Transcript Telecommunications and Trade in Services

Telecommunications and Trade in
Services
May 26, 2005
Hanoi, Vietnam
Deunden Nikomborirak
Thailand Development Research Institute
OUTLINE
1. Economics of Telecommunications
2. Recent developments in
Telecommunications Service Market.
3. Multilateral Agreements on
Telecommunications
4. Policy Implications for Developing
Countries
5. Regulatory Implications for Developing
Countries
1. The Economics of Telecommunications
• Once telecom was considered a natural monopoly.
• Now, increasing competition from (a) lower cost of
wireline transmission system (b) availability of
wireless technology and (c) possibility of shared
network (interconnection)
• Operator who controls local wired transmission -i.e., “the last mile” may retain market power; not so
for long distance and international voice services.
• Significant network externalities justify efficient
policies to promote universal service
Percentage of outgoing international traffic open to
competition
Monopoly
Competition
35%
4
1990
74%
85%
46%
14
29
48
1995
1998
2005
Number of
countries
permitting
competition
in
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.
2. Recent developments in Telecommunications
Service Market.
• The rise of the Internet (Broadband, VoIP)
- blurring the line between voice and data
transmission.
• Proliferation of wireless communication -i.e., satellite and terrestrial fixed-wireless
systems such as microwave relay system
and WiFi.
International voice traffic
(in billions of minutes)
180
160
VoIP
140
PSTN
120
As % of total
100
11.8%
80
60
13.1%
7.4%
40
4.8%
20
Source: ITU /
TeleGeography
0
0.01%
0.2%
1997
1998
1.6%
1999
2000
2001
2002
2003
Sources of telecom revenue
Worldwide, in US$ billions
1'200
1'000
Data and other
800
600
Mobile
400
International fixed telephone
200
Source: ITU
World Telecom
Indicators Database.
Domestic fixed telephone
0
1993
95
97
99
01
2003
Likely situation in five year’s time
• IP-based traffic indistinguishable from PSTN
– IP-based international traffic in 2008 >50% of total
– A majority of voice traffic will originate on wireless networks
and much of it will be IP-based
• Numbering convergence
– ENUM will allow calls to and from IP voice on multiple
different devices
– Numbering plan will allow for non-geographic and deviceindependent VoIP numbers
• Voice over IP over mobile
– Voice will increasingly travel over data channel in mobile
networks to provide discounted calling prices
“Modes of Telecom Trade”
• Cross-border
– Still the primary form of telecom services trade, but VoIP
is replacing accounting rates. VoIP will make it more
difficult to tax traded services.
• Commercial presence
– Although more than half incumbents are privatised,
foreign ownership is probably less now than 3 years ago
for fixed-line PTOs, but much greater for mobile operators
• Consumption abroad
– Greatly increased, due to roaming of mobiles. Now
subject to competition policy investigations in EU
• Movement of staff
– Has not grown as much as expected, mainly due to
outsourcing of call centres, software development etc.
3. Multilateral Agreements on
Telecommunications
3.1 GATS 1994
3.2 Annex on
Telecommunications
3.3 Basic
Telecommunications
Agreement 1997
3.4 WTO Reference
Paper
3.1 GATS general obligations
• Most-favoured nation (MFN), Article II
• Transparency, Article III
• Domestic regulation, Article VI:
– qualification requirements and procedures
– technical standards
– licensing requirements
• Monopolies and exclusive service supply
(Article VIII)
• Market access (Article XVI)
• National Treatment (Article XVII)
3.1 GATS - specific commitments
• Scheduling of service commitments:
– Mode One (cross-border) : call back services
– Mode Two: Right of consumption abroad important for
large users (e.g. private networks)
– Mode 3: Commercial presence (investment)
– Mode Four: Movement of natural persons
• Commitments are “technology neutral”
– Reservations and “additional commitments”.
Examples:
• Phase in periods and limits on number of network
suppliers
• Reference Paper
3.2 Annex on
Telecommunications
• In the application of Article III of the GATS
(Transparency), the following info must be
made publicly available:
– tariffs and other terms and conditions of
service;
– specifications of technical interfaces;
– conditions applying to attachment of terminal
or other equipment;
– and notifications, registration or licensing
requirements, if any.
3.2 Annex on
Telecommunications
• Access to and use of Public
Telecommunications Transport Networks
and Services
– Member shall ensure reasonable and nondiscriminatory terms and conditions, for the
supply of a service included in its Schedule.
– Member may place reasonable conditions on
access to and use of public
telecommunications. Such conditions shall be
specified in the Member's Schedule
3.3 Basic Telecommunications
Agreement in 1997
• A plulilateral agreement
with 91 signatory states
with combined revenues
over 90% of global
revenues.
• Liberalize voice, data,
and international services
by January 1998
• Common approach to
regulation
• Foreign investment rights
were critical issue
Basic Telecom Commitments
100
1997: The 4th Protocol
69 governments
 91 governments
9 MFN exemptions
In force: Feb ‘98
2 still to ratify
6 Members & 16 acceding countries
90
80
70
60
50
Today:
40
committed
3 protocol schedules improved
“Phased-in” already in place by at least a
dozen countries

30
20
10
0
1994
Source: Trade in Services Division, WTO
1997
2003
BT Commitments
Emerging Economies
(As percent of emerging economies with commitments)
90%
Reg. Disciplines
Data Transmission
Source: Trade in Services Division, WTO
88
85
Cellular Telephone
82
Fixed Telephone
79
Leasing circuits
Mobile Satellite
72
Voice simple resale
54
Implemented To be phased-in
Source: Trade in Services Division, WTO
Examples of basic telecommunication services:
(WTO Website)
(a) Voice telephone services
(b) Packet-switched data transmission services
(c) Circuit-switched data transmission services
(d) Telex services
(e) Telegraph services
(f) Facsimile services
(g) Private leased circuit services
(o) Other
- Analog/digital cellular/mobile telephone services
- Mobile data services
- Paging
- Personal communications services
- Satellite-based mobile services (incl. e.g. telephony, data, paging, and/or PCS)
- Fixed satellite services
- VSAT services
- Gateway earth station services
- Teleconferencing
- Video transport
- Trunked radio system services
3.3 Regulatory Reference Paper
• Competitive safeguards
– prevention of anti-competitive practices
– engaging in anti-competitive cross-subsidisation
– withholding information
• Interconnection
– provided under non-discriminatory terms
– cost-oriented, transparent and timely
– additional network termination points on request
at cost-oriented rates
– Published terms and rates
– Disputes procedure
3.3 Regulatory Reference Paper
• Universal Service Obligations
– at discretion of Member State
– no more burdensome than necessary
• Licensing criteria
– publicly available
– transparent process
• Regulatory authority independent of
operation
• Allocation and use of scarce resources
– objective, timely, transparent and nondiscriminatory procedures for allocation
4. Policy Implications for Developing
Countries
1. Assessing of the role of telecommunications in
economic and social development,
2. Rethinking the role of the state in
telecommunications, in particular in the provision
of universal services.
3. Examining the need for foreign capital and
technology and for compliance to international
regulatory standard.
Trade Policy should be the Tip of the
Iceberg
Trade Policy
Market restructuring and Policy
Role of Telecom & IT in Economy
• Telecom/IT are vital
drivers of economic
growth
• Competition and
market reform are
best option
• Trade policy can
leverage benefits of
market reform
– Capital markets
– Credibility vs. flexibility
5. Regulatory Implications for Developing
Countries
• In general, amore transparent and objective
regulatory regime
• Pricing regime:
– regulatory forbearance in competitive markets
(take-off of mobile services due to ability to do
premium service pricing)
– cost-based pricing regime (which requires an
overhaul of cost accounting and cost allocation)
– elimination of cross-subsidies that leads to raterebalancing (traditional pricing under-priced local
services and over-priced long distance).
Regulatory Implications for Developing
Countries
• Interconnection regime:
– non-discriminatory and fair access to
transmission networks.
– Cost-based interconnection charges.
– Unbundling network
– establish an effective interconnection dispute
settlement
• Universal service regime
– the end of “cross-subsidization”
– establishment of a transparent, nondiscriminatory and competitively neutral
regime
Regulatory Implications for Developing
Countries
• Allocation of Scarce resource (numbers,
frequencies)
– allocation needs to be transparent, timely,
objective and non-discriminatory
– needs to make public allocated frequency
bands, but detailed identification of
frequencies allocated for specific gov’t use not
required.
Regulatory Implications for Developing
Countries
• Competition oversight
– require regulatory provisions dealing with anticompetitive practices, in particular abuse of
dominance
Cross-border regulatory issues
• International services and settlement rates
– Market power on monopoly termination
– FCC “Benchmarks”
• Challenges to traditional settlement rates: USMexico dispute
• “International Charges for Access to
International Services” (ICAIS)—market power
exercised by U.S. carriers
• Mobile services terminated on foreign networks