Tariff regulation in the Chilean telecommunication market

Transcription

1 GOVERNMENT OF CHILE Ministry of Transport and Telecommunications Telecommunications Subsecretariat Tariff regulation in the Chilean telecommunication market Buenos Aires, June 2005

2 Applicable legal and regulatory framework

3 Tariff regulation: Normative aspects The General Telecommunications Act (Act No of 1982) and the amendments thereto, in particular the provisions of Article 24 bis, 25 and Section V, on tariffs. Regulations governing the procedure for, announcement of and participation in the tariffsetting process, as laid down in Section V of the General Telecommunications Act (Act No ) (Supreme Decree No. 4 of 2003).

4 Tariff regulation: Normative aspects Tariff freedom (the general rule) Services affected under the Act (Articles 24 bis and 25) Services provided by public service licensees and intermediaries through interconnection arrangements. Metering, billing, charging and collection services provided to carriers by public service licensees (Supreme Decree No. 95 of 1994). Tariffs for services provided under interconnection arrangements enable these licensees to charge for the cost of using their networks.

5 Tariff regulation: Content aspects Basic principles of tariff-setting: Tariffs charged to users reflect costs. Guaranteed absence of cross-subsidies between services and tariff areas. Use of efficient enterprise model generates incentives for the actual licensee to introduce technology enhancements in its network and in regulated services, thereby increasing their efficiency. Through the tariff-setting process it is possible to pass on to the consumer the efficiency gains made by the company as a result of its improved management coupled with technological advances.

6 Tariff regulation: Content aspects Efficient company (Act , Art. 30A and F): Provides only regulated services. Only those costs that are essential to their provision. Using available technology. Maintaining quality. Determination of costs of each service: investment and operation, including capital cost. Indivisibility of unregulated services: only fraction of costs used, consistent with the proportion of assets used.

7 Tariff regulation: Content aspects Incremental development cost (IDC) (Art. 30) General rule: marginal cost charging Plans for expansion of each service by tariff area. The incremental development cost is obtained for each expansion plan. Exception: Long-run marginal cost In the absence of expansion plans. Total long-run cost (Art. 30C) Asset replenishment plan for the efficient company. Average volume of different services provided.

8 Tariff regulation: Content aspects Efficient tariffs (Art. 30E) Generate revenue equivalent to the IDC (marginal cost). In case of more than one regulated service in a tariff area, equal profit margins. Where expansion plan provides for unregulated services: only fraction of IDC used, in keeping with the proportion of asset usage. Definitive tariffs (Art. 30F) Only where there are economies of scale. Efficient tariffs increased until total long-run cost reached. Inefficiencies minimised. Where efficient company provides unregulated services: only fraction of total long-run cost used, in keeping with the proportion of asset usage.

9 Tariff regulation: Content aspects Capital cost rate (Art. 30B) Risk-free rate of return. Company's systematic risk. Risk premium. Capital cost rate = Risk-free rate + Systematic risk * Risk premium Indexation An index is determined for each service. Based on published input price indices. Representative of cost structure of the efficient company.

10 Procedure: Technical and economic bases Participant Participant registration registration notice notice Licensee Elaboration of of technical & economic bases bases (TEBs) Registered Registered Third Third parties parties Draft TEBs Opinions TEB proposal Subtel Submission of preliminary TEBs Licensee Review and and elaboration of of preliminary TEBs TEBs Review and and compilation of of points of of disagreement

11 Procedure: Technical and economic bases Licensee Review and and compilation of of points of of disagreement Submission of disagreements and possible request for assistance from committee of experts Subtel Analysis and and decision on on definitive TEBs TEBs Notification of definitive TEBs Licensee Elaboration of of tariff tariff study study commences Background Opinion Committee Committee of of experts experts

12 Procedure: Tariff-setting Licensee Elaboration of of tariff tariffstudy Registered Registered third third parties parties Opinions Tariff proposal Ministries Review of of tariff tariffstudy Report on objections & counter-proposals Licensee Incorporates or orinsists Background Opinion Committee Committee of of experts experts Report on insistence Ministries Final Final decision

13 Procedure: Tariff-setting Possible objections Ministries Final Final decision Substantiating report Ministries Elaboration & signature of of tariff tariffdecree Tariff decree Comptroller-General of the Republic Constitutional and and legislative review Processing of tariff decree Official Bulletin Publication of of tariff tariffdecree Background Ministries Consultations Clarification of of the the tariff tariffprocess

14 -380 Official Bulletin announcement launching process -365 Presentation of TEB proposal -360 Presentation of disagreements and request for committee of expert (CoE) assistance (20) Participant registration Procedure: Tariff processes Draft TEB 15 CoE report Participant comments Setting-up and swearing-in of CoE CoE clarification report Start of tariff study announced Presentation of tariff study (Subtel calls for TEB proposal for new licensees) Subtel calls for CoE assistance Preliminary TEBs Request for clarification Definitive TEBs Opinions 210 Tariff study Presentation of tariff study Setting-up of CoE Report on objections and counter-proposals Report on the modifications and insistence CoE report Substantiating report and Tariff Decree

15 Tariff regulation: Tariff aspects The main services regulated in the context of public service licensees for mobile telephony correspond to: Interconnection at network termination points Access to other telecommunication service licensees Administrative functions (metering, charging, billing, collection, balance management)

16 Tariff regulation: Tariff aspects The main services regulated in the context of public service licensees for fixed telephony correspond to: Interconnection at network termination points Access to other telecommunication service licensees Administrative functions (metering, charging, billing, collection, balance management)

17 Fixed and mobile telephony market: Current situation

18 Chilean market: Fixed lines Evolution of fixed telephony: Lines in service and penetration ( ) Lines in service Penetration

19 Chilean market: Mobile subscribers Evolution of mobile telephony: Mobile subscribers and penetration ( ) Lines in service Penetration

20 Chilean market: Internet connections Evolution of Internet connections (June 2000 December 2004) Switched Dedicated Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec

21 Chilean market: Penetration indicators Penetration of fixed telephony, mobile telephony and Internet in Chile December 2004 Internet connections per 100 households 12.6 Internet connections per 100 inhabitants 5.0 Mobile subscribers per 100 households 67.3 Mobile subscribers per 100 inhabitants 59.6 Fixed lines per 100 households 51.6 Fixed lines per 100 inhabitants Nota: Para el caso de la penetración en los hogares la información corresponde a la encuesta CASEN Note: In the case of household penetration, the information is drawn from the CASEN 2003 survey.

22 Results: Tariff processes

23 Tariff regulation: Tariff processes During the most recent period, the regulatory body conducted a series of tariff processes with the aim of establishing regulated tariffs for the services in question in the various market segments. The processes covered public service licensees for mobile and fixed telephony and intermediate service licensees. They involved a review of the tariff decrees relating to the dominant enterprises and mobile and rural companies, bringing other companies into the arena.

24 Tariff regulation: Tariff processors The processes by segment correspond to: Mobile and of the same type: Bellsouth Entel PCS Entel Móvil Smartcom Telefónica Móvil Nextel (Multikom and Centennial) Rural: CTR RTC Megacom Fixed: CTC Telefónica del Sur TelCoy EntelPhone VTR Manquehue Telesat CMET Intermediate: Entel

25 Mobile access charges: The new prices Time-based structure for access charges ($/min) Normal Reduced Night Former regulatory framework Tariff Decree

26 Mobile access charges: The new prices Time-based structure for access charges (USD/min) Cargo Average de Acceso access Promedio charge = USD = 0.110/min cus$/min Normal Reduced Night Former regulatory framework Tariff Decree

27 Comparison of charging periods Current time-band structure Time band Working days Saturdays Sundays and public holidays 00:00-08:59 Reduced Reduced Reduced 09:00-13:59 Normal Normal Reduced 14:00-19:59 Normal Reduced Reduced 20:00-23:59 Reduced Reduced Reduced Traffic distribution: Normal rate : 57.9% Reduced rate : 42.1% Proposed time-band structure Time band Working Saturdays Sundays and public days holidays 00:00-07:59 Night Night Night 08: Normal Normal Reduced 14:00-19:59 Normal Reduced Reduced 20:00-23:59 Reduced Reduced Reduced Traffic distribution: Normal rate : 61.4% Reduced rate : 33.5% Night rate : 5.1%

28 Access charges: Decreasing prices Access charge ($/min)

29 Local access charges: Normal rate Local company access charges by primary zone 14 (in pesos as at December 2003) ($/minute) Arica Iquique Antofagasta Copiapó La Serena Ovalle Los Andes Quillota San Antonio Valparaíso Santiago Rancagua Curicó CTC ETPH CMET VTR (*) MNET TSAT TSUR TCOY Primary zones

30 Local access charges: Normal rate Local company access charges by primary zone (in pesos as at December 2003) ($/minute) Talca Linares Chillán Concepción Los Ángeles Temuco Punta Arenas Valdivia Osorno Puerto Montt Ciudades Medianas Décima Región Coyhaique Puerto Aysén CTC ETPH CMET VTR (*) MNET TSAT TSUR TCOY Primary zones

31 Telephone line service Local company telephone line service per tariff area (in pesos as at December 2003) ($/Line-month) Santiago Valpara íso Concepción Antofagasta, La Serena and Chillán Iquique, Quillota, Los Andes, Curicó and Linares Tariff areas Arica, Copiapó, Ovalle, San Antonio, Talca, Los Ángeles and Punta Arenas Rancagua and Temuco Valdivia, Osorno and Puerto Montt Coyhaique Isla de Pascua

32 THE END Tariff regulation in the Chilean telecommunication market Buenos Aires, June 2005 by Roberto Baltra T. Adviser,, Subsecretario de Telecomunicaciones