Telecommunication Regulatory Reform and the WTO Process Dr Tim Kelly, ITU Session 1: Course on Telecom Policy, Regulation and Management, University of Witwatersrand, 6-7 May, 1999 * The views expressed in this presentation are those of the author, and do not necessarily reflect the opinions of the ITU or its membership. Dr Kelly can be reached by e-mail at Tim.Kelly@itu.int Agenda The Telecommunications Sector in the 1990s Trade in telecommunications WTO Trade Principles The stakes: Market liberalisation Shift from a bilateral to a multilateral trade regime Establishing independent regulators What does it all add up to? 1
Telephone main lines worldwide (M) 96 Annual average growth (right scale) 129 175 245 327 407 520 Source: ITU World Telecommunication Indicators Database. 694 744 800 E s t i m a t e 970 60 65 70 75 80 85 90 95 96 97 00 F o r e c a s t 7% 6% 5% 4% 3% 2% 1% 0% Waiting list and average waiting time for telephone service, World World waiting list (millions) 47 46 45 44 43 42 41 40 39 1990 1992 1994 1996 Source: ITU World Telecommunication Indicators Database. Wait list Wait time 2 1 - Average waiting time (years) 2
Cellular subscribers worldwide, per 100 inhabitants Annual growth rate of cellular subscribers (right scale) 0.22 Introduction of digital systems 0.63 0.31 0.43 1.00 1.62 3.50 2.50 E s t i m a t e 1990 1991 1992 1993 1994 1995 1996 1997 Source: ITU World Telecommunication Development Report, 1998 70% 60% 50% 40% 30% 20% 10% 0% Cellular subscribers as a % of total telephone subscribers, 1996 35 30 25 20 15 10 5 0 Lebanon Thailand Malaysia Sri Venezuela Lanka South Africa China Colombia SUBSTITUTE Israel Japan N. Zealand Iceland Italy Korea Germany (Rep.) Greece SUPPLEMENT 0 10 20 30 40 50 60 Main telephone lines per 100 inhabitants Source: ITU World Telecommunication Development Report, 1998 3
30 Trends towards competition: OECD countries Number of OECD countries 25 20 15 10 5 0 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Monopoly Duopoly Open competition Source: 1999 OECD Communications Outlook. Growth in international traffic per line, in emerging markets (1990=100) 200 175 Competitive markets 150 125 100 Non-competitive markets 75 50 25 0 1990 1991 1992 1993 1994 1995 Source: ITU World Telecommunication Development Report, 1996/97. 4
Telecom privatisations,, value by region, 1994-97 Latin America 8% African & Arab states 2% Asia-Pacific 23% Western Europe 62% Eastern Europe 5% Total value: US$ 94.5 billion, 39 privatised companies Source: ITU African Telecommunication Indicators, 1998 Teledensity before and after privatisation: : Year of privatisation = 100 230 210 Chile 190 170 150 130 110 Malaysia Mexico World 90 70 Pre-privatisation Post-privatisation 50 P-5 P-4 P-3 P-2 P-1 P P+1 P+2 P+3 P+4 P+5 Source: ITU World Telecom Indicators Database 5
Trade in telecoms Dual role of telecommunications As a facilitator of trade in other sectors (GATS) As a directly traded product and service (BTA) How can telecom services be traded? Modes of delivery Cross-border (e.g., international calls) Commercial presence (e.g., Foreign Direct Investment) Consumption abroad (e.g., calling cards) Movement of staff (e.g., consultancy services) Global Telecom Trade, US$ billion 100 80 60 Other Settlement payments 40 20 0 1990 1991 1992 1993 1994 1995 Telecom equipment Note: Other includes privatisation receipts, cross-border roaming of mobiles, consultancy, FDI, foreign aid etc. Source: ITU World Telecommunication Development Report, 1996/97 6
WTO timetable 1986-1993: Uruguay Round 15 April 1994: Marrakech Treaty (GATS) 1994-1997: Group on Basic Telecommunications (GBT) April 30 1996: Standstill Feb 15 1997: Basic Telecommunications Agreement (BTA) April 1997: Information Technology Agreement (ITA) 5 February 1998: Implementation of BTA General Agreement on Trade in Services (GATS) principles Most-favoured nation (MFN), Article II Transparency, Article III Domestic regulation, Article VI: qualification requirements and procedures technical standards licensing requirements Monopolies and exclusive service supply (Article VIII) Market access (Article XVI) National Treatment (Article XVII) 7
GATS annex on telecommunications Scope: public telecommunications transport networks and services (PTTN&S) Transparency Access to and use of PTTN&S on reasonable and non-discriminatory terms Obligations: interconnection to PTTN (including private nets) Safeguards: public service responsibilities protect technical integrity of network Basic Telecom Agreement Process initiated in 1994 to extend GATS commitments to basic telecoms (i.e., voice) Process reached standstill in April 96. Sticking points: Reaching Critical Mass of countries One-way by-pass of accounting rate system Status of mobile satellite services Negotiations re-opened, 15 Jan-15 Feb 1997 Successful conclusion on 15th February 69 countries signed agreement 61 countries committed to Regulatory Reference Paper, in whole or in part 8
Countries permitting competition in basic telecoms: 1990 1995 1998 Japan United Kingdom United States Australia Canada Chile Finland Japan Korea (Rep.) New Zealand Philippines Sweden United Kingdom United States Australia Austria Belgium Canada Chile China Denmark El Salvador Finland France Germany Ghana Hongkong SAR Israel Italy Ireland (Dec 98) Japan Korea (Rep.) Mexico New Zealand Netherlands Norway Philippines Russia Spain (Dec 98) Sweden Switzerland Uganda UK USA plus others... Percentage of outgoing international traffic open to competition 35% 46% 74% 85% 4 14 29 48 1990 1995 1998 2005 Monopoly Competition Number of countries permitting more than one operator for international telephony Note: Analysis is based on WTO Basic Telecommunications Commitments and thus presents a minimum level of traffic likely to be open to competitive service provision. Source: ITU, WTO. 9
African countries making GATS commitments to liberalisation Côte d Ivoire Full competition by 2005 Ghana Duopoly for five years, then review Mauritius Competition by 2004 Senegal Competition some time between 2003-2006 South Africa Competition by 2003 Uganda Duopoly, 1998-2003; thereafter review Regulatory Reference Paper (1) Competitive safeguards prevention of anti-competitive practices engaging in anti-competitive crosssubsidisation witholding information Interconnection provided under non-discriminatory terms cost-oriented, transparent and timely additional network termination points on request at cost-oriented rates Published terms and rates Disputes procedure 10
Regulatory Reference Paper (2) Universal Service Obligations at discretion of Member State no more burdensome than necessary Licensing criteria publicly available transparent process Independent regulatory authority Allocation and use of scarce resources objective, timely, transparent and nondiscriminatory procedures for allocation Number of new African Regulatory agencies established per year, 1992-97 6 6 2 2 1 1 1992 1993 1994 1995 1996 1997 Source: ITU African Telecommunication Indicators, 1998 11
Two Telecom Worlds? WTO World: 132 Members, governments only 72 Members, accounting for 93% of global telecoms market and 55% of global population, have made market access commitments 63 Members have committed to regulatory principles (Reference Paper) ITU World: 188 Member States & 500+ Sector Members (private) 72 are also part of WTO world, in whole or in part 116 Member States, accounting for <45% of global population, not part of WTO telecoms world 56 are not WTO Members 60 are WTO Members but have not made market access commitments What s covered, what s not? Covered in WTO telecoms agreements Government measures Individual country commitments (schedules) providing market access to stated markets in telecom services Related agreements (GATS, Information Technology) Regulatory principles Commercial presence (foreign direct investment) Not covered in WTO basic telecoms agreement Non-government measures (e.g., commercial contracts) Market areas not covered in individual commitments or stated as exemptions Rest of world (including China, Russia etc) Accounting rates and settlements Broadcasting and audiovisual industry 12
What does it all add up to? Philosophical Facilitating the transition to a competitive market environment Birth of a global information society Telecommunications as a traded service Practical Shift from a revenue-sharing to a cost-oriented regime for international telecommunications Market liberalisation now the dominant paradigm Efforts to provide a soft landing for those countries likely to be hardest hit by changes Lower prices creating opportunities for new services 13