Telecommunications Misconceptions
1. The Regulator’s role is to push for lower prices
2. TLRIC is the solution for all interconnection
conflicts
3. Fixed to Mobile calls are more expensive than
Mobile to Fixed calls.
MEXICO/UIT
Lines in service (000)
18000
Fixed
16000
Mobile
14000
TOTAL
12000
10000
8000
6000
4000
2000
year
MEXICO/UIT
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
0
1982
lines (000)
20000
Mexican Demographics
Nominal GDP per Capita (1999) = US$ 4,910
Income distribution = Uneven, 1994 Crisis.
Urban population
75%
Income per urban household
is 2.7 higher than rurals
Urban Fixed Penetration
34%
Rural Fixed Penetration
2%
MEXICO/UIT
Main differences between cellular wireless and wireline
Cost
Pre-paid
Post-paid
Wireline
Fixed
wireline
cost per
line
Fixed wireless cost per customer
Usage (minutes per month)
MEXICO/UIT
Misconception 1: The Regulator’s role is to push for lower prices
Vicious Circle
Competition Destroy Model
Virtuous Circle
Pro-Competition Model
Wrong price regulation
Market prices
Lower ROI
Higher ROI
Less investments
More investments
Less competition
More competition
Over-regulation
& subsidies
Lower prices
MEXICO/UIT
Misconception 1: The Regulator’s role is to push for lower prices
False
“Price” is a dangerous variable to manipulate.
In most cases competition works (excluding
some dominant´s services). Regulators can
stimulate competition using other methods:
Auctioning more frequencies, More Licenses,
No Discrimination, Transparency.
MEXICO/UIT
Misconception 2: TLRIC is the solution for all interconnection conflicts
CAPEX vs Traffic
4
3.5
3
C
A
P
E
X
Wireline
2.5
AMPS
2
TDMA3
CDMA
1.5
1
0.5
0
0.01
0.03
0.05
0.07
0.09
Traffic (Erl)
0.11
0.15
0.20
MEXICO/UIT
Misconception 2: TLRIC is the solution for all interconnection conflicts
CAPEX vs Customer’s Density
6
5
C
A
P
E
X
Wireline
4
AMPS
3
TDMA3
CDMA
2
1
0
6
10
30
50
70
90
120
160
200
300
Density (Users/Km2 )
MEXICO/UIT
Misconception 2: TLRIC is the solution for all interconnection conflicts
CAPEX vs Available Spectrum
6
5
C
A
P
E
X
Wireline
4
AMPS
TDMA3
3
CDMA
2
1
0
8
10
12
14
16
18
20
22
24
26
28
30
Bandwidth (MHz)
MEXICO/UIT
Misconception 2: TLRIC is the solution for all interconnection conflicts
False
TLRIC depends on technology, customer´s
density and traffic. One company has something
that another company wants. To calculate
TLRIC, Regulators need not available
information.
Only dominant or essential services should be
calculated in this way. In most cases
competition can better solve the problems using
“obligation to sell and no discrimination”
criteria.
MEXICO/UIT
Fixed to Mobile calls are more expensive than
Mobile to Fixed calls.
Wireline Price
VEN
Wireline call + Billing & Collection
Wireless Interconnection (LRIC)
Minimum Wireline Interconnection + B & C
MEX
Wireline Sales Margin (Resale)
EUR
Wireline Sales Margin (Resale)
ARG
Wireline call + Billing & Collection
Wireless Price (Wholesale)
Wireless Price (Retail)
Wireline Interconnection + B & C
MEXICO/UIT
Mexican Prices
Caller’s price
Originating Network
Destination Network
US 28 c
US 25 c
US 3 c
US 38 c
US 19 c
US 19 c
MEXICO/UIT
Fixed to Mobile calls are more expensive than
Mobile to Fixed calls.
There are several reasons that can produce this
result. In the Mexican case, billing and collection
is a function or service not well defined in the
incumbent´s concession, provoking endless
conflicts.
There are some services that are difficult to offer
without billing and collection: Call by call carrier
selection, collect calls and Calling Party Pays.
MEXICO/UIT
Final Comments
• As a result of competition there is a tendency to
deaverage and bundle services in different ways.
• It is very important for customers everywhere,
but specially in developing countries, to know in
advance the price of each call.
• This is an important Regulator´s function.
MEXICO/UIT