SPPI telecommunication in France 23rd Voorburg Group Meeting Aguascalientes, Mexico 2226 September 2

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SPPI telecommunication in France23rd Voorburg
Group MeetingAguascalientes, Mexico22-26
September 2008Denis GacInsee
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Definition of the service

• CPA 2008
• 61.1 subsidiary telecommunications services
• 61.2 wireless telecommunications services
• 61.3 telecommunications services via satellite
• 61.9 other telecommunications services
• Business to business only

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Definition of the service

• On each occasion this may include
• The use, maintenance and access to the following
  transmission systems
• Voice telephone
• Data files
• Texts SMS
• Sounds radio
• Images TV
• Access to the internet

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Pricing unit of measure

• Agt Telephone
• the prices are based on
• The distance of the call
• The time of the call
• The length of the call
• The network coverage of the operator
• The networking costs
• the prices, however, are not individualised
• "FIXED RATES"  system
• there are a number of different fixed rates

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Pricing unit of measure

• Bgt data transmissions
• depend more on the volumes which are transferred
• on the speed of the transfer
• on the security of the transmissions
• prices negotiated between operators and clients
  
• private prices
• Cgt TV and radio transmission
• prices negotiated between operators (not very
  many) and clients (not very many)

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Market conditions and constraints

• Size of industry (sectoral perspective)
• This is a very concentrated market The first 10
  companies represent 84 of the turnover, that is
  almost 44 billion (2005)

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Market conditions and constraints

• According to the EAE source (sectoral survey)
• Corporate customers 29.6
• Management customers 0.3
• Household customers 70.1
• The proportion of telecoms services is growing in
  the budget of households 1.4 en 1992 (15
  billion )
• 2.4 en 2006 (24 billion )
• The monthly bill per client is growing by 3 a
  year.

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Market conditions and constraintsCompanies
represent just 1/3 of the turnover for the sector
Source ARCEP (regulation authority)
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Telecommunications (without TV and radio)annual
revenue by industry (millions )
Market conditions and constraints
others
data transport
added value services
wireless
wireless
internet
wired
wired
Source ARCEP (regulation authority)
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Market conditions and constraints

• The market in France

France Telecom
Y
Orange (FT) SFR Bouygues
Eutelsat TDF Globecast Colt Verizon ATT
Free Wanadoo (FT) Telecom Italia
Neuf Cegetel
Coriolis Debitel
Corporate operators
General public operators
FAI
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Market conditions and constraints

• Special conditions or restrictions
• The mobile telephone is the driving force behind
  the market, and there is a constant variation in
  service offers
• The fast-growing market continues to lead to
  mergers and acquisitions, a situation that must
  be monitored
• New services are appearing (voice on IP, ADSL,
  IP-PN on MPLS pour transport de data)
• New operators (MVNO)
• Fixed line telephony lacks speed and subscription
  represents more than half of the turnover in this
  sub-sector
• The operators sell networking services which we
  do not take into account (intermediate use).

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Market conditions and constraints

• Recordkeeping practices
• As regards telephony, ARCEP (an authority
  regulating electronic telecommunications)
  conducts a survey on all the operators every
  quarter the information we need for the
  assessment of our rates is given to us by
  agreement.
• For the sub-sectors which are not entirely
  covered by these surveys (audiovisual
  transmissions and data transmission), this
  process is carried out by following the usual
  method, that is to say by selecting companies and
  questioning each company at their offices.

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Standard classification structure

• ARCEP nomenclature
• Transmission of messages or data
• Fixed line telephony services
• Internet access services
• Mobile telephony services
• Information services
• Dedicated network services, transmission of data
• Added value services
• Renting of terminals
• Secondary incomes
• Additional nomenclature (INSEE)
• Other telecommunications services
• Television transmission services
• Radio transmission services
• Other telecommunications services
• Cable transmission of radio and TV programmes
• Cable transmission of radio and TV programmes

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National accounts concepts

• The same classification is now given by the
  accountants and the managers of the price rates
• 642C Telecommunications (not audiovisual
  transmissions)
• 642D Transmissions of radio and television
  programmes
• Up to 2004, the telephony consumer price rate was
  used in order to reduce the price, (a stable
  rate) but is it impossible to make a consistent
  volume of production which is growing twice as
  fast as CA, with a price rate that does not
  change?
• A price rate based on unit values (a rate that
  decreases) allows consistency with CA and the
  amount of minutes.
• Since 2005, the production price rate has been
  used (although this is not yet widespread)

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Pricing methods

• There is a continuing debate on the subject of
  the best method for the calculation of this rate
  
• unit value?
• rate method?
• bill method?
• Another debate is a consumer price rate the same
  as a production price rate?
• For telephony, the SPPI /France service has
  chosen the "unit values" method,
• as recommended by the "methodological guide"
• by the note "price indexes for telecommunications
  services" (G Deuchars - US BLS et K Moriya -
  Bank of Japan) 2001 (Bordé/Gorko 1999)
• and according to the experiences of the other
  countries
• (the CPI /France service, however, has chosen a
  combination of rate method and bill method)
• The advantage that one can see in this is the
  reduction of the operators response charge
  through the quarterly recovery of ARCEP files

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Pricing methods

• Fixed line telephony national price per minute
  (ARCEP)
• international price
  per minute (ARCEP)
• to mobile price per
  minute (ARCEP)
• subscription
  official rate (France Télécom)
• Mobile telephony calls price per minute
  (ARCEP)
• SMS price of
  SMS (ARCEP)
• Internet access price of access (ARCEP)
• Data transmission survey of 7 companies/40
  quotations
• TV and radio transmission survey of 6
  companies/40 quotations

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Pricing methods

• in telephony and internet unit prices
• Quarterly ARCEP survey figures
• Laspeyres rate
• rebased annually (proportion of companies rebased
  annually)
• supporting the companies involved throughout the
  year
• in the transmission of data (IP-VPN), TV, radio
• ARPA (average revenue per access)
• ARPL (average revenue per line)

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Quality adjustment methodology

• The unit price method is designed, in theory, to
  overcome difficulties in adjustments in the
  service quality
• However, in this case we are dependent on the
  detail in the available information level
• The service category that is detailed should be
  as precise and homogenous as possible, which is
  not always the case
• Call price by distance
• Call price by time slot
• Call price by length of calls
• Unfortunately we are limited by the nature of the
  case and available detail.

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Quality adjustment methodology

• Unresolved questions
• Will special offers (unlimited calls to certain
  numbers) and the widespread use of fixed rates
  which incorporate several kinds of service
  (tripleplay, quadrupleplay) be compatible with
  our calculation method? (in these kinds of fixed
  rates there is also a TV servicenot our field).
  Fixed lines and mobiles will soon be on fixed
  rates.
• The modification of the calculation method would
  require a considerable technical and
  methodological investment

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Comparing SPPI with turnover/output

• Turnover
• With the market being extremely concentrated, the
  size of the turnover does not present great
  difficulties.
• Exchanges of services between companies can lead
  to double accounts (call terminations, rent of
  large market lines between operators) which are
  absent from the calculations of the price rate.
• Frequent mergers on the market must be monitored
  closely for the calculation of average prices
• Output
• ARCEP regularly issues information on call
  volumes. The price rate calculation based on unit
  prices is in accordance with this production
  approach.

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SPPI
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Summary

• The subject of telecommunications is a sensitive
  one, and a consensus has not yet been reached
  between operators, the regulator, consumer
  associations and statisticians, both regarding
  the level (international comparisons, between
  operators) and development.
• This rate is therefore not used around France,
  due to the fact that there are differing
  interests
• Operators a big reduction!
• Regulator prices should come down more!
• Consumer associations prices are going up!
• Statisticians ???