Discussion Papers

Patrick Anell, Konrad Zoz

The implications of fixed to mobile substitution on the costs of the public switched telephone network (PSTN)

No. 304 / February 2008

Summary

The present study focuses on implications of fixed to mobile substitution on the costs of the public switched telephone network (PSTN) operated by the incumbent in Germany. The indicators used for this purpose are the interconnection charges, which are calcu-lated by the analytic cost model for the national core network (AKM). Because of fore-casting difficulties concerning the prospective development of substitutional effects and demand shifts, a scenario analysis was carried out to approximate the correlation be-tween fixed to mobile substitution and the costs of the PSTN. Relevant data sources for this analysis were public available data concerning traffic allocation and expert opinions.

To cover the demand for fixed line voice traffic and its allocation, a database was cre-ated estimating the geographical locations of MDFs and the number of subscribers connected to these. The estimation based on public available information like number and location of local access networks, population statistics and population density.

Main part of the study was generating possible scenarios about the prospective devel-opment of fixed to mobile substitution up until 2010. At this primarily three scenarios with different approximated values of fixed to mobile substitution were configured (sce-nario “low fixed to mobile substitution”, scenario “moderate fixed to mobile substitution” and scenario “high substitution”). The main problem regarding the development of the scenarios was the lack of data concerning the dimension of fixed to mobile substitution. The data available only covers traffic volume and number of access lines according to technology but no quantification of substitutional effects. However empirical evidence shows that the number of access lines and the traffic volumes in the PSTN are degreas-ing while the number of access lines and traffic volumes in mobile phone networks is increasing. This development can be interpreted partly as the result of fixed to mobile substitution, however it is caused by other effects as well. Additional to fixed to mobile substitution a couple of other effects reduce traffic volume in the incumbent’s PSTN. These effects are:

  • Substitution by competitors access lines
     
  • Substitution by voice over IP
     
  • Substitution by voice over broadcasting cable connections
     
  • Substitution of PSTN based narrowband internet access by broadband internet access

Our scenario analysis shows that fixed to mobile substitution hasn’t an outstanding im-pact on the interconnection fees. The effect on the PSTN traffic volume is even lower than the effects caused by other effects like substitution of PSTN based narrowband internet access by broadband internet access and substitution by competitors access lines.

The interconnection fees show only a moderate increase because of fixed to mobile substitution up until 2010. The increase differs from 2,23 % (scenario “low FMS”) and 9,16 % (scenario “high FMS”). Finally it is to assume, that a reduction of traffic volume in the incumbent’s PSTN caused by fixed to mobile substitution has no massive effects on the interconnection fees in Germany.

[only a german version available]

Discussion Paper is available for download.

To top  |  Print