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Damascus - Syria, 1012 October 2010

ITU/BDT Arab Regional Workshop on

Wireless Broadband Internet Access in Rural areas Session 2: Definition and Scope of Universal Access/Service
Moez Chakchouk
Ministry of Communication Technologie Tunisia Email : moez.chakchouk@mincom.tn

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Introduction

In the 21st century, affordable broadband access to the Internet is becoming as vital to social and economic development as networks like transport, water and power Dr Hamadoun Tour, ITU Secretary-General.

ICT for alleviation of poverty in developing countries:

Reality of rural and remote areas of developing countries: lack of infrastructure, low population density, low economic activities, illiteracy, lack of ICT and information, difficult geographical, environmental and living conditions, etc. Rapid migration of population from rural to urban areas in developing countries causing poverty. Amelioration of living condition and empowering rural and remote areas by ICT. Applicability of emerging ICT technologies and services.

Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Introduction

The digital divide between urban areas of developed countries and rural areas of developing countries are becoming: Wider and Wider! We must strengthen our actions to bridge the digital divide by developing ICT infrastructure in rural areas.

Tunis Commitment
We shall strive unremittingly, therefore, to promote universal, ubiquitous, equitable and affordable access to ICTs, including universal design and assistive technologies, for all people, especially those with disabilities, everywhere, to ensure that the benefits are more evenly distributed between and within societies, and to bridge the digital divide in order to create digital opportunities for all and benefit from the potential offered by ICTs for development.
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Outline

Basic Definitions Universality Policy Implementing Universality Role of regulators Universality trends

Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Basic Definitions

Universal Service (US)

Promoting or maintaining of universal availability of connections by individual households to public telecommunications networks, A practical ICT policy objective (developed countries), Not economically feasible (developing countries). Providing to every person a reasonable means of access to a publicly available telecommunication centres, May be provided by pay telephones, tele-centres, community telephone centres, community Internet access terminals, etc.
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Universal Access (UA)


Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Basic Definitions
Universality policy generally refers to both US and UA The common objective provide or maintain service to those who would not normally be served :


Teledensity Universal Service

Universal Access

Revenue per inh.

People living in rural areas (high cost service areas), Lower income people, People with physical disabilities, etc.
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Basic Definitions

Three main issues relevant to Universality

Availability: The Service is available in total geographic territory and especially in inhabited parts of the country through pub lic, community, shared or personal devices. Accessibility: All citizens can use the service, regardless of location, gender, disabilities and other personal characteristics. Affordability: The service is affordable to all citizens regarding three main factors:

People incomes, Overall price levels which in turn depend on costs (technology) and profits (competition), Other factors: price presentation and packaging, payment schemes, credit management, user awareness and value perceptions, ...
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Regulatory Best Practices 4th Global Symposium for Regulators (GSR2003):

An enabling regulatory environment: Role of governments and regulators

The success of any universal access/service policy is dependent upon political support at the highest level that recognizes the role of ICTs as a tool for development It is essential that Regulators exist or be established where they do not yet exist, and that their key role in implementing universal access policies and promoting competition be recognized and reinforced. A series of policy and regulatory reform measures can be taken to achieve universal access to ICTs.
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Fundamental Step: Formulating a national policy that identifies appropriate and realistic universal access/service objectives. Five major objectives of implementing Universality Policies:
1) 2) 3) 4) 5) To promote Ubiquitous Network Society, To promote national political, economic and cultural cohesion, To eliminate disparity between rural and urban areas. To encourage more balanced distribution of the population, To promote economic growth. Define Universality What to Fund? Guarantee the best Quality of Service, Ensure affordable tariffs for all, Implement Universality How to Fund?
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Four major issues:


1) 2) 3) 4)

Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Universality Policies have to differ from developing countries to developed countries, with regards to seven major factors:
1) 2) 3) 4) 5) 6) Social, economical, political environment, Telecom regulatory environment, ICT Infrastructure development, Market opening and privatization strategy achievements, Efficiency of the competition environment, Geographical difficulties and distribution of population in rural and urban areas, 7) Existing disparity, realization of the Millennium Development Goals (MDGs) and perceived order of need (telecom vs water vs electricity vs housing vs etc.)

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Scope of Universal Service Provision The European Commission Case (Universal Service Directive 2002/22/EC):

Covers connection to the telephone network and access to services provided over that network

Refers to access at a fixed location (technologically neutral could be wireless), Network connection must support dial-up Internet access, Subject to periodical review.

Directory enquiry services and directories Public payphones Specific measures for disabled users, In addition to some mandatory services, e.g. uninterrupted access to emergency services, operator assistance service, bill control measures, etc.
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Scope of Universal Service Provision The European Commission Case (Review Report April 2006):

There is no need to change the scope of the US obligations at the time particularly noting that: Access to mobile services is high but competitive mobile markets can be expected to continue to support high access without the need for a special mobile US obligations, Only a minority of households have access to broadband and extending the USO scope to cover broadband at that stage would be costly (governments could however support rollout of broadband through direct government funding),
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Universality and economic growth


High correlation between network penetration and economic development Increasing evidence of causality Consensus that network development should have high priority in order to achieve economic growth However, Universal Service Obligations (USO) can be sometimes in conflict with objective of economic growth Network Development Network development for universal service?
Prioritise subscribers who needs subsidies who are in rural areas

Network development for economic growth? Broadband


Prioritise subscribers with ability to pay with economic potential
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Focus on Broadband as an essential need to access information


Provides access to information, which is public good and is essential to all forms of economic activities Provides access to new applications & allows companies to explore new business opportunities, access customers and obtain information about market prices. Provides better access to information that makes markets function more efficiently and raises producer incomes. Provides access to information on the performance of government that helps improve government accountability and governance. Broadband networks are increasingly being used to deliver public services such as financial services, healthcare and evoting.

Broadband in developing countries will follow a similar path, but with much greater emphasis on wireless networks. Expanding affordable access to broadband is a top priority for governments of developed & developing countries.
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Proposed strategy

First, appreciate the market competition environment (market analysis), Then, determine the market deficit areas/people, and Finally choose the best funding strategy in order to ensure an efficient implementation of the universal policy, including funding issues.
Access deficit Market deficit

Poverty

Connected people

Economically feasible

Intervention required

Remote areas (rural)


Session 2: Definition and scope of universal Service/Access
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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Policy

Policy elements can provide direct or indirect stimulus

Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Implementing Universality

Promoting universality in a competitive market via a cost-based approach


Network development for economic growth
Subscribers with ability to pay: Pay (Common Costs + Marginal Costs) Subscribers without ability to pay: Pay (Marginal Costs)

Two Options:
Tariffs de-averaging (!!!) Tariffs self select packages

Support

the USO objectives, Profitable when marginal costs are covered, No subsidy required Commercially viable

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Implementing Universality

Five main adopted options in different countries:


1) 2) 3) 4) 5) Market-based reform Mandatory Service Obligations Cross Subsidies Access Deficit Charges (ADC) Universality Funds

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Implementing Universality

Market-based reforms: especially privatization, competition, and cost-based prices, etc.


Proven effectiveness in expanding service in economies with state-run telephone monopolies, Privatization tied to specific network roll-out obligations (sometimes including non-economic areas), Reforms should provide incentives for continuous service to all areas that are economic to serve, Reforms wont expand service to uneconomic areas, Some conflict could exist between these reforms especially when an exclusivity periods are granted in order to maximize privatization proceeds to the government.

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Implementing Universality

Mandatory Service Obligations: imposed by license conditions or other regulatory measures


Can be effective, if realistic and not anti-competitive, Most effective for newly licensed or newly privatized operators, Places burden of financing universality on specific operators; with potentially anti-competitive effects (if USO burden outweighs benefits), Sometimes used as a rationale to limit market-based reforms: tariffs rebalancing and competition.

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Implementing Universality

Cross Subsidies: between or within services provided by incumbent operators,


Traditional approach in place in many countries; often combined with mandatory service obligations Promotes inefficiency; demand is depressed for higher cost services that provide subsidies and entry is foreclosed in subsidized markets, In most cases, only existing users receive the subsidy, Anti-competitive effects are difficult to detect and prevent.

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Implementing Universality

Access Deficit Charges (ADC): paid by telecom. operators to subsidize the access deficit of incumbents
Spreads burden of financing uneconomic access services across all operators (including competitors), Difficult to calculate access costs; difficult to implement and administer in a transparent and efficient manner, Inefficient (as with cross subsidies), Difficult to calculate benefits of USO provider; can lead to excessive access charges to competitors,

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Implementing Universality

Universality Funds: independently administered funds that collect revenue from various sources and provide targeted subsidies to implement universality programs
Most effective means of providing targeted subsidies to expand or support uneconomic service Potentially the most efficient and most transparent, Work best in expansion of service to new areas if combined with competitive bids for private operators, Some administrative complexity and transaction expenses in establishing fund; some potential for bad governance; difficult to forecast associated costs and revenues.

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Role of regulators

Typical goal: Ensure the provision of telecoms services as needed to meet all reasonable demand by:

Protecting consumer interests (price, quality, variety), Establishing and maintaining an efficient competitive market and providing protection from the market power of incumbent operators, Stimulating investment and economic growth and enabling privatesector market entrants to operate through reasonable access to the facilities of incumbent players, Encouraging existing players to develop and innovate further in markets that are expanded by the dynamics of competition, and Maximizing and securing public interest.
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Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Role of regulators

Regulators need to balance the Interests of various groups of stakeholders, which are often conflicting, even within each group : Public Interests vs Specific Interests
I want employment I want universal access I want to develop the economy I want increased density I want to comply with WTO regulations I want to max. revenues for scarce resources I want to strengthen our position as a communications hub,
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Public Interests

Consumer Interests

Telecom Operator Interests

Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Role of regulators

Regulators need to balance the Interests of various groups of stakeholders, which are often conflicting, even within each group : Public Interests vs Specific Interests
I want choice I want the best customer service I want better quality of service I want lowest tariffs possible I want advanced and innovative services I want to access the service everywhere

Public Interests

Consumer Interests

Telecom Operator Interests

Session 2: Definition and scope of universal Service/Access

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Role of regulators

Regulators need to balance the Interests of various groups of stakeholders, which are often conflicting, even within each group : Public Interests vs Specific Interests
I want to enter market I want ROI on my infrastructure invests I want to offer converged services I want to offer only services I want to offer low quality for low prices I want to operate in certain regions only I want the freedom to use any technology

Public Interests

Consumer Interests

Telecom Operator Interests

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ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Trends

Review of Universality Scope with respect to :

Mobile telecoms development (technologies, services, penetration, revenues, etc.)


National licence conditions have made mobile communications ubiquitously available, e.g. In Tunisia more than 99% of the population is covered, Access radio network shared: low cost base, Subscriber added at a marginal cost independently of its location, Pre-paid services: low entry price for consumers greater possibility to control costs. Comprehensive national broadband strategies are already in place but until now overall proportion of the population in most of Arab countries using broadband does not fulfil the requirement of a service used by a majority of consumers, Competition in broadband market needs a lot of attention (ULL is not implemented), Broadcasting services need also to be considered in a convergent market.
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Broadband and convergence development

Session 2: Definition and scope of universal Service/Access

ITU/BDT Arab Regional Workshop on Wireless Broadband Internet Access in Rural areas

Damascus - Syria, 1012 October 2010

Universality Trends

Other important issues have to be raised:

Whether the US obligations should be defined with regard to network access rather than with reference to particular services, Whether the practice of requiring the incumbent operator to continue to exclusively fund the USO, as occurs in most of countries, is still appropriate given developing competition, Whether a general adapted taxation mechanism is more appropriate than an universality fund implemented through complicated regulatory reforms.

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Damascus - Syria, 1012 October 2010

ITU/BDT Arab Regional Workshop on

Wireless Broadband Internet Access in Rural areas

Thanks for your attention ...


Moez Chakchouk
Ministry of Communication Technologie Tunisia Email : moez.chakchouk@mincom.tn

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