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ITU/BDT Arab Regional Workshop For a Universal Service Evolution in Jordan. Luc Savage Chief Strategy Officer Jordan Telecom February 2005.

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Presentation on theme: "ITU/BDT Arab Regional Workshop For a Universal Service Evolution in Jordan. Luc Savage Chief Strategy Officer Jordan Telecom February 2005."— Presentation transcript:

1 ITU/BDT Arab Regional Workshop For a Universal Service Evolution in Jordan. Luc Savage Chief Strategy Officer Jordan Telecom February 2005

2 WTO definition  Each member has the right to define the kind of USO it wishes provided…  Not to be anti-competitive, means transparent, non-discriminatory and completely neutral.  Not more burdensome than necessary for the kind of USO defined by the member.

3 Others common principles  Distinction between mandatory and universal service telex, lease lines… can be mandatory  USO is about providing a safety net It is a social policy issue It is not an action plan to develop new technologies Forces of competition must drive the service aspects of innovation, price, quality of service and choice

4 Others common principles  Competitively neutral Designation of US provider neutrality If a US cost exists, provider must be compensated  Technological neutrality Choice of technology should be made by USP bidder Regulation on none mature technology will distort competition Regulation on unstable technology leads to cost risk  Regulatory certainty Needs consistency with law, policy, licenses

5 Why a U. S. in Jordan ?  Introduction of full competition : risk of not served customers or areas need for regulatory intervention in the form of USOs… …and the corresponding loss sharing mechanism.  Unbalanced development in Jordan Rural vs urban areas Governmental policy to encourage local development  Un-accessibility to telecommunication increase social gap 33% of households bellow 200 JD/ month

6 What is U.S. in Jordan ?  A Basic Public Telephone Service Connection to exchange line services  A geographical scope Community of at least 300 people  A USP: the incumbent monopoly  Mandatory services not included in USO Directory services Emergency services Disability services

7 Why a US evolution ?  New regulation end of monopoly avoid competition distortion  New government vision to create the knowledge society avoid knowledge gap advanced social policy  New services internet, mobility Which one to be included in the USO ?  New players US policy will correct market failures on mature markets

8 Which vision for US ?  Encourage free market  Avoid “social gap” that prevents knowledge economy % of USO cost funded Level of USO services HIGH LOW HIGH DETER USP ENTRY DETER USP ENTRY COMPETITION DISTORTION SAFETY NET COMPETITION NEUTRALITY SAFETY NET COMPETITION DISTORTION HIGH SOCIAL POLICY COST

9 Service scope: to enhance the present USO with…  Data rate sufficient to permit functional Internet access most spread basic internet speed  Provision of universal access through private payphone Distinction between economic and uneconomic areas  Special offer for low incomes households Applicant for government social welfare benefits

10 Geographical scope: same as today  Any person in a community > 300 people at prevailing standard rates < 300 people at full cost above 50 hours - standard cost  Principle adopted for network planning since the beginning of liberalization Regulatory certainty

11 Targeted users: economically deprived Jordanian  Encourage subsidies for those who need them Those who would not benefit from these services otherwise Those who are entitled to receive government provided social welfare  Uneconomic customers in economic areas  Uneconomic areas  But not economic customers in uneconomic areas  Avoid subsidies in economic markets Discount for those who can afford this service Discount for more than 1/3 of the total market  Unbearable cost for the “economical” market  33% of household below 200 JD/month as income Maximize the size of the addressable competitive market

12 Costing approach: must avoid competitive distortion  Should include Unavoidable net losses Incurred by an efficient operator Universal service scope To “non-viable” customers  Should not include Cost of mobility, which is not included in the scope of service. The whole access deficit cost of the incumbent operator  To be verified by the TRC Transparency  Uneconomic areas  Uneconomic customers in economic areas Consistency with regulatory costing methodology  Agreed border between access and core network  Long Run Incremental Cost is the most appropriate, ASAP.

13 US Provider selection based on open tendering process  All kingdom coverage Urban / rural areas are unbalanced through the Kingdom Other large socio-economic differences between governorate Low cost require economy of scale  Beauty contest process opened to all operators Quality of service Most efficient to minimize the subsidy required Permanence Compliance with scope of service  Obligation limited to five years Regulatory certainty Technology cycle Market forces evolution

14 Funding mechanism fair and simple  Cost shared by all operator who benefit from its existence But for operator with less than 1% market share  Simple mechanism Complex regulation cannot be implemented Operators pay their compensation in the form of provisional payments and then balancing payments  Fair mechanism JT remains main contributor as long it remains main operator Interconnection charge is preferred: Otherwise based on a fund with:  Provisional payment  Balancing payment  Based on traffic revenue

15 Implementation schedule from the 1 st jan 2005  USO fund mechanism from 1 st jan 2005 Consistent with international best practices Consistent with JT license terms  Other schedule would distort competition Wait for “effective competition” in Jordan is out of JT license scope Set an unacceptable precedent in license breach Create regulatory uncertainty:  NRA guaranties license enforcements  TRC stated in November 2004 that JT license does not have to be modifies in 2005

16 Thank you !

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