Opening Forum Speech

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Global trends in telecom development and
Paradigm Shift Saburo TANAKA Seminar in
Guatemala City, Nov. 2002
http//www.itu.int/ITU-T/othergroups/tal/index.htm
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The original document was elaborated by Dr Tim
Kelly, ITU/SPU. It has been completed by Saburo
Tanaka. The views expressed in this presentation
are those of the authors, and do not necessarily
reflect the opinions of the ITU or its
membership. Authors can be contacted by e-mail
at Tim.Kelly_at_itu.int saburo.tanaka_at_itu.int
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Global trends in telecom development

• The state of the industry
• Fixed-lines
• Mobile
• The Internet
• The state of the market
• Increasing competition
• Private sector participation
• Independent regulation
• Situation in the Regions
• Paradigm shift
• Examining market reality

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A Mobile Revolution
Fixed Lines vs. Mobile Users,
worldwide, Million
1'400
Mobile Users
1'200
Fixed Lines
1'000
800
600
400
200
0
1993
1995
1997
1999
2001
2003
Source ITU World Telecommunication Indicators
Database.
4
Projection of revenue growth (USbn)
1000
Actual
900
800
Other Data, Internet,
13
Leased lines, telex, etc
Projected
700
600
Mobile
36
500
Int'l
Service revenue (US bn)
400
8
300
200
43
Domestic Telephone/fax
100
0
90
91
92
93
94
95
96
97
98
99
00
01
02
Source ITU.
5
Use of international circuits from the USA
180,000
160,000
140,000
120,000
100,000
Unused
Capacity (Mbps)
Data
80,000
Basic voice telephony
60,000
40,000
20,000
0
1995
1996
1997
1998
1999
2000
Source FCC
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Bursting the Telecom Bubble

• Total market value of telecom operators down from
  US6.3 trill. to US3.8 trill.
• More than 400000 redundancies announced in
  telecoms since Oct 00
• On average, a major telephone operator goes bust
  once every six days
• Source www.ft.com

Share price trends in the US Technology Media
and Telecoms (TMT) sector
7
Nevertheless, the Internet continues to grow
Internet users, million, and growth rate in
Source ITU.
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The state of the market

• Increasing competition
• Around two-thirds of telecom subscribers now have
  a choice of operator
• More than 99 per cent of mobile and Internet
  subscribers now have a choice of operator
• Dominantly private-ownership
• 19 out of top 20 top public telecom operators are
  partially or fully private-owned
• Of the top 20 mobile operators, 16 are
  fully-private, 3 are partially private, 1 is
  state-owned
• Independent regulators
• There are currently 112 independent regulators
  (only 12 in 1990)

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Private, competitive, mobile and global
Status of telecommunication privatization , by
country and by share of global revenue, 2001
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Legal status of competition Distribution by
country, 2001
Legal status of telecommunication competition, by
country, 2001
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Mobile as the new global network
Mobile and fixed telephone subscribers worldwide,
1982-2005
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Total telephone users (fixed plus mobile) per 100
inhabitants
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Mobile as percentage of total telephone
subscribers, 2001
Source ITU World Telecommunication Indicators
Database
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Distribution of population, main telephone lines,
mobile cellular subscribers and Internet users by
country economic classification, 2001
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Growth in fixed line teledensity, Chile and
Argentina, 1986-2000
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Growth in mobile teledensity, Hong Kong SAR and
Singapore, 1988-2000
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Teledensity with rising rank
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Teledensity with falling rank
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Latin America monthly residential subscription
charge, 2000 (in US)
3.5
Colombia
Costa Rica
3.6
Ecuador
6.2
Brazil
7.7
Uruguay
8.2
9.14
Average
Chile
10.8
Argentina
13.2
13.6
Peru
Mexico
15.5
0
2
4
6
8
10
12
14
16
18
Source ITU World Telecommunication Indicators
Database
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Caribbean monthly residential subscription
charge, 2000 (in US)
Source ITU World Telecommunication Indicators
Database
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Residential installation charge (in US)
Source ITU World Telecommunication Indicators
Database
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Residential monthly subscription (in US)
Source ITU World Telecommunication Indicators
Database
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South America
Comparative prices for 100 minutes per month use
of a mobile phone in selected South American
markets (in US, 2000)
Note The 100 minutes of cellular use is based
on the lowest charge (among different operators
in a country) payable for a basket of 50 peak and
50 off-peak minutes of calls per month.
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Central America and the Caribbean
Comparative prices for 100 minutes per month use
of a mobile phone in selected Central American
and Caribbean markets (in US, 2000)
Note The 100 minutes of cellular use is based
on the lowest charge (among different operators
in a country) payable for a basket of 50 peak and
50 off-peak minutes of calls per month.
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Central America
Dial-up Internet tariff (in US), 2001Monthly
cost of 30 hours Internet use, including PSTN
usage for selected Central American countries
Note Generally tariffs of leading ISPs.
Countries with indicate an unlimited Internet
access.Source ITU
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South America the Caribbean
Dial-up Internet tariff (in US), 2001Monthly
cost of 30 hours Internet use, including PSTN
usage for selected South American and Caribbean
countries
Note Generally tariffs of leading ISPs. Source
ITU
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Telephone tariffs (2000)
 
 
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Cellular tariffs (2000)
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Telephony Some DATA(2000)Internl
Telephone revenue 54 billion US Settlement
transaction 27 billion US Net Settlement
payment to developing countries amount to around
5 billion USIntl Infrastructure costs
reduction lt 20 Annual average traffic
increase 8 Average Settlement rate
reduction ?
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Falling prices
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Traditional regimeJoint provision of service
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Country A
Country B
X
X
Two different national operators jointly
establish an international circuit and decide the
revenue they wish to obtain. They then divide
that revenue fifty-fifty split.
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Emerging regimeMarket entry and interconnection
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Jointly provided circuit
Country B
Country A
X
X
X
Circuit provided by operator B
Cross border interconnection and the trading of
international traffic minutes
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Delivering international voice traffic in 2002
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The value chain of the international
telecommunications industry
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Refile and other practices using accounting rate
system
Operator in A sends traffic tooperator in C
under anarrangement of exclusivity
Operator in C declares traffic to B on transit
through A
3
A
1
A
Origin CDestination B
Origin ADestination B
Operator in B receives traffic at settlement rate
C/B instead of A/B
C
C

• Operator in A is a partner of operator in C
• Settlement rates A/B gt C/B

2
Operator in C re-labels the traffic as
originated in C
4
B
B
42
CALL BACK using Accounting Rates
Using AR
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Mobile tromboning (using accounting rate)
Operator X or Operator As facility in another
country
International boundary
Operator As Intl facility
Operator Bs Intl facility
Operator As national network
Operator Bs mobile network
High Interconnection charge
?
?
Called B
Caller A
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International simple resale (ISR) (By-passing
accounting rate)
Country A
Country B
Operator B
PSTN
Operator A
Interconnect
IWF
Leased lines
Once a foreign carrier accepts the benchmark
rate, it can negotiate ISR arrangements with US
carriers
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Telephone service using data transmission (By-pass
ing accounting rate)
Country A
Country B
VSAT
Operator A
Inter-connection
PSTN
?
Voice is packetized data transmissionTelephone
regulations do not apply
46
IP Telephony (by-passing accounting rate)
Call from International Telecommunication Network
(ITN) to another ITN via IP-based Network
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Conclusion and Recommendation

• Erosion of traditional system of accounting rates
  for exchange of international traffic
• Domestic interconnect fees will be dominant mode
• Major price cuts in international calls
• Availability of new infrastructures
• Impact of Internet pricing model (distance and
  duration independent)
• Mobiles exceed fixed-line phones worldwide
• Introduction of third generation mobiles after
  2001
• Generational shift, as new users reject
  fixed-lines
• Interconnection and tariff rebalancing