Developing the Telecoms Market: Universal Access

1. Developing the Telecoms Market:Universal Access Commonwealth Telecommunication Organization (CTO) 38th Meeting of Council Trinidad, 28 September 1998 Michael Minges International Telecommunication Union (ITU) Telecommunication Development Bureau (BDT)

2. CONTENTS Measuring Access Pricing Access Universal Access Supplying Access Achieving Access

3. MEASURING TELECOM 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) “Teledensity” Main telephone lines per 100 inhabitants Source: ITU.

4. Teledensity limitations Note: 1996 data. Figure in parenthesis shows the number of persons per household. Source: ITU.

5. Other measurements of telecommunication access Have telephone 32% None 32% South Africa 8.8 million households Use neigh- bours 8% Use at shop/clinic 12% Use payphone 16% • Households with a telephone • Towns with telephone service • Payphones per inhabitant • Distance from a telephone • Time from a telephone Source: CSS. October household survey, 1995

6. PRICING ACCESS • Telephone service pricing • Socially desirable • Cost-oriented • Measuring affordability • Tariff strategies to reach the “unphoned” Source: ITU.

7. 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 • May not generate enough revenue for network expansion Source: OSIPTEL.

8. 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 Source: OECD.

9. Defining affordability

10. Affordability & demand World households, millions, 1996 ~ 1’500 million households in the world Source: ITU estimate.

11. Tariff strategies for the “unphoned” • Tariff reductions for disadvantaged • Prepaid calling cards • Subsidized payphone calls • Supporting incoming calls Source: ITU estimate.

12. UNIVERSAL ACCESS • Universal service Telephone in most homes • Universal access Telephone within reasonable distance for everyone

13. Achieving Universal Service Countries with Universal Telephone Service (more than 90% of households with a telephone) Source: ITU.

14. Universal servicetakes time Percentage of households with a telephone Source: ITU.

15. Universal Access to Universal Service transition Universal Service Households with telephone, % Universal Access Purchasing Power Parity per Capita, US$ Source: ITU.

16. Universal access concepts Criteria Population Distance Time Definition A telephone for every permanent settlement of ‘x’ population A telephone within ‘x’ kilometres A telephone within ‘x’ minutes 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. Á

17. Technology Wireless (mobile and fixed cellular) Satellite (Global mobile systems) Voice plus (Cable TV and Internet) Policy Privatization BTO Competition SUPPLYING ACCESS

18. Mobile cellular Cellular subscribers as % of total telephone subscribers 35% Sri Lanka Singapore 30% South Africa 25% UK 20% Cyprus Jamaica 15% Malta Namibia 10% T&T India Barbados 5% SUPPLEMENT SUBSTITUTE 0% 0 20 40 60 Main lines per 100 inhabitants • In some countries, wireless is substituting for wired service • Characterised by low levels of fixed-line density with competitive wireless markets Source: ITU.

19. Fixed cellular SRI LANKA • 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. Source: ITU.

20. 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.”

21. Voice+ • Bundle voice telephone with another service • Cable television • Internet Note: Years ending 31 March. Source: OFTEL.

22. Implementing universal access through payphones • Mandated targets for incumbent PTOs • Franchising public payphones: • Indonesia: Wartels • West Africa: Télécentres, Téléboutiques, Télékiosks • Bangladesh: Village Pay Phones Source: Sonatel, Gaston Zongo.

23. Supply policies Main lines Tele- Density Mexico Thailand Philippines Policy Privatization Build-Transfer-Operate Competition (BTO) Increase main lines Install 4.1 million Add 5.5 million Target at annual average telephone lines telephone lines of 12% between between between 1990-1994. 1993-1996. 1994-1998. Pre- competition Post- competition Pre- privatization Post- privatization Post- BTO Pre- BTO Key: 8 8 8 8 8 8 6 6 6 6 6 6 Telephone lines (m) 4 4 Teledensity 4 4 4 4 2 2 2 2 2 2 - - 0 0 0 0 86 90 94 90 92 94 96 90 94 98

24. 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?

25. 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 Source: ITU from Network Wizards data.

26. 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.

27. A universal access road map Definition changes with technology Translate goals and into concrete economic policies development MONITOR DEFINE What is universal access goal? “All urban households with telephone, all localities with public telephone” INFOR- MATION -Households / localities with / without telephone - Distances / time from telephone POLICY What tools to achieve goal? Targets, universal service funds, tariff policies How and who will monitor & enforce policy? Universal Service Agency? Policies need to be monitored for compliance

28. Year 2010 Goals Household telephone penetration Payphones per 1’000 people Teledensity 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 Goal: Provide reasonable access to telecommunications for all of humanity by the year 2010 * Host of 1998 World Telecommunication Development Conference

29. WORLD TELECOMMUNICATION DEVELOPMENT REPORT 1998 Universal Access to Telecommunications

30. http://www.itu.int/indicators