International gateway liberalization

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International gateway liberalization WSIS Facilitation Meeting on Action Line C6 ITU Headquarters, Geneva, 20 Infrastructure sharing: extending ICT access to all Vaiva Lazauskaite vaiva.lazauskaite@itu.int Regulatory and Market Environment Division, BDT International Telecommunication Union International Telecommunication Union

Trends in Liberalization of ICT markets Liberalization, which in general refers to fewer government restrictions in exchange for greater participation of private entities, has become more widespread, including by percentage of ITU Member States and types of ICTs. 100% 90% 80% Competition in International fixed telephony Percent of ITU Member States 70% 60% 50% 40% 30% 20% 10% 0% 1998 2007 1998 2007 1999 2007 2004 2007 International fixed Mobile Internet services International gateways Competition in mobile Competition in Internet services Competition in IGW Monopoly Note: This figure reflects what is legally permissible ITU World Telecommunication Regulatory database 2

Promises and Expectations of Liberalization Telecommunication sector in general: Increased investment: Market players are able to take rational Buy or build decisions. Increased competition: New market players. Better and newer services Lower costs and lower prices Faster growth of the market: Increased teledensity; Increased usage of services. Contribution to economic growth International gateways: Increased investment: Investing in new gateways; Upgrading existing gateways to meet increased demand. Bigger choice of international connectivity providers. Lower prices of international communications. Increased international bandwidth. Faster market growth: Increased traffic and use. Contribution to economic growth: Decrease in grey markets; Increase in state revenues. 3

Experience: Tanzania (1) Liberalization of IGW in 2005 together with introduction of converged licensing framework By May 2006 four new service providers were licensed that are rolling out wireless services Thousands Fixed, mobile and Internet markets development in Tanzania, 1997-2007 9000 25% 8000 7000 6000 5000 4000 3000 Liberalization of IGW 20% 15% 10% Fixed lines Mobile subscribers Internet Users Fixed lines per 100 inhabitants 2000 1000 0 5% Mobile subscribers per 100 inhabitants Internet users per 0% 100 inhabitants 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ITU World Telecommunication/ ICT Indicators database 4

Experience : Tanzania (2) Fixed international tariffs: From 2000-2005 average tariffs of international calls dropped by 38 percent, From 2005-2006, after liberalization of fixed telephony market and international gateways, they decreased by 57 percent. Mobile international tariffs: 2000-2005 average tariffs of international calls dropped by 49 percent, From 2005-2006 they decreased by 68 percent. Tanzania Communication Regulatory Authority 5

Experience : Tanzania (3) The cost of connectivity in 1999 was extremely high with a mere 32kbit/s link costing about USD 16 000. As a result of converged licensing framework and increasing number of ISPs the bandwidth prices have dropped to about USD 3 000 per Mbit. In developed countries, however, bandwidth of 1 Mbit is available for as low as USD 300. Like many other African countries, Tanzania lacks a cheap and high-capacity Internet connection. All ISPs are connected via expensive satellite connections. Burundi Congo (Dem. Rep.) Zambia Malawi Rwanda Mozambique Tanzania Uganda Kenya International Internet bandwidth, Mbit/s, 2007 4 10 37 67 70 72 100 344 759 0 100 200 300 400 500 600 700 800 ITU World Telecommunication/ ICT Indicators database 6

Experience : Thailand (1) Liberalization of IGW in 2006. There are six international gateway operators in Thailand. After liberalization of international gateways, the number of Internet users increases. Fixed, mobile and Internet markets development in Thailand, 1997-2007 60 50 40 30 20 Liberalization of IGW 100% 90% 80% 70% 60% 50% 40% 30% Fixed lines Mobile subscribers Internet Users Fixed lines per 100 inhabitants 10 0 0% Internet users per 100 inhabitants 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ITU World Telecommunication/ ICT Indicators database 20% 10% Mobile subscribers per 100 inhabitants 7

Experience : Thailand (2) In line with Internet users, the number of broadband subscribers was growing. Growth of broadband subscribers in Thailand This means greater required bandwidth. Ministry of Information and Communication Technology In 2007 (right after liberalization of IGW) International Internet bandwidth increased by more than 2.5 times 30000 25000 20000 15000 10000 5000 0 Evolution of International Internet Bandwidth in Thailand, Mbit/s 24894 9909 6808 268 642 1011 1438 3006 2000 2001 2002 2003 2004 2005 2006 2007 ITU World Telecommunication/ ICT Indicators database 8

Experience: Botswana (1) In 2006 - Liberalization of IGW and new licensing framework. According to the Botswana Telecommunications Authority, during the period of March 2006 - March 2007, fixed telephony experienced a slight increase. The total number of subscribers (lines) increased from 132 to 137 thousand. Thousands 1500 1000 500 Fixed, mobile and Internet markets development in Botswana, 1997-2007 Liberalization of IGW 80% 70% 60% 50% 40% 30% 20% 10% Fixed lines Mobile subscribers Internet Users Fixed lines per 100 inhabitants Mobile subscribers per 100 inhabitants 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 0% Internet users per 100 inhabitants ITU World Telecommunication/ ICT Indicators database 9

Experience: Botswana (2) From 2006-2007 mobile penetration increased from 47 to 76 percent Mobile penetration, per 100 inhabitants, 2007 Zimbabwe 9 Zambia 22 Namibia 39 Botswana 76 South Africa 87 0 20 40 60 80 100 Tariffs of mobile services were decreasing in neighboring countries. In Botswana they decreased by 65.9 percent during a threeyear period USD 60 50 40 30 20 10 0 Mobile tariff, (100 minutes of use per month), USD 34.5% 11.4% 39.4% 65.9% 35 31 33 20 55 36 41 14 1999 2006 1999 2006 1999 2006 2003* 2006 Namibia South Africa Zambia Bostwana 10 ITU World Telecommunication/ ICT Indicators database

Experience : Botswana(3) 26 licensed ISPs in 2007. Internet access is very limited: Half of all households have access to electricity; Personal computers costs about USD 1,000; Bandwidth costs are between USD 5,000-8,000 per month for 1 Mbit. The number of Internet users in the country is about 80 000 with an average bandwidth of 17 bits/s per capita or 375 bits/s per user. International Internet bandwidth, Mbit/s, 2007 Botswana 30 Zambia 37 Namibia 56 Zimbabwe 57 South Africa 3380 0 500 1000 1500 2000 2500 3000 3500 4000 ITU World Telecommunication/ ICT Indicators database 11

Experience : Indonesia Liberalization of IGW in 2004 Increase of the traffic (minutes in and out) by 200%. Increase of the total revenue by 94%. Decrease of the price of services. LIRNEasia research 12

Some other: Kenya: Liberalization of IGW in 2005; Increase of total bandwidth available to the country by almost 700% in 2006; Decrease the price of international telephone calls (around 70%) and Internet connection and charges. Morocco: Liberalization of IGW in 2002; Increase of bandwidth; Decrease of the price of services (Internet connection and roaming charges); 99% of Internet connection in 2007 are broadband; Broadband prices are the cheapest in Africa, at USD 18 per month for a 256 kbps package; Offers highest broadband speeds in Africa (20Mbit/s). 13

Liberalization of International gateways It is evident from the experience throughout the world that liberalization of international gateways has brought many benefits to the sector including the decrease of tariffs and boosting sector growth: All analyzed countries to a certain extent experienced some or all expected benefits. Liberalization of IGW alone could not address all challenges. Important challenges remain: Dominance control; Interconnection issues; Cost of access to international bandwidth; Security issues. 14

Liberalization of International gateways Monopoly of IGW, however, may cause additional challenges: IGW monopoly cannot entirely prevent bypass or arbitrage market practices (call back, illegal VoIP); Costs and energy to control illegal bypass and grey markets; Demand for international bandwidth is rapidly growing is a single operator able to provide all required demand? Monopoly of IGW is barely sustainable in the world of convergence, rapid technological development and globalization. Even if liberalization of the IGW is just one piece of larger system, it may significantly influence market development. 15

More Information GSR 2008 Discussion paper on International Gateway Liberalization: the Singapore experience http://www.itu.int/itu- D/treg/Events/Seminars/GSR/GSR08/papers.html Trends in Telecommunication Reform 2008 (forthcoming) 16

Thank you! International Telecommunication Union Committed to connecting the world 17