Hubber Strategy and Regulation Elsa Vinietta (23215130)
Sigit Haryadi
Telecommunications Engineering STEI ITB Bandung, Indonesia
[email protected]
Telecommunications Engineering STEI ITB Bandung, Indonesia
[email protected]
Abstract—Hubber system is proposed as a solution for Indonesian Telecommunications problem in the era of global trend, where the sustainability of Indonesian Telecommunications operators is threatened as the result of the evolvement of OTT communication service (IP-based) that substitutes the traditional operator’s communication services (non IP-based), SMS and telephony. The definition of hubber as proposed is: a hub for IP-based communication between OTT provider or global CDN with Indonesian network provider that is embodied in Telecommunications network and distributed data center infrastructure. As a Point of Interconnection, hubber has administrative aspect, business aspect, and technical aspect. Revenue forecasting has been done to Telkomsel – the largest Indonesian operator, and the result shows that Telkomsel’s revenue will go down for the first time in 2015. To achieve positive 7% revenue growth, Telkomsel has to set its revenue target from hubber of 4.83 trillion Rupiahs in 2015 with a steady increase in annual growth and reaching almost a tenfold increase in value, 46.14 trillion in 2020. Keywords— hubber, OTT, Telecommunications operators
I.
INTRODUCTION
The use of Internet has been growing rapidly in recent decades. The development of technologies has led to a trend of new service: OTT (over-the-top) service. While hubber concept has not been implemented in Indonesia, most Telco services through OTT can be consumed with low price or even free of charge because OTT providers rely their profits from advertisement, application sales, and inapp purchase. OTT services have been widely substituting the legacy services of telecom operators, especially telephone and SMS. Meanwhile, operators need to invest heavily to comply the traffic demand as the result of OTT trend, because the use of OTT is very intense and the delivered contents need very high bandwidth. In contrast, most Indonesian Internet services that are offered by Telco operators and popularly used are time based, for example, unlimited volume per month, so traffic from OTT does not contribute much to Telco operators’ revenue. If this trend continues, the national Telco operators will suffer losses, even though they are also needed by OTT providers to distribute their services to their end consumers. Meanwhile, in Indonesia, there has not been an effective regulation related to the relationship between the Telco
operators and the OTT service providers. II. STUDY OF THE OTT Over-the-top (OTT) service refers to the form of services provided via the Internet, by utilizing the traditional service provider network canal [1]. In line with the above definition, reference [2] defines OTT providers as service providers offering only Telecommunications services without dealing with Telecommunications networks needed to distribute them, and only rely on the worldwide Internet network. OTT services can be classified into communication services and content services [1]. OTT providing communication services is currently a problem for the Telco because those services substitute Telco’s legacy communication services such as telephony and SMS. With the presence of OTT, traffic on the network is no longer dominated by the voice traffic, but by the data [3]. These changes in characteristics of the traffic changes the revenue of Telco operators. Telco operators must continue to pay to increase data capacity in order to maintain service quality. Meanwhile, the gain by Telecommunications operators tend to have linear growth. Increased costs are not proportional to the increase in revenue. This makes Telco’s existences are being threatened by OTT. The emerging campaign of net neutrality principle became one factor that makes Telco operators do not have many options to react to the threat of OTT. The definition of net neutrality proposed by Tim Wu is "a principle behind an antidiscrimination in the networks that give users the right to use any network attachments or applications as long as they are not harmful.” There is a contradiction between Telco’s business benefit and neutrality of the network [4]. III.
STRATEGY PLANNING PHILOSOPHY
Increasing use of the Internet service in Indonesia in recent years turned out to be contrary to the national Telco’s revenue growth. According to data from Indonesian ICT ministry in 2013, the three major cellular operators in Indonesia, Telkom, Indosat and XL has been experiencing a dominant negative total revenue growth from 2007 to 2011 [5]. In particular, Telkomsel as the largest mobile Telco operator in Indonesia also experienced a decline in revenue growth of a few years back. Analysis of operational data from
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the annual report in the period of 2008 to 2014 revealed that the cause of the decline in revenue growth of Telkomsel is the same as the cause of a decrease in revenue of Telco operators in many countries. The growth of SMS and telephony service usage has been decreasing, on the other hand, data services usage has been experiencing rapid growth. As a consequence, a high investment for data service infrastructures should be performed, and that can be seen from the growing number of BTS 3G/4G from year to year, while revenue from data services, which generally are time based and not volume based, has been slowly growing, and those conditions cause a decrement in ARPU. Because the growth of users tends to decline, the growth of revenue is predicted to be declining as well. OTT is a service that occupies the data pipe belonging to Telco operators. To access global OTTs, the access to OTT data centers abroad is needed. Communication with the OTT which mostly have a client-server protocol (with or without CDN) requires that a message first sent OTT server and after that is sent to the destination, although the location of the sender and recipient are much closer geographically compared to OTT server location. That is one factor that makes communication in Indonesia inefficient. OTT-related problems are existed not only in Indonesia, but also in most countries in the world that have Internet access, both developed and developing countries. According to the reference [6], the countries in the world have been making and implementing national policies and regulations regarding OTT services according to their jurisdictions, which tries to answer the problems posed by the presence of OTT. Regulation that is applied in various countries has its respective context, motivation, and environment. From the philosophy explained above, hubber system design has a main objective to maintain Telco operators’ revenue growth by creating new sources of revenue and reducing cost. In addition to the main objective, hubber is also created to meet additional objectives, namely: • Enhancing information security and national sovereignty • Enhancing the resilience of the national economy • Improving the quality of national Telecommunications IV.
shifted upward and become the ‘top service’. These changes are illustrated with figure IV.1 and IV.2.
Figure IV.1 Traditional Telecommunications
Figure IV.2 Future Telecommunications
B. Regulation Planning of Hubber System Hubber network regulation proposed in this paper covers: the scope of hubber, hubber definition, hubber roles and responsibilities, and hubber business model. • Scope of Hubber 1. Hubber is an IP-based communications link 2. Hubber connects Indonesian Telco operators with OTT or global CDN 3. Hubber is a local CDN • Hubber Definition Definition of hubber proposed in this paper are: a hub for IP-based data communications between OTT or global CDN provider with Telecommunications providers that provide Internet access to users in Indonesia, which has a special infrastructure consisting of Telecommunications infrastructure and distributed data center. In hubber system, OTT service users in Indonesia subscribe to internet service from Telco operators to get access, and Telco operators connect with OTT services provider through the hubber. Basically, hubber does not manipulate or interpret the data packets communicated between users and OTT providers.
STRATEGY AND REGULATION PLANNING FOR HUBBER SYSTEM
A. Strategy Planning in Implementing Hubber Hubber system is required to bridge the traditional Telecommunications era to the future Telecommunications era. In the era of traditional Telco, access and services are provided solely by Telco operators, and customers only can use services that is provided by the operator which they are subscribed to. In the future of Telecommunications era, customers can use various services from various service providers (SP) as well. This means that OTT services will be
Figure IV.3 Hubber System
In this paper, hubber is also described with the term PoI (Point of Interconnection) between Telco Indonesia with OTT or global CDN. Hubber as a PoI mentioned in this paper has administrative, business, and technical aspect. Physical
network connection which supports hubber system is just a part of the technical aspect of the PoI. • Roles and Functions of Hubber Roles and functions of the hubber in proposed regulation is as follows: 1. Managing the relation between OTT provider and global CDN with national Telco operators 2. Running the local CDN functionality 3. Managing network security management 4. Maintaining QoS and GoS to the customer together with Telco operators • Hubber Business Model In terms of business, the presence of hubber changes best effort service distributed via the Internet into a new form of service with the QoS. Some OTT providers that choose to connect to their users in Indonesia via hubber can guarantee the quality of their services to their customers in accordance to the selected class of service.
Figure IV.4 Traffic Flows in Hubber System
1.
2. 3.
4.
OTT providers can put the contents, data, and applications that are frequently accessed by Indonesian customers on the hubber server. In addition, the traffic from OTT providers to Indonesian users and vice versa are passed through hubber network. Hubber network distributes the traffic from OTT to network operators in Indonesia and vice versa. For communications between users in Indonesia, OTT traffic especially static content is served by hubber server. Customers are connected to the Internet, especially OTT services only through Telco operators.
Furthermore, in the figure IV.5 and IV6, the service exchange and expected fee are illustrated and explained.
In hubber system, the concept of OTT service subscription fee is introduced. The subscription fee is paid by the customer and then divided to both OTT providers and Telco operators as an additional revenue. The proposed payment mechanism of the OTT subscription fee is using the prepaid or postpaid system that conforms to the Internet subscription mechanism for respective customers. This mechanism chosen in order to facilitate the implementation and supervision of the payment. The payment mechanism is illustrated in figure IV.7.
Figure IV.7 Payment mechanism in Hubber System
1.
Users make payment with prepaid or postpaid mechanism for Internet services like they do in prehubber system. In addition, users also pay a subscription fee for OTT services that they want to use, symbolized as a number X. The amount of X depends on the service level (class of service) selected by the customer. From the payment X, Telco operators received some portion of it as a consequence of the use of their resource in delivering the OTT services. The other portion, called Y, is given to hubber. Y is received by OTT providers as a subscription fee for their services.
2.
3.
The existence of the class of service is also proposed in hubber system, allowing customers to choose the level of service from one OTT provider according to the customer's needs and capability. Examples of the class of service implementation in hubber system is as follows: Table IV.1 The Example of Class of Service Proposed in Hubber System
CLASS
AVAILABLE SERVICES
CHARGE
3
Only reading
Free
2
Class 3 service + texting
Charged
1
Class 2 service +sharing file
Charged (higher price)
Figure IV.5 Service Interaction in Hubber System
Figure IV.6 Billing in Hubber System
C. Hubber Business Simulation In this business simulation, a forecast is conducted using data from Telkomsel as a representative Telco operators of Indonesia to determine the Telco operators’ revenue target from hubber. The principle used in this forecast is that the loss of income from the Telco operators’ legacy services – telephony and SMS – are replaced by income from a new source, in this case, hubber. Telkomsel’s total revenue growth
determined in advance in accordance with the national GDP growth target, and Telkomsel’s revenue target from hubber is determined to cover the loss of revenue from the SMS and telephony, so that Telkomsel’s revenue growth target can be achieved. Using national GDP as a reference, the value of 7% is used as the linear target value of the revenue growth. Forecasting in this simulation is done with time-series extrapolation method of the existing annual growth values [7]. Business simulation calculations yield predictions and targets as shown in the figure IV.8.
Table IV.2 Determining Telkomsel’s Revenue Target from Hubber Year
Targeted Revenue (Trillion Rupiahs)
2015
4.83
2016
11.22
2017
18.81
2018
27.32
2019
36.48
2020
46.14
For the next calculation, proposed a 50:50 profit sharing between OTT and Telkomsel. This assumption is used because of the initial idea where OTT and Telco have the same significant role in operating communications services. Thus, total revenues from hubber implementation can be determined by summing Telkomsel’s revenue target from hubber and OTT provider’s target revenue from huber. Table IV.3 Determining Hubber ARPU Total revenue from hubber implementation (Trillion Rupiahs)
Data enabled customer (thousands)
Hubber ARPU (Rupiahs per months)
2015
9.65
71791.30
11204.10
2016
22.43
74539.11
25080.57
2017
37.63
76518.46
40977.48
2018
54.63
77983.57
58379.77
2019
72.97
79094.35
76880.18
2020
92.27
79954.30
96173.13
Year Figure IV.8 Result of Hubber System Business Simulation
From figure IV.8: • Existing Revenue: revenue value in the annual report. • Predicted revenue: revenue calculation as the result of predicting and summarizing the values of SMS, telephony, and Internet volume from year to year. This is calculated with assumption that hubber is not implemented. • Targeted revenue: target values that is obtained by setting the annual growth rate of 7%. • Revenue from hubber: additional revenue for Telkomsel with assumption that hubber system is applied, originated from the OTT subscription fees from the customers. From the business simulation that has been done, the revenue target of hubber operator is calculated, and the result is indicated by the the cross-marked line in figure IV.8. It can be seen that the value of operator’s revenue from hubber implementation is increasing every year. This is in line with the trend that the use OTT service (IP-based communications) as the main communication services will continue to increase while SMS and telephony will be gradually decreased until completely replaced by IP services.
Hubber ARPU as shown in the rightmost column of table IV.3 is the cost that a customer is expected to pay in addition to Internet cost each month. Hubber ARPU value is expected to increase every year. This ARPU hubber is the expected average of the total subscription cost of a customer for all OTTs that is used, because in the OTT era a customer can subscribe to more than one OTT providers. Therefore, the more OTT providers are connected via hubber, the more affordable is target subscription fee per OTT. The increasing hubber ARPU target is in line with the increasing hubber deployment target, so that OTT services with guaranteed QoS can be enjoyed and the better quality of OTT communication services can be experienced by more customers in Indonesia. V.
CONCLUSION
Hubber system is needed in Indonesia to maintain the existence of Indonesian telecom operators facing the global trend where non IP-based communication services are
gradually replaced by IP-based communication services provided by OTT providers. Hubber system in Indonesia is proposed to comply these regulation points: • Huber definition: a hub for IP-based data communications between OTT or global CDN provider with Telecommunications providers that provide Internet access to users in Indonesia, which has a special infrastructure consisting of Telecommunications infrastructure and distributed data center. • Roles of hubber: managing the relationship between OTT or Global CDN with national Telco, performing the function of a local CDN, managing network security management, and maintaining QoS and GoS services to the customer. • In the new business model, hubber system offers changes from today OTT services which is best effort via the Internet into a service that has a QoS. This is manifested by the OTT subscription fee which is then divided as revenue for both OTT providers and Telco operators. Meanwhile, traffic from OTT providers who do not cooperate with hubber still pass through the network as best effort traffic. Based on the results of business simulation done on Telkomsel, it is predicted that Telkomsel’s revenue will go down for the first time in 2015. To achieve positive 7% revenue growth, Telkomsel has to set its revenue target from hubber of 4.83 trillion Rupiahs in 2015 with a steady increase in annual growth and reaching almost a tenfold increase in value, 46.14 trillion in 2020.
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