Tariff comparison: Global Trends

1
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 Tim.Kelly_at_itu.int.
2
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

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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

4
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

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Residential installation fee, in US Selected
countries plus World average, 1998
Philippines
8.20
Malaysia
17.77
22.03
India
South Africa
34.80
Brazil
46.38
Hongkong Sar
61.35
Thailand
106.81
Mexico
106.94
124.00
Average
171.31
Russia
202.79
Indonesia
China
225.57
Source ITU World Telecommunication Indicators
Database.
Argentina
250.01
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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
7
Business installation fee, in US Selected
countries plus World average, 1998
6.86
Philippines
17.77
Malaysia
22.03
India
34.80
South Africa
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
8
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
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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
10
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
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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

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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

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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
14
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.
15
Intl business call basket, 1996 based on call
pairs, Asia-Pacific100
84.2
Hongkong
86.7
Australia
91.9
Singapore
99.5
Indonesia
100.0
Average
103.8
USA (ATT)
108.4
India
Source ITU, Asia-Pacific Telecom Indicators,
1997.
117.1
China
129.2
Japan (KDD)
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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

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Trends over time Indias 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
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Trends over time Indias 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
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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