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Tuesday, June 19, 2007

Truphone and T-Mobile Interconnect - I see the argument, but they are both on thin ice here

The ongoing spat between T-Mobile and Truphone about interconnecting between VoIP and circuit-switched mobile is an interesting one. (See Truphone's side of the argument here)

In a nutshell -Truphone has managed to persuade the UK regulator to issue it with mobile numbers (07xxx) although it doesn't own/operate a cellular network. It argues that the increasing practicality & ubiquity of VoWLAN enables it to offer a "mobile telephony" service without a conventional mobile network.

The problem is that while this decision gives Truphone some unarguably reasonable things (a mobile number - ie the primary one that people tend to save in address books, and use for things like SMS), it also comes with some less-reasonable elements. In particular, as termination fees for calls to mobile phones are supposedly cost-based, it's unreasonable to expect the inbound operator to receive the same money for terminating on (cheaper) WiFi than on a cellular network. Thus T-Mobile resents paying the same to terminate calls on a Truphone number as it does on Vodafone or Orange numbers. It appears to be using a recent Ofcom ruling on mobile interconnect rates that contains the phrase "for connecting calls on their mobile networks".

I've written before about the likely complexities of numbering & interconnect in an FMC world. Given that there are plenty of VoWLAN providers that operate software on handsets, I'm not convinced that there should be any difference between those that manage to argue their way to an 07xxx number range, versus the others.

So at one level I can sort of see T-Mobile's point - and I can also see Truphone's point that T-Mo appears to be acting in a unilateral, heavy-handed fashion. And so this wouldn't be quite so much of a problem if it was just that Truphone didn't get full-whack interconnect fees for VoWLAN termination, but just the measly 0.21p per minute that T-Mo has reportedly offered. The real problem is that in some cases, Truphone incurs a lot more costs by forwarding the call to the user's "underlying" GSM number on the same phone when it's out of WiFi coverage. This is expensive, and therefore all forwarded calls cost Truphone much more than it gets out of T-Mo to begin with (" even when Truphone's costs are 9p per minute to terminate the call"). Mind you - that's actually terminating the call on someone else's mobile network, not Truphone's , so it's still not cut & dried.

But I reckon T-Mobile is in serious danger of painting itself into a corner on this, unless it is hoping to prompt a much wider review of FMC and wVoIP interconnect.

In order not to appear hypocritical, T-Mobile will also have to refuse to pay full-rate interconnect fees for BT Fusion or Orange Unik (or, er, T-Mobile US' UMA service) when they're in WiFi coverage, as that's also much cheaper to complete calls. Or to any of the mobile operators looking to extend their brand & number range out to PC-based VoIP clients.

And in response, any fixed operator would be well within their rights to refuse to pay mobile termination fees to T-Mobile for the privilege of completing those calls which divert to a voicemail server (again, cheap), rather than connecting to an actual end user over the cellular network.

And T-Mobile is also therefore implicitly staking a claim to only 0.21p per minute interconnect, when it transitions its cellular network to all-IP LTE, presumably around 2011. That will have to use VoIP, as circuit-switched telephony isn't supported. Put that date in your diaries, interconnect managers at Vodafone, Orange, O2 & 3 - as soon as it starts to support VoIPo3G, feel free to slash your payments. They've made their bed; let them lie in it.

Basically, T-Mobile's short-term hissy fit (although in some ways understandable) has long term ramifications. Up until now, everyone had operated on the unspoken principle of "mutually assured destruction" about the real complexities of interconnect and termination in an IP world. We had a standoff, with all players knowing that calling-party-pays, mobile vs fixed numbering, and VoIP interconnect were likely casualties of the fallout.

T-Mobile UK has just pressed the big red button withoiut thinking of the longer-term issues.


Anonymous said...

Excellent article Dean. Just one point for now. You mention that T-Mobile are setting a benchmark for termination charges when they transition to an IP network. Their argument is that the higher termination charges that 07xxx numbers invoke is due to the fact that the network operator for these numbers has the encumbrance of an expensive mobile network. This will remain the case when T-Mobile transition to an IP network. It is not the protocol ( GSM or IP ) that determines the termination charges, more the expense of the radio infrastructure.

Dean Bubley said...

Fair point Jack - although once the call is in the VoIP domain it makes it very difficult to determine how/where it terminates and therefore the applicable cost.

What happens if it's forked to two IP endpoints simultaneously, for example?

I suspect the long-term answer may end up being "Biller keeps all" rather than interconnect payments.

Aswath said...

Apropos Truphone's contention that it incurs high termination charges when it is forced to forward the call to the subscriber's mobile number, consider the case of a wireline customer has invoked call forwarding to a mobile number. Can the wireline operator then demand a higher termination fee? I am of the opinion that this particular point is spurious. Isn't the current practice that the cost incurred on the forwarded leg is incurred by the party that has invoked the call forwarding and not the original caller?

Jag said...

Isn't spectrum (and "lighting it up") a cost element that needs to be considered here? AFAIK Truphone have not invested in any radio spectrum, and therefore have no costs to recover from spectrum-related investment.

Fixed voice operators (i.e. those without cellular spectrum investment) don't charge cellular termination rates. It will be interesting how this issue gets resolved.

Just a thought.

Jag said...

Actually, I apologise Dean: you already considered spectrum (sometimes implicitly) in your argument. However, I'm not sure I fully understand your point about LTE. Surely even in an all-IP LTE world, spectrum is still an issue? i.e. whatever types of bearer you carry the voice in - whether it be PCM, AMR, VoIP etc. there is still a radio spectrum investment/licensing part that needs to be considered in the cost side of the equation yes?

Jag said...

Actually, I apologise again - as the last point I made was already made by commenter Jack above. Doh!

Dean Bubley said...

Jag, the problem is that spectrum is priced in different ways in different countries. Sometimes it's auctioned for the highest price, sometimes it's a beauty parade with the expectation of higher corporate tax revenues or whatever. That would then make any European harmonisation of interconnect regimes totally impossible.

Also, if that's really the way that operators think, presumably everyone's happy for bilateral interconnect agreements to be asymmetric?

And should interconnect be higher if the terminating operator is inefficient with its use of spectrum & needs more of it to complete the call? (eg codec choice, not deploying HSPA / LTE and so on)