Accounting rate reform and what it means

1
Trends in international telecom traffic, costs
and prices
Dr Tim Kelly, International Telecommunication
Union (ITU) Closing Workshop on the costing and
pricing of telecom services in the Arab States,
Tunis, 29 Nov - 2 Dec 1999
Note The views expressed in this presentation
are those of the author and do not necessarily
reflect the opinions of the ITU or its
membership. Dr Tim Kelly can be contacted by
e-mail at Tim.Kelly_at_itu.int.
2
Agenda

• Trends in international traffic
• Worldwide
• Arab States
• Regional breakdown of traffic
• Market shares
• Competitive markets
• Cost and price trends
• FCC benchmarks
• ITU Focus Group, indicative target rates
• Conclusions

3
Trends in subscribers and international traffic,
Worldwide
1'200
160
143
140
124
Fixed main lines
1'000
Mobile subscribers
108
120
Total int'l traffic
800
94
100
82
72
telephone traffic
600
80
Billions of minutes of international
worldwide (millions)
Fixed lines and mobile subscribers
62
54
60
48
44
400
38
40
30
200
20
0
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Source ITU/TeleGeography Inc. Direction of
Traffic 1999 Trading Telecom Minutes.
4
Trends in subscribers and international traffic,
Arab States
25
6
Fixed lines
4.9
5
Mobile
4.3
20
3.7
Int'l outgoing
4
3.3
15
2.7
3
2.3
Subscribers (millions)
Int'l traffic (billion mins)
2.0
10
1.8
1.6
2
5
1
0
0
1993
1994
1995
1996
1997
1998
1999
2000
2001
Source ITU World Telecommunication Indicators
Database.
5
Yemen
Oman
Qatar
Bahrain
Syria
Minutes of international traffic, outgoing and
incoming, Arab States, 1998
Jordan
Tunisia
Kuwait
Algeria
Lebanon
Egypt
Morocco
UAE
S. Arabia
0
500,000,000
1,000,000,000
1,500,000,000
Source ITU World Telecommunication Indicators
Database. Note Excluding States with lt100000
minutes.
6
Trends in subscribers and international traffic,
Egypt
Fixed lines
4
600
Mobile
Int'l outgoing
500
Int'l incoming
3
400
2
300
Traffic (million minutes)
Subscribers (millions)
200
1
100
0
0
1993
1994
1995
1996
1997
1998
Source ITU World Telecommunication Indicators
Database.
7
Trends in subscribers and international traffic,
Lebanon
0.8
400
Fixed lines
Mobile
Int'l outgoing
0.6
300
Int'l incoming
0.4
200
Traffic (million minutes)
Subscribers (millions)
0.2
100
0.0
0
1993
1994
1995
1996
1997
1998
Source ITU World Telecommunication Indicators
Database.
8
Trends in subscribers and international traffic,
Morocco
Fixed lines
2
600
Mobile
Int'l outgoing
500
Int'l incoming
1.5
400
1
300
Traffic (million minutes)
Subscribers (millions)
200
0.5
100
0
0
1993
1994
1995
1996
1997
1998
Source ITU World Telecommunication Indicators
Database.
9
Trends in subscribers and international traffic,
Saudi Arabia
Fixed lines
3
1,200
Mobile
Int'l outgoing
1,000
Int'l incoming
2
800
600
Subscribers (millions)
Traffic (million minutes)
1
400
200
0
0
1993
1994
1995
1996
1997
1998
Source ITU World Telecommunication Indicators
Database.
10
Trends in subscribers and international traffic,
Tunisia
Fixed lines
1.0
200
Mobile
Int'l outgoing
0.8
Int'l incoming
150
0.6
100
Subscribers (millions)
Traffic (million minutes)
0.4
50
0.2
0.0
0
1993
1994
1995
1996
1997
1998
Source ITU World Telecommunication Indicators
Database.
11
Trends in subscribers and international traffic,
UAE
Fixed lines
1.0
1,000
Mobile
Int'l outgoing
0.8
800
Int'l incoming
0.6
600
Subscribers (millions)
Traffic (million minutes)
0.4
400
0.2
200
0.0
0
1993
1994
1995
1996
1997
1998
Source ITU World Telecommunication Indicators
Database.
12
Trends in outgoing traffic, bn minutes
60
50
Developed countries
40
30
20
Developing countries
10
-
1990
1991
1992
1993
1994
1995
1996
1997
Source ITU/TeleGeography Inc. Direction of
Traffic 1999 Trading Telecom Minutes.
13
Trends in incoming traffic, bn minutes
60
50
40
Developed countries
30
20
Developing countries
10
0
1990
1991
1992
1993
1994
1995
1996
1997
Source ITU/TeleGeography Inc. Direction of
Traffic 1999 Trading Telecom Minutes.
14
Trends in settlement payments and receipts,
Developing countries, USbn
20
Payments
Receipts
Net settlement
15
10
5
0
1993
1994
1995
1996
1997
1998
Source ITU/TeleGeography Inc. Direction of
Traffic 1999 Trading Telecom Minutes.
15
Percentage of outgoing international traffic open
to competition
Mono-
poly
Compe-
85
74
tition
46
35
Number of countries permitting more than one
operator for international telephony
4
14
29
48
1990
1995
1998
2005
Note Analysis is based on WTO Basic
Telecommunications Commitments and thus presents
a minimum level of traffic likely to be open to
competitive service provision. Source ITU,
WTO.
16
Level of competition in international services in
WTO basic telecoms agreement
Monopoly
Competition
Source ITU Telecommunication Regulatory
Database.
17
Countries permitting intl competition
20
Israel
1990
1998
1
Japan
1
Australia
21
Italy
2
New Zealand
2
Austria
22
Japan
3
UK
3
Belgium
23
Korea (Rep.)
4
USA
4
Brunei D.
24
Malaysia
1995
5
Canada
25
Mexico
1
Australia
6
Chile
26
Netherlands
2
Canada (partial)
7
Colombia
27
New Zealand
3
Colombia
8
DPR Congo
28
Norway
4
Chile
9
Denmark
29
Peru
5
Denmark
10
Dominican Rep.
30
Philippines
6
Finland
11
El Salvador
31
Russia
7
Japan
12
Finland
32
Somalia
8
Korea (Rep.)
13
France
33
Spain (after Dec. 1998)
9
Malaysia
14
Germany
34
Sweden
10
New Zealand
15
Ghana
35
Switzerland
11
Philippines
16
Guatemala
36
Uganda
12
Sweden
17
HK-China (after Dec 1998)
37
Ukraine
13
UK
18
Indonesia
38
UK
14
USA
19
Ireland (after Dec. 1999)
39
USA
18
Top 10 PTOs by outgoing intl traffic
Source ITU/TeleGeography Inc. Direction of
Traffic 1999 Trading Telecom Minutes.
19
Selected PTOs, performance 1997/98
change in traffic change in intl rev.
-2.1
-16.4
DT
2.2
-2.9
SwissCom
0.6
5.9
Telecom Italia
-2.7
8.2
ATT
21.2
17.6
MCI WorldCom
1.1
0.5
Sprint
-17.3
9.7
FT
-14.3
4.5
BT
Note Based on 1998 international outgoing
traffic and revenue from international
operations. For Sprint, MCI WorldCom and ATT,
data relates to 1997. The definition of
international revenue (gross, net or retail) is
tat used by each individual operator. Source
ITU/TeleGeography Inc. Direction of Traffic
1999 Trading Telecom Minutes.
20
Emerging global alliances, shares of intl
traffic market
ATT/BT, 17.2
Others,
47.3
Total, 1997 81.2 bn minutes
MCI WorldCom,
Telefonica, TP,
11.1
Cable Wireless, 4.7
Unisource, 5.4
Note Traffic shares relate to minutes of
outgoing traffic from members of each
alliance.Source ITU/TeleGeography Inc.
Direction of Traffic, 1999 Trading Telecom
Minutes
21
Emerging global alliancesRecent developments

• WorldCom merges with MCI, bids for Sprint
• Following collapse of BT/MCI merger, BT ATT
  join forces in Concert
• ATT and Telefonica withdraw from Unisource
• GlobalOne on point of collapse following purchase
  of Sprint by WorldCom
• Deutsche Telekoms bid for Telecom Italia fails
  Olivettis succeeds
• Cable Wireless re-positioning itself as
  supplier of data services
• Telia and TeleNor merge

22
Global average settlement rates, US per minute
1
1997-98,
0.8
-14 p.a.
0.6
1987-92,
-2 p.a.
1992-96,
0.4
-4 p.a.
D.140
0.2
D.140
approved
revised
0
87
88
89
90
91
92
93
94
95
96
97
98
Source ITU/TeleGeography Inc. Direction of
Traffic 1999 Trading Telecom Minutes.
23
Convergence Accounting rate to US in US per
minute, four European countries
1.6
1.4
Italy
1.2
France
1
UK
0.8
Germany
0.6
0.4
0.2
0
1993
1995
1997
1999
Source FCC. Data for year-end except 1999
September 1999
24
0.30
Kuwait
World Ave.
0.41
0.84
Morocco
0.89
Tunisia
Accounting rates with USA, US per minute, 1
Nov 1999
0.90
Algeria
1.00
Jordan
1.10
Egypt
1.10
Bahrain
1.36
S. Arabia
1.36
Syria
Oman
1.38
1.72
Mauritania
1.75
Lebanon
2.00
UAE
Source FCC (Ken Stanley).
25
Trends in accounting rates, US per min
2.50
Oman
Saudi Arabia
Qatar, UAE
2.00
1.50
Bahrain
Kuwait
1.00
World Average
0.50
0.00
1992
1993
1994
1995
1996
1997
1998
1999
Source FCC (Ken Stanley). 1999 is 1 November
1999 data.
26
Trends in accounting rates, US per min
2.50
Mauritania
2.00
Morocco
1.50
Egypt
Tunisia
1.00
Algeria
World Average
0.50
0.00
1992
1993
1994
1995
1996
1997
1998
1999
Source FCC (Ken Stanley). 1999 is 1 November
1999 data.
27
Two alternative scenarios
ITU Focus Group targets, by teledensity (T), to
be achieved by 2001 (2004)
FCC Benchmarks, by income group
Source ITU Focus Group Report, FCC.
28
Tariff rebalancing trends, in US Average of 39
major economies
12
10
8
6
4
300 minutes, local calls
3 mins Int'l call to US
2
Monthly line rental
0
1990
1991
1992
1993
1994
1995
1996
1997
Source ITU World Telecommunication Indicators
Database.
29
International traffic trendsConclusions

• Voice traffic continuing to grow, but the main
  action is now elsewhere
• Mobile and the Internet will be the major demand
  drivers for the future
• Competitive markets will be the norm,
  monopolistic markets the exception in the future,
  in most regions of the world
• Alliances will continue to be formed, but
  partnerships are still unstable
• Settlement rates in most countries of the region
  are well above indicative target rates