Telecommunications Price Regulation in Thailand 1 ONWAREE JARERNPORN OFFICE OF THE NATIONAL BROADCASTING AND TELECOMMUNICATIONS COMMISSION, THAILAND ITU REGIONAL SEMINAR ON COSTS AND TARIFFS FOR ASIA AND PACIFIC AND MEETING OF THE SG3 RG- AO TOKYO, JAPAN, 8-9 APRIL 2013
Thai Telecom Sector Mobile market Subscribers : 83,884,206 (growing) Penetration rate : 123.52% Postpaid / Prepaid : 88 / 12 Blended ARPU : 207 baht (~$7) Revenue proportion : 63.7% voice, 23.3% non-voice, 13% other 2 140 Mobile penetration rate (%) Mobile revenue proportion (%) 120 100 80 80.21 93.01 98.58 106.56 114.58 123.52 201 2 201 1 15.41 14.58 14.57 17.76 70.01 67.66 other non-voice voice 60 40 46.79 61.19 2005 2006 2007 2008 2009 2010 2011 2012 201 0 12.99 23.31 63.7 0 20 40 60 80
Thai Telecom Sector Mobile market Current brands/operators 2G & 3G (in-band migration) AIS : AIS & DPC (42.81%) DTAC (28.68%) True Move : True Move, Real Move (MVNO under CAT Telecom) (27.06%) My : CAT Telecom (0.97%) 3G on 1.9GHz TOT (~47,000 subscribers) MVNOs under TOT (total subscribers ~120,000) : i-kool (Loxley), 365 (365 Communication), i-mobile 3G (Samart i-mobile), IEC 3G (IEC International), MOJO 3G (M Corporation) 3G on 2.1GHz to start operating in 2013Q2 AIS : Advance Wireless Network DTAC : DTAC Network True Move : Real Future 3
Fixed telephone Thai Telecom Sector Subscriber : 6,391,030 (declining) ARPU : 380 baht (~$12.7) 3 Operators : TOT (country-wide), True (BKK&metropolitan), TT&T (rural) 4 7,400 7,200 7,000 6,800 6,600 6,400 6,200 Fixed telephone subscribers (thousands) 7,205 6,835 6,683 6,391 450 400 350 300 250 200 150 100 50 Fixed telephone ARPU (baht) 410 415 303 380 6,000 5,800-2009 2010 2011 2012 2009 2010 2011 2012
Fixed broadband internet Thai Telecom Sector Subscriber : 4,130,464 (growing) ARPU : 714 baht (~$23.8) 5 providers : TOT, True, 3BB, CS Loxinfo, KSC 5 Fixed broadband internet subscribers (thousands) 4,500 4,000 3,500 3,000 2,500 2,773 3,441 3,916 4,130 750 700 650 Fixed broadband internet ARPU (baht) 723 707 679 714 2,000 1,500 600 1,000 550 500-2009 2010 2011 2012 500 2009 2010 2011 2012
Regulatory Provisions Telecommunications Business Act B.E. 2544 (2001) 6 Section 55 The Commission shall prescribe in notification the categories and maximum rate of fee and tariff that the licensee can charge the user according to the nature and categories of telecommunications service. Section 56 The setting of the maximum rate of fee and tariff under Section 55 shall: (1) be expressed by clear calculating method; (2) be fair to both the licensee and the user; (3) not cause a discrimination, preference or obstacle to the user or any person.
Regulatory Provisions 7 Act on the Organisations to Assign Radio-frequency Spectrum and to Regulate the Sound Broadcasting, Television Broadcasting and Telecommunication Services, B.E. 2553 (2010) Section 27 The NBTC shall have the powers and duties as follows: (9) To set tariff structure and price structure for sound broadcasting, television broadcasting and telecommunications services which shall be fair to service users and service providers with due regard to public interest; Section 29 In setting the rates for network access or interconnection charges, any fees or service charges for the undertaking sound broadcasting, television broadcasting and telecommunications services under this Act and the Broadcasting Business Act or the Telecommunications Business Act, the NBTC shall have due regard to the public interest and burden of the consumers, costs of providing service, optimization and efficient allocation of resources.
Objective for Office of NBTC 8 Fair to operators Fair to consumers Regards public interest Cost study & market condition Regards costs
Regulatory Background NTC Notification Re: Maximum Rate of Service fee and Advance Service Fee Collection in Telecommunications Business B.E. 2549 (2006) (2006 Notification) NTC Notification Re: Exempting Certain Telecommunication Businesses from Complying with the NTC Notification Re: Maximum Rate of Service fee and Advance Service Fee Collection in Telecommunications Business B.E. 2549 (2006) B.E. 2550 (2007) Stipulated temporary maximum rates for all services provided by type 3 operators Price plans exceeding the temporary maximum rates must get prior approval from NTC (NBTC) Set price regulation methodology: ROR (operators could propose Price Cap but subject to NTC approval) Set obligations for operators to submit data, and for Office of NTC to make reports on maximum rates 9
Regulatory Background 10 NBTC Notification Re: Maximum Rate of Service Fee for Domestic Mobile Voice Service B.E. 2555 (2012) (April 2012) domestic mobile voice service must not exceed.99 baht (~$0.03) per minute for each minute Applied only to SMP operating on 2G frequency (AIS and DTAC) Averaging is acceptable (150 baht per 200 minutes is ok, 2.75 baht for 3 minutes is ok, first minute 2 baht then.50 baht for each following minute is not ok) NBTC Notification Re: Abolishing Temporary Maximum Rates Stipulated by the NTC Notification Re: Maximum Rate of Service fee and Advance Service Fee Collection in Telecommunications Business B.E. 2549 (2006) (October 2012) Abolished all temporary maximum rates (leaving mobile voice service the only regulated service) Prices are still monitored from operators monthly report of all their price offers
Past Price Study (ROR Study) Category Services Target operators Fixed line 11 installation, line rental, local call, long distant call TOT, True, TT&T Mobile voice call AIS, DTAC, True Move International international call CAT RR = B*r + E + d + T RR = Revenue Requirement B = Rate base r = Rate of Return (cost of capital) E = Expenses d = Depreciation T = Tax data from Thailand Uniform System of Accounts (TUSOA)
ROR model Past Price Study (ROR Study) 12 01 User Inputs 02 TUSOA data 03 Reports & Scenario Revenue projections Regulated services Adjustments & Separations Change in rate levels Services Separation Revenue Requirement Rate of Return Demand data WACC Model Calculated rates
Final decision Past Price Study (ROR Study) Considering all results, regulate only mobile voice service Coinciding with SMP identification => apply only to SMP SMP in mobile retail market = AIS and DTAC Using DTAC result (higher cost of the two) Public consultation Implementation => published in the Royal Gazette 13 Pending cases at Administrative Court for nullifying the Notification Compliance issues still persist
Moving Forward: Next step of price study Project on Study of Telecommunications Price Regulation in Thailand (Price study 2013) 14 Voluntary Contribution Agreement between the Office of NBTC and ITU Target services: Mobile non-voice (SMS, MMS, broadband), particularly on 3G networks Fixed broadband Main outputs: Models and cost results for SMS, MMS and mobile broadband, and fixed broadband (report on cost study) Policy recommendation on regulatory approach, including monitoring and compliance
Price Study 2013 15 IC costs (from another project) Retail-specific costs and mark-up Retail cost model Market data (current prices, etc)
Price Study 2013 16 Main activities Jan-Mar April May June July Aug. Sep. Oct. Market data, regulations and past works Model development Input from data request Input from IC project Drafting report Finalised policy recommendation preliminary
Price Study 2013 17 Expected outcome: Regulation that benefits consumers while fosters healthy competition Good information on cost levels, current prices and level of competition Revision of current price regulation regime, with a view to move to price cap Hope to share the results with you next time!
Thank you 18