International interconnection:International interconnection:Part 1: Trends in international Part 1: Trends in international

telecom traffictelecom 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 e-mail at Tim.Kelly@itu.int.

International Interconnect:International Interconnect:A series of three lecturesA 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

3Int’l Interconnect: 1. Traffic TrendsInt’l Interconnect: 1. Traffic Trends

AgendaAgendaTrends in international traffic

Steady growth in voice traffic Higher percentage originating from mobiles Explosive growth of Internet traffic

Regional breakdown of traffic Market sharesCompetitive marketsTelecom Italia’s international positionITU/TeleGeography “Direction of Traffic”

publication

143

124

108

94

7262

5448

4438

30

82

0

200

400

600

800

1'000

1'200

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Fix

ed

lin

es

an

d m

ob

ile

su

bs

cri

be

rs

wo

rld

wid

e (

mil

lio

ns

)

0

20

40

60

80

100

120

140

160

Bil

lio

ns

of

min

ute

s o

f in

tern

ati

on

al

tele

ph

on

e

tra

ffic

Fixed main lines

Mobile subscribers

Total int'l traffic

Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Trends in international traffic Trends in international traffic minutes (billions)minutes (billions)

Domestic fixed-line revenues,

59.3%

International revenues, 8.9%

Mobile service

revenues, 21.2%

Other (incl. Internet, leased lines, telex), 10.6%

1998 Telecom service revenue. Total = US$724bn

The changing pie: The changing pie: Global telecom Global telecom service revenue, 1998service revenue, 1998

Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

Ser

vice

rev

enu

e (U

S$

bn

)Projection of revenue growth (US$bn)Projection of revenue growth (US$bn)

0

100

200

300

400

500

600

700

800

900

1'000

Tele-com1995

1996 1997 1998 Tele-com1999

2000 2001 2002 Tele-com2003

Actual Projected

Other (e.g., Internet, leased lines, telex)

Mobile service revenues

International

Domestic fixed-line service revenues

Source: ITU “World Telecommunication Development Report 1999: Mobile cellular”

Growth trends: Growth trends: fixed-lines, mobilephones fixed-lines, mobilephones and estimated Internet users, millionsand estimated Internet users, millions

Note: Columns show actual and projected users at end of year.Source: ITU.

0

200

400

600

800

1'000

1'200

1995 1996 1997 1998 1999 2000 2001 2002 2003

Fixed-line telephones

Mobilephones

Estimated Internet users

100 years of telephones100 years of telephones

0

10

1'000

1910 20 30 40 50 60 70 80 90 2000 10

Fixed

Mobile

0

500

1'000

1'500

2'000

1990 2000 2010

Fixed

Mobile

Log scale: 1910-2010 Normal scale: 1990-2010

Source: ITU, “World Telecommunication Development Report: Mobile Cellular” 1999.

Internet outgrowing voiceInternet outgrowing voiceHongkong SAR, April‘98-July’99,Hongkong SAR, April‘98-July’99,Minutes of user per month, ‘000sMinutes of user per month, ‘000s

0

200

400

600

800

1'000

1'200

498

698

898

1098

1298

299

499

699

Dial-up Internet(via PSTN)

Int'l voice/fax (in + out)

Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Trends in call volume, Trends in call volume, Deutsche Telekom, 1997-98Deutsche Telekom, 1997-98

7.2%

36.0%

86.3%

-2.1%-7.1%

Domesticlong-

distance

Int'loutgoing

calls

Local calls Calls tomobile

networks

Calls toInternet (T-

Online)

Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Europe, 68.0%

North America, 16.8%

Asia-Pacific, 9.7%

LAC, 3.6%Africa, 1.9%

Regional share of International traffic, 1983

By origin, total = 10.2 billion minutes

Europe, 43.0%

North America, 32.5%

Asia-Pacific, 18.5%

LAC, 4.1%Africa, 1.9%

Regional share of int’l traffic, 1997

By origin, total = 81.8 billion minutes

Changing regional shares of global Changing regional shares of global international traffic, 1983 & 1997international traffic, 1983 & 1997

Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

21.7%

21.6%

17.1%

16.1%

16.0%

12.3%

N. America

Asia-Pacific

LAC

World

Africa

Europe

Compound annual growth rates in Compound annual growth rates in outgoing traffic, 1983-1997outgoing traffic, 1983-1997

Trends in Trends in outgoingoutgoing traffic, traffic, bn minutesbn minutes

-

10

20

30

40

50

60

1990 1991 1992 1993 1994 1995 1996 1997

Developed countries

Developing countries

Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Trends in Trends in incomingincoming traffic, traffic, bn minutesbn minutes

Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

0

10

20

30

40

50

60

1990 1991 1992 1993 1994 1995 1996 1997

Developed countries

Developing countries

Top 10 PTOs by outgoing int’l trafficTop 10 PTOs by outgoing int’l trafficPTO 1998 Bn Mins % change 97/98

AT&T (97 data) 10’331 8.2%

MCI WorldCom (97) 7’313 17.6%

Deutsche Telekom 4’711 -2.1%

France Telecom 3’400 9.7%

Sprint (97) 2’759 0.5%

BT 2’710 4.5%

Telecom Italia 2’339 5.9%

SwissCom 1’901 -2.9%

Telefonica 1’803 15.1%

Hongkong Telecom 1’718 -2.1%

Source: ITU/TeleGeography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

1.1%

21.2%

0.6%

2.2%

-14.3%

-16.4%

-17.3%

-2.7%

BT

FT

Sprint

MCI WorldCom

AT&T

Telecom Italia

SwissCom

DT

4.5%

9.7%

0.5%

8.2%

5.9%

-2.9%

-2.1%

17.6%

% change in traffic% change in traffic % change in int’l rev.% change in int’l rev.Selected PTOs, performance 1997/98Selected PTOs, performance 1997/98

Note: Based on 1998 international outgoing traffic and revenue from international operations.For Sprint, MCI WorldCom and AT&T, data relates to 1997. 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”.

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”

AT&T/BT, 17.2%

GlobalOne, 14.3%

MCI WorldCom,Telefonica, TP,

11.1% Cable & Wireless, 4.7%

Others, 47.3%

Total, 1997: 81.2 bn minutes

Unisource, 5.4%

Emerging global alliances, Emerging global alliances, shares of shares of int’l traffic marketint’l traffic market

18Int’l Interconnect: 1. Traffic TrendsInt’l Interconnect: 1. Traffic Trends

Emerging global alliances:Emerging global alliances:Recent developmentsRecent 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 WorldComDeutsche Telekom’s bid for Telecom Italia fails;

Olivetti’s succeedsCable & Wireless re-positioning itself as supplier of

data servicesTelia and TeleNor merge

35%46%

74% 85%

1990 1995 1998 2005

Mono-poly

Compe-tition

4 14 29 48

Number of countries permitting more than one operator for international

telephony

Percentage of outgoing international Percentage of outgoing international traffic open to competitiontraffic open to competition

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.

Level of competition in international Level of competition in international services in WTO basic telecoms services in WTO basic telecoms agreementagreement

CompetitionMonopoly

Source: ITU Telecommunication Regulatory Database.

Countries permitting int’l competitionCountries permitting int’l competition

1990 1998 20 Israel1 Japan 1 Australia 21 Italy2 New Zealand 2 Austria 22 Japan3 UK 3 Belgium 23 Korea (Rep.)4 USA 4 Brunei D. 24 Malaysia

1995 5 Canada 25 Mexico1 Australia 6 Chile 26 Netherlands2 Canada (partial) 7 Colombia 27 New Zealand3 Colombia 8 DPR Congo 28 Norway4 Chile 9 Denmark 29 Peru5 Denmark 10 Dominican Rep. 30 Philippines6 Finland 11 El Salvador 31 Russia7 Japan 12 Finland 32 Somalia8 Korea (Rep.) 13 France 33 Spain (after Dec. 1998)9 Malaysia 14 Germany 34 Sweden

10 New Zealand 15 Ghana 35 Switzerland11 Philippines 16 Guatemala 36 Uganda12 Sweden 17 HK-China (after Dec 1998) 37 Ukraine13 UK 18 Indonesia 38 UK14 USA 19 Ireland (after Dec. 1999) 39 USA

Telecom Italia, int’l traffic Telecom Italia, int’l traffic trends, trends, billion minutesbillion minutes

1'000

1'500

2'000

2'500

3'000

3'500

1994 1995 1996 1997 1998

Incoming traffic

Outgoing traffic

1'799

2'193

2'4702'288

2'554 2'511 2'589 2'605

2'0181'751

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

ForecastActual

Telecom Italia, revenues from int’l callsTelecom Italia, revenues from int’l callsIn Billion LireIn Billion Lire

Source: Telecom Italia. Forecasts from Salomon Smith Barney.

Fixed charges, 20.7%

Domestic calls, 34.5%

International calls, 6.2%

Mobile, 22.1%

Equpt. 5.3%

Other 11.2%

Fixed charges, 21.5%

Domestic calls, 39.7%

International calls, 4.8%

Mobile, 37.0%

Equpt. 6.4%

Other 9.0%

Telecom Italia, revenues breakdownTelecom Italia, revenues breakdownIn Billion LireIn Billion Lire

1998199841.4 billion 41.4 billion LireLire

2000200043.2 billion 43.2 billion LireLire

Source: Telecom Italia. Forecasts from Salomon Smith Barney.

25Int’l Interconnect: 1. Traffic TrendsInt’l Interconnect: 1. Traffic Trends

International traffic trends:International traffic trends:ConclusionsConclusions

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

For more information ...For more information ... Publication launch:

10 October 1999(TELECOM ‘99)

Available on paper and on-line (PDF format)

Also available withdatabase on CD-ROM

Website:

http://www.itu.int/ti

Other reports launched at TELECOM ‘99Other reports launched at TELECOM ‘99 World Telecom Development Report 1999: Mobile Cellular

Trends in Telecom Reform 1999: Convergence & Regulation

Internet for Development (updated with latest data)