Mobile Overtakes Fixed: What happens next? Dr Tim Kelly Co-ordinator, Strategies & Policy Unit (SPU), International Telecommunication Union, 18 July 2000 Your excellencies, Ladies and Gentlemen, It is my pleasure to join you in Honolulu for this 22nd Annual Pacific Telecommunications Conference. You have selected as the theme for this event “A new vision for the 21st Century”. In keeping with the spirit of all things “new”, I have entitled this presentation “New millennium, new network economy, new ITU”. Note: 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 Tim Kelly can be contacted by e-mail at Tim.Kelly@itu.int. 1

Agenda Mobile Overtakes Fixed What happens next? Long-term trends Recent trends Individual examples What happens next? Implications for Universal Service/Universal Access Implications for IP world I propose to examine the argument that at the start of the new millennium, we stand on the threshold also of a “New Economy”, which is information-based, network-driven and which is qualitatively different from the “old economy” of goods and services. I will then go on to look at the “new international network” which is underpinning the development of this New Economy. It is IP-based, it is privately-owned and operated and it is characterised by “light touch” regulation. Finally, I will offer some thoughts on what these developments mean for the “new ITU” and for the reform process upon which we have now embarked.

100 years of telephones Log scale: 1910-2010 Normal scale: 1990-2010 2'000 1'000 1'500 Fixed Fixed 1'000 10 Mobile Mobile 500 In this presentation, I have concentrated on “new things”: the new millennium, the new network economy, and the new ITU. But our industry has a long history. During the course of the last century, the number of telephone lines grew from under ten million to more than nine hundred million. There are also almost half a billion mobilephone users. In a handful of countries such as Cambodia, Italy, Finland and the Republic of Korea, the number of mobile subscribers is now greater that the number of fixed-line users. By the end of the coming decade, there will probably be more mobile subscribers worldwide than fixed-line ones. What is remarkable about the development of the mobile sector is that it will have gone from zero to one billion subscribers within two decades. This holds fresh promise for the perennial problem of the telecommunications development gap. In the Asia-Pacific region, the contrasts in the level of network development between rich and poor countries are as great as anywhere in the world. But equally, the level of demand for telecommunication services is also high. Within the next decade I confidently expect that the waiting lists for telecommunication services which have characterised the last hundred years will finally disappear. Anyone, anywhere should be able to buy a telephone -- mobile or fixed -- choose a service provider, and connect to the international network. The final barrier is, of course, the affordability of telephone service which still remains beyond the reach of many of the world’s inhabitants. That will be the major challenge our industry faces in the new millennium: reaching out to new consumers and offering them a service which they want and which they can afford. I believe it can be done. 1910 20 30 40 50 60 70 80 90 2000 10 1990 2000 2010 Source: ITU, “World Telecommunication Development Report: Mobile Cellular” 1999.

Recent trends: Number of new connections added per year to the global network (in millions) 172 Mobile Fixed 100 63 52 52 48 50 50 45 39 35 32 26 28 21 11 5 7 1991 1992 1993 1994 1995 1996 1997 1998 1999 Source: ITU, “World Telecommunication Development Report: Mobile Cellular” 1999.

Example 1: Cambodia Mobile Fixed Rank 205 203 203 197 191 Telephone 0.57 Telephone 183 density rank 0.32 174 0.22 0.15 0.09 0.23 0.18 0.05 0.08 0.04 0.04 0.05 0.05 1992 93 94 95 96 97 98 Source: ITU, “World Telecommunication Development Report: Mobile Cellular” 1999.

Example 2: Finland 80 70 60 50 40 30 20 10 Fixed Mobile 91 92 93 94 95 91 92 93 94 95 96 97 98 99 Source: ITU, “Mobile/Fixed Interconnect: Finland case study”

Example 3: Uganda

What happens next? Universal service/access Traditional universal service Availability, Accessibility, Affordability [of fixed-line service] Funding via [hidden] tariff subsidies or [transparent] universal services fund/agency “Post-Mobile” universal service Mobile may well be cheapest & most effective way of reaching the “unphoned” Pre-paid is becoming dominant paradigm for low-cost access Geographical coverage is key issue Persistence of subsidy-based funding mechanisms may hinder market development

Access in Finland fixed only both mobile only no telephone 100 90 80 70 60 % OF HOUSEHOLDS 50 40 30 20 10 12.96 1.97 2.97 3.97 4.97 5.97 6.97 7.97 8.97 9.97 10.97 11.97 12.97 1.98 2.98 3.98 4.98 5.98 6.98 7.98 8.98 9.98 10.98 11.98 12.98 1.99 2.99 3.99 4.99 5.99 6.99 7.99 8.99 9.99 10.99 11.99 12.99 1.00 2.00 3.00 Source: ITU, “Mobile/Fixed Interconnect: Finland case study”

What happens next? Implications for IP world Traditional Internet Access from dial-up and leased line connections Content providers receive no direct compensation from carriage providers “Post Mobile” Internet 3G mobile licences are proving very valuable (around US$40 billion bid for UK licences) Future Internet devices may be: Access from 3G mobile-ready devices, purchased off-the shelf, which automatically log-on to nearest mobile ISP [Some] Content providers receive share of per-minute access charges Location-specific services