MTR in LAC
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EN
SU
RIN
G TE
LEC
OM
MU
NIC
ATIO
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SU
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ES
S A
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WO
RLD
Mobile termination rates in Latin America & the Caribbean
Michael MingesSenior Market Analyst
Mobile Termination Rates (MTRs)
• Wholesale price to terminate a call from another mobile or fixed network in a mobile network
• Mainly relevant with “Calling Party Pays” where the termination charge is established by the network being called and paid by the network making the call
• In general, charged on a per minute basis
Reasons for regulating MTRs
• Termination in each mobile network is a monopoly
• World Trade Organization (WTO): Reference Document
• Reduce anti-competitive behavior and other market distortions
European Union
• Identifies markets for ex-ante regulation • Applies 3 criteria:
– Significant entry barriers – Markets whose structure will not lead to effective competition
within relevant time frame – Application of competition laws are not enough to solve market
failures
• One retail market and six wholesale markets have ex-ante regulation including wholesale market #7: Termination of voice calls on individual mobile networks
WTO: Reference Document
• Interconnection based on costs that are transparent and reasonable
• Public availability of interconnection negotiation proceedings
• Transparency of interconnection agreements• Major providers to make publicly available
interconnect agreements or a reference interconnect offer
U
se o
fcu
rren
t cos
ts
(LR
IC)
Evolution of cost models for MTRs
Use
of
curr
ent c
osts
(FA
C-C
CA
)
Use
of
hist
oric
al c
osts
(F
AC
-HC
C)
Leve
l of M
odel
Evo
lutio
n
Tarif
f Cap
Neg
otia
tion
Source of Data Benchmark Benchmark
Top-DownBenchmark, Top-Down, Bottom-Up
Increase in Competition
Adapted from: Centro de Modelamiento Matemático, Universidad de Chile. Reporte Preparado para la Comisión de Regulación de Telecomunicaciones de Colombia. Mayo 2007.
Latest recommendation European Union
• Efficient operator• Implies symmetric MTRs • Current costs, “bottom-up” using
LRIC• Efficient technology: NGN &
2G/3G• Only costs that would be avoided
if voice termination for others was not provided
COMMISSION RECOMMENDATION of 7 May 2009 on the Regulatory Treatment of Fixed and Mobile Termination Rates in the EU (2009/396/EC)
7.32
9.96
3.33
7.05
0
2
4
6
8
10
12
2009 2010 2011 2012
US cents per minute
Baseline
Recommended
Average MTR in EU
Adapted from COMMISSION STAFF WORKING DOCUMENT accompanying the RECOMMENDATION
Converted to US cents using May 9, 2009 exchange rate
Regulatory Schemes for MTRs in Latin America & the Caribbean (LAC)
CountryAsymetric / symmetric rates
Ex – ante Chile Symmetric
Colombia Symmetric
ECTEL Symmetric
Peru Asymetric
Only regulated when operators cannot reach agreement
Argentina Symmetric
Brazil Asymmetric
El Salvador Asymmetric
Venezuela Symmetric
Trends in LAC
• MTRs have not fallen by much over last few years in LAC
• LAC has the second highest regional average MTR in the world
0
5
10
15
2004 2005 2006 2007 2008
0
5
10
15
Europe LAC SSA MENA AP
US cents per minute
LAC
2009
MTRs in LAC US cents per minute
0
5
10
15
20
25
30
35
BrasilUruguay
VenezuelaECTELBelize
NicaraguaEcuador
PerúChileJamaicaMexico
ArgentinaParaguayBolivia
Rep. Dom.Trin. & Tob.ColombiaHondurasPanamaGuyana
0
5
10
15
20
25
30
35PPPUS centsLAC PPPLAC US cents
Other MTR issues
• Peak / Off-peak• Variation by operator• Variation by origination• Variation by region• Taxes and other adjustments• Timetable• International termination• Pass-thru to retail tariffs
MTRs in Uruguay
6
3
3
3.79
3
6
ANCEL CLAROMOVISTAR
Uruguayan Pesos per minute
http://www.ursec.gub.uy/scripts/templates/portada.asp?nota=Contenidos/Consultas%20Publicas/interconexi%F3n/Interconexion&Despliegue=DATOS_big.asp
Taxes & other adjustments
$0.00
$0.10
$0.20
$0.30
$0.40
$0.50
$0.60
Taxes
MTR
Mark-up
Brazil, price of mobile off-net call (Sao Paulo, Vivo->Oi), US$, 2009
0.00.51.01.52.02.5
2005 2006 2007 2008
Current prices
Constant prices
Chile, MTR, Peak rate (Ch$ / second)
116118120122124126
Dec-07 Jun-08 Dec-08
Colombia, MTR in current pesos
Timetable
• Glide paths• Annual reductions• Periodic adjustments
Mobile subscriptions per 100 people, 2008
0102030405060708090
100
CubaBoliviaHaiti
Costa RicaGuyanaBelize
NicaraguaCanadaMexico
Peru
Dominican Republic
Suriname
BrazilLAC
HondurasEcuadorParaguayColombia
Chile
United States
GrenadaBarbadosEl SalvadorVenezuelaGuatemala
JamaicaSt. LuciaUruguayBahamasSt. VincentPanama
Trinidad & Tobago
ArgentinaDominica
St. Kitts & NevisAntigua & Barbuda
MTRs, competition & use
142170
137189125
158
119114165
102
112
96
143
195
154
496
138308220
356
311
211
124129
198
216176156
163
84
93
0
1000
2000
3000
4000
5000
6000
7000
$0.00 $0.15 $0.30
Low MTRHigh HHI
Low MTRLow HHI
High MTRHigh HHI
High MTRLow HHI
Her
finda
hl-H
irsch
man
Inde
x,
2008
Minutes of
use per month
MTR, 2008, US$
LACcountrie
s
769396102
114119125129138142143
154156158162163
189191195198
216220
308311
356367
447492496
589697
0 100 200 300 400 500 600 700
ArgentinaBrazilPeru
S. AfricaSwitzerland
TurkeyItaly
VenezuelaJapan
GermanyChile
ColombiaSpain
HungaryEgypt
MexicoTaiwan
SwedenUK
FranceRussia
MalaysiaThailand
KoreaIsrael
SingaporeHong Kong
China*India
CanadaUSA
RPP
CPP
Minutes of user per month, 2008
CPP
RPP
Conclusions
• There is a wide divergence in LAC in respect to both MTR regulation and the rates themselves
• The average MTR in LAC is relatively high in comparison to other developing country regions
• Variety of policies regarding cost model, timetables and symmetry