Transcript ECTA report

Enterprise communications:
steps towards an internal market
Ilsa Godlovitch
Enterprise communications roundtable
28 January 2014 Brussels
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Contents
 Context : Recent policy initiatives
 The end-user perspective
 How do corporations use ICT?
 How do corporations perceive the single market?
 Industrial applications of ICT: TVH – a case study
 The supply side
 How are business communications solutions supplied?
 Which access products are used?
 Case study on enterprise supply: BT Global Services
 Regulatory and commercial conditions for access
 Implications for policy
1
Connected Continent
 September 2013 draft Regulation concerning the ‘European single market
for electronic communications and to achieve a Connected Continent’ (the
‘Connected Continent’ proposals)
 Aims inter alia to ‘attain productivity gains associated with ICT use’
through ‘greater choice and quality of business inputs’ (Section 1.1
explanatory memorandum)
 Productivity gains estimated between €35-90bln per annum (Ecorys/TU
Delft ‘cost of non-Europe’ 2011, WIK ‘business communications’ 2013)
 Relevant provisions include
 Single EU authorisation’ (Chapter II); and
 Virtual wholesale access products (Chapter III(ii)) – proposes harmonised specifications
in Annex I for
i.
Virtual Unbundled Local Access (VULA)
ii.
IP bitstream
iii. Terminating segments of leased lines

Requires Commission Implementing Act for VULA by 2016
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European Commission Recommendations
 2007 Relevant Market Recommendation (under review 2014)
 Wholesale access for business primarily addressed through market 6 (terminating
segments of leased lines including ethernet)
 How should business access market/s be defined? Role of leased lines vs bitstream?
 2013 Recommendation on consistent approach to non-discrimination and
cost methodologies
 Explicitly covers markets 4 (wholesale physical access/unbundling) and 5 (wholesale
broadband access)
 Relevance to business?
 2005 European Commission Recommendations on leased lines
 Covers pricing and provisioning times – recommends maximum ceilings
 Still relevant? Applied?
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Contents
 Context : Recent policy initiatives
 The end-user perspective
 How do corporations use ICT?
 How do corporations perceive the single market?
 Industrial applications of ICT: TVH – a case study
 The supply side
 How are business communications solutions supplied?
 Which access products are used?
 BT Global Services – a case study on enterprise supply
 Regulatory and commercial conditions for access
 Implications for policy
4
How do corporations use ICT?
 Businesses are extensive users of fixed and mobile telephone services
and Internet, but are increasingly relying on ICT for all aspects of their
operations, eg
 High-qualtiy video-conferencing as a means of reducing travel costs
 Applications in the ‘cloud’
 Stock management and ‘just in time’ delivery
 E-commerce platforms
 Businesses typically require all sites (and nomadic workers) to be
connected via a secure ‘Wide Area Network’ (WAN)
 Other ‘applications’ provided over the top
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Business users’ experience of communications
 WIK end-user survey (more than 100 corporations) Jan 2013
 Business communications services usually constitute a bundle of different products and
solutions, ideally tailor-made for the company
 Nearly 70% would prefer to use a single supplier for most or all communications. Only
5% of those preferring multiple suppliers prefer to source on national basis
 Fewer than 20% of respondents considered that several suppliers were generally able to
make suitable offer. 46% claimed it was rare to have more than 1 or 2 suitable suppliers
 Most common problem inability to purchase fixed and mobile services from same
supplier. More than 40% cited problems finding supplier to cover all relevant sites or
provide consistent services across all countries
 Switching cited as another major concern
 Findings mirror ERG business end-user survey (2009)
 Consistent with CMT end-user survey (2011) – incumbent share increases
with number of sites in Spain
 CSMG for Ofcom (2013) end-users cited problems with competition for very
high bandwidth leased lines in UK except in London business districts
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Incumbent share increases with number of sites
 Example: Telefonica’s market share by number of sites and customer bill
Customer Bill
1 site
2-5 sites
6-10 sites
11 and more sites
Total
Less than 600
45-60%
45-60%
1-5%
<1%
45-60%
From 600 to 1.500
45-60%
>75%
5-15%
<1%
45-60%
From 1.500 to 6.000
35-45%
>75%
45-60%
5-15%
45-60%
From 6.000 – 12.000
15-25%
>75%
>75%
25-35%
45-60%
From 12.000 – 30.000
15-25%
60-75%
>75%
45-60%
45-60%
From 30.000 to 100.000
5-15%
35-45%
60-75%
60-75%
45-60%
From 100.000 to 300.000 5-15%
15-25%
45-60%
60-75%
45-60%
More than 300.000
5-15%
15-25%
25-35%
>75%
60-75%
Total
35-45%
60-75%
60-75%
>75%
45-60%
Source: CMT (2011)
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TVH: a case study
 TVH is a global supplier of parts of industrial vehicles such as fork lift
trucks, agricultural equipment, headquartered in Belgium
 Customers in more than 170 countries and €1bln turnover (of which 60% in
Europe)
 Employs 4,000 people worldwide including 1,500 in Belgium, and 700 in a
US (Kansas) call centre
 Sites range from major centres (head office, warehouses, call centre and
data centres) to smaller offices with 2-3 staff. Large travelling salesforce
 Technology used throughout provisioning process
 online orders automatically transmitted to warehouses and transport company
 Just in time’ delivery with ‘track and trace’
 Cloud-based applications accessible to all staff including travelling salesforce
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TVH: a case study
 100 premises connected to a corporate wide area network (WAN)
 Connectivity depends on requirements of each site
 Large sites have two fibre connections with symmetric bandwidth and MPLS
functionality
 Sites with more than 10 people have MPLS main line and Internet back-up
 Elsewhere, business-grade DSL may suffice
 30% of sites rely on DSL alone. Majority served by fibre with DSL back-up
 Decisions about connectivity rest with supplier (Easynet) – TVH’s main
concern is not with communications, but the performance of applications
 Satisfied with supplier, but has experienced numerous problems with
underlying access
 100 working days to connect new warehouse just outside Liege
 More than 3 months to connect fibre to Italian headquarters
 2 months in NL to pass cable from one side of road to other
 “We have to plan everything according to connectivity rather than business
needs”
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Contents
 Context : Recent policy initiatives
 The end-user perspective
 How do corporations use ICT?
 How do corporations perceive the single market?
 Industrial applications of ICT: TVH – a case study
 The supply side
 How are business communications solutions supplied?
 Which access products are used?
 BT Global Services – a case study on enterprise supply
 Regulatory and commercial conditions for access
 Implications for policy
10
How are business communications supplied?
Gartner magic quadrant for communications
outsourcing and professional services
 Certain operators
specialise in provisioning
to major enterprises
 Gartner ‘magic quadrant’
lists largest global
suppliers of
communications and IT
solutions to companies
 Within Europe, smaller
business providers may
target market segments
Gartner: October 2013
11
Which services do enterprise providers supply?
 Enterprise providers offer ‘value added’ services over the top of connectivity
 Primary focus provisioning ‘Wide area network’ (WAN) and services such as
telephony, Internet access, web hosting, data warehousing
 WAN is a common and secure ‘platform’ over which services flow
 Multi-protocol label switching (MPLS) converts all traffic to IP, routes efficiently
 WAN may also be created using a common ‘ethernet’ interface
 For less business-critical sites, secure connectivity can also be provided via
the Internet through virtual private networks (VPN)
 Enterprise providers may offer a range of solutions
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How are services provided?
 Enterprise services are ‘value add’, but depend on connectivity
 Most enterprise providers have extensive fibre backbone networks and
fibre access networks in specific districts with high business demand
 Access is needed to connect sites to the backbone
 Outside countries of incumbent operation and select dense business
districts where they may have their own fibre, third party access used
 WIK (2013) business supplier interviews suggest:
 c90% access sourced from third parties of which more than 75% from local incumbents
 Main access products are leased lines and bitstream
 Local access (eg unbundling, VULA) used instead of regional bitstream in countries with
more dense network reach – eg co-existing residential business
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Which access products are most used
for widespread coverage?
 Leased lines
 Leased lines provide dedicated (uncontended) symmetric transmission capacity between
fixed locations
 Leased lines are used both as “access” links connecting major business sites and internally
within the networks of fixed and mobile broadband providers
 Leased lines are an active product that can be provided over copper (low bandwidths) or
fibre
 Traditional interfaces (TDM) are widely used, but in decline, to be replaced by more modern
interfaces – primarily native Ethernet. Wavelength (WDM) technology is being introduced
 Leased lines can be available at various lengths (ie requiring little or considerable own
backbone)
 Bitstream (wholesale broadband access)
 Bitstream is an active product which is normally asymmetric and contended
 Bitstream may be offered with either IP or native ethernet interface. Ethernet interfaces allow
greater control by the service provider
 Bitstream may be offered at local (or more commonly) regional or national handover points
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Leased lines, VULA and bitstream: schematic diagrams
VULA
Bitstream
regional
(aggregation)
national
(core)
Fibre
local
(access)
Fibre
IPRouter
Leased Lines (Ethernet)
Fibre
Fibre
Fibre
IPRouter
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BTGS case study: common platform to all sites
Source: BT Global Services
 MPLS (multiprotocol label switching) provides enables efficient routing
over multiple technologies including ADSL, ATM, ethernet. BT IP connect
offers layer 3 handoff. BT ethernet connect offers layer 2 handoff.
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BTGS case study: access usage for MPLS
Source: BT Global Services
 Internal data and BT projections show a trend away from traditional
interface leased lines towards fibre-based ethernet leased lines
 DSL use is stable or declining
 Trends match those of other providers in data from previous WIK research
17
Access mix varies by country
Source: BT Global Services
 The ‘mix’ of access in each country may depend on:
 Customer requirements eg small vs large sites
 Availability of services – ethernet leased lines are preferred but may not be available on
attractive terms
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As speeds increase, ethernet predominates
 Traditional interfaces are
still used for very low speed
leased lines (<2Mbit/s)
 Ethernet leased lines
predominate at higher
speeds
 Data similar to those from
other operators in previous
WIK research
 Overall trend towards higher
speed lines for business
Source: BT Global Services
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BTGS case study: access costs
Source: BT Global Services
 Access constitutes on average 60% of total networking costs in Europe
(excluding UK)
 As high as 80% in Eastern Europe, just above 40% in the UK
 Level of cost may depend on access mix (DSL cheaper than fibre leased
lines), network depth, but also on regulation (esp price controls)
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BTGS Case study: oil and gas
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BTGS case study: oil and gas
 HQs and distribution offices:
 Requires high capacity for voice/data and video conferencing + internal comms
 Business critical activities necessitate fixed dedicated lines, high SLA
 Petrol stations
 Less demanding than other offices. Voice, email, inventory and payment clearance
 Business-grade DSL lines may suffice
 Exploration
 Requires connectivity (voice, data) to offshore exploration units
 VSAT may be used
 Web hosting (public interface with customers)
 Service requires high upspeeds (pushing data to clients) and low downspeeds
 Typically requires fixed ethernet fibre
 Call centres and data centres
 Sites require very high bandwidth – often in 1-10G range
 Typically requires dedicated ethernet fibre
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BTGS case study
 BTGS is a supplier to a multinational oil and gas company
 Contract is for Global WAN, Security and Webfiltering
 Most significant presence in France, Germany, and US, but also dispersed
presence elsewhere in Europe and beyond
 Nearly 800 access circuits of which 28% are supplied through ethernet
leased lines, 25% through traditional leased lines and 47% through DSL.
 70% of the DSL lines are concentrated in a single country where the
company is headquartered. This is because of the high concentration of
retail outlets (petrol stations) in that country
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Contents
 Context : Recent policy initiatives
 The end-user perspective
 How do corporations use ICT?
 How do corporations perceive the single market?
 Industrial applications of ICT: TVH – a case study
 The supply side
 How are business communications solutions supplied?
 Which access products are used?
 Case study on enterprise supply: BT Global Services
 Regulatory and commercial conditions for access
 Implications for policy
24
Current regulation of business inputs highly varied –
treatment of ethernet, segmentation by speed/geography
 Two markets in the existing relevant market recommendation are relevant
to business inputs – market 6 (terminating segments of LL/ethernet) and
market 5 (bitstream/WBA)
 Terminating segments of leased lines (market 6)
 Several NRAs segment the market by speed – variously at 2Mbit/s (Eastern Europe),
155Mbit/s Germany), 1Gbit/s – others do not segment by speed or removed speed
segmentation eg UK, Sweden
 A few NRAs segment by geography eg UK excludes parts of London, most do not
 Some NRAs consider Ethernet as a low cost substitute for tradtional leased lines and
apply tight price controls, others consider new/risky and apply retail minus
 Business-grade bitstream (market 5)
 Some NRAs have identified as separate segment with different characteristics (technical
and geographic) compared with residential eg Austria or included in wider business
access market eg NL. Most do not distinguish
25
Pan-European approaches to market 6
(terminating segments of leased lines/ethernet)
Country
Regulated PPCs available?
Cost orientation?
AT
Geographically segmented with major cities excluded
and no regulation >155Mbit/s
BE
Yes, awaiting BIPT decision following consultation
Yes
CZ
No regulation >2Mbit/s (3 criteria test not met)
No price control
DE
Yes, but no regulation >155Mbit/s
Yes
DK
Yes
Copper <2Mbit/s but not above
ES
Yes (but no lines >70km traditional interfaces or
>35km Ethernet interfaces)
Copper traditional, retail minus for
Ethernet
FR
Yes
No cost orientation >10Mbit/s
HU
No regulation >2Mbit/s (3 criteria test not met)
No price control
IE
Yes, but no regulation >155Mbit/s for trunk between
certain listed cities.
Yes
IT
Terminating segment of leased lines are regulated (but Yes, price cap (less stringent for WES and
lines to mobile operators excluded)
>155Mbit/s)
NL
Yes
Yes
PL
Yes
Yes
PT
Yes
Yes, but not WES (retail minus)
RO
No regulation >2Mbit/s (3 criteria test not met)
No
SE
Yes (proposed up to 30Mbit/s, DWDM unregulated)
Yes (where regulation applied)
UK
Yes (limited geographic segmentation), no remedies
>1Gbit/s
Yes
Source: WIK-Consult (data from 2012)
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Challenging speed boundaries
 Many regulators have segmented leased line markets on the basis of speed
and deregulated high speed leased lines, but this may not be an appropriate
segmentation
1. Evidence suggests that at least below 1Gbit/s costs do not significantly
vary with speeds.
• Ofcom business communications market review. Consistent with results of
WIK BU-LRIC cost assessments
2. Where higher speed lines have been left unregulated (or not costoriented), wholesale charges seem to be considerably higher than
where they have been regulated
27
Benchmarks for ethernet leased lines
UK: 10/100Mbit/s 25km EAD with mainlink
DE: Ethernet over SDH (native ethernet not available).
Weighted average of backbone, regional, country
NL: assumed weighted average of different regions
UK: EAD circuits with mainlink
DE: Ethernet over SDH (native ethernet not available).
Weighted average of backbone, regional, country
NL: assumed 100% metro for short distance
Source: WIK-Consult calculations based on reference offer charges May 2013
 Charges for high speeds (>100Mbit/s) significantly greater in Italy, Spain and
Germany
28
Competitive conditions MAY vary based on geography:
business districts vs elsewhere
 CSMG (2013) for Ofcom found through end-user interviews that very high
bandwidth leased lines (>1Gbit/s) were competitively supplied in certain
parts of London and surrounding area (business districts), but not outside,
irrespective of speed
 This pattern (competitive supply in business districts, but not outside for
without restriction) is consistent with:
 Pattern of parallel fibre deployment and competitive wholesale supply concentrated
around business districts (financial centres, business parks)
 Commission approach to geographic segmentation for residential markets (based on
relevant duplicate infrastructure, not speed)
 The observation that companies with dispersed sites nationwide and cross-border are
less well served (cf CMT (2011)) than those with fewer sites
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False positives: why might NRAs find
‘competition’ in high speed leased lines?
 Market shares calculated across the national territory without excluding (if
present) very dense business districts are likely to be misleading
 In a typical market, where high bandwidth lines are competitively supplied,
but only in business districts, the incumbent share will be very low in
business districts, but very high elsewhere.
 An incumbent may have an incentive to refuse to supply or supply on poor
terms high speed lines in regions without competitive constraint, and/or to
discriminate in its own favour – to protect its position for multi-site business
Effect of segmentation on market shares: indicative illustration
Lines
Business district
Non-business district
Low speed
High speed
Low speed
High speed
Incumbent
25
25
25
25
Competitor
15
75
0
10
Market shares High speed (nationwide) Low speed (nationwide) Business district Non-business
Incumbent
37%
77%
36%
83%
Competitor
63%
23%
64%
17%
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Contents
 Context : Recent policy initiatives
 The end-user perspective
 How do corporations use ICT?
 How do corporations perceive the single market?
 Industrial applications of ICT: TVH – a case study
 The supply side
 How are business communications solutions supplied?
 Which access products are used?
 Case study on enterprise supply: BT Global Services
 Regulatory and commercial conditions for access
 Implications for policy
31
Implications for ‘connected continent’ virtual products
 Cross-border, multi-site aspects of enterprise demand and supply provides
a strong rationale for greater consistency in regulatory treatment of the
underlying wholesale inputs
 Nature of main wholesale business inputs also more uniform than in
residential markets
 Connected Continent virtual products ‘go in right direction’, but:
 Do not properly distinguish between residential and business wholesale products
 Do not prioritise business products
 Do not address ‘enforcement’ side – ie consistent approach to market analyses
 Recommendation 1 – Connected Continent
 Refocus virtual access products around business access (offer 3: symmetric dedicated
+ offer 2bis: high quality asymmetric contended).
 Require harmonisation of specifications and approach towards relevant market
definitions associated with business access.
32
Implications for Recommendation on relevant markets
 Consistent and correct definitions for business access in relevant market
Recommendation are crucial in achieving consistent outcomes
 There is a need to provide concrete guidance on approaches to speed and
geographic segmentation as well as the treatment of ethernet
 Product market definitions should align with eventual outcomes for Annex I
‘connected continent’
 Recommendation 2
 Define complementary markets or segments for (i) symmetric dedicated capacity with
business-grade specifications and SLA; and (ii) high-quality asymmetric contended
capacity with business-grade SLA
 Clarify that ethernet leased lines are a form of ‘symmetric dedicated capacity’, which do
not in principle warrant a different approach from those of traditional interfaces.
 Clarify that geographic segmentation may be justified in dense business districts
characterised by multiple business fibre access lines and commercial wholesale supply.
Segmentation on the basis of speed is not normally warranted, except in the presence
of material differences in cost.
33
Is a new Recommendation needed for business?
 Recent European Commission Recommendations (Termination 2009, NGA
2010, costing and non-discrimination 2013) have focused primarily on
voice and residential broadband
 WIK benchmarks and interviews suggest issues raised in the 2005 leased
lines recommendation (prices and provisioning times) are still relevant, but
the parameters are outdated
 ‘Connected Continent’, if approved will deal with product descriptions, but
not access conditions such as costs, SLAs, non-discrimination
 Recommendation 3
 Adopt recommendation on business access updating previous 2005 guidance on best
practice provisioning and charging for business access products in SMP areas EU-wide.
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[email protected]
WIK-Consult GmbH
Postfach 2000
53588 Bad Honnef
Deutschland
Tel.:+49 2224-9225-0
Fax: +49 2224-9225-68
eMail: [email protected]
www.wik-consult.com
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Background
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Benchmarking Ethernet leased lines: service levels
Reference offer
bandwidths
QoS (delay, jitter,
packet loss)
Provisioning time and
penalties
Fault repair and
penalties
Germany
10, 100 (RO
regulated)
1Gbit/s, 10Gbit/s
(unregulated)
Delay <30ms
Variation Voice 2ms,
other 5ms
Frame loss <0.1%
Provisioning date confirmed 20
wk.days
Provisioning
8 weeks – 6 months
Penalties not in RO
20% connection 16-30 days,
increasing thereafter
24h after fault message
Not in RO
Express repair 8 hours
(extra charge)
>12h late repair 10%
monthly charge increading
to max 20%
Italy
10, 96,150 Mbit/s
1Gbit/s (10Gbit/s no
RO)
No information
No info re order confirmation
48-90 days (95%)
100 days (100%)
Penalties: 1-2 days 30% rental
increasing
5 hours (broken line)
Netherlands
10, 100Mbit/s
1Gbit/s
Not guaranteed
Delay <10ms
Jitter <10ms
Frame loss <0.05%
Order confirmation 1 day
Provisioning date confirmed 15
days after order accepted
1-6 days late 20% rental standard
or 50% advanced
Standard 90% in 8 hours,
100% within 12 hours
Advanced 90% within 4,
100% in 8
Delayed repair (from >2
hours) up to 60% discount
Spain
10, 100Mbit/s
1Gbit/s, 10GBit/s
(no RO)
Delay <10ms
Jitter: 20 microsec
Order confirmed 15 days
Provisioning 60 days
Penalties: 5% connection charge
per day delayed.
6-8 hours
10, 100Mbit./s,
1Gbit/s
10Gbit/s (OSA)
No information
Order confirmed 8 days (next day
in practice)
Provisioned 30 days standard
increasing if installations required
resulting in 60 day average
1 monthly rental for each day late
5 hours
UK
<=4 hours late 25%
monthly rental
4-8hours 100%
Increasing
12.5-16.7% monthly charge
per hour
15% monthly rental for
each fault + 15% per hour
in excess
37
Recommended price ceilings for 5km leased lines:
trends towards lower charges, higher speeds
 Between 1999 and 2005 recommended charge caps for 34Mbit/s more than halved to
€963 (incl connection) and a new cap for 155Mbit/s was introduced as equipment
delivered higher speeds for same cost.
 If cost trends continued 5km 155Mbit/s traditional interface (more costly than ethernet)
would be capped at <€500 per month
38
How do charges compare with 2005
Recommendations?
 Charges for 100Mbit/s Ethernet LL in Italy exceed proposed maximum charges in
for 155Mbit/s traditional interface in the Commission 2005 Recommendation
 Only the UK and NL would meet the “adjusted” benchmark charge cap assuming
charge reductions for a given speed over time as technologies evolve
39
Recommended provisioning times: how do current
standards compare
 The European Commission Recommendation of 2005 advised that 95% of
orders for 34Mbit/s leased lines should be provisioned within 52 calendar
days (7.5 weeks approx 37 working days) from user transmitting the order
 Measurement is difficult because the contractual terms vary and
standardised KPIs are not available
 Given available information at least Italy, Germany, and Spain are likely to
have provisioning times for ethernet leased lines in excess of the 2005
Recommendation
40