【正文】 ? otherwise CNC see margin reducing? No settlement ? No settlement? No settlementCNC CNC End userPTASwitchSHPSTNSwitchCNC backbone(1)Switch SwitchBJPSTNPTATransmission(paid by CNC)Fees:12Transmission(paid by CNC)Note 1: Currently leased from CT. Own backbone by July 2023ExampleInterconnectionBackupTERMINATION SETTLEMENT MAY REDUCE CNC MARGIN (II)Example: National Long DistanceBackupCNC pays PTACNC paysPTAKeepIPphone price the sameCustomerpays PTA(1)IPphone priceCustomerpays PTAIPphone priceNew IPphone priceCurrent IPphone Trial Stage scenario: no settlementCNC Alternative I CNC Alternative IIPossible scenario for 2023: no settlement1RMB/minNote 1: PTA charges customer on 3 minute units, per 3 min. Calculation for this example uses average per minute rate of , assuming customer calls long enough duration.Source: BJ PTAPossible scenario for 2023: settlement rate for both origination and termination ends2? Increase IP price to cover settlement cost? Customer 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。 city PTA? City PTA before implementation will generally ask for lead time for verification with upper levels. . in some cases new entrant has to wait for extended time period for this process? Under the Market Department’s coordination, there are up to 18 independent departments within each city PTA to cooperate for the execution and resource planning of interconnect? Each of these department can add delay to the process, lead times add up? In case of insufficient resource, the requesting and approval process for expansion / upgrade is even longer? Local PTA can easily use resource constraint as an excuse for delay in interconnection… But interconnection is feasible? CNC has so far been able to reach interconnect contract at provincial levels? Most PTAs in CNC’s target cities displayed timely cooperationIn order to ensure quick execution, CNC should? Understand and incorporate into planning process the status of incumbent work resources? Give lead time in planning and municating intention to interconnect with the incumbent? Build strong munication channel with all levels of PTAs? Coordinate for good timing across all levels。multiple localUnlimitedBasic tele servicesRemain 1 for the next 6 yearsINTERCONNECTION ISSUES AND IMPLICATION TO CNCKey Issues Assumptions Implication to CNC? Obligation clearly specified by regulation for interconnection between 7 types of tele work licensed operators? CNC’s IP broadband work receive equivalent protection? MII sets technical specification of interconnect solutions? Clear provision on cost and ownership of technical asset? From time of written request, interconnect plete within:? 2 months if only CO data modification is involved? 4 months if capacity expansion needed? 7 months if new POI (1) needed? Time frame not strictly adhered to, varies from 46 months? Dispute settled primary via coordination? Arbitrated by MII and local government? Violation fine is very low (30,000 RMB max per offense)? Possible to claim for pensation due to noncooperation of incumbents (the last resort)? ? Settlement for IP based will follow scheme when trial finishes? Incumbents provide cabi room and conduit access? In case there’s no excess conduit capacity, incumbent has to provide feasible expansion plan? Local practice will vary? Incumbent charges rental fee for conduit access? Incumbent charges for leased line needed for interconnect? Infrastructure and work investment related to interconnect are responsibility of both parties, separated from POIIncumbent obligation to interconnectInterconnect tim