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Tariff comparison: Global Trends. Dr Tim Kelly (ITU), Seminar on tariff strategies for competitive environments, ALTTC, Ghaziabad, 20-22 July 1999.

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Presentation Transcript
slide1

Tariff comparison:

Global Trends

Dr Tim Kelly (ITU),

Seminar on tariff strategies for competitive environments,ALTTC, Ghaziabad, 20-22 July 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 [email protected]

agenda
Agenda
  • The purpose of tariff comparisons
  • Rate comparisons
    • Installation charges
    • Subscription charges
    • Local and international call charges
  • Tariff baskets
    • OECD business and residential baskets
    • OECD international basket
    • Other baskets
  • Trends over time
tariff comparisons what for
Tariff comparisons: What for?
  • To carry out benchmarking between competitive operators in the same country
  • To carry out benchmarking between similar operators in different countries
  • To track effects of tariff rebalancing over time
  • To provide comparative information for managers, regulators, users
  • To create “baskets” of different services to compare like with like
different types of tariff comparison
Different types of tariff comparison
  • Individual rate comparisons (e.g., installation charge, local call rate)
  • Composite basket with fixed components (e.g., Siemens basket)
  • Composite basket with variable components (e.g., OECD Tariff Comparison basket)
  • Variations over time in same price variable
slide5

Residential installation fee, in US$: Selected countries plus World average, 1998

Philippines

8.20

Malaysia

17.77

India

22.03

South Africa

34.80

Brazil

46.38

Hongkong Sar

61.35

Thailand

106.81

Mexico

106.94

Average

124.00

171.31

Russia

Indonesia

202.79

China

225.57

Source: ITU World Telecommunication Indicators Database.

Argentina

250.01

slide6

Monthly residential subscription, in US$: Selected countries plus World average, 1998

1.88

China

3.19

Thailand

3.43

Russia

5.23

India

7.11

Malaysia

7.22

Brazil

7.22

Indonesia

8.91

Hongkong Sar

8.99

Philippines

9.50

Average

10.05

South Africa

12.83

Argentina

Source: ITU World Telecommunication Indicators Database.

14.01

Mexico

slide7

Business installation fee, in US$: Selected countries plus World average, 1998

6.86

Philippines

17.77

Malaysia

22.03

India

South Africa

34.80

46.38

Brazil

61.35

Hongkong Sar

106.81

Thailand

165.00

Average

225.57

China

250.01

Argentina

274.97

Indonesia

383.10

Mexico

Source: ITU World Telecommunication Indicators Database.

582.44

Russia

slide8

Monthly business subscription, in US$: Selected countries plus World average, 1998

2.90

China

3.19

Thailand

5.23

India

Indonesia

10.66

11.62

South Africa

12.44

Malaysia

12.52

Brazil

14.08

Hongkong Sar

14.80

Average

18.84

Russia

19.26

Mexico

20.51

Philippines

Source: ITU World Telecommunication Indicators Database.

36.42

Argentina

slide9

Local call charge in US cents per 3 mins: Selected countries plus World average, 1998

0.0

Russia

0.0

Philippines

0.0

Hongkong Sar

1.4

China

2.2

India

3.2

Malaysia

3.8

Indonesia

7.0

South Africa

9.0

Average

9.3

Brazil

9.6

Thailand

10.0

Argentina

Source: ITU World Telecommunication Indicators Database.

13.2

Mexico

slide10

International 3 min call to US, in US $: Selected countries, 1998/99

0.63

Australia

1.18

United Kingdom

1.29

Mexico

1.83

Japan

2.49

South Africa

2.63

Hongkong Sar

2.76

Brazil

3.28

Indonesia

3.58

Thailand

4.36

India

6.65

China

Source: ITU World Telecommunication Indicators Database.

7.39

Russia

rate comparisons versus tariff baskets
Rate comparisons versus tariff baskets
  • Rate comparisons:
    • Easy to construct and understand
    • BUT, easy to misinterpret
    • Can be misleading due to different tariff structures and different tariff strategies between countries
  • Tariff baskets:
    • Much harder to construct
    • BUT, much more meaningful in terms of comparisons between countries or operators with different tariff structures
    • More representative of experience of different user groups
slide12

OECD tariff baskets: Then and now ...

  • Six baskets defined:
  • Business telephony
  • Residential telephony
  • International telephony
  • Mobile communications
  • X.25 data communications
  • Leased lines at 9.6 kbit/s, 56/64 kbit/s and 1.5/2.0 Mbit/s
  • Comparisons between countries
  • Additional telephony baskets to take account of usage discounts (e.g. small businesses, multinationals, elderly)
  • Combined national and international telephony basket
  • Additional baskets needed for Internet, ISDN, digital mobile (roaming), PCS, ATM etc
  • Comparisons between operators within countries
slide13

OECD residential tariff basket:

August 1998

Note: Including tax. Calculation is based on Purchasing Power Parities expressed in US$.

Source: OECD. Based on methodology defined in ICCP 22 “Performance indicators for Public Telecommunication Operators”

slide14

Off-peak, Internet access basket:

August 1998, 20 hours per month

Source: OECD. Based on dial-up Internet access via PSTN. Excludes any element of fixed charges.

slide15

Int’l business call basket, 1996:

based on call pairs, Asia-Pacific=100

84.2

Hongkong

86.7

Australia

91.9

Singapore

99.5

Indonesia

Average

100.0

USA (AT&T)

103.8

India

108.4

Source: ITU, Asia-Pacific Telecom Indicators, 1997.

China

117.1

Japan (KDD)

129.2

trends over time
Trends over time
  • Tracking trends in tariffs over time helps to assess:
    • affordability of tariffs
    • performance/efficiency of company
    • competitive position of company
    • Tariff rebalancing strategy
  • Trends in local currency (Rupees)
    • Provide most meaningful indicator for local customers
  • Trends in US$, Euros, SDRs or PPPs
    • Provide comparability relative to other currencies and relative to local price inflation
trends over time india s international tariffs 3 minute peak rate call in rupees
Trends over time: India’s international tariffs, 3 minute, peak rate call, in Rupees

250

North America

Europe, Asia

200

150

Neighbouring countries

100

50

0

1995

1996

1997

1998

1999

Source: ITU/TeleGeography “Direction of Traffic, 1999”

trends over time india s international tariffs 3 minute peak rate call in us
Trends over time: India’s international tariffs, 3 minute, peak rate call, in US$

8

7

North America

6

Europe, Asia

5

4

3

Neighbouring countries

2

1

0

1995

1996

1997

1998

1999

Source: ITU/TeleGeography “Direction of Traffic, 1999”

conclusions the value of tariff comparisons
Conclusions: the value of tariff comparisons
  • A useful tool for management, for regulators and for users
  • But, can be misleading if tariff comparisons are used selectively, or are quoted out of a wider socio-economic context
  • Use of tariff baskets is a more reliable and meaningful indicator than simple rate comparisons
  • Trends over time are best measure of company performance
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