The Under-serviced Area Provider

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1 The Under-serviced Area D. W. Ngwenya and H.E. Hanrahan University of Pretoria, South Africa University of the Witwatersrand, South Africa Abstract: Under-serviced Area (USAP) telecommunications licences are a special form of local access provider licence under the South African Telecommunications Amendment Act of USAP licences are intended to facilitate small business participation in telecommunications and to promote universal access and universal service. This paper examines key issues relating to USAP licences. While the network technology to support the model exists, principal concerns centre on the sustainability of business models and on operations support. * Keywords: Telecommunications Licence, Local, Universal, Universal. I. INTRODUCTION The South African Telecommunications Amendment Act makes provision for several categories of telecommunications licences, including international, national long distance and local access service provision [1]. The last category allows services to be provided to customers in a defined geographical area and to interconnect with the networks of other licensees. A local access provider (LAP) using legacy circuit switched technology would require an end exchange which may be owned or leased. A LAP using next generation network technology requires a packet mode access network, an access gateway and a Call Agent. The Act also defines a new class of licence for provisioning of telecommunications services or facilities in under-serviced areas. An under-serviced area is currently defined as geographic area having less than 5% teledensity. Initially designated areas cover several hundreds square kilometres. These areas designated as under-serviced consist primarily of low income and previously disadvantaged communities. The licensees are small businesses and they serve as local operators in the areas served. The objectives of this class of licence are to stimulate SMMEs involvement in the telecommunications industry, to advance universal access, and to facilitate economic development in the designated areas [2]. The licence conditions allow the under-serviced area provider (USAP) to offer any telecommunications service. Wireless access is effectively restricted to the serving area. The USAP is entitled to obtain interconnection with a licensed public telecommunications service provider and by so doing offer its customers national and international services. A USAP is thus a particular licensing dispensation for a local access provider. * This paper has been partially sponsored by Unisys South Africa This paper explores issues to be faced by would-be under-serviced area providers. Section II discusses the policy intent underlying the Under-serviced Area. Section III provides the context for discussion of issues via a description of possible physical architectures used by an idealised USAP. Section IV identified the roles within the USAP domain and outside as a basis for possible business models for the USAP. The role of the Universal Fund is examined. Section V examines issues in operations support relevant to the USAP. II. POLICY BACKGROUND The first policy objective underlying the USAP as a special class of local access provider licence is to encourage small, medium and micro enterprise (SMME) participation in the telecommunications industry. Participation is in a service provider role in an under-serviced area. The USAPs are therefore forced to operate in geographic areas where the level of economic activity is low. As there may already be a teledensity of up to 5%, an incumbent operator is also active in the area. In addition, there may be large-scale churn on the lines that the incumbent has already installed. The provision of telecommunications infrastructure is a necessary but not sufficient condition for stimulating economic activity. Licensing SMMEs as local area operators required other interventions. In the business model we examine the role of the Universal Fund as one means. Measures must be designed to ensure sustainability and growth. A possible model is to link the USAP venture with another intervention to facilitate economic activity. Expanding Universal is a stated aim of the USAP licences. The technical means of providing universal access are public payphones and telecentres. In addition, access to Internet services ( and Web-based services) is envisaged via telecentres. Should the USAP venture be successful, Universal objectives will be met. However, if the USAP business model is not viable, failure to extend Universal is inevitable. Universal service expansion is a longer-term objective of the USAP licences. The envisaged level of Universal is basic telephony in every home. Progress towards Universal is critically dependent on increase of economic activity in the area served. We therefore conclude that it is critical that economic activity be stimulated in the under-serviced area and the mere presence of a new telco is not in itself sufficient. Additional supply-side measures are essential. III. PHYSICAL ARCHITECTURE FOR USAP The ITU-T model for access network boundary, as shown in Figure 1, depicts a separation between the service node (SN) and the access network (AN).

2 The SN is described as the entity generating the service transported across the AN to the service user. It provides access to various switched and/or permanent telecommunications services. User UNI AN TMN Q3 Network Network Operator SNI SN TMN Q3 Node Figure 1 network boundary The AN is an implementation comprising those entities which provide the required transport bearer capabilities for the provision of telecommunications services between a Node Interface (SNI) and each of the associated User-Network Interfaces (UNIs). The SNI is the interface between the AN and the SN. For narrow band PSTN traffic the most commonly used interface is V5.2. The V5.2 interface consists of multiple 2048Kbits/s (E1 links) interface. VB5.2 can be used for broadband. The UNI is located between the Network and the User. The Q3-interface is a standardized interface between the management function of the Network and its Telecommunication Management Network (TMN). Information between different TMN s is typically exchanged across a standardized -interface. A. Node Since the USAP is seen as a local access provider, we begin by identifying a physical reference model for expected USAP s access network. The physical reference model takes into account future voice and data convergence. We therefore suppose that the USAP s network is packet based. The envisioned access gateway unit (AGU) is shown in Figure 2. UNI Gateway Unit (Multiservice platform) Multiplexer Authatication, Authorisation,and Accounting Broadband Voice Gateway V5.2 (n x E1) NNI Broadband (Packet-based) SNI PSTN (Local Exchange) Figure 2 Envisioned USAP s access gatewat unit The AGU is a multiservice platform and it is the user entry point into the network, and concentrates various types of traffic (POTS, ISDN, ADSL, ATM, and IP), directing it to the packet network. In addition to terminating narrowband and broadband traffic, the AGU also handles user authentication, authorisation, and accounting (AAA) processes. The AGU typically consists of a Voice Gateway (VG), a Broadband Gateway (BAG), and an Multiplexer. The VG concentrates PSTN traffic and performs TDM-to-packet conversion, resulting in Voice over IP solution. The BAG enables interconnection to other packet-based networks, such as ISPs and NGNs. B. Network As mentioned before one of the objectives of this class of licence is to advance universal access. Universal access refers to all individuals having access to a telephone within a reasonable distance. Universal service means that every household has a telephone so that individuals can make calls from home [5], [6]. To present a broad definition, a telephone is replaced with telecommunications services to allow for future information services. It is easy to see that universal access is but an intermediary stage to universal service. The ultimate goal is universal service based on availability, accessibility, and affordability. If such is the case then a solution is required to evolve from universal access into universal service with ease. Universal access is commonly achieved through deployment of payphones and telecentres [7]. However, telecentres, in their current form, are physically concentrated making them unsuitable for services such as telemedicine, teleworking, and tele-education, which may require to be delivered in the user s location. Also, as members of the community obtain telephone lines in their homes the role of telecentres, in their current form, diminishes. The current form of telecentres is thus unattractive for business investment and does not facilitate evolvement from universal access to universal service. Therefore telecentres, in their current form, and payphones are proposed to USAP as a first phase. In the first phase the USAP may want a model that is tried and tested. The Next Generation Distributed Telecentre (NGDT) is proposed as an alternative to the traditional telecentre [8] and second phase of network deployment. This type of a telecentre is distributed over the area served. The same access can be used for a subscriber at home, for a service centre or even a payphone. All users share the same infrastructure. The technology used to implement the telecentre is essentially the same as that used for access to the NGN. The NGDT is therefore a virtual telecentre, implemented using access network technology for the NGN. The NGDT can be implemented using wireless technology. This allows distribution at a modest cost. Further, with wireless technology networks can be installed more quickly and easily than cable-based systems. Figure 3 shows an example of a physical architecture of a wireless-based NGDT. The wireless WAN of the NGDT

3 V D C 1 A _ + U P L I N K M e d a C o n e r L N K P W R N K R T S D consists of a number of remotely located LANs, which could be wired, wireless, or both. Each of the LANs is wirelessly connected to the Multipoint Base System (MBS) through a wireless bridge (). Several wireless standards can be used for propagation. xdsl based NGDT, which can be thought as multiple CPE per xdsl, is envisioned to enable utilisation of existing access copper plant in some dwellings. TMN Transport Network Gateway MBS Payphones Users: parties that use the service without contracting with the service provider, for example prepaid users, payphone users, and telecentre users. We also identify external business roleplayers as follows: Third Party : This allows other parties other than the service provide to offer Value Added s (VAS). They serve as a wholesaler to the service provider. Because of the low capital expenditure requirement of the USAP, we expect that an IN Platform or equivalent Application Server will be beyond the reach of the USAP. Provision of INtype value added services to the USAP s customers is likely to be outsourced. OSS : See section V. Trunking provider: in the case that the USAP area is a significant distance from the point of interconnect. Node(s) Fax Computer Centre Figure 3 Wireless-based NGDT SME/SOHO/ Home/School/etc C. s We define target services initially as being telephony, e- mail, and browser-based services. Over and above voice, this group allows basic messaging and broadband access. s such as telemedice and tele-education can be offered. s can be enhanced in time by offering value added services from third party providers. Consumer Subscriber/ User Subsidiary Facilities Retailing business Interconnect Connectivity business External Roleplayers 3 rd Party OSS/BSS Trunking IV. BUSINESS MODEL CONSIDERATIONS The main obstacle for small businesses is the initial capital and the cost of ownership. Therefore it is important to develop a business model that allows flexible ownership regime structure. A. Roleplayers We identify the roleplayers in providing and using services in designated underserved areas: Facilities : the party or parties that own the physical and software resources. This covers transmission, switching, control, and network management and operations. provider: the party to whom the users contract. This party has control over the subscriber profile. Interconnect provider: a licensed operator that provides access to national and international networks. Subsidiary service provider: for example telecentre operators, payphone operators, or parties that provide and maintain the physical connections to users. Subscriber: a party having a contract with the service provider. Figure 4 Business roles and relationships Figure 4 shows relationships of the various roleplayers. The primary role of the USAP is in the service provider domain. Payphones and telecentres may be owned and managed by the USAP or by other stakeholders. For example a shop owner and a community-based organisation are some examples of other stakeholders who can payphone kiosks or telecentres. For this reason it makes sense to add the subsidiary service provider role as a separate entity from the service provider. On the other hand some customers, for example businesses, may deal directly with the service provider. The separation of business roles as depicted in Figure 4 creates an attractive business model in that stakeholders need not be involved in all business domains. This reduces capital expenditure and the cost of ownership in each domain. B. Sustainability The sustainability of the business model is of prime concern. High rates of default resulted from the Telkom licensing model under which the metric is simply the lines rolled out. The operator is left with stranded investment. Similarly, only a few of the many telecentre models have been successful. The Telecom Amendment Act provides for a Universal Fund (USF), which receives its funds

4 from levies on the turnovers of the licensed operators. The only use of USF funds is the payment of subsidies to bodies including licensed operators with obligations to extend service to under-serviced areas or communities as well as to assist small businesses in underserved areas. On face value, the USF seems to be a source of funding for USAPs. Should the USF support capital expenditure or running expenses? An order of magnitude calculation is informative about the impact of the USF. Assume that the South African telecommunications market on which the Universal Levy is paid is R50bn per annum and the levy rate is 0.5%. The USF would have some R250m to disburse per annum. The form of subsidy could be a contribution toward capitalisation of the USAP or to supporting operating expenses on a per-line basis. Assume the USF devotes half its budget to subsidising USAPs. Assume a capital subsidy of R per line and operating subsidy at R1000 pa per qualifying line. Table 1 shows various cases, depending on the fraction of the subsidy devoted to capital. Table 1 Five splits of Subsidy between Capital and Operating Percent of Subsidy to Capex New Lines Enabled Operating Lines Subsidized These figures are illustrative rather than definitive. They indicate that, given the total size of the telecoms market, the subsidy is better applied in the short term to subsidising operating lines. That is lines that have a qualifying subscriber. V. OPERATIONS SUPPORT Figure 1 indicates TMN-compliant network management in the access network and service node. While the operations support system may not be strictly TMN compliant, it is essential to the USAP enterprise. Requirements for an Operations Support System (OSS) for the USAP must therefore be carefully established. The USAP, because of the low-income areas in which it operates, is likely to need to keep capital and operating expenditure to a minimum. Using the TMN FCAPS method, the minimum OSS requirements are: Fault Management: including the detection and repair of faults in the access network and service node. Configuration Management: updating subscriber profiles and routing and physical configuration information. If the USAP outsources the provision of value-added services to a provider with an IN-platform, the USAP s basic call control (PSTN end exchange, H.323 Gatekeper, or SIP Server) must be configured with the necessary trigger processing information. Accounting: collection of usage information and processing to determine customer billing and settlement data for interconnect and other outsourced providers. Performance Management: ensuring that end-to-end Quality of is not degraded in the USAP network. The USAP must operate at Quality of comparable with established telcos as their networks interconnect with other networks. Neither the USAP network subscriber nor a party in another network must see degraded service. Security Management: ensuring that the integrity of the USAP network is not compromised. Critical to defining OSS requirements is the interconnect agreement with the long distance carrier. Normal interconnect agreements cover the transfer of bearer signals and signalling across the point of interconnect. Interconnect agreements must cover the data to be transferred and the procedures to be followed under all envisaged conditions. VI. CONCLUSION The Under d Area telecommunications licence is an initiative to meet policy goals: enable SMMEs to participate in telecommunications, and to promote universal service and universal access. Numerous business models are possible but all are subject to the constraint that an underserved area is, until economic development succeeds, a low-income area. We therefore conclude that that subsidisation is likely to be inevitable. We also caution that operations support is a critical component of the USAP infrastructure. REFERENCES [1] Republic of South Africa Telecommunications Amendment Act No. 64, November [2] Republic of South Africa Department of Communications, Telecommunications Policy Directions Issued by Minister of Communications, also available at last accessed May [3] ITU-T Recommendation G.902 (1995), Framework Recommendation on Functional Network. [4] A. Azcorra, et al, IP/ATM Integrated s over Broadband Copper Technologies, IEEE Communications Magazine, pp 90 97, May [5] Discussion paper on Defination of universal service and universal access in Telecommunications in South Africa, published in the Government Gazzette, Vol. 400, No , 22 October [6] Universal access and universal service Discussion Paper (Input on defination of universal service). Available at last accessed 19 November [7] H.E. Hanrahan, Convergence, Digitisation and New Technologies: Toward the Next Generation Network, South African Journal of Information and Communication, vol 2, no1, pp 71-75, [8] L. Chalemba and G. Agnew, Network Architecture for the Next Generation Distributed Telecentre, SATNAC 2001 Conference Proceedings, CD-ROM ISBN , September 2001.

5 [9] D. Aron, K. Dunmore, F. PamPush, The Impact of the Unbundling Network Elements and the Internet on Telecommunications Infrastructure (Submitted to the Harvard Information Infrastructure Project), 4 December 1997, Also available at http: / ml, last accessed 19 November 2001 BIOGRAPHY Dumisa Ngwenya holds a BSc. (Physics/Maths) degree from the University of Swaziland, a BSc. (Engineering) from the University of Natal, and a MSc. (Engineering) from the University of Witswatersrand. At present he is a Senior Lecturer in Telecommunications and Computer Engineering at the University of Pretoria. Prior he has worked, at various positions, for the Swaziland Post and Telecommunications, Mintek, Alcatel Altech Telecoms, and Dimension Data. Hu Hanharan is Professor of Communications Engineering at Wits University. He leads the Centre for Telecommunications and s (CeTAS), a research and advanced teaching centre devoted to improving knowledge and practice in the evolving telecoms access networks and telecoms services.