ITU/BDT Regional Economic and Financial Forum of

Telecommunications/ICTs for Latin America and the Caribbean

UIT/BDT Foro Regional sobre Economía y Finanzas de
las Telecomunicaciones/TICs para América Latina y el Caribe
Nassau, Bahamas 21‐22 April/Abril 2015

International Mobile Roaming:

The ITU cost analysis technical paper and tool for NRAs

Simon Forge
SCF Associates Ltd

v2c

Simon Forge SCF Associates Ltd 2015 1

AGENDA

• Introduction – the roaming issue today

• Development of cost model – the basis of

roaming costs in the MNO – wholesale and retail

• Use cases for roaming

• Gathering the information for the cost model:

Surveying MNOs with a questionnaire on costs

Simon Forge SCF Associates Ltd 2015 2

 Does a cross‐region call (eg
in the EU) really cost so
much more than a
DOMESTIC national call for
voice or data?
Roaming
Charge
 Up to 4 times
domestic or more

 BOTH calling
Domestic Charge and called party
•calling party pays pay

Simon Forge SCF Associates Ltd 2015 3

 The Roaming Issue Today
•International Mobile Roaming incurs additional charges that too often are not
cost based but instead random and arbitrary in levels of retail tariffs.

•Action by regulators to counter overcharging for IMR requires that NRAs

understand the real MNO cost-basis for roaming - wholesale and retail

•In practice a simple form of forensic accounting is needed to analyse the IMR
cost structure and activity at an international level

•To understand both the national MNO costs and those within the international
wholesale IOTs (inter operator tariffs) requires international co-operation –
probably among a group of NRAs – perhaps across a region – and then further.

•IMR also relies on inter-MNO negotiation and co-operation in which wholesale

tariffs may be divorced from underlying costs. The net effect is to reduce the
efficiency effects of competition

•In an epoch when subscribers, and the economy increasingly depend on cost-
effective mobile communications, any such charges should be cost justified, or
else both the citizen and the economy suffer- an additional tax on the economy.

•Note that any counter-measures, by their nature, must be multi-country.

Simon Forge SCF Associates Ltd 2015 4
The Roaming Issue Today, Cont’d
•Asking MNOs to act responsibly has had little or no affect (in the experience
of the EU).

•In consequence, regulation for price caps may be necessary – as the EU has
found in its various caps on roaming progressively implemented since 2007.

•It may be useful to find a realistic estimate for a target level for the additional
cost of roaming above the domestic tariff

•This could be aimed at as the maximum limit – which is the model the EU uses
- of progressive caps on roaming charges

•Here, build on the success of ITU-T Recommendation D-98* and subsequent

other ITU Recommendations on the way, to move towards a standard ITU cost
model for IMR and thus eventually - cost-based IMR tariffs worldwide.

•AND if there is interest, further work using the model with MNOs may indicate
maximum levels that could be targeted for the IMR on-cost over domestic
tariffs – which in the long term may have a ‘glidepath’ towards zero.

* D- 98 (09/2012) Series D, General Tariff Principles: Charging in International Mobile Roaming

Simon Forge SCF Associates Ltd 2015 5
THE RESULT – One example: EU Roaming – a history of moving
towards cost‐oriented pricing for International Mobile Roaming
(IMR)

Forecast

Source: European Commission

Simon Forge SCF Associates Ltd 2015 6

 The financial structure of MNO roaming tariffs

Profit Margin Mark-up

on costs
(7BN Euro/
year*
Negotiated surcharges (IOTs) for wholesale for EU
termination of call between MNOs (under STIRA) MNOs in 2014)
and also with fixed line carriers
Cost- factors
Cost base for use of the Visited country’s that may be
cited as the
infrastructure, mobile and/or fixed drivers of
extra marginal
costs for
Cost base for use of the Home country’s international
infrastructure, mobile and/or fixed traffic, by
volume
*MNO estimates from Orange, Vodafone, O2, 12 Sep 2013
STIRA – Standard Terms for International Roaming Agreements IOT- Inter-Operator Tariff MTR -Mobile Termination Rate
Simon Forge SCF Associates Ltd 2015 7
 International roaming involves the following cost
centres
- which are extensions of existing domestic network operational systems
So roaming costs should be just an additional fraction of domestic
costs

IOTs - Wholesale
Roaming agreements
Operational
Major with each MNO & FNO for business processes
cost origination, carriage & for roaming and their
centres termination (negotiation support systems
& payments costs)

Business Support
Network Business Support
Network Services Opex
Equipment Services Capex
Equipment Capex (Processes operation,
Opex (Billing &
(Gateways, VLR, S/w licences,
(Salaries, NOC ops, customer care
mediation, cabling, NOC Salaries, Maintenance,
Maintenance, Software & h/w,
etc, procure/extend) Data centre
Site rents, etc) Data centre)
overheads, etc)

MNO= Mobile Network Operator, FNO= Fixed Network Operator

VLR= Visiting
Simon Forge SCF Associates LtdLocation
2015 Register, NOC =Network Operating Centre, & systems 8
Roaming costs
International roaming involves the following activities for equipment, systems
and operations:-
 Identification and verification
Collection/ transport of call data records (CDRs) with costs of retail billing for
roaming subscribers; may include specific real-time systems (e.g. for pre-paid
customers) such as CAMEL;
Interconnection & transit infrastructure costs for international calls &
payments to transit carriers;
Payments for call termination for visited MNO, at wholesale prices, with
discrepancy resolution;
Associated additional home network and business systems costs;
Costs of negotiation/upkeep of roaming agreements
For prepaid may also use a local recharge hub, or some agreement to use
local recharge cards for roaming top-up
Plus a slice of SG&A costs – proportional shared costs of company operations
Simon Forge SCF Associates Ltd 2015 9
Simplified mobile roaming infrastructure follows standard
roaming architecture (UMTS/ GSM)

Billing details Roamed (visited)

under roaming HLR
agreements network
as TAP file

Interconnect B Billing system(s)

ID registered Register ID CDRs

for visiting
VLR Core network
subscribers
+ Metering & discovery
elements
Transit
network (s) Gateway
Internet
International gateway
PSTN
calls Fixed
network
SIM card
Local and 3rd
country calling via Identifiers*
visited network
SCF ASSOCIATES LTD

HLR Home Location Register

CDR Call Data Record
VLR Visiting Location Register
TAP Transferred Account Procedure
SIM Subscriber Identification Module
Simon Forge SCF Associates Ltd 2015
* Specifically IMSI - International mobile subscriber identifier 10
Inside each MNO – there are the charging, billing
and customer care business processes in the BSS
Network Billing
Activation
operations Provisioning
Financial accounting package Operational planning
Network management

Charging Billing package:

•Network interface •Billing management module
•Mediation system •Input CDR processing module Customer care
Mobile •CDR silo •Roaming/interconnect module
Core •Billing / Rating module •CRM (Customer
Network •Billing data preparation relations management)
•Customer records application
International
•Supplementary services •Credit control
roaming
•Fraud detection and control •Debt treatment
data transfer
•Customer databases
as TAP Files, Bill preparation and printing SCF Associates Ltd

possibly
using EDI server
system
Customers
TAP Files under IOT*
roaming agreement

interconnected networks (PSTN, GSM/

GPRS/ 3GPP UMTS & LTE / WLAN) *IOT : Inter-operator tariffing
Roaming TAP Transferred account procedure
Simon Forge SCF Associates Ltd 2015 calls 11
Should this technical infrastructure cause far higher
roaming costs than domestic?

• The core issue is whether IMR calls have a different & higher cost
structure than national “offnet” calls i.e. calls terminated on
another network nationally
• Reasonable to expect increased network & support systems for
IMR capacity
• The nature of these extra costs is for network and billing systems
to cover international call transport, with wholesale invoicing and
retail billing
• Questionable whether cost differences are large for this type of
increment in operational load over that required for a national
increase in traffic minutes.
• Likely that any increase is a fraction not a multiple of current
national real costs
• Further investigation requires empirical cost accounting analysis
with a cost model that is MNO and technology neutral.
Simon Forge SCF Associates Ltd 2015 12
The basis of the cost model:
identifying which actions and assets roaming demands via USE
CASES drawn from actual behaviour:-
•To define the business processes, with staff and support infrastructure with its
software / hardware
•And therefore to identify the cost structures of IMR services with the elements,

Business Assets Use cases

MNO Roaming
Processes
View Subscriber
Sales perspective
Use case 4
& Back office
Marketing
& Finance Assets Use case 3
Customer care required Use case 2
Billing for Receive call
Network roaming Use case 1
ops Make call

Costs
of
Assets
Simon Forge SCF Associates Ltd 2015
used 13
Costing identification mechanisms
used in the roaming cost model
‐ A pragmatic ABC‐type approach
Overview (MNO) Identify relevant
level Business Processes

End-user level Identify Use Cases

Identify operational
Operational level
processes and systems

Cost level Identify Cost elements

Simon Forge SCF Associates Ltd 2015 14
An MNO runs on business processes
that are defined by the subscriber needs for using the mobile comms network,
with its business support services, and all the business operations

The major business processes for the MNO:-

•Acquire assets including real estate for BSTs, network equipment, IT systems, data centres, etc
•Build network
•Rollout network services and value added services – eg mapping, Apps Store, etc
•Operate networks and services
•Acquire subscribers
•Register subscribers
•Activate subscribers
•Provision subscribers
•Retain subscribers
•Billing for domestic and roaming services - plan, build, train, operate, maintain
•Customer care – services and infrastructure – plan, build, train, operate, maintain
•Handle network management, including repair teams - plan, build, train, operate, maintain
•Manage logistics for network elements
•Manage logistics for retail sales channels, especially handset inventory and supplier contracts
•Acquire, equip and manage tied or owned retail outlets
•Marketing, with promotions, handset subsidies, etc
•Sales, with contracts and/or prepaid
•Accounts, with accounts payable and payroll
•International negotiations for roaming agreements
•Regulatory negotiations and policy with spectrum acquisition
Each business process will breakdown into subsidiary or component business processes,
defined in aggregated mode through the user experience, often via ‘use-cases’
Simon Forge SCF Associates Ltd 2015 15
Key business processes
for the roaming phases
Handle sign–up when arrive in visited country

Common USE-CASES that define the

roaming business processes
1 Place call inside visited country a) to another mobile,
offnet or on-net or b) to a fixed line subscriber
For voice,
2 Place call to home – a) to a mobile or b) fixed termination data and
SMS
3 Receive call from home, a) from a mobile, or b) fixed source

4 Place call while in visited country to a 3rd country a) to a

mobile or b) to a fixed termination

Return to home network and sign -up

Simon Forge SCF Associates Ltd 2015 16
For analysis of the International Mobile Roaming service cost structures –
Use Case 1: Roaming mobile call made within visited country

Call type Cost elements Use Case Illustration

Country A Country B
A traveller
•Mobile origination in Subscriber
from Country A Visits (roams)
country B in home
in country B
goes to Country country A
B and makes a
•National transit in country B
call to a
subscriber in •Mobile termination in
country B country B

•Roaming specific costs –

Roaming mobile (technical & operational) eg
authentication and Verification
call made within Local
authorisation with home MNO Subscriber
visited country to signalling
local subscriber Visited
•Retail specific costs Home
MNO MNO
(technical & operational)
Network Network
Infrastructure Infrastructure

Simon Forge SCF Associates Ltd 2015 17

Use Case 2: Call from visited country back to home country
A traveller from country A A B
goes to country B and Home
MNO
makes a call back home
to a subscriber in country B.

Call type
International call back to home
country from visited country Visited MNO

Cost elements
•Mobile origination in country B
•International transit
•Mobile or fixed termination in country A
•Roaming specific costs (technical & operational)

•Retail specific costs (technical & operational)

Simon Forge SCF Associates Ltd 2015 18
 Use Case 3: Receiving a call in a visited country (from home or visited
country)
A traveller from country A
goes to country B and A B
receives a call - from either
of the countries A or B – so may
be a local or international call

Call type
Incoming call while roaming that
originates from home country, or,
from inside the visited country, and
may come from a mobile or a fixed
line phone
Cost elements

•Mobile termination in country B

•Possible International transit
•Roaming specific costs (technical & operational)
•Retail specific costs (technical & operational)
Simon Forge SCF Associates Ltd 2015 19
Use Case 4: Call to a third country while roaming
A Traveller from country A A B
goes to country B and
makes a call to a
subscriber in country C.
Note that country C may
or may not be in a region
where international
roaming prices are C
regulated.

Call type Cost elements

Call from inside a visited •Mobile origination in country B
country to a third country •International transit
•Mobile origination in country A
•International transit
•Mobile or fixed termination in country C
•Roaming specific costs (technical & operational)
•Retail specific costs (technical & operational)
Simon Forge SCF Associates Ltd 2015 20
The process of using the cost model

•Effective data gathering is the core activity – ie the data

collection process and interacting with MNOs:-

•Negotiations with MNOs - dealing with roaming

issues

•Interviews – the data collection process - a sample

questionnaire for NRAs for use with the cost model

•Organisation of data from MNOs

•Standard format for final report

Simon Forge SCF Associates Ltd 2015 21
Information Requirements for the Cost model: obtain
the underlying costs of roaming

• To make comparisons :- gather BOTH domestic retail rates and roaming

retail rates for visited countries - for voice, SMS & mobile data services

• Accumulate data for both prepaid and postpaid

• Gather both domestic wholesale rates and roaming wholesale rates for
voice, SMS and mobile data services

• To see how roaming traffic levels are changing – collect the historic traffic
volumes, for domestic and roaming, for voice, SMS and mobile data
services (eg over 2 years by quarter) so can compare.

Simon Forge SCF Associates Ltd 2015 22

 The Questionnaire survey process
• Select most suitable 4 or 5 MNOs for first piloting the data gathering
exercise – ie, the most likely to respond, where feedback will be rapid and
complete (ie good relationship with NRA and well organised internally, with
comprehensive accounting)

• Pilot test the questionnaire and spreadsheets with the selected MNOs

• Analyse pilot survey returns

• Use lessons learnt from feedback to improve the questionnaire before

proceeding to information gathering from all relevant MNOs across the
visited MNOs

• Proceed to full survey of all relevant MNOs

Simon Forge SCF Associates Ltd 2015 23

There are also questions for the NRA to consider

Objective of these questions is to judge whether NRAs are in a

position to gather and use the relevant costing information and so
implement a “Roam Like a Local” framework:-
 For wholesale roaming prices that domestic MNOs are charged by
visited MNOs - can the NRA obtain the wholesale pricing information?

 For the wholesale roaming prices that domestic MNOs can charge out
to foreign MNOs – can the NRA obtain the wholesale pricing?

 Has the NRA the authority to share information with NRAs from other
countries?

 Has the NRA the authority to regulate retail roaming prices charged by
domestic MNOs to their roaming subscribers?

 Does the NRA have the authority to regulate wholesale roaming prices
charged by domestic MNOs to visited MNOs?
Simon Forge SCF Associates Ltd 2015 24
What is needed to go forward ?
• Formulate an international mobile roaming
strategy
• GO Global:‐
 Endorse a common roaming cost model globally as a first step
to understanding the situation

 Introduce enforcement - progressive price caps

 Implement processes for enforcement:-

- Global recommendations on methodological principles

- Global Recommendations to enforce roaming price caps

Simon Forge SCF Associates Ltd 2015 25

 International Mobile Roaming:
The ITU cost analysis and tool for NRAs

ITU/BDT Regional Economic and Financial Forum of Telecommunications/ICTs for Latin

America and the Caribbean
UIT/BDT Foro Regional sobre Economía y Finanzas de
las Telecomunicaciones/TICs para América Latina y el Caribe
Nassau, Bahamas 21‐22 April/Abril 2015
Simon Forge SCF Associates Ltd 2015 26