Assessing the Value of Roaming over Mobile
Networks
K.R.Renjish Kumar, Heikki Hämmäinen
{ [email protected] ; [email protected] }
Networking Laboratory
Helsinki University of Technology
Finland
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 1
Outline
•
•
•
•
•
•
Introduction
Definitions
Value model
Impact analysis
Discussion
Conclusions
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 2
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.
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 3
Roaming value chain evolution
Conten
t SP
GRX
SP
Cleari
ng
MNO/
SO
MVN
O
Subsc
riber
House
• New players, additional value
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 4
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 nonpartisan authority.
• Convergence: seamless service provisioning over multipleaccess technologies
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 5
Key elements for roaming
• Interoperability at the
transport and service
layers.
• Triggers agreements
• Results in increasing
number of roaming
subscribers.
Subscribers
Agreements
Transport, Services
06/09/2004
Networking Laboratory
Helsinki University of Technology
Subscriber Plane
Agreement Plane
Technology Plane
Renjish Kumar/Heikki Hämmäinen
Slide 6
Mobile roaming dynamics
Value
Interoperability
Inter-operator
Agreements
Population coverage
Positive Feedback
Roaming leads to positive feedback
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 7
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.
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 8
Roaming parameters
Parameter
Description
Nnet
Total number of roaming networks.
S
Average number of interoperable services per network.
Ain
Roaming ARPU for inbound subscribers per service per network
Aout
Roaming ARPU for outbound subscribers per service per network
Nin
Number of inbound subscribers per network
Nout
Number of outbound subscribers per network
Nagree
Number of basic roaming agreements per network.
CT
Total transaction cost incurred per service
mclust
Number of members in a cluster
Ncagree
Number of agreements to be made by an operator within a cluster.
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 9
Roaming Model
• Value of roaming for a service operator, Vroam= Vin + Vout - Croam
• For Nnet + 1 number of networks,
– Value from inbound subscribers = Vin = (Nnet*Nin)(S*Ain)
– Value from Outbound subscribers = Vout= Nout (S*Aout*Nnet)
– Cost of roaming incurred by an operator = Croam = CT*Nagree*S
Vroam = (Nnet*Nin)(S*Ain) + Nout (S*Aout*Nnet) - CT*Nagree*S
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 10
Impact Analysis
• Case Bilateral:
– Nnet = Nagree
Vbilat = Nagree*S [(Nin*Ain + Nout *Aout) - CT]
Condition for profitability:
CT  (Nin*Ain + Nout *Aout)
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 11
Impact Analysis
• Case Clustered:
– Nagree < Nnet
– Ncagree = Nagree - mclust*1
Vclust = Nnet*S [Nin*Ain + Nout *Aout] - CT* S*Ncagree
Condition for profitability:
CT  (Nnet[Nin*Ain + Nout *Aout])/Ncagree
06/09/2004
Networking Laboratory
Helsinki University of Technology
where Ncagree > 0
Renjish Kumar/Heikki Hämmäinen
Slide 12
Impact Analysis
• Case Centralized:
– Nagree = 1
Vcentre = Nnet*S [Nin*Ain + Nout *Aout] - CT* S
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 13
Value comparison
Subscribers
Agreement
s
Subscribers
Agreements
Subscribers
Transport, Services
Agreements
Centralized
Transport, Services
Clustered
Ccentre  Cclust  Cbilat
1  (Nagree – m*1)  Nagree
Transport, Services
06/09/2004
Bilateral
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 14
Value dynamics
Vbilat
Bilateral
-∆V3
+∆V1
-∆V2
Clustered
Vcentre
Vclust
Centralised
+∆V2
•BilateralClusteredCentralized (at Equilibrium)
•Equilibrium conditions:
•Convergence
 innovations at the application layer
•Stabilisation of roaming technology
 lack of differentiation at the roaming layer
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 15
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
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 16
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
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 17
Discussion: Inter-access technology roaming
• Need for interoperability on the rise due to
– packet-switched data services
– convergence
• Handsets with multiple access interfaces
– Increases Nnet Increases roaming subscribersIncreases
roaming ARPU
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 18
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.
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 19
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.
06/09/2004
Networking Laboratory
Helsinki University of Technology
Renjish Kumar/Heikki Hämmäinen
Slide 20