Regional Seminar on the economic and financial aspects of
telecommunications Study Group 3 Regional Group for Latin America and
Caribbean (SG3RG-LAC)
Project
“Cost modeling implementation”
Paraguay, March 14th, 2012
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Background and main milestones
1990
2000
2010
1995: Constitutional
ammendment
2003: New PGMU
1997: LGT - Lei Geral de
Telecomunicações
2003: Telecommunication
public policy (Regulation
4733/2003)
1998: Privatization
2005: RSAC (Accounting
Separation)
1998: PGMU – Universal
Services
2008: PGR – Plano Geral
de Atualização da
Regulamentação
2011: Cost
modelling project
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Legal arrangements for telecom provision
Public Regime
• Provided through concession or
permission, in contracts between
Brazilian government and operators
• Universalization
obligations
and
continuity
• Tariffs and adjustments considered in
contracts
• Includes
fixed
services – STFC
Private Regime
• Provided through authorization
• No universalization
obligations
nor
continuity
• No prices control.
• Prices defined by market forces
telecommunication
2
Tariff Regulation
Retail - Price-cap
• Simpler method for tariffs regulation
• Based on historical prices and price
index adjustments, considering
efficiency factors
• Usually facilitates the process of tariff
restructuring
• Can be applied for a basked of
products / services or individual ones
Wholesale - Cost-based
• Emulates efficient operator and
market competition, considering price
= marginal cost
• More complex than price-cap
methodology
• In Brazil, it will be applied with
emphasis to wholesale tariffs (e.g.
interconnection rates and EILD)
• In Brazil, it will be applied in the STFC
local and long distance services
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Economic monitoring development
since privatization
Incentives
• Although we have not constructed yet the Cost models (TD
and BU), some regulations were published in order to show
to the market that the most important things in Brazilian
telecommunication sector are: the competition and the
productive efficiency;
• The focus is not at the price control.
Regulation
adjustments
Transitioning
• Regulation adjustments that pointed to cost-oriented
wholesale tariffs regulation;
• Retail minus in FTR regulation
• Smooth transitioning to cost-oriented models, so that
investment flows are not impaired;
• Recent regulation establishing VC´s and MTR reduction,
until the cost-oriented values to be published in two years.
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Telecommunication in Brazil - evolution
Fixed lines
Mobile lines
(Million)
(Million)
40
42
203 245
43
86
31
10
13
23
0
1990 1995 2000 2005 2010 2012
Penetration
(# fixed lines /
100 households)
29
34
68
75
73
74
1
1990 1995
Penetration
(# mobile lines /
100 population)
0
01
2000 2005
14
47
2010
2012
106
125
•The Brazilian market regulations were good. We can see an important increasing of lines sold and of
penetration;
•The Cost Model shall improve the market conditions;
Source: Anatel, IBGE, Teleco
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Cost model examples
Telecommunication cost modeling examples
Examples of models used in Europe(1)
Interconnection
Austria
FL-HCA
Belgium
FL-CCA
Denmark
HCA
France
FL-CCA
Germany
FL-CCA
Greece
FL-CCA
Ireland
FL-CCA
Italy
FL-CCA
Netherlands
FL-CCA
Portugal
FL-CCA
Spain
CCA
Leased lines
HCA
HCA
HCA
FL-HCA
HCA
HCA
FL-HCA
FL-HCA
FL-HCA
HCA
CCA
Methodology for tariffs regulation in Latin America (2)
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7
1
No regulation
(negotiation)
Cost based
(mainly LRIC)
LRIC and
benchmarkings
HCA: Historical Cost Accounting
CCA: Current cost accounting
FL-HCA: Forward-looking based on historical cost
FL-CCA: Forward-looking based on current cost
International experiences were considered by Anatel´s team during the period of the ToR´s
discussion.
Source: (1) Study on the implementation of cost accounting methodologies and accounting separation by telecommunication operators with significant market power, Andersen 2002
(2) Mobile Termination Rates – to regulate or not To regulate? Discussion paper ITU – 2009
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Main workfronts and expected results
Anatel´s main tasks
Top-Down
Bottom-Up
Main work
fronts
Tariffs
Interconnection
tariffs
Expected results
Data validation
EILD values
Economic Groups Composition
GRUPO
1
2
3
4
5
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COMPOSIÇÃO (Resolução nº 101)
Telefônica (STFC); Vivo (SMP); Emergia (SCM), DTHi (DTH) …
Telemar Norte Leste (STFC); TNL PCS (SMP); Brasil Telecom (STFC);
14 BrT Celular (SMP); BrT Com Multimídia (SCM), Vant (SCM)...
Embratel (STFC); Claro (SMP); Vésper (STFC);
CTBC Telecom (STFC); CTBC Multimídia (SCM); Engeredes…
Sercomtel (STFC); Sercomtel Celular (SMP) ...
TIM Nordeste (SMP); TIM Celular (SMP), TIM (STFC)…
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Cost modelling project in Brazil
x Project phases
II
Operators´ data processing and
validation
Dec/11 – Aug/12
III
FAC-HCA
Top-down modelling
Aug/12 – Jan/13
IV
FAC-CCA
Top-down modelling
I
Planning
Aug/12 – Jan/13
V
Sep/11
LRIC
Top-down modelling
Feb/13 – Jun/13
VII
Tariffs
VI
Bottom-up modelling
Jul-Sep/13
Dec/11 – Apr/13
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Cost modelling project in Brazil
International consortium
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Summary – main points
• Cost based modeling is a complex process, demanding a
series of related activities and regulatory actions, including,
specially, operators commitment;
• It is a powerful tool for regulators to adjust tariffs in order to
implement telecommunications strategy and policy;
• Important decisions by Anatel (defined by regulations) will
incorporate the results of the cost modeling process:
− MTR: conflict composition among fixed and mobile
operators
− Network elements rental
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Thank you
Hélio Fonseca
hmmfonseca@anatel.gov.br
5561 2312-2993
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