A synthetic approach to interconnection policy revision with the introduction of 3G mobile telecommunication

Abstract

As W-CDMA R5 (HSDPA) service became recently commercialized in Korea, it is claimed that new pricing methodology for the 3G mobile interconnection needs to be devised and established as soon as possible, but it is hard to find any former study about it. In this paper, a synthetic investigation into three aspects of new mobile telecommunication services - technique, market, and regulation - is conducted to verify the feasibility of new interconnection pricing methodology. In technical aspects, there are three major problems related to this: scheme of channel allocation, voice quality, and facility structure. First of all, due to the dynamic characteristics of W-CDMA and HSDPA channel allocation, it is very hard to come up with an appropriate common cost allocation method. In addition, there is no evidence to objectively demonstrate the superiority of 3G voice quality to that of 2G. And finally, more synthetic features of 3G facilities compared to the facilities composing 2G might lead to sharper confrontation among the market participants over time. In market aspects, the uncertainty of market dominance by W-CDMA is an important problem. Contrary to 2G CDMA technology, which had no competitors in Korean mobile telecommunication market, W-CDMA cannot avoid tough competition with 2G CDMA with EV-DO, brand-new WiBro, and EV-DO rA, and there is a possibility that the period of 3G service can be shortened because of its transitional feature to All-IP. In regulatory aspects, there are two major concerns: ex ante regulations and the level of interconnection charge. The interconnection charge regulations for the premature market belong to the category of ex ante regulations, and that can pose an obstacle in the early activation of the market. Under the current condition where 2G and 3G networks are used together, the possibility of arbitrary termination by terminating operators between 2G and 3G networks may cause harm to 2G, fixed carriers and retail users whe...