Developing the Telecoms Market: Universal Access Michael Minges International Telecommunication Union (ITU) Telecommunication Development Bureau (BDT)
Commonwealth Telecommunication Organization (CTO) 38th Meeting of Council Trinidad, 28 September 1998
CONTENTS Measuring Access Pricing Access Universal Access Supplying Access Achieving Access
MEASURING TELECOM ACCESS “Teledensity”
Main telephone lines per 100 inhabitants
Source: ITU.
27.8 8.3 1.3 0
to to to to
68.3 (46 27.8 (46 8.3 (47 1.3 (48
countries) countries) countries) countries)
Teledensity limitations
Teledensity
Household density
100 75 48
50 25
22
24
56
63
28
0 . 5) . 7) . 7) . 0) . 0) 2 2 7. 0) 5 4 6 ( ( ( ( ( ( r e a UAE USA rain pore anc r Qat a F g Bah Sin Note: Source:
1996 data. Figure in parenthesis shows the number of persons per household. ITU.
Other measurements of telecommunication access
None 32%
te H le av 32 p h e % on e South Africa
Use at shop/clinic 12%
8.8 million households
Use payphone 16%
Use neighbours 8%
Source: CSS. October household survey, 1995
• Households with a telephone • Towns with telephone service • Payphones per inhabitant • Distance from a telephone • Time from a telephone
PRICING ACCESS
– Socially desirable – Cost-oriented
• Measuring affordability • Tariff strategies to reach the “unphoned”
Households with telephone (%)
• Telephone service pricing
100 90 80 Relative 70 telephone charges 60 1995 50 40 30 20 10 0 0% 5% 10% Telephone charges as % of household income
Source: ITU.
Socially desirable pricing • Social benefits outweigh costs • Affordable price, maybe < break-even • Initial group of telephone users are clustered in the largest city and are not poor • May not generate enough revenue for network expansion
Percentage of households in Lima, Peru with a telephone, by income, 1996 A = Richest 25% 100 B = Second 25% % C = Third 25% 84% D = Poorest 25%
37% 36% 7% A
B
Source: OSIPTEL.
Lima
C
D
Cost-oriented pricing • Competitors enter high margin markets traditionally used to subsidize local services • In telecom markets opened to competition, prices gravitate towards “costs” • Higher fixed charges for residential users
OECD Residential tariff basket, 1990=100 120 Fixed charges 110 Total basket
100 90
Usage charges
80 1990 Source: OECD.
1992
1994
1996
Defining affordability
Establish average operating costs for telephone network
US$ 200 - 400 per subscriber per year
Derive an average tariff
US$ 64 - 122 per year
Determine how many households can afford service
Where 5% of household income > US$ 1’340 - 3’200
Choose a policy for families that Financial assistance, widespread cannot afford service payphones, etc.
Affordability & demand World households, millions, 1996 800 Without telephone service
700 600 500 400 300 200
With telephone service
100
On wait list
Could not afford Could afford
0
~ 1’500 million households in the world Source: ITU estimate.
Tariff strategies for the “unphoned” • Tariff reductions for disadvantaged • Prepaid calling cards • Subsidized payphone calls • Supporting incoming calls
2'000 1'800 1'600 1'400 1'200 1'000 800 600 400 200 0
Mexico cellular subscribers (000s) Prepay
2.0%
Contract 1.5%
Density
1.0% 0.5% 0.0% 1994 '95
Source: ITU estimate.
'96
'97
UNIVERSAL ACCESS • Universal service Telephone in most homes
• Universal access Telephone within reasonable distance for everyone
Achieving Universal Service
Countries with Universal Telephone Service (more than 90% of households with a telephone)
Source: ITU.
Universal service takes time Percentage of households with a telephone 100%
100%
Korea (Rep).
80%
80%
Turkey
Canada USA
60% Sweden Australia
40% 20%
France Japan
0% 1960 1970 1980 1990 1996
Source: ITU.
60% 40% 20%
Malaysia Poland Mexico Thailand
LDCs 0% 1960 1970 1980 1990 1996
Universal Access to Universal Service transition Trinidad &Tobago
Households with telephone, %
100%
al s er ce v i vi n U er S
10%
al s er v i ss Un ce Ac
1% $0 Malawi
Source: ITU.
UK
$5'000
$10'000
$15'000
Purchasing Power Parity per Capita, US$
$20'000
Universal access concepts Criteria Population
Distance
Time
Definition
Example
A telephone for every permanent settlement of ‘x’ population
In Ghana, defined as a telephone in every locality of more than 500 people.
A telephone within ‘x’ kilometres
In Burkina Faso, defined as a telephone every 20 kilometres.
A telephone within ‘x’ minutes
In South Africa, proposed as a telephone within a 30 minute travelling distance.
SUPPLYING ACCESS • Technology – Wireless (mobile and fixed cellular) – Satellite (Global mobile systems) – Voice plus (Cable TV and Internet)
• Policy – Privatization
– BTO
– Competition
Mobile cellular 35% 30% 25%
Cellular subscribers as % of total telephone subscribers Sri Lanka South Africa
20% Jamaica
15%
Namibia
10% 5% 0%
India
T&T
SUBSTITUTE
Singapore UK Cyprus Malta Barbados SUPPLEMENT
0 20 40 60 Main lines per 100 inhabitants Source: ITU.
• In some countries, wireless is substituting for wired service • Characterised by low levels of fixed-line density with competitive wireless markets
Fixed cellular SRI LANKA
• Wireless Local Loop (WLL)
– In Sri Lanka, two WLL operators licensed in 1996.They must each install 100’000 WLL lines by year 2000.
600 Main lines (000s)
• Around 50 systems in some 25 countries
4 Teledensity 3
500 400
2
300 Fixed-lines
200 100
1
WLL
0 '96 Source: ITU.
'98
0 2000
Teledensity
– Cheaper than conventional cellular because do not have to support mobility
700
Satellite • Global Mobile Personal Communications by Satellite (GMPCS) systems technically provide world-wide communications access • From a practical point of view, costs and capacity limitations will limit usage of these systems • “The primary Iridium customers will be travelling professionals who need comprehensive, reliable global wireless communication.”
Voice+
– Cable television – Internet
UK Cable Telephony subscribers (000s) 2'500 2'000 1'500
As % of all residential telephone subscribers (right scale)
10% 8% 6%
1'000
4%
500
2%
0
0%
19 92 19 93 19 94 19 95 19 96 19 97
• Bundle voice telephone with another service
Note: Years ending 31 March. Source: OFTEL.
Implementing universal access through payphones • Mandated targets for incumbent PTOs • Franchising public payphones:
6% 5%
As % of all telephone lines
4% 5'416
3% 2%
6 9 1 9
5 9 1 9
9
4
0%
1 9
9 3 9
1%
2'040
1'221
541
1
– Indonesia: Wartels – West Africa: Télécentres, Téléboutiques, Télékiosks – Bangladesh: Village Pay Phones
Senegal: "Télécentres privés"
Source: Sonatel, Gaston Zongo.
Supply policies Mexico
Target
Key:
TeleDensity
Build-Transfer-Operate (BTO) Increase main lines Install 4.1 million at annual average telephone lines of 12% between between 1990-1994. 1993-1996. PrePostprivatization privatization
8 6 4 2 -
8 6 4 2 -
86
90
94
Pre- BTO
Post- BTO
8
8
6
6
4
4
2
2
0
0 90
92
94
96
Competition Add 5.5 million telephone lines between 1994-1998. Precompetition
Postcompetition
8 6 4 2 0
8 6 4 2 0 90
94
98
Teledensity
Main lines
Philippines
Privatization
Telephone lines (m)
Policy
Thailand
ACHIEVING ACCESS • What should Universal Service / Access include? • How can Universal Service / Access be funded? • How can Universal Service / Access policies be created and monitored? • What are some Universal Service / Access targets?
What should Universal Service / Access include? • Should universal service include multimedia access? • “...provision via a fixed connection will also allow a fax and modem to operate” —European Union • Pricing important • Connecting schools, libraries and hospitals
Internet host computers Millions 6 5 Per 1'000 people (right scale)
30 22
4 3 2
16 2
6
.4 .7 1.3 91 93 95 97 9 9 9 9 1 1 1 1 Source: ITU from Network Wizards data.
1 0
Universal service funding
How it works
Advantage
Disadvantage
Cross subsidy
Financial Assistance
Universal Service Fund
Access charge
Residential tariffs subsidized by profitable services.
Disadvantaged users are given a discount on their telephone bill.
Operators are subsidized for providing service in underserved areas.
Long-distance operators pay local operators.
Targeted at those that need the most help.
Costs are shared by all operators.
Eases transition to cost-based tariffs.
Administrative costs.
Administrative overhead. Costs of universal service difficult to determine.
Difficult to determine exact costs. May reduce incentive for the local operator to improve efficiency.
Simple. Cost recovery left to the operator. May not benefit those intended for, may not be sustainable under competition, not transparent.
DEFINE
A universal access road map
Definition changes with technology and economic development
What is universal access goal? “All urban households with telephone, all localities with public telephone”
INFORMATION
Translate goals into concrete policies
-Households / localities with / without telephone - Distances / time from telephone
MONITOR How and who will monitor & enforce policy? Universal Service Agency?
POLICY
What tools to achieve goal? Targets, universal service funds, Policies need to tariff policies be monitored for compliance
Year 2010 Goals Goal: Provide reasonable access to telecommunications for all of humanity by the year 2010 Teledensity 1996 WORLD Developing Low income excluding China
MALTA*
2010
12.80 5.07 2.44 1.22 48.30
Household telephone penetration 1996
2010
34.4 10 5
16.3 8.5 4.1 >100
Payphones per 1’000 people 1996
2010
1.55 >50 >20
0.84 0.57 0.21 4.00
* Host of 1998 World Telecommunication Development Conference
2 1
WORLD TELECOMMUNICATION DEVELOPMENT REPORT 1998 Universal Access to Telecommunications
http://www.itu.int/indicators