMi.com
Internet initiatives
Transition “The Group’s highest revenue growth segment was Public Data & Private Network... Revenue growth from Internet related activities was particularly strong. There has been a substantial increase in demand for …services in areas like e-business consulting, network management, Internet solutions and web hosting.” –SingTel commenting on recent results
Singapore Telecom Share of revenue (%) 45
43
41
38
International
34
22 15 10
10
95
96
18
Data
97
98
Source: Singapore Telecom.
99
And in the End… • People will always have a need to communicate internationally… • …But, international voice is becoming a lowvalue commodity like apples, traded on exchanges like corn or oil… • …Value is in network infrastructure and services, strength is your network expertise and brand… • Build international IP connectivity, originate and terminate Internet calls, become an ISP and develop services with partners. “Companies that succeed as an Internet provider, and as a supplier of IP-based services, will win in the end.”—Telia (Sweden)
“In 1999, Swisscom launched a series of projects which have the aim of evolving Swisscom’s fixed-line networks away from the current circuit-switched infrastructure optimized for narrow-band voice traffic toward a packet-based infrastructure designed for broadband data traffic and highly efficient transmission of voice traffic. The core of the infrastructure of this next generation network will be based on IP technology.” —Swisscom 1999 Annual Report
More info
www.itu.int/ ti/publications/DOT99/index.htm
www.telegeography.com /Publications/tg00.html