Price restructuring and implications for achieving Universal Service/Access. Dr Tim Kelly, ITU “Workshop on Trends in Regional Telecom Prices in Asia-Pacific” Bangkok, 11-15 Sept 2000. - PowerPoint PPT Presentation
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Price restructuring and implications for Price restructuring and implications for achieving Universal Service/Access achieving Universal Service/Access The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its Membership. Dr Kelly can be contacted by e- mail at [email protected]Dr Tim Kelly, ITU “Workshop on Trends in Regional Telecom Prices in Asia- Pacific” Bangkok, 11-15 Sept 2000
Transcript
Price restructuring and implications for Price restructuring and implications for achieving Universal Service/Accessachieving Universal Service/Access
The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its Membership. Dr Kelly can be contacted by e-mail at [email protected]
Dr Tim Kelly, ITU“Workshop on Trends in
Regional Telecom Prices in Asia-Pacific” Bangkok,
11-15 Sept 2000
Price restructuring and Universal Service/Access
AgendaWhat is Universal Service / Access?
Changing notions of universal serviceQuantifying universal service obligations International comparisons
The dilemmaPrice restructuring tends to lead to higher prices for
monthly subscription charges and local callsResidential customers are the most affected
Getting the balance right …… between affordability and sustainability… between cross-subsidy and cost-orientation
of basic telephone service“to promote the extension of the benefits of the new telecommunication technologies to all the world’s inhabitants” ITU Constitution, Article 1
Price restructuring and Universal Service/Access
Universal access and Universal service
Universal service: telephone in every home
Universal access: telephone within reasonable distance for everyone
0102030405060708090
100
GDP per capita
Percentage of households with a telephone
Universal access
Universal service
Price restructuring and Universal Service/Access
Teledensity disparities
27.8 to 68.3 (46)8.3 to 27.8 (46)1.3 to 8.3 (47)0 to 1.3 (48)
Price restructuring and Universal Service/Access
0200400600800
1'0001'2001'4001'6001'8002'000
<1 1-5 5-10 10-20 20-30 30-40 40-50 >50Teledensity band
Popu
latio
n, m
illio
n
The scale of the problem (global)
Source: ITU World Telecommunication Indicators Database.
72% of world’s population live in economies with less than 10 main lines per 100 inhabitants
Price restructuring and Universal Service/Access
Teledensity transition
<1 1-10 5- 10- 20- 30- 40- >50 10 20 30 40 50
0
10
20
30
40
50
No. of countries:
Average
Best
1 10 20 30 40 50
43 37 29 28 22 17 19 25
Tele-density:
Years
Source: ITU World Telecommunication Development Report 1998: Universal Access.
Price restructuring and Universal Service/Access
The scale of the problem (national)Urban/rural divide
12 % of Thailand’s population lives in Bangkok50 % of Thailand’s fixed-line subscribers in BangkokTeledensity: 36.1% in Bangkok; 4.7% in rest of
ThailandChurn
In a competitive market, carriers will attempt to win rich, credit-worthy subscribers and to lose loss-making ones
Mobile/fixed divideYounger, richer subscribers have mobiles only or bothOlder, less wealthy subscribers have fixed lines
Price restructuring and Universal Service/Access
Estimates of the cost of meeting USOs:As a percentage of total sector revenueArgentina 0.6-1%Australia 2.0%Chile 0.2%Colombia 4.3%France 3.0%Norway 2.0-2.4%Peru 1.0%Sweden 0.8-1.2%Switz. 1.7-2.2%UK 0.2-0.3%USA 5.0%
Payphone losses
4%
Geographic price
averaging32%
Social Programmes
23%
Tariff imbalances
41%
Estimated breakdown of USOs in transition to competition in France, 1999. Total = 4.9B FF
Source: World Bank.
Price restructuring and Universal Service/Access
Universal service dilemmasIn Thailand, there is geographically-
averaged prices and a local call costs 3 Baht (untimed)BUT, in Bangkok, more than 2 million consumers live
within local call zone In rural areas only a few hundred consumers live within
local call zoneTHEREFORE, consumers in rural area are cross-
subsidising those in Bangkok!SO, geographically averaged prices do not
always assist with Universal Service …
Price restructuring and Universal Service/Access
Have telephone
29%
No access
18%
NearbyPublic phone
36%
Neigh-bours 6%
Nearby5%
Not Near-by 6%
Anot
her p
hone South Africa
9 millionhouseholds
Source: Statistics South Africa.<http://www. statssa.gov.za/>
New concepts of Universal service: Mobile overtaking fixed lines in Finland
0
10
20
30
40
50
60
70
80
90 91 92 93 94 95 96 97 98 99
Penetration rate, per 100 inhabitants
Mobile
Fixed-line
0
20
40
60
80
100
90 91 92 93 94 95 96 97 98 99
Household penetration, in %
Fixed-line
Mobile
Pre-paid mobile and Universal Pre-paid mobile and Universal ServiceService
Source: ITU World Telecommunication Indicators Database.
Mobile can enhance access
Pre-paid has given access a major boost, esp. in Europe
Pre-paid allows subscribers to receive incoming calls (under calling party pays regimes)
Pre-paid mobile cellular subscribers, 1998, as % of total Total
pre-paid (m)
15.2
2.0
1.6
1.3
0.4
0.8
0.7
0.6
74%
60%
53%
50%
40%
37%
35%
35%
Italy
Mexico
Portugal
S. Africa
Indonesia
Austria
Greece
Philippines
Price restructuring and Universal Service/Access
The “myth” of subsidised accessIt is commonly argued that telephone access
should be priced at a low rate so that as many people as possible can afford it
But, this may result in ‘subsidies’ from non-telephone
users to telephone owners, who are typically business, government and richest 1% of population
if revenues do not cover costs, then the waiting list will grow
Price restructuring and Universal Service/Access
“Socially desirable” pricing
• Rates are kept artificially low
• 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
Price restructuring and Universal Service/Access
Defining affordabilityRelative affordability, e.g., <5 per cent of
average family income BUT, initial telephone users are are not necessarily
“average In low income countries, costs for network
installation may be high, but incomes are low“Best practice” cost of operating a
networkMethodology must be refined for residential and
business usersCosts must be split between one-time & recurring
Price restructuring and Universal Service/Access
-
20
40
60
80
100
0% 2% 4% 6% 8% 10%Telephone charges as % of household expenditure
Per
cent
of h
ouse
hold
s w
ith
tele
phon
e
Telephone charges relative to household income, 1995
Note: The annual telephone charges data are a basket based on one tenth of the installation charge, annual subscription in the largest local network, 700 local calls and 130 long-distance calls. Taxes are included.
Source: TU World Telecommunication Development Report 1998: Universal Access.
Price restructuring and Universal Service/Access
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.
Methodology for determining average and best practice costs
Source: TU World Telecommunication Development Report 1998: Universal Access.
Note: Based on study of 10 operators from different regions and income groups. “Best practice” is the lowest1. 40% of operating costs discounted by 20 per cent (covered by higher business subscription charge.2. Actual connection charge, divided by seven. 3. Assuming telephone charges represent 5% of income.
Source: ITU World Telecommunication Development Report, 1998: Universal Access.
Price restructuring and Universal Service/Access
Global measures of Affordability
Source: ITU World Telecommunication Development Report, 1998: Universal Access.
0
100
200
300
400
500
600
700
WithService
OnWaitlist
Couldafford
Couldnot
afford
~1'500 million households in the world
Without telephone service
Price restructuring and Universal Service/Access
Pricing strategies for extending Universal Access
Installation charges initially high, but coming down over time
Residential subscription charges should reflect cost of servicing line (typically US$5-10 per month)
Set separate charges for residential and business subscribers
Lower prices for payphone or community telephone access
Note: % of households with telephone obtained fromcensus surveys and refer to year 1996. † Residentialtelephone lines per 100 households. ‡ Residentialtelephone lines per 100 households is greater than100 due to 2nd telephone lines.
Source: ITU World Telecommunication DevelopmentReport 1998.
Achieving Universal service
Price restructuring and Universal Service/Access
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
TeledensityHousehold telephonepenetration
Payphones per 1’000
people
Year 2010 GoalsGoal: Provide reasonable access to telecommunications
for all of humanity by the year 2010
Source: ITU World Telecommunication Development Report, 1998
