ITU/BDT Arab Regional Workshop

1. ITU/BDT Arab Regional Workshop For a Universal Service Evolution in Jordan. Luc Savage Chief Strategy Officer Jordan Telecom February 2005

2. WTO definition • Each member has the right to define the kind of USO it wishes provided… • Not to be anti-competitive, means transparent, non-discriminatory and completely neutral. • Not more burdensome than necessary for the kind of USO defined by the member.

3. Others common principles • Distinction between mandatory and universal service • telex, lease lines… can be mandatory • USO is about providing a safety net • It is a social policy issue • It is not an action plan to develop new technologies • Forces of competition must drive the service aspects of innovation, price, quality of service and choice

4. Others common principles • Competitively neutral • Designation of US provider neutrality • If a US cost exists, provider must be compensated • Technological neutrality • Choice of technology should be made by USP bidder • Regulation on none mature technology will distort competition • Regulation on unstable technology leads to cost risk • Regulatory certainty • Needs consistency with law, policy, licenses

5. Why a U. S. in Jordan ? • Introduction of full competition : risk of not served customers or areas • need for regulatory intervention in the form of USOs… • …and the corresponding loss sharing mechanism. • Unbalanced development in Jordan • Rural vs urban areas • Governmental policy to encourage local development • Un-accessibility to telecommunication increase social gap • 33% of households bellow 200 JD/ month

6. What is U.S. in Jordan ? • A Basic Public Telephone Service • Connection to exchange line services • A geographical scope • Community of at least 300 people • A USP: the incumbent monopoly • Mandatory services not included in USO • Directory services • Emergency services • Disability services

7. Why a US evolution ? • New regulation • end of monopoly • avoid competition distortion • New government vision • to create the knowledge society • avoid knowledge gap • advanced social policy • New services • internet, mobility • Which one to be included in the USO ? • New players • US policy will correct market failures on mature markets

8. Which vision for US ? • Encourage free market • Avoid “social gap” that prevents knowledge economy HIGH SOCIAL POLICY COST SAFETY NET HIGH COMPETITION NEUTRALITY COMPETITION DISTORTION % of USO cost funded DETER USP ENTRY DETER USP ENTRY LOW COMPETITION DISTORTION SAFETY NET LOW HIGH Level of USO services

9. Service scope:to enhance the present USO with… • Data rate sufficient to permit functional Internet access • most spread basic internet speed • Provision of universal access through private payphone • Distinction between economic and uneconomic areas • Special offer for low incomes households • Applicant for government social welfare benefits

10. Geographical scope:same as today • Any person in a community • > 300 people at prevailing standard rates • < 300 people at full cost above 50 hours - standard cost • Principle adopted for network planning since the beginning of liberalization • Regulatory certainty

11. Targeted users:economically deprived Jordanian • Encourage subsidies for those who need them • Those who would not benefit from these services otherwise • Those who are entitled to receive government provided social welfare • Uneconomic customers in economic areas • Uneconomic areas • But not economic customers in uneconomic areas • Avoid subsidies in economic markets • Discount for those who can afford this service • Discount for more than 1/3 of the total market • Unbearable cost for the “economical” market • 33% of household below 200 JD/month as income Maximize the size of the addressable competitive market

12. Costing approach:must avoid competitive distortion • Should include • Unavoidable net losses • Incurred by an efficient operator • Universal service scope • To “non-viable” customers • Should not include • Cost of mobility, which is not included in the scope of service. • The whole access deficit cost of the incumbent operator • To be verified by the TRC • Transparency • Uneconomic areas • Uneconomic customers in economic areas • Consistency with regulatory costing methodology • Agreed border between access and core network • Long Run Incremental Cost is the most appropriate, ASAP.

13. US Provider selectionbased on open tendering process • All kingdom coverage • Urban / rural areas are unbalanced through the Kingdom • Other large socio-economic differences between governorate • Low cost require economy of scale • Beauty contest process opened to all operators • Quality of service • Most efficient to minimize the subsidy required • Permanence • Compliance with scope of service • Obligation limited to five years • Regulatory certainty • Technology cycle • Market forces evolution

14. Funding mechanismfair and simple • Cost shared by all operator who benefit from its existence • But for operator with less than 1% market share • Simple mechanism • Complex regulation cannot be implemented • Operators pay their compensation in the form of provisional payments and then balancing payments • Fair mechanism • JT remains main contributor as long it remains main operator • Interconnection charge is preferred: • Otherwise based on a fund with: • Provisional payment • Balancing payment • Based on traffic revenue

15. Implementation schedulefrom the 1st jan 2005 • USO fund mechanism from 1st jan 2005 • Consistent with international best practices • Consistent with JT license terms • Other schedule would distort competition • Wait for “effective competition” in Jordan is out of JT license scope • Set an unacceptable precedent in license breach • Create regulatory uncertainty: • NRA guaranties license enforcements • TRC stated in November 2004 that JT license does not have to be modifies in 2005

16. Thank you !