【正文】 stomer doesn’t pay PTA but perceive IPphone price increase? CNC maintain current IPphone revenue? Keep IP price same? Customer doesn’t pay PTA nor perceive IPphone price increase? CNC pays PTA out of IPphone ine? CNC revenue = 54% of current IPphone revenue? CNC retains 100% of IPphone price as revenue? CNC retains 100% of IPphone price as revenueThe economics. CNC would lobby for new settlement rate specific to IPphone economicsKEY PRICING REGULATION ISSUES AND IMPLICATION TO CNCKey Issues Assumptions Implication to CNC? Regulation follows costbased pricing guideline? Carriers obliged to publish accounting data assisting pricing regulation? Price floor specified for incumbent? New entrant has flexible price range around incumbent rate? Local, NLD, IDD, wireless, satellite? National leased lines? Price Bureau within each provincial government sets prices according to local standard of living and inflation rates? Local PTAs will have autonomy? Since local works have been built by local PTA investments, local PTA has strong influence on local price levelsGeneral pricing rulesDifferential TreatmentCentral controlLocal control / Geographic practice? Usually high initial CNC cost position due to leasing access and settlement? Short term uncertainty in price based petitiveness? Some flexibility in pricing of CNC product offering? Advantageous long term petition capability over incumbent? Clarity in pricing is favorable to CNC? But limits CNC pricing flexibility? Disadvantageous local price based petitive position in some geographies? Varied cost structure across geographies plicates product management process, difficult for CNC to have consistent pricing, and hence, image.LEASED LINE COST HIGHEST AMONG INTERCONNECT COSTSApproximately RMB 134K/month to Link up One CityItem Cost per month (in RMB1,000)Leased line to local PTA? Capacity: 2 M bps? Number of channels: 30Domestic LD transport(1)Total for connecting up one cityLeased line to international gateway? E1 capacityTotal for IDD from one city9100150109 159 222。 134 average320454 average(1) Before CNC backbone construction pletes, bandwidth for this segment is leased from China TeleBackupROW AND ISSUES RELATED TO BULIDING LOCAL LOOPKey Issues Assumptions Implication to CNC? Theoretically, CNC can assume privileged access to public resources, . bridges and roads? There is no specific definition of ROW in most localities? In practice, there’s no free access? On time fee charged for digging as high as RMB 20K per km reimbursement to local municipalities? Labor account for 510% of total cost? Conduits in bridges and mercial buildings owned by municipal governments? Conduits in residential area largely owned by CT? Conduit access auctioned by local government when building pletes? Once auctioned, additional conduits can not be easily added for 45 yearsUtility privilegeAccess fees and costOwnership controlScheduling? Theoretical utility privilege does not guarantee local cooperation ? Local access to conduit in most cities primarily rely on renting from resource holders . CT, utilities etc.? Negotiation of rental largely on a casebycase basis? Casebycase negotiation will delay local loop buildout? Conduit access rights have to be purchased back from exiting holders? Planning and coordination needed to fit scheduleFREQUENCY FOR WIRELESS BB NEED TO BE ALLOCATEDCurrently Only Narrow Band Wireless Spectrum AssignedKey Issues Assumptions Implication to CNC? No clear regulation available and fierce petition expected in frequency bands for LMDS (2538GHz)? 18901900MHz and 19601980MHz reserved for FDD Mode WLL? 19001920 reserved for cordless standards . DECT? Wireless data in 821825 and 866870MHz range, NO voice traffic is permitted in this range? Frequency management policies implemented by local DTAs, in conjunction with PTAs and PTBs? Local frequency allocation is issued after PTA test and MII examination, a process of 6 12 months? Allocation remains fixed for 35 years on average? Frequency policies handled by local DTAs, problems resolved locally and appealed to MII? 19751980MHz band occupied by DGT’s wireless access work in SH, BJ, GZ, SZ, FZ and Xiamen? 18901895 and 19701975MHz occupied by Uni in CD, TJ and CQ? Local wireless access licenses need to be obtained from local PTAs? Primarily to be controlled instead of frequency auctions? No overall regulation backing oime solution? Roof top access and building access depend on casebycase negotiations with property ownersFrequency band allocationAdministration of frequenciesLicense of serviceFrequency feesRoof top access? Reserved frequency and available LMDS modulation affects viability and quality of CNC access solutions? Long circle of frequency allocation process will impact timetomarket for CNC solutions? Occupied frequency spectrums in key target cities expect to take long cycle of negotiation and migration? Cost of local wireless access solutions? local license application cycle delay and variation? Will introduce delays in key cities . BJ, SH and GZ? Time to market to key target customersOTHER REGULATIONS AND OBLIGATIONSKey Issues Likely scenario Implication to CNC? Less transparent practices likely to remain for 4 5 years before equitable policies are made? During the interim, incumbent is subsidized for USO by other carriers, reflected in account settlement prices: ? New entrant not expected to be obligated? … Instead indirectly participate in paying incumbent subsidy via higher prices? Expect to be thoroughly addressed over 12 years time? Regulation provides general end user right to choose LD carrier,