Discussion Papers

Anna Maria Doose, Dieter Elixmann, Rolf Schwab

Carrier (pre)selection in a changing market environment: challenges and opportunities

No. 340/April 2010 

Summary

The present study focuses on the business model of call-by-call and preselection (C(P)S) providers and addresses several issues. First, the technical basis of the provision of C(P)S services is illuminated. Second, as to the market importance of these services in Germany the following can be stated: Since 2006, a remarkable decrease in the use of C(P)S can be observed. Based on the total number of call minutes in Germany, the two categories still account for roughly 10% (approximately 19 billion minutes). Thus, the importance of the C(P)S business in Germany has shrunk by approximately two thirds in just five years.Third, the following characteristics describe the market structure: In total, 114 carrier codes are awarded to 105 companies (March 2010). These companies mainly belong to the following types of market participants: Specialists, i.e. companies with a focus on the C(P)S business, providers of information and value-added services, carriers with a local and regional focus (city carriers), national carriers with retail focus and carriers with wholesale and business focus. Preselection services are still offered by more than 30 companies. However, a significant proportion thereof can be attributed to resellers. Fourth, we have addressed legal and regulatory issues. For the future C(P)S business, the coming decisions of the Federal Network Agency with regard to the imposition of an obligation for German Telekom AG to enable C(P)S for their customers is of fundamental importance.

A key topic of the study are the medium and longer term aspects of the C(P)S business model. Fifth, we have therefore analysed in detail technical options regarding carrier selction in an NGN/IP-based network environment. Sixth, we have discussed several crucial factors for the C(P)S business modell „tomorrow": (1) migration to IP/NGN and the resulting (and possibly modified) regulation of wholesale services for C(P)S; (2) the development of DTAG access lines as a key parameter for the future market potential of C(P)S; (3) "forced migration" of the remaining PSTN access lines of DTAG; (4) substitution of fixed voice calls by mobile communications and VoIP; (5) future trends in retail prices (flat-rate services) and mobile termination rates; (6) image aspects (customer protection). One can think of several options for a re-positioning of the C(P)S business model in the future, e.g. increased investment in own network infrastructure, expanding the product portfolio by broadband access, "mobile virtual network operator" as an additional component for the C(P)S business, expanding the product portfolio by including activities from other markets. However, these variants in all likelihood will have little practical relevance. Overall, the positioning of C(P)S providers in the future will still be determined by the (extremely) short-term optimization of distributing traffic load to termination partners and the appropriate adjustments to market needs.

(Full version only available in German language)

Discussion Paper is available for download.

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