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Global Trends in Telecom Restructuring

Global Trends in Telecom Restructuring. Dr Tim Kelly, ITU Monday Session 1 CTO Senior management seminar: Telecoms restructuring and business change Malta, 17-21 May, 1999.

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Global Trends in Telecom Restructuring

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  1. Global Trends in Telecom Restructuring Dr Tim Kelly, ITU Monday Session 1 CTO Senior management seminar: Telecoms restructuring and business change Malta, 17-21 May, 1999 The views expressed in this paper are those of the author and do not necessarily reflect the opinions of the ITU or its membership. Dr Kelly can be contacted at Tim.Kelly@itu.int.

  2. Agenda • The state of the Telecoms sector worldwide • The Public Switched Telephone Network • Mobile Communications • The Internet • Market liberalisation / privatisation * • Separation of regulatory and operational functions • The telecoms development gap: The changing international telecoms environment • The erosion of the accounting rate system • Key policy issues * This will be the subject of separate presentations.

  3. Telephone main lines worldwide (M) 970 7% 792 6% 744 Annual average 694 F 5% growth o (right scale) 520 4% r 407 e 3% 327 c 245 2% 175 a 129 96 s 1% t 0% 60 65 70 75 80 85 90 95 96 97 00 Source: ITU World Telecommunication Indicators Database.

  4. Annual growth in telephone networkEmerging economies, 1990-95 27% 10% 9% 8% Africa Arab Latin Asia- States America Pacific Source: ITU “Asia-Pacific Telecommunication Indicators, 1997: New Telecom Operators”.

  5. Top 20 PTOs by revenue, 1997 Source: ITU PTO Database.

  6. Cellular subscribers worldwide (M) F o r Annual average e growth c (right scale) a s t 70% 420 60% 50% 285 40% 214 30% 144 20% 91 55 10% 34 23 16 11 0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 2000 Source: ITU World Telecommunication Indicators Database.

  7. Cellphones, like fixed-lines, are closely related to wealth 100.00 Countries above the 2 Finland R = 0.8422 line have a higher than Israel expected mobile cellular penetration Switzerland Estonia Lebanon considering their level 10.00 Belgium of income. Bolivia Saudi Arabia 1.00 Gabon Cellular subscribers per 100 inhabitants, 1997 Azerbaijan Russia Cambodia Countries below the line have a higher than 0.10 expected mobile Tunisia cellular penetration considering their level Cameroon of income. 0.01 $100 $1'000 $10'000 $100'000 GDP per capita, US$, 1996 Source: ITU World Telecommunication Indicators Database.

  8. Top 20 mobile companies, 1997 Source: ITU PTO Database.

  9. Internet hosts (million) and growth rates, 1990-1998 50 43.5 Telephone 6% 40 lines 29.7 30 Cellular 52% subscribers 20 16.1 Internet 87% hosts 9.4 10 4.7 2.3 1.3 0.7 0.4 0 90 91 92 93 94 95 96 97 98 Source: ITU “Challenges to the Network: Internet for development, 1999”. Network Wizards.

  10. Distribution of Internet hosts, January 1998 Australia, Japan & New Zealand 7.0% Developing Canada & Asia-Pacific Other US 2.9% 4.6% 64.1% Europe, 24.3% LAC* 1.2% Africa 0.5% Source: ITU “Challenges to the Network: Internet for development, 1999”.

  11. Top 20 Internet Service Providers, 1998 Internet / Online Service Owner Rank Website Subscribers (latest, provider (Country) 000s) AOL (USA) * AOL Jun-98 1 www.aol.com 17’100 Fujitsu, others Aug-98 2 www.nifty.ne.jp Nifty-Serve (Japan) 2'630 Biglobe (Japan) NEC, others Mar-98 3 www.biglobe.ne.jp 2'560 T-Online (Germany) Deutsche Telekom Jun-98 4 www.t-online.de 2'300 MSN (USA) Microsoft Jun-98 5 home.microsoft.com 2'000 Chollian (Korea (Rep.)) Dacom Dec-97 6 http://www.chollian.net/ 1'170 WorldNet (USA) AT&T Jun-98 7 www.att.net 1'095 EarthLink Sprint (USA) Sprint, others Jun-98 8 www.earthlink.com 710 Prodigy (USA) Prodigy Jun-98 9 www.prodigy.com 638 Infovia (Spain) Telefonica Dec-97 10 www.tsai.es 535 Netcom (USA) ICG Jun-98 11 www.netcom.com 512 HiNet (Taiwan-China) Chungwa Telecom Jun-98 12 www.hinet.net 507 MindSpring (USA) MindSpring Jun-98 13 www.mindspring.net 393 SBC Internet Services SBC Jun-98 14 www.public.swbell.net 330 www.public.pacbell.net Tele2 (Sweden) Tele2 Jun-98 15 www.tele2.se 317 GTE Internetworking (USA) GTE Jun-98 311 16 www.gte.net Source: ITU “Challenges to the Network: Internet for development, 1999”. CWIX (USA) Cable&Wireless Jun-98 17 www.cwix.com 310 Wanadoo (France) France Telecom Jun-98 18 www.wanadoo.fr 266 Netvigator (Hongkong SAR) Hongkong Telecom Mar-98 19 www.netvigator.com 235 Telia Internet (Sweden) Telia Dec-97 20 www.telia.se 232 TOTAL, top 20 34’151

  12. Market liberalisation and corporatisation/privatisation of incumbents • Process and impact of liberalisation: worldwide trends (Tuesday, Session 1) • Process and impact of commercialisation/privatisation: worldwide trends (Tuesday, Session 2) • Towards the future: what next for telecoms businesses? (Wednesday, Session 1)

  13. Separation of regulatory and operational functions Of 188 ITU Member States: • 156 have separated posts & telecoms (32 have not) • 147 have separated regulatory and operational functions (41 have not) • 132 have a regulator which is independent of the operators in terms of finance and decision-making (in 56, it is not) • 83 have fully or partially privatised the incumbent operator (105 have not) • 38 have liberalised basic telecom services (150 have not)

  14. Drafting of new telecom laws Source: ITU Telecom Regulatory Database.

  15. Creation of separate regulatory bodies, worldwide (cumulative) 80 51 30 22 12 Source: ITU Telecom Regulatory Database. 1990 1990 1992 1992 1994 1994 1996 1996 1998 1998

  16. Separate regulatory bodies, worldwide, 1998 Source: ITU Telecom Regulatory Database.

  17. The development gap: Impact of the changing international telecoms environment • Telecommunications development gap • Narrowing between developed and middle-income developing countries • Widening between middle-income developing countries and the Least Developed Countries (LDCs) • New development gap emerging for advanced telecom services (Internet, broadband, multimedia) • Uneven pace of market liberalisation • For instance, there are more telephone companies in the UK than the whole of Africa • Erosion of accounting rate system • Traditional support for network roll-out

  18. 27 .8 to 68 .3 8 .6 to 27 .8 1 .4 to 8 .6 0 to 1 .4 “The future is here, it’s just not evenly distributed” William Gibson Teledensity 1996 (46) (45) (47) (48) Source: ITU World Telecommunication Indicators Database.

  19. Percentage of installed base, 1997 21.8 m 792 m 1.4 billion 5.8 billion 100% High income 80% Upper middle Lower middle 60% 40% Low income 20% 0% Internet hosts Telephone lines TV sets Population Source: ITU World Telecommunication Indicators Database.

  20. Developing countries typically depend on international services & settlements Domestic revenues, 33% Net settlements, 37% Source: ITU/CTO/InfoDev Country Case Studies. Collection charge revenue, 30% Sri Lanka

  21. Developing countries also have relatively high cost structures (US cents per minute) 350 User tariff 300 Settlement rate 250 Cost (low estimate) 200 150 100 50 0 India Mauritania Sri Lanka Uganda Colombia The Bahamas Senegal Samoa Source: ITU/CTO/InfoDev Country Case Studies.

  22. Settlement rates are now declining rapidly ... 1.2 Global average 1.06 1.04 1.02 1.00 0.98 1 0.95 0.92 0.87 0.85 0.81 0.8 Pre-1992 (D.140) Change = -2% p.a. 0.67 0.6 Settlement rate, in SDR per minute 1996-98 0.50 0.4 1992-1996 Change Change = -4% p.a. = -21% 0.2 p.a. 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Source: ITU-T Study Group 3 (COM 3-53). 1998 estimate is a minimum projection based on D.140 Annex D.

  23. 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.

  24. Key policy issues to be tackled • Interconnection • How to manage the transition to a multi-player environment? • Internet • Who really sets the rules? Who really gets benefits? • International settlements • How to transition to a cost-oriented system while providing a “soft-landing” for developing countries? • International infrastructures • How to ensure equal access at competitive rates? • Investment • How to increase investment, esp in LDCs?

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