Trends in international telecom traffic costs and prices

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@itu. int.

Trends in int’l traffic, costs and prices Agenda l Trends in international traffic ð Worldwide ð Arab States l l Regional breakdown of traffic Market shares Competitive markets Cost and price trends ð FCC benchmarks ð ITU Focus Group, indicative target rates l Conclusions 2

Trends in subscribers and international traffic, Worldwide 143 Fixed main lines 1'000 124 Mobile subscribers 108 Total int'l traffic 800 94 160 140 120 100 82 72 600 400 30 38 44 48 54 80 62 200 60 40 20 0 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: ITU/Tele. Geography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”. Billions of minutes of international telephone traffic Fixed lines and mobile subscribers worldwide (millions) 1'200

Trends in subscribers and international traffic, Arab States Fixed lines Subscribers (millions) 4. 9 Mobile 20 4. 3 3. 3 15 2. 7 1. 6 1. 8 2. 0 5 3. 7 Int'l outgoing 10 6 2. 3 5 4 3 2 1 0 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: ITU World Telecommunication Indicators Database. Int'l traffic (billion mins) 25

Minutes of international traffic, outgoing and incoming, Arab States, 1998 Yemen Oman Qatar Bahrain Syria Jordan Tunisia Kuwait Algeria Incoming Lebanon Outgoing Egypt Morocco UAE S. Arabia 0 500, 000 1, 000, 000 1, 500, 000 Source: ITU World Telecommunication Indicators Database. Note: Excluding States with <100’ 000 minutes.

Trends in subscribers and international traffic, Egypt Fixed lines Mobile Int'l outgoing Int'l incoming 3 600 500 400 2 300 200 1 100 0 0 1993 1994 1995 1996 Source: ITU World Telecommunication Indicators Database. 1997 1998 Traffic (million minutes) Subscribers (millions) 4

Trends in subscribers and international traffic, Lebanon 400 Fixed lines Mobile Int'l outgoing Int'l incoming 0. 6 300 0. 4 200 0. 2 100 0. 0 0 1993 1994 1995 1996 Source: ITU World Telecommunication Indicators Database. 1997 1998 Traffic (million minutes) Subscribers (millions) 0. 8

Subscribers (millions) 2 1. 5 Fixed lines Mobile 600 Int'l outgoing Int'l incoming 500 400 1 300 200 0. 5 100 0 0 1993 1994 1995 1996 Source: ITU World Telecommunication Indicators Database. 1997 1998 Traffic (million minutes) Trends in subscribers and international traffic, Morocco

Trends in subscribers and international traffic, Saudi Arabia Fixed lines Mobile Int'l outgoing Int'l incoming 1, 200 1, 000 2 800 600 1 400 200 0 0 1993 1994 1995 1996 Source: ITU World Telecommunication Indicators Database. 1997 1998 Traffic (million minutes) Subscribers (millions) 3

Trends in subscribers and international traffic, Tunisia Fixed lines Mobile Int'l outgoing Int'l incoming 0. 8 200 150 0. 6 100 0. 4 50 0. 2 0. 0 0 1993 1994 1995 1996 Source: ITU World Telecommunication Indicators Database. 1997 1998 Traffic (million minutes) Subscribers (millions) 1. 0

Trends in subscribers and international traffic, UAE Fixed lines Mobile Int'l outgoing Int'l incoming Subscribers (millions) 0. 8 1, 000 800 0. 6 600 0. 4 400 0. 2 200 0. 0 0 1993 1994 1995 1996 Source: ITU World Telecommunication Indicators Database. 1997 1998 Traffic (million minutes) 1. 0

Trends in outgoing traffic, bn minutes 60 50 40 Developed countries 30 20 Developing countries 10 1991 1992 1993 1994 1995 Source: ITU/Tele. Geography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”. 1996 1997

Trends in incoming traffic, bn minutes 60 50 40 Developed countries 30 20 Developing countries 10 0 1991 1992 1993 1994 1995 Source: ITU/Tele. Geography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”. 1996 1997

Trends in settlement payments and receipts, Developing countries, US$bn 20 Payments Receipts Net settlement 15 10 5 0 1993 1994 1995 1996 1997 1998 Source: ITU/Tele. Geography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Percentage of outgoing international traffic open to competition Monopoly 74% 35% 85% Competition 46% 4 14 29 48 1990 1995 1998 2005 Number of countries permitting more than one operator for international telephony 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.

Level of competition in international services in WTO basic telecoms agreement Monopoly Competition Source: ITU Telecommunication Regulatory Database.

Countries permitting int’l competition 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1990 Japan New Zealand UK USA 1995 Australia Canada (partial) Colombia Chile Denmark Finland Japan Korea (Rep. ) Malaysia New Zealand Philippines Sweden UK USA 1998 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Australia Austria Belgium Brunei D. Canada Chile Colombia DPR Congo Denmark Dominican Rep. El Salvador Finland France Germany Ghana Guatemala HK-China (after Dec 1998) Indonesia Ireland (after Dec. 1999) 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 Israel Italy Japan Korea (Rep. ) Malaysia Mexico Netherlands New Zealand Norway Peru Philippines Russia Somalia Spain (after Dec. 1998) Sweden Switzerland Uganda Ukraine UK USA

Top 10 PTOs by outgoing int’l traffic Source: ITU/Tele. Geography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Selected PTOs, performance 1997/98 % change in traffic % change in int’l rev. -2. 1% DT -2. 9% -16. 4% 2. 2% Swiss. Com 5. 9% 8. 2% 0. 6% Telecom Italia AT&T -2. 7% 21. 2% 17. 6% MCI World. Com 0. 5% 9. 7% 4. 5% 1. 1% Sprint FT BT -17. 3% -14. 3% Note: Based on 1998 international outgoing traffic and revenue from international operations. For Sprint, MCI World. Com and AT&T, data relates to 1997. The definition of international revenue (gross, net or retail) is tat used by each individual operator. Source: ITU/Tele. Geography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Emerging global alliances, shares of int’l traffic market AT&T/BT, 17. 2% Others, 47. 3% Global. One, 14. 3% Total, 1997: 81. 2 bn minutes Cable & Wireless, 4. 7% Note: Source: MCI World. Com, Telefonica, TP, 11. 1% Unisource, 5. 4% Traffic shares relate to minutes of outgoing traffic from members of each alliance. ITU/Tele. Geography Inc. “Direction of Traffic, 1999: Trading Telecom Minutes”

Trends in int’l traffic, costs and prices Emerging global alliances: Recent developments 21 l World. Com merges with MCI, bids for Sprint l Following collapse of BT/MCI merger, BT & AT&T join forces in “Concert” l AT&T and Telefonica withdraw from Unisource l Global. One on point of collapse following purchase of Sprint by World. Com l Deutsche Telekom’s bid for Telecom Italia fails; Olivetti’s succeeds l Cable & Wireless re-positioning itself as supplier of data services l Telia and Tele. Nor merge

Global average settlement rates, US$ per minute 1 1997 -98, -14% p. a. 0. 8 0. 6 0. 4 0. 2 0 1987 -92, -2% p. a. D. 140 approved 1992 -96, -4% p. a. D. 140 revised 87 88 89 90 91 92 93 94 95 96 97 98 Source: ITU/Tele. Geography Inc. “Direction of Traffic 1999: Trading Telecom Minutes”.

Convergence: Accounting rate to US in US$ per minute, four European countries 1. 6 1. 4 Italy 1. 2 France 1 UK Germany 0. 8 0. 6 0. 4 0. 2 0 1993 1995 1997 1999 Source: FCC. Data for year-end except 1999 = September 1999

Kuwait World Ave. Morocco 0. 30 0. 41 0. 84 Tunisia 0. 89 Algeria 0. 90 Jordan 1. 00 Egypt 1. 10 Bahrain 1. 10 Accounting rates with USA, US$ per minute, 1 Nov 1999 S. Arabia 1. 36 Syria 1. 36 Oman 1. 38 Mauritania Lebanon UAE Source: FCC (Ken Stanley). 1. 72 1. 75 2. 00

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 Source: FCC (Ken Stanley). “ 1999” is 1 November 1999 data. 1996 1997 1998 1999

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 Source: FCC (Ken Stanley). “ 1999” is 1 November 1999 data. 1996 1997 1998 1999

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.

Tariff rebalancing trends, in US$ Average of 39 major economies 12 10 8 6 4 2 0 300 minutes, local calls 3 mins Int'l call to US Monthly line rental 1990 1991 1992 1993 1994 1995 1996 1997 Source: ITU World Telecommunication Indicators Database.

Trends in int’l traffic, costs and prices International traffic trends: Conclusions l Voice traffic continuing to grow, but the main action is now elsewhere l Mobile and the Internet will be the major demand drivers for the future l Competitive markets will be the norm, monopolistic markets the exception in the future, in most regions of the world l Alliances will continue to be formed, but partnerships are still unstable l Settlement rates in most countries of the region are well above indicative target rates 29