Transcript IP Pricing and Interconnection in Korea by Inho Chung Korea Telecom

IP Pricing and
Interconnection in Korea
by Inho Chung
Korea Telecom
(The views in this slide do not necessarily represent the
views or policies of Korea Telecom)
April, 2001
Korea Telecom
1
The Trend of Internet in
Korea
1995
1996
1997
1998
1999
2000
(~Oct)
No of
ISPs
11
16
21
26
54
80
No of
Users
366
731
1,634
3,103
10,860
16,400
No of
Host
38,644
73,194
131,005
177,299
460,974
-
No of
Domain
569
2,644
8,045
26,166
207,023
511,003
( thousands)
April, 2001
Korea Telecom
2
The structure of Internet
Service Markets in Korea
• Access Service Providers
• Dial-up, ADSL, CATV, ISDN, Private line,
B-WLL, Satellite, Wireless Phone,Wireless
Internet
• Internet Service Providers
• IP/CPs
April, 2001
Korea Telecom
3
Structure of Internet
Networks
CP
CP
End
User
ISP
ASP
ASP
ISP
End
User
ASP
ISP
End
User
IX
End
User
ISP
ASP
CP
April, 2001
CP
Korea Telecom
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Pricing in Korean Internet
Markets
• ASP
• Different flat rate per month by speed
» Premium, Lite
• ISP
• Flat(All you can eat)
• IP/CP
• Free, flat rate, usage rate, mixed
• Internet advertisement
• Use infoshop service for billing and collecting fees
April, 2001
Korea Telecom
5
The Comparison of Internet Access
Services in Korea (at the end of 2000)
ISDN
ADSL
CATV MODEM
Satellite
Market share
7.8%
64.9%
27.0%
0.3%
Installation
and
subscription
cost (won)
90,000
~
100,000
30,000
~
80,000
40,000
~
570,000
Monthly
usage cost
(won)
41.6 per 277
seconds
40,000
~
50,000
40,000
~
50,000
20,000
April, 2001
Korea Telecom
6
The Interconnection
Arrangements in IP
•
•
•
•
Peer-to-peer bilateral
Hierarchical bilateral
Third-party administrator
Cooperative Arrangements
April, 2001
Korea Telecom
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Two Conditions for Peering to
Function Efficiently
• Equal level of connectivity between
networks
• Volumes of traffic or numbers of subscribers
• The costs of processing traffic less
than the costs of developing a
payment scheme
April, 2001
Korea Telecom
8
Developments in Peering
• In Oct. 1999 Digex Inc. and AGIS cut
off their peering connections due to a
dispute
• In 1997 UUNet, MCI, and BBN left the
CIX router
– 4 largest networks including above 3
controlled 85~95% of backbone traffic
by 1997
April, 2001
Korea Telecom
9
Peering to Transit
UUNet
Allows peering only
to large ISPs
– To qualify for
peering ISPs have
to have more than
four backbone
networks of DS-3
– Supplier-Supplier
Relationship
April, 2001
Forces small ISPs
to make transit
contracts
Korea Telecom
– Pay $ 2,000 per
month for
interconnection
service
– Customer-Supplier
Relationship
10
The Bright and Dark Sides of
This Trend
Bright side
Dark side
– Induces large ISPs
to invest their own
network
– Improves the
service quality and
realize economy of
scale
April, 2001
Korea Telecom
– Discourages new
ISPs to enter into
markets
– Possibility of large
ISPs’ abuse of
market power and
balkanization of
internet
11
Characteristics of Interconnection
in Korean IP Markets
• Indirect Interconnection through IX >
direct interconnection between ISP
• Mainly two types of interconnection
arrangements
• Peering
• Supplier-customer relationship
• No dominant system of settlement
between ISPs
April, 2001
Korea Telecom
12
Legal Principles in IP
Interconnection in Korea
•
•
Major common carriers are required
to provide interconnection to every
other service providers by law
Settlements for traffic
•
Voice network – data network
» No settlements
•
Data network – data network
» Pay accounting rates for traffic
April, 2001
Korea Telecom
13
Payment of Interconnection Line
Costs between Networks
Cases
April, 2001
KIX-CIX
Who pay for
interconnection line costs
CIX
CIX-CIX
Half and half
IX-ISP
ISP
ISP-ISP
Depends on negotiation
Korea Telecom
14
Settlement between ISPs
• ISPs mainly rent lines from common
carriers and pay for line rental
• No settlement between ISPs for traffic
in principle
• The large ISPs who are themselves
common carriers charge for their
service
• KT charge 1.2 times of line rental costs to
ISPs for delivering their traffics
April, 2001
Korea Telecom
15
Who should Pay for
Delivering Traffic?
• Difficult to distinguish which party
gets more benefit from the traffic
over internet
• E-mail or web-searching?
• The party who initiates the traffic
should pay for the delivery cost
• This is the case in delivering a telephone call
even with existence of externality
April, 2001
Korea Telecom
16
Which way to go?
• Do governments need to regulate
interconnection in IP markets?
– No public position on this issue
– Cyber Korea 21
• sharing of carriers’ revenue with ISPs for
their contribution to traffic increase
• Do we need to move from peering to
transit?
– Need more sophisticated settlement system
April, 2001
Korea Telecom
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