Developing the Telecoms Market:Universal Access
Commonwealth Telecommunication Organization (CTO)38th Meeting of Council
Trinidad, 28 September 1998
Michael MingesInternational Telecommunication Union (ITU)
Telecommunication Development Bureau (BDT)
CONTENTS
Measuring Access
Pricing Access
Universal Access
Supplying Access
Achieving Access
27.8 to 68.3 (46 countries)8.3 to 27.8 (46 countries)1.3 to 8.3 (47 countries)0 to 1.3 (48 countries)
MEASURING TELECOM ACCESS
“Teledensity”Main telephone lines per 100 inhabitants
Source: ITU.
Teledensity limitations
22 24 28
4856
63
0
25
50
75
100
Qatar (7.0)
Bahrain (6.0)UAE (5.7)
Singapore (4.0)
France (2.5)USA (2.7)
Teledensity Household density
Note: 1996 data. Figure in parenthesis shows the number of persons per household.Source: ITU.
• Households with a telephone
South Africa 8.8 millionhouseholds
Other measurements of telecommunication access
Have
telephone
32%
Useneigh-bours 8%
Usepayphone
16%
Use atshop/clinic
12%
None32%
Source: CSS. October household survey, 1995
• Towns with telephone service
• Payphones per inhabitant
• Distance from a telephone
• Time from a telephone
PRICING ACCESS
• Telephone service pricing– Socially desirable– Cost-oriented
• Measuring affordability
• Tariff strategies to reach the “unphoned”
Relativetelephonecharges
1995
01020304050
60708090
100
0% 5% 10%Telephone charges as % of
household income
House
hold
s w
ith
tele
phone (
%)
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 arenot poor
Percentage of households in Lima, Peru with a telephone, by income, 1996100%
84%
37% 36%
7%
A B Lima C D
A = Richest 25%B = Second 25%C = Third 25%D = Poorest 25%
Source: OSIPTEL.
• May not generate enough revenue for network expansion
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 80
90
100
110
120
1990 1992 1994 1996
OECD Residential tariff basket, 1990=100
Total basket
Fixed charges
Usage charges
Source: OECD.
Defining affordability
Establish average operatingcosts for telephone network
US$ 200 - 400 per subscriberper year
Derive an average tariff US$ 64 - 122 per year
Determine how manyhouseholds can afford service
Where 5% of household income> US$ 1’340 - 3’200
Choose a policy for families thatcannot afford service
Financial assistance, widespreadpayphones, etc.
0
100
200
300
400
500
600
700
800
Withtelephone
serviceOn
waitlist
Couldafford
Couldnot
afford
Without telephone service
Affordability & demand
~ 1’500 million households in the world
World households, millions, 1996
Source: ITU estimate.
Tariff strategies for the “unphoned”
• Tariff reductions for disadvantaged
• Prepaid calling cards
• Subsidized payphone calls
• Supporting incoming calls 0
200400600800
1'0001'2001'4001'6001'8002'000
1994 '95 '96 '97
0.0%
0.5%
1.0%
1.5%
2.0%Prepay
Contract
Density
Mexico cellular subscribers (000s)
Source: ITU estimate.
UNIVERSAL ACCESS
• Universal serviceUniversal serviceTelephone in most homes
• Universal accessUniversal accessTelephone within reasonable
distance for everyone
Achieving Universal Service
Countries with Universal Telephone Service(more than 90% of households with a telephone)
Source: ITU.
Universal servicetakes time
0%
20%
40%
60%
80%
100%
1960 1970 1980 1990 1996
France Japan
Sweden
Canada
Australia
USA
0%
20%
40%
60%
80%
100%
1960 1970 1980 1990 1996
Korea (Rep).
Turkey
Malay-sia
Poland
Mexico
Thai-land
LDCs
Percentage of households with a telephone
Source: ITU.
Universal Access to Universal Service transition
Malawi
UK
Trinidad &Tobago
1%
10%
100%
$0 $5'000 $10'000 $15'000 $20'000
Purchasing Power Parity per Capita, US$
House
hold
s w
ith t
ele
phone,
%
Universal
Access
Univers
al
Service
Source: ITU.
Universal access concepts
Example
In Ghana, defined as a telephone in every locality of more than 500 people.
In Burkina Faso, defined as a telephone every 20 kilometres.
In South Africa, proposed as a telephone within a 30 minute travelling distance.
Criteria
Population
Distance
Time
Definition
A telephone for every permanent settlement of ‘x’ population
A telephone within ‘x’ kilometres
A telephone within ‘x’ minutes
SUPPLYING ACCESS
• Technology– Wireless
(mobile and fixed cellular)
– Satellite (Global mobile systems)
– Voice plus (Cable TV and Internet)
• Policy– Privatization
– BTO
– Competition
Mobile cellular
• In some countries, wireless is substituting for wired service
• Characterised by low levels of fixed-line density with competitive wireless markets
Namibia
SouthAfrica
Barbados
Jamaica
SUBSTITUTE
T&TIndia
SingaporeSriLanka
UK
Cyprus
Malta
0%
5%
10%
15%
20%
25%
30%
35%
0 20 40 60
SUPPLEMENT
Main lines per 100 inhabitants
Cellular subscribers as %of total telephone subscribers
Source: ITU.
Fixed cellular
• Wireless Local Loop (WLL)– Cheaper than
conventional cellular because do not have to support mobility
• Around 50 systems in some 25 countries– In Sri Lanka, two WLL
operators licensed in 1996.They must each install 100’000 WLL lines by year 2000.
0
100
200
300
400
500
600
700
'96 '98 2000
Main
lin
es
(00
0s)
0
1
2
3
4
Tele
den
sity
Fixed-lines
WLL
Teledensity
SRI LANKA
Source: ITU.
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+
• Bundle voice telephone with another service– Cable television– Internet
UK Cable Telephony subscribers (000s)
0
500
1'000
1'500
2'000
2'500
1992
1993
1994
1995
1996
1997
0%
2%
4%
6%
8%
10%As % of all residential telephone
subscribers(right scale)
Note: Years ending 31 March.Source: OFTEL.
Implementing universal access through payphones
• Mandated targets for incumbent PTOs
• Franchising public payphones:– Indonesia:
Wartels– West Africa:
Télécentres, Téléboutiques, Télékiosks
– Bangladesh: Village Pay Phones
Senegal: "Télécentres privés"
5'416
2'0401'221
541
1993
1994
1995
1996
0%
1%
2%
3%
4%
5%
6%
As % of alltelephone lines
Source: Sonatel, Gaston Zongo.
Supply policies
Mexico Thailand Philippines
Policy Privatization Build-Transfer-Operate Competition(BTO)
Increase main lines Install 4.1 million Add 5.5 millionTarget at annual average telephone lines telephone lines
of 12% between between between1990-1994. 1993-1996. 1994-1998.
0
2
4
6
8
90 92 94 96
0
2
4
6
8
-
2
4
6
8
86 90 94
-
2
4
6
8
0
2
4
6
8
90 94 98
0
2
4
6
8 Teledensity
Post-privatization
Pre-competition
Post-competition
Pre- BTO Post- BTOPre-privatization
Tele
phone lin
es
(m)
Mainlines
Tele-Density
Key:
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 1.3.7.42 6
30
22
16
19911993
19951997
0
1
2
3
4
5
6
Internet host computers Millions
Per 1'000 people(right scale)
Source: ITU from Network Wizards data.
Universal service funding
How it works
Advantage
Disadvantage
Cross subsidy
Residential tariffs subsidized
by profitable services.
Simple. Cost recovery left to the operator.
May not benefit those intended for, may not be
sustainable under
competition, not transparent.
Financial Assistance
Disadvantaged users are given a discount on
their telephone bill.
Targeted at those that need the most help.
Administrative costs.
Universal Service Fund
Operators are subsidized for
providing service in
underserved areas.
Costs are shared by all operators.
Administrative overhead. Costs
of universal service difficult to determine.
Access charge
Long-distance operators pay
local operators.
Eases transition to cost-based
tariffs.
Difficult to determine exact
costs. May reduce incentive
for the local operator to
improve efficiency.
A universal
access road map
INFOR-MATION-Households /
localities with / without telephone- Distances / time from telephone
DEFINEWhat is universal
access goal?“All urban
households with telephone, all localities with
public telephone”
POLICYWhat tools to achieve goal?
Targets, universal service funds, tariff policies
MONITOR
Translate goalsinto concrete
policies
Policies need tobe monitored for
compliance
Definitionchanges
withtechnology
andeconomic
development
How and who will monitor & enforce policy? Universal Service Agency?
1996 2010 1996 2010 1996 2010
WORLD 12.80 34.4 1.55
Developing 5.07 10 16.3 >50 0.84 2 Low income 2.44 5 8.5 >20 0.57 1 excluding China 1.22 4.1 0.21
MALTA* 48.30 >100 4.00
TeledensityHousehold telephonepenetration
Payphones per 1’000
people
Year 2010 Goals
* Host of 1998 World Telecommunication Development Conference
Goal: Provide reasonable access to telecommunications for all of humanity by the year 2010
WORLD TELECOMMUNICATION
DEVELOPMENT REPORT 1998
Universal Access to Telecommunications
http://www.itu.int/indicators