12 March 2007 PT 2 TRIS Copenhagen Meeting 22-23 March 2007 IP Interconnection 12 March 2007 PT 2 TRIS Copenhagen Meeting 22-23 March 2007 Restricted - Confidential Information Access to and distribution of this document is restricted to the persons listed under the heading Security Classification Category*. This document is confidential to the Association and is subject to copyright protection. This document is to be used only for the purposes for which it has been supplied and information contained in it must not be disclosed or in any other way made available, in whole or in part, to persons other than those listed under Security Classification Category* without the prior written approval of the Association. The GSM MoU Association (“Association”) makes no representation, warranty or undertaking (express or implied) with respect to and does not accept any responsibility for, and hereby disclaims liability for the accuracy or completeness or timeliness of the information contained in this document. The information contained in this document may be subject to change without prior notice. © Copyright of the GSM MoU Association 2007 * All GSM Association meetings are conducted in full compliance with the GSM Association’s anti-trust compliance policy

IP Interconnection Key activities in 2007: GSME response to ERG consultation on IP Interconnection GSME response to BNetzA consultation on IP Interconnection GSMA participation in ITU-T GSR Economic study on IP Interworking by CRA/G+T will be released to public on 26/03/07 Continued engagement with stakeholders © Copyright of the GSM

Economic Study on IP Interconnection Migration to IP-based networks has raised a regulatory debate about appropriate IP interconnection charging models Key areas discussed: Potential for efficiency and welfare gains exist IP interconnect can help these gains be captured What are the policy implications © Copyright of the GSM

Key conclusions Current IP interconnection is burdened with inefficiency, and NGNs create the opportunity for large efficiency and welfare gains Efficient interconnect models will be determined by both efficient retail pricing, and the distribution of network costs To best capture potential NGN gains, interconnect pricing must be commercially flexible There is no single interconnect model that is universally superior. Multiple models will be required to capture efficiencies A “one-size-fits-all” interconnect model (as is contemplated with bill-and-keep (BAK)) would fail to capture potential gains, harming NGN investment incentives, and hindering the development of NGN services (including QoS-based services) Regulators should proceed cautiously and seek to provide regulatory certainty by offering assessment frameworks rather than prescribing solutions © Copyright of the GSM

Current vs. future IP Interconnect Future NGN interconnect enables economic efficiency improvements over current arrangements Today’s IP interconnect Future NGN interconnect Priority assigned by packet Quality of service (QoS) can be guaranteed, with different quality for different services Differential charging by priority Single party could provide virtual tunnel “QoS path” (e.g. IPX) for quality-critical services Best efforts quality Packets transported along multiple blind routes without regard for contents Packets can only be counted at network handoff points Interconnect pricing negotiated bilaterally at handoff, in isolation of retail pricing LARGE ECONOMIC EFFICIENCY GAINS POSSIBLE VERDICT: INEFFICIENT © Copyright of the GSM

Future IP interconnection will depend on establishing quality of service paths Labelling acts in same way as signalling Path QoS parameters in terms of latency, jitter and packet loss appropriate to the messages being exchanged Labelling produces QoS path for carriage across networks Access Network Access Network CPE adds and respects labels Customer Premises Equipment Customer Premises Equipment © Copyright of the GSM

Regulatory Implications Proceed cautiously No justification to propose remedies such as mandating a single IP interconnection model Too early to tell what model or models will prevail commercially Don’t prescribe a single charging model Multiple retail and wholesale models to support different services Industry developing appropriate IP interconnection models without the need for ex ante regulatory intervention Evolution to IP-based services will enhance competition Deployment of NGNs has the potential to change the way many services are delivered Regulators should not assume existing economic bottlenecks will be replicated Use existing regulatory frameworks Based on an objective analysis of the market, market reviews assessment of market power and general competition law © Copyright of the GSM

Contact Details Robindhra Mangtani Director GSM Association Mob: +44 7957 806261 Email: rmangtani@gsm.org © Copyright of the GSM