Updating trends in telecom service development Saburo TANAKA Seminar in Cancun, July 2003 The original document is elaborated by Dr Tim Kelly, ITU/SPU. It has 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@itu.int saburo.tanaka@itu.int International Telecommunication Union Agenda ! Market situation " In the world in general " In Africa ! Telephony (fixed-line) " Future trends " What need to do in Africa (USO) ! Mobile phone " General trends " What to do to be competitive ! Internet 2 " Connectivity in LDCs 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 Source: ITU World Telecommunication Indicators Database. 1999 2001 2003 Revenue growth (US$bn) 1000 Service revenue (US$ bn) 900 800 700 Other: Data, Internet, Leased lines, telex, etc 600 500 14% Mobile 39% Int'l 400 8% 300 200 100 Domestic Telephone/fax 39% 0 90 91 92 93 94 95 96 97 98 99 00 01 02 Source: ITU. International Telecommunication Union Mobile and Internet: Identical twins born two years apart? Users (millions) and penetration per 100 pop. 1,000 18 Mobile subscribers 800 16 Internet users 14 Mobile penetration 600 12 Internet penetration 10 8 400 6 4 200 2 0 5 0 1992 93 94 95 96 97 98 99 2000 01 International Telecommunication Union Distribution of mobile and Internet users by region, 2001 Estimated Internet users, 500 million Americas, 28% (TAL 18%) Africa, 3% 6 Asia-Pacific, 38% Europe, 31% Americas, 37% (TAL 5%) Asia-Pacific, 32% Europe, 29% Mobile phone users 948 million Africa, 1% International Telecommunication Union Growth rate in phone subscribers 50 45 World 40 TAL 35 33.1 30 In % 25 21.0 10.4 13.6 12.6 15.0 6.0 8.0 7.0 22.4 18.0 12.0 10 5 22.4 21.0 20 15 29.3 14.0 11.0 9.0 0 1993 7 1994 1995 1996 1997 Years 1998 1999 2000 2001 International Telecommunication Union Regional share of the world’s phone subscribers Africa & Arab States 100% 80% Americas (TAL) 60% Europe 40% Source: ITU Asia-Pacific Telecom Indicators 20% Asia-Pacific 0% 8 1991 1996 2001 Main telephone Lines Main telephone lines per 100 inhabitants Main telephone lines 1995 (k) 2001 (k) CAGR (%) 1995-01 1995 2001 CAGR (%) 1995-01 Africa 12’549.6 21’261.8 9.2 1.77 2.62 6.7 Americas (TAL) 221’295.8 (44’993.6) 296’508.4 (86’189.1) 5.0 (12.1) 28.71 (9.33) 35.14 (16.2) Asia 183’456.0 392’671.0 13.5 5.42 10.68 12.0 Europe 263’183.7 324’484.0 3.6 33.27 40.54 3.3 Oceania 10’942.7 12’310.9 2.0 38.81 40.04 0.5 WORLD 689’251.6 1’144’884.6 7.2 12.29 17.19 5.8 3.4 (9.8) International telephone traffic Int’l telephone circuits Outgoing telephone traffic M Minutes Minutes per inhabitant 2000 Minutes per subscriber 2000 2000 (k) 1995 2000 CAGR (%) 95-00 Africa 1’340.6 2’147.2 9.7 3.0 110.2 58.7 Americas 22’343.8 (3’447.9) 47’191.5 (5’226.8) 16.9 (7.9) 57.5 (10.2) 163.4 (57.2) 499.3 Asia 10’612.0 17’756.2 10.7 4.9 51.2 420.2 Europe 27’800.7 46’739.8 10.9 58.7 147.5 459.9 Oceania 1’342.2 2’114.4 1.0 69.9 173.8 4.7 WORLD 63’362.8 115’847.5 13.1 19.5 117.8 1’442.5 Telecommunications revenue Total (M US$) 2000 Per inhabitant (US$) 2000 Per main line (US$) 2000 Per employee (US$) 2000 As a % of GPD 2000 Africa 16’391.9 23.0 868 68’880 2.4 Americas 379’521.4 (65’914.1) 470.7 (12.8) 1’315 239’818 2.9 Asia 235’089.8 65.9 679 163’131 2.6 Europe 276’607.5 347.1 873 141’229 2.8 Oceania 17’677.5 580.5 1’440 252’219 3.6 WORLD 925’074.0 156.5 942 176’824 2.8 Waiting list for telephone lines Waiting list for telephone lines Total demand Satisfied demand Waiting time (years) 1995 (k) 2000 (k) CAGR (%) 1995-00 2000 (k) 2000 (%) 2000 Africa 3’640.2 3’677.4 0.2 23’044.7 84.3 2.4 Americas (TAL) 2’788.8 (2’788.1) 4’864.6 (4’864.6) 11.8 (11.8) 288’761.0 98.4 0.3 Asia 13’419.1 10’386.6 -5.0 192’228.4 97.1 0.9 Europe 21’420.4 11’838.2 -11.2 321’204.0 96.4 1.2 Oceania 12.2 9.9 -4.2 12’223.4 99.9 - WORLD 41’277.6 30’772.5 -5.7 837’145.7 97.0 0.8 Telecommunications investment Total (M US$) 2000 Per inhabitant (US$) 2000 Per main line (US$) 2000 As a % of revenue 2000 As a % of GFCF 1999 Africa 3’476.2 6.2 194 25.2 4.6 Americas (TAL) 53’972.8 (1’155.6) 68.3 (2.3) 188 14.2 2.3 Asia 88’163.8 25.1 263 38.4 3.6 Europe 53’056.9 66.6 168 19.2 3.1 Oceania 4’113.2 137.7 338 23.5 3.6 WORLD 202’771.8 35.7 209 22.1 3.0 Household penetration rates of various services in Malaysia Television sets Fixed lines 95% 75% 59% Mobile phones 54% 22% PC 9% 24% Total households Urban households Rural households International Telecommunication Union Graphical representation of the Four USP objectives SERVICES TYPE OF ACCESS Basic telephony 15 The Internet Collective access Objective 1: Collective access to basic telephony and public payphone services Objective 3: Collective access to Internet access services Individual access Objective 2: Individual access to basic telephony services Objective 4: Individual access to Internet access services International Telecommunication Union USP Regulations - Graphical Points Underserved # Connected Implementation of universal service plan Designation of the universal service provider Draft universal service plan Notification of universal service targets 16 Progress Report Compliance with QOS standards Costing USP Licensees Claims USP Fund International Telecommunication Union Selected Highlights • Costing of universal service provision " Commission shall pay the designated universal service provider from the USP Fund the cost incurred in implementing the approved universal service plan in a universal service target "The net cost in implementing the approved universal service plan is computed as: Net USP cost = avoidable cost - revenue forgone • USP Fund "Contribution - By licensee of 6% of its weighted net revenue. Only by those whose net revenue > RM500,000. "Commission shall maintain proper accounts of the USP Fund - Annual report and statement of accounts 17 Universal service policy implementation in domestic market 100% G6: Mandatory contribution to a universal service fund 80% G5: Obligatory investment in unprofitable areas 60% G4: Discriminatory tariffs in favour of specific eligible groups G3: State-imposed limit on the monthly subscription fee 40% G2: State-imposed limits on installation charges 20% G1: State-imposed limits on the price of domestic calls 0% Africa America Source: ITU/BDT Tariffs Policies Database Arab States Asia & Pacific Europe & CIS How are your universal service costs financed H5: Receipts from a fund covering only Discriminatory tariffs in favour of specific eligible groups and Obligatory investment in unprofitable areas H4: Receipts from a fund covering all costs 100% 90% 80% 70% 60% H3: The setting of a USO mark-up on top of the interconnection charge 50% 40% 30% H2: Reflection of the access deficit in the calculation of interconnection charges 20% 10% 0% Africa America Arab States Source: ITU/BDT Tariffs Policies Database Asia & Pacific Europe & CIS H1: Cross-subsidies between inter. and nat. services Time-frame for absorbing the access deficit (Tariffs Rebalancing) 100% 90% 80% I0: None 70% I3: Over seven years 60% 50% I2: Between three and seven years 40% I1 Less than three years 30% 20% 10% 0% Africa America Source: ITU/BDT Tariffs Policies Database Arab States Asia & Pacific Europe & CIS International Telecommunication Union The secret of mobile success ! Why is mobile currently growing ten times faster (~55% p.a.) worldwide than fixed lines networks (~5.5% p.a.)? ! Why is the average mobile user much younger than the average fixed-line user? ! Why do users make calls using a mobilephone even when a fixed-line telephone is available and cheaper? ! What is the secret of the success of mobile? Price Options 21 A selection of price options From Orange (UK) Plan name Monthly charge for single phone Standard talk time included (per month) Peak time call charges (per minute) Off-peak call charges (per minute) Chat 60 £17.63 60 off-peak minutes 40p 5p Talk 30 £17.50 30 minutes 30p 5p Talk 120 £25.00 120 minutes 24p 5p Talk 400 £58.75 400 minutes 22p 5p Talk 1300 £176.25 1’300 minutes 17p 5p Talk 3700 £470.00 3’700 minutes 15p 5p Talk 7500 £940.00 7’500 minutes 15p 5p Everyday 50 50p/day 50 minutes/day 40p 1p Source: http://www.uk.orange.net/kit/index.html. Declining prices for mobile access, global average, in US$, 1992-2000 Monthly subscription, in US$ Connection charge, in US$ CAGR, 1992-2000 = -9.2% p.a CAGR, 1992-2000 = -32.1% p.a. 44.9 38.1 547 34.2 410 31.3 20.2 231 16.6 180 86 1992 Note: Source: 1994 1996 1998 1999 75 2000 1992 1994 1996 1998 1999 CAGR = Compound Annual Growth rate. ITU “World Telecommunication Development Report 1999: Mobile cellular” 2000 Expenditure per month Cultivate the high-spenders 14 per cent of highspending customers generate 53% of revenue Average revenue per user (ARPU) 14% 53% 22% 36% 24% 8% 40% 3% Customers Source: Price Waterhouse Coopers, based on Canadian data. 40 per cent of lowspending customers generate 3% of revenue Mobile and Fixed-line ARPU in Japan Yen 1,000 300 278 250 252 265 275 284 Mobile 272 Fixed-line 230 200 158 150 100 98 98 97 98 99 1990 1991 1992 1993 1994 100 98 96 134 94 127 92 141 91 152 88 160 87 50 0 1995 1996 Years 1997 1998 1999 2000 2001 2002 International Telecommunication Union Mobile generations: Hong Kong, China (million users) 7 6 5 4 Analogue 2.5G users Other prepaid "Activated" prepaid users PCS 1.7/ 1.8 GHz 3 Source: ITU Asia-Pacific Telecom Indicators. 2 Digital, 800/900 MHz 1 OFTA 26 0 1995 1996 1997 1998 1999 2000 2001 2002.8 Opportunités d’appel dans le monde 5.0% 5.0% 0.3% 7.5% 19.9% 1993 89.7% 52.7% 26.7% Mobile-tomobile 19.9% 1998 Mobile-tofixed 25.0% 2003 Source: ITU Fixed-Mobile Interconnect website: http://www.itu.int/interconnect 23.4% Fixed-tofixed Fixed-tomobile 25.0% Mobile subscribers Mobile subscribers Mobile subscribers per 100 inhabitants 1995 2001 CAGR (%) 1995-01 1995 2001 CAGR (%) 1995-01 Africa 652.0 25’504.2 114.9 0.2 5.9 100.8 Americas (TAL) 40’257.1 (3’881.6) 223’366.0 (7’127.0) 32.7 (11.6) 2.0 (0.1) 20.8 (7.4) 41.7 (112.3) Asia 23’104.7 335’767.4 74.7 3.0 20.2 63.0 Europe 24’084.1 349’563.8 56.2 4.7 48.3 71.3 Oceania 2’618.0 13’732.8 45.9 3.0 22.8 43.5 WORLD 90’715.91 947’934.2 80.80 2.81 23.58 71.26 International Telecommunication Union Distribution of Internet users, 2001 W. Europe 25% North America 32% LAC 5% C&E Europe 3% AsiaPacific 33% Africa 1% Arab States 1% 29 LDCs falling further behind: 25% 20% Share of worldwide Internet Users LDCs Share of world population = 10.6% Share of world Internet users = 0.2% China 15% Other Emerging Economies 10% 5% 0% 1995 LDCs 1996 1997 1998 1999 2000 Source: ITU World Telecommunication Development Report, 2002: Reinventing Telecoms Barriers to connectivity in LDCs ! Regulatory barriers " Many LDCs retain a monopoly telecom carrier, including for data and Internet traffic " Some LDCs restrict market entry by ISPs ! Economic barriers " High costs for int’l leased lines in some markets, esp. those without infrastructure competition " For LDCs with only low levels of IP demand, unit bandwidth costs are higher than for countries with higher levels of demand (economies of scale) " Many countries are not served by international cables (e.g., landlocked countries, small islands) The “Internet latecomer” problem ! In the beginning, the Internet was: " North American " Not-for-profit " Used primarily for email & file transfer ! By the mid-1990s, the Internet had: $ Spread to the OECD countries $ Begun “privatisation” of the backbone $ Become primarily a channel for the Web ! By 2005, the Internet may be: $ Available throughout the world $ A fully commercial undertaking $ Used primarily for multimedia streaming USA & Canada AsiaPacific Europe Latin America & Caribbean Arab States, Africa Bandwidth begins with “B” International Internet Bandw idth per capita (bit/s) Belgium Brazil 36 Botsw ana 9 Bahamas 7 Bulgaria 5 Belize 2 Bolivia 1.0 Bangladesh 0.1 Benin 0.04 0.04 Burundi 8014 Source: ITU World Telecommunication Development Report, 2002: Reinventing Telecoms Total (Mbps) 81'426 6'069 14 2 44 .512 8 16 .256 .256 760 million Africans share less IP connectivity than 400’000 Luxemburgers 1'400 Africa's IP bandwidth (Mbit/s) 1'200 Africa's share of global total 0.3% 1'000 0.2% 800 600 0.1% 400 200 0 0.0% 1999 Source: Note: 2000 2001 ITU African Telecom Indicators, adapted from TeleGeography Inc. “Packet Geography, 2002”. Figures are for mid-year. Even within Africa, large disparities are evident Distribution of international Internet bandw idth in Africa, 2001 100% 90% South 80% Africa 70% 60% 50% Northern 40% Africa 30% Sub 20% Saharan 10% Africa 0% Population Bandw idth Source: ITU World Telecommunication Development Report, 2002: Reinventing Telecoms Typical ISP cost comparisons <<<Developing countries Commercial & operational costs International connectivity International connectivity National connectivity National connectivity OECD countries >>> Commercial & operational costs Two LDC “success stories” ! Nepal " 16-fold increase in IP connectivity in 8 months following liberalisation of VSAT market in 1999 " Lowest IP access prices in South Asia " BUT, opening up VSAT market has lead to a drastic fall in incoming telephone traffic and settlements ! Uganda " Rapid increase in network growth following introduction of second national operator, MTN Uganda and VSAT liberalization " Nine separate ISPs own international gateways " BUT, entire national capacity is less than 20 Mbit/s Source: Internet Diffusion Case Studies at: http://www.itu.int/ti/casestudies Something should be done … ! Feasibility study to look at an international project to increase IP connectivity in LDCs ! Look at regulatory, economic and commercial issues and examine evidence for market failure ! Could VSATs provide a solution? " Evidence from Uganda and Nepal suggests opening VSAT market could make big difference " But, VSATs are expensive ! How could such a solution be delivered? " Providing a “subsidy” without interfering with the operation of market forces (avoiding creating dependency on foreign donors) " Working with ISPs rather than end-users Issues for discussion ! Is there a problem? " Is IP connectivity more expensive and more scarce in LDCs? " Do higher connectivity prices feed into higher access prices? ! Can it be solved? " What can be done by LDCs? (e.g., liberalizing VSAT markets, liberalizing ISP markets) " What can be done by the international community? ! How to structure the project? " Which donors, which agencies, which players? " How to involve DOT Force, UN ICT Task Force etc?