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Tariff comparison: Global Trends

Tariff comparison: Global Trends. Dr Tim Kelly (ITU), Seminar on tariff strategies for competitive environments, ALTTC, Ghaziabad, 20-22 July 1999.

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Tariff comparison: Global Trends

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  1. Tariff comparison: Global Trends Dr Tim Kelly (ITU), Seminar on tariff strategies for competitive environments,ALTTC, Ghaziabad, 20-22 July 1999 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 at Tim.Kelly@itu.int.

  2. Agenda • The purpose of tariff comparisons • Rate comparisons • Installation charges • Subscription charges • Local and international call charges • Tariff baskets • OECD business and residential baskets • OECD international basket • Other baskets • Trends over time

  3. Tariff comparisons: What for? • To carry out benchmarking between competitive operators in the same country • To carry out benchmarking between similar operators in different countries • To track effects of tariff rebalancing over time • To provide comparative information for managers, regulators, users • To create “baskets” of different services to compare like with like

  4. Different types of tariff comparison • Individual rate comparisons (e.g., installation charge, local call rate) • Composite basket with fixed components (e.g., Siemens basket) • Composite basket with variable components (e.g., OECD Tariff Comparison basket) • Variations over time in same price variable

  5. Residential installation fee, in US$: Selected countries plus World average, 1998 Philippines 8.20 Malaysia 17.77 India 22.03 South Africa 34.80 Brazil 46.38 Hongkong Sar 61.35 Thailand 106.81 Mexico 106.94 Average 124.00 171.31 Russia Indonesia 202.79 China 225.57 Source: ITU World Telecommunication Indicators Database. Argentina 250.01

  6. Monthly residential subscription, in US$: Selected countries plus World average, 1998 1.88 China 3.19 Thailand 3.43 Russia 5.23 India 7.11 Malaysia 7.22 Brazil 7.22 Indonesia 8.91 Hongkong Sar 8.99 Philippines 9.50 Average 10.05 South Africa 12.83 Argentina Source: ITU World Telecommunication Indicators Database. 14.01 Mexico

  7. Business installation fee, in US$: Selected countries plus World average, 1998 6.86 Philippines 17.77 Malaysia 22.03 India South Africa 34.80 46.38 Brazil 61.35 Hongkong Sar 106.81 Thailand 165.00 Average 225.57 China 250.01 Argentina 274.97 Indonesia 383.10 Mexico Source: ITU World Telecommunication Indicators Database. 582.44 Russia

  8. Monthly business subscription, in US$: Selected countries plus World average, 1998 2.90 China 3.19 Thailand 5.23 India Indonesia 10.66 11.62 South Africa 12.44 Malaysia 12.52 Brazil 14.08 Hongkong Sar 14.80 Average 18.84 Russia 19.26 Mexico 20.51 Philippines Source: ITU World Telecommunication Indicators Database. 36.42 Argentina

  9. Local call charge in US cents per 3 mins: Selected countries plus World average, 1998 0.0 Russia 0.0 Philippines 0.0 Hongkong Sar 1.4 China 2.2 India 3.2 Malaysia 3.8 Indonesia 7.0 South Africa 9.0 Average 9.3 Brazil 9.6 Thailand 10.0 Argentina Source: ITU World Telecommunication Indicators Database. 13.2 Mexico

  10. International 3 min call to US, in US $: Selected countries, 1998/99 0.63 Australia 1.18 United Kingdom 1.29 Mexico 1.83 Japan 2.49 South Africa 2.63 Hongkong Sar 2.76 Brazil 3.28 Indonesia 3.58 Thailand 4.36 India 6.65 China Source: ITU World Telecommunication Indicators Database. 7.39 Russia

  11. Rate comparisons versus tariff baskets • Rate comparisons: • Easy to construct and understand • BUT, easy to misinterpret • Can be misleading due to different tariff structures and different tariff strategies between countries • Tariff baskets: • Much harder to construct • BUT, much more meaningful in terms of comparisons between countries or operators with different tariff structures • More representative of experience of different user groups

  12. OECD tariff baskets: Then and now ... • Six baskets defined: • Business telephony • Residential telephony • International telephony • Mobile communications • X.25 data communications • Leased lines at 9.6 kbit/s, 56/64 kbit/s and 1.5/2.0 Mbit/s • Comparisons between countries • Additional telephony baskets to take account of usage discounts (e.g. small businesses, multinationals, elderly) • Combined national and international telephony basket • Additional baskets needed for Internet, ISDN, digital mobile (roaming), PCS, ATM etc • Comparisons between operators within countries

  13. OECD residential tariff basket: August 1998 Note: Including tax. Calculation is based on Purchasing Power Parities expressed in US$. Source: OECD. Based on methodology defined in ICCP 22 “Performance indicators for Public Telecommunication Operators”

  14. Off-peak, Internet access basket: August 1998, 20 hours per month Source: OECD. Based on dial-up Internet access via PSTN. Excludes any element of fixed charges.

  15. Int’l business call basket, 1996: based on call pairs, Asia-Pacific=100 84.2 Hongkong 86.7 Australia 91.9 Singapore 99.5 Indonesia Average 100.0 USA (AT&T) 103.8 India 108.4 Source: ITU, Asia-Pacific Telecom Indicators, 1997. China 117.1 Japan (KDD) 129.2

  16. Trends over time • Tracking trends in tariffs over time helps to assess: • affordability of tariffs • performance/efficiency of company • competitive position of company • Tariff rebalancing strategy • Trends in local currency (Rupees) • Provide most meaningful indicator for local customers • Trends in US$, Euros, SDRs or PPPs • Provide comparability relative to other currencies and relative to local price inflation

  17. Trends over time: India’s international tariffs, 3 minute, peak rate call, in Rupees 250 North America Europe, Asia 200 150 Neighbouring countries 100 50 0 1995 1996 1997 1998 1999 Source: ITU/TeleGeography “Direction of Traffic, 1999”

  18. Trends over time: India’s international tariffs, 3 minute, peak rate call, in US$ 8 7 North America 6 Europe, Asia 5 4 3 Neighbouring countries 2 1 0 1995 1996 1997 1998 1999 Source: ITU/TeleGeography “Direction of Traffic, 1999”

  19. Conclusions: the value of tariff comparisons • A useful tool for management, for regulators and for users • But, can be misleading if tariff comparisons are used selectively, or are quoted out of a wider socio-economic context • Use of tariff baskets is a more reliable and meaningful indicator than simple rate comparisons • Trends over time are best measure of company performance

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