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- 1 - Paramaribo, May 2004 Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra Torres by Roberto Baltra Torres Head of Economic Regulation Head of Economic Regulation GOVERNMENT OF CHILE Ministry of Transport and Telecommunications Under-Secretariat of Telecommunications
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Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

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Page 1: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 1 -

Paramaribo, May 2004Paramaribo, May 2004

Regulation of interconnection tariffs –Access charges

Mobile tariff process in Chile

by Roberto Baltra Torresby Roberto Baltra TorresHead of Economic RegulationHead of Economic Regulation

GOVERNMENT OF CHILE

Ministry of Transport andTelecommunications

Under-Secretariat of Telecommunications

Page 2: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 2 -

• Tariff freedom (general rule)• Obligatory services under law (Articles 24bis and

25)– Services provided by public and intermediary

service licensees via interconnections. Metering, billing, charging and collectionservices supplied to carriers by public servicelicensees (Supreme Decree No. 95 of 1994)

– Tariffs for the services provided viainterconnections enable licensees to cover thecost of use of their networks.

TariffTariff regulationregulation: : Normative aspectsNormative aspects

Page 3: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 3 -

• Principal services regulated in the context ofpublic mobile telephony service licensees are:– Interconnection at network termination points– Access to other telecommunication service

licensees– Administrative functions (metering, charging,

billing, collection, account management).

TariffTariff regulationregulation: : Normative aspectsNormative aspects

Page 4: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 4 -

• Fundamental principles of tariff-setting:– Tariffs charged to users reflect costs.– Guarantees the absence of cross-subsidization between

services and tariff areas.– Use of the efficient enterprise model generates

incentives so that the real licensee introduces technological improvements in its network and regulatedservices, thereby increasing their efficiency.

– The tariff-setting process enables any efficiency gainsachieved by the company as a result of improved management and technological development to be passed on to the consumer.

TariffTariff regulationregulation: : ContentContent

Page 5: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 5 -

• Efficient enterprise (Act 18.168 Articles 30A and 30F):– Provides only regulated services– Only essential service provision costs– Using available technology– Maintaining quality– Determining costs of each service: investment

and operation including capital costs– Invisibility and non-regulated services: only a

portion of the costs is used, in accordance withthe proportion of the assets used.

TariffTariff regulationregulation: : ContentContent

Page 6: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 6 -

• Incremental development cost (IDC)(Article 30)– General rule: marginal cost pricing

– Expansion plans for each service by tariff area– The IDC is obtained for each expansion plan

– Exception: long-run marginal cost– In the absence of expansion plans

• Long-run total cost (LTYC) (Article 30C)– Project for replenishment of the efficient

company’s assets– Mean volume of provision of the various services.

TariffTariff regulationregulation: : ContentContent

Page 7: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 7 -

• Efficient tariffs (Article 30E)– Generate revenue equivalent to IDC (marginal cost).– In case of more than one regulated service in a tariff

area, equal marginal profits.– If expansion project provides non-regulated services:

only part of IDC is used, in line with proportion of assets used.

• Final tariffs (Article 30F)– If, and only if, there are economies of scale.– Efficient tariffs are increased until the long-run total cost

(LRTC) is reached.– Minimize introduction of inefficiencies.– If efficient company provides non-regulated services:

only part of LRTC is used, in line with proportion of assets used.

TariffTariff regulationregulation: : ContentContent

Page 8: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 8 -

• Rate of capital cost (Article 30B)– Risk-free rate of return– Systematic risk of company– Risk premium– Rate of capital cost = 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 efficient company.

TariffTariff regulationregulation: : ContentContent

Page 9: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 9 -

Proposal forTEBs

Drawing up of techno-economic

bases(TEBs)

Drawing up of techno-economic

bases(TEBs)

Licensee

Revision and elaboration of

disputed issues

Revision and elaboration of

disputed issues

Referral of preliminary TEBs

Licensee

Revision and elaboration of

preliminary TEBs

Revision and elaboration of

preliminary TEBs

Subtel

Opinions

Registeredthird

parties

Registeredthird

parties

Notificationregistrationparticipants

Notificationregistrationparticipants

Draft TEBs

ProcedureProcedure: : TechnoTechno--economiceconomic bases (bases (TEBsTEBs))

Page 10: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 10 -

Revision andelaboration of

disputed issues

Revision andelaboration of

disputed issues

Opinion

Dossier

Committeeof Experts

(CoE)

Committeeof Experts

(CoE)

Licensee

If necessary refers disputed issues to

Committee of Experts (CoE)

Analysis andresolution of final

TEBs

Analysis andresolution of final

TEBs

Subtel

Notifies finalTEBs

Initiates tariffstudy

Initiates tariffstudy

Licensee

ProcedureProcedure: : TechnoTechno--economic economic bases (bases (TEBsTEBs))

Page 11: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 11 -

Tariff proposal

Revision oftariff study

Revision oftariff study

Ministries

Elaboration oftariff study

Elaboration oftariff study

Licensee

Resubmissionreport

Report on objectionsand counter-proposals

Opinion

Dossier

Committeeof

Experts

Committeeof

Experts

Finaldecision

Finaldecision

Incorporatesor resubmits

Incorporatesor resubmits

Licensee

Ministries

OpinionsRegisteredthird

parties

Registeredthird

parties

ProcedureProcedure: : TariffTariff--settingsetting

Page 12: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 12 -

Endorsmentreport

FinaldecisionFinal

decision

ReviewReview

Elaboration and signature tariff decree

Elaboration and signature tariff decree

Tariff decree

Consultations

DossierOffice of the Controller General of the Republic

Publication of tariffdecree

Publication of tariffdecree

Official journal

Possibleobjections

Ministries

Ministries

Clarificationsrelating to tariff

process

Clarificationsrelating to tariff

process

Ministries

Processing oftariff decree

ProcedureProcedure: : TariffTariff--settingsetting

Page 13: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 13 -

-380

(20) 20 5 5 30

(Subtel requiresTEB proposal

for newlicensees)

-360

Presentation of TEB

proposal

0 20 25 30 70

-340 -290

PreliminaryTEBs

Submission ofdisputed issues and recourse to Committee of Experts (CoE)

Subtel calls on CoE

CoE report

3 5 2

80

Request forclarifications

CoE clarification

report

Final TEBs

90

180

-180

Presentation oftariff study

120

300

-60

Report on objectionsand counter-

proposals

30

Report containing amendments and

resubmissions

-30 0

330 360

30

Endorsment report and tariff

decree

Presentation oftariff study

-180

CoE report

Registration of participants

5

-365

Comments fromparticipants

-355

15

Opinions on tariff study

10 10

30

-180

210

5

Formation of CoE

Notification of start of process

Draft TEBs

10

40

Formation and

swearing-in of CoE

-270

Notification of start oftariff study

ProcedureProcedure: : Tariff processTariff process

Page 14: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 14 -

ChileanChilean marketmarket: : Previous situationPrevious situation

Page 15: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 15 -

ChileanChilean marketmarket: : Mobile subscribersMobile subscribers

Evolución Telefonía Móvil: Abonados Móviles y Penetración (1990- Marzo 2003)

0,1 0,3 0,5 0,6 0,8 1,4 2,2 2,8

6,5

15,0

22,2

34,0

42,641,1

-

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

7.000.000

8.000.000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Mar-03

-3,0

2,0

7,0

12,0

17,0

22,0

27,0

32,0

37,0

42,0

47,0

Telefonía Móvil Penetración

Trends in mobile telephony: mobile subscribers and penetration(1990 – March 2003)

Mobile telephony Penetration

Page 16: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 16 -MobileMobile subscriberssubscribers: : Prepayment Prepayment vs. vs. contractcontract

Evolución de Abonados Móviles según Plan Comercial

(Enero 1999 - Junio 2002)

0500.000

1.000.0001.500.0002.000.0002.500.0003.000.0003.500.0004.000.0004.500.0005.000.000

Ene-

99

Abr-9

9

Jul-9

9

Oct-9

9

Ene-

00

Abr-0

0

Jul-0

0

Oct-0

0

Ene-

01

Abr-0

1

Jul-0

1

Oct-0

1

Ene-

02

Abr-0

2

Contrato Prepago

Trends in numbers of mobile subscribers according to commercial plan

(January 1999 – June 2002)

Jan 9

9

Apr

99

Jul 99

Oct

99

Jan 0

0

Apr

00

Jul 00

Oct

00

Jan 0

1

Apr

01

Jul 01

Oct

01

Jan 0

2

Contract Prepayment

Apr

99

Apr

02

Page 17: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 17 -

LinesLines in in service service vs. vs. mobile subscribersmobile subscribers

Lineas en Servicio vs Abonados Móviles(Enero 2000 - Junio 2002)

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

Ene-00 Abr-00 Jul-00 Oct-00 Ene-01 Abr-01 Jul-01 Oct-01 Ene-02 Abr-02

Líneas en ServicioAbonados Móviles

Lines in service vs. mobile subscribers

(January 2000 – June 2002

Lines in service

Mobile subscribers

Jan 00 Apr 00 Jul 00 Oct 00 Jan 01 Apr 01 Jul 01 Oct 01 Jan 02 Apr 02

Page 18: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 18 -

Monthly traffic per mobile subscriberMonthly traffic per mobile subscriber

Tráfico Promedio Mensual (generado) por Abonado Móvil 1/ (Minutos Efectivos)

Tipo de Tráfico Primer Trimestre 2003 (p) Primer Trimestre 2002 Variación (%) Móvil - Móvil 43,0 44,8 -4,1% Móvil - Fijo (S) 17,3 19,8 -12,3% Móvil LDI Salida 0,2 0,2 -9,0% Móvil Internet 0,0 0,0 — Móvil SSCC Salida 1,3 1,6 -19,1% Total 62 66 -6,8%

SUBTEL, sobre la base de información proporcionada por las compañías móviles y portadores.(p) Cifras preliminares.áfico promedio por abonado al mes se elaboró como el promedio de la relación de tráfico/número de abonados mensual, loes equivalente a la división entre el tráfico anual y el número de abonados a fines de cada año.

Average monthly traffic (generated) per mobile subscriber 1/

(actual minutes)

Type of traffic First wuarter 2003 (p) First quarter 2002 Variation (%)

Mobile-mobile 43.0 44.8 –4.1%Mobile-fixed 17.3 19.8 –12.3%Mobile LDI outgoing 0.2 0.2 –9.0%Mobile Internet 0.0 0.0 –Mobile supplementaryservices outgoing 1.3 1.6 –19.1%Total 62 66 –6.8%

First quarter 2003 (p) First quarter 2002 Variation (%)

SUBTEL, based on information supplied by mobile operators and carriers. P) Preliminary figuresAverage traffic per subscriber per month was calculated as the average of the ratio of traffic subscriber numbers per month equivalent to the division between annual traffic and the number of subscribers at the end of the year.

Page 19: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 19 -

Composition of traffic carriedComposition of traffic carried

Composición del Tráfico cursado a través de la Redes de Telefonía Móvil (Primer Trimestre 2003)

Remainder1.3%

Fixed-mobile24.4%

Mobile CCSS (incoming + outgoing)

1.9%

Mobile-mobile51.5%

Mobile-Fixed (outgoing)20.8%

Composition of traffic carried on mobile networks

(First quarter 2003)

Page 20: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 20 -

Access Access chargescharges: : Previous situationPrevious situation

Cargo de Acceso, no incluye IVA(vigentes a Octubre de 2003)

120,9 120,9 120,9 120,9 120,9

84,6 84,6 84,6 84,6 84,6

0,0

40,0

80,0

120,0

160,0

200,0

Telefónica Móvil Bellsouth Entel PCS Móvil PCS Smartcom

($/m

inut

o)

Horario Normal Horario Reducido

Access charges (excluding VAT)(as at October 2003)

Standard charging period

Reduced-rate charging period

(USD

/min

ute)

Page 21: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 21 -

Tariff modelTariff model

Page 22: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 22 -

OverviewOverview

Projection ofdemand

Technicalservicecosts

(service routingfactors)

Networkdesign

Cost ofregulatedservices

Economiccost

Administrativecosts

Accesscharges

Geographicalcoverage

Page 23: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 23 -

0

2.000

4.000

6.000

8.000

10.000

12.000

1985 1990 1995 2000 2005 2010

Años

Mile

s d

e A

bo

nad

os

RealProyectado

Projection of demandProjection of demand: : SS--curvescurves

Subs

crib

ers

(tho

usan

ds)

Years

Actual

Projected

Page 24: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 24 -

Geographic segmentation of demandGeographic segmentation of demand

Current position

Current position

Currentposition

Networkdesign

Page 25: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 25 -

Technical costsTechnical costs: : Routing factorsRouting factors

Economic costper component

NPV=0

Servicerouting factors

Cost of regulatedservices

Oth

er o

per

ato

rs->

mob

ile

etc.

Services

Assets3-sector macro

BSC

NTP interconnecion

MSC/VLR

etc.

1

Mob

ile -

> M

obile

Ow

n n

etw

ork

21

1

50

2

0

70

Accesscharges

Page 26: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 26 -

• Design “inputs”: area, traffic, number of subscribers

• Only voice services (not data). Monthly traffic is calculated and peak-time traffic is projected

• The real network is not designed; on the basis of performance parameters, the requirements for each item of equipment are calculated

• GSM and possibly CDMA is used• Use of “routing factors”• Design for each year of forecast period

Network designNetwork design: : Main considerationsMain considerations

Page 27: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 27 -

BTS BSC MSC

Microcell

Macrocellsite

Transmission BTS - BSC

Transmission BSC-MSC

HLR

Transmission MSC - Others

Designparameters

Coverage

Demand

Totalnetwork

Given: quality ofservice

Given: spectrum, HC traffic, bandwidths, re-use: No. of sectors

Network designNetwork design: : Coverage and capacityCoverage and capacity

Coveragenetwork

Trafficnetwork

Page 28: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 28 -

Four types of area

Urban

Metropolitan

Highway

Rural

Four types of BTS

MacrocellOmni

2-sectormacrocells

3-sector macrocells

Microcell

Network designNetwork design: : Area and cell typesArea and cell types

Page 29: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 29 -

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Area

Pop

ulat

ion

Met

rop

olit

an

Urb

an Rural and highways

Network designNetwork design: : Coverage requirementsCoverage requirements

Page 30: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 30 -

• Many network design calculations are based on the following equation:• Number of components required = Demand/

(Capacity per component * use)• Use is a parameter for reflecting the

combination of various effects of decreasing use:• Maximum design use: this usage parameter

ensures that network equipment is not overloaded by any change in demand, e.g. some types of equipment are recommended to be used at no more than 90% of their capacity.

Network designNetwork design: : Coverage equipmentCoverage equipment

Page 31: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 31 -

• Use is a parameter for reflecting the combination of various effects of decreasing use (continued):– Use as a function of reasonable growth: in a real

mobile network, development of the network is in response to expected demand (months to years), depending on the modularity of the equipment and the time taken to make all preparations for getting the new equipment online.

• Takes account of non-homogeneous features of traffic.

Network designNetwork design: : Coverage equipmentCoverage equipment

Page 32: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 32 -

• Current use:• Current use = Normal use * (xt/xt+p)

• Normal use = Design use *Scorched node use * growth

t t+p Time

Dem

and

xt

xt+p

Network designNetwork design: : Network component growthNetwork component growth

Page 33: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 33 -

Number of BTSNumber of BSCper primary zone

Optimizationmodel

MSC numberand location

Network designNetwork design: : Optimization modelOptimization model

Page 34: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 34 -

• General layout

Input information

Demand projection

Switching costs

Link costs

Switch location model

Model Output

- Switches:

- Quantity

- Capacity

- Link capacity

Optimum design

Network designNetwork design: : Switch location modelSwitch location model

Page 35: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 35 -

BTS BSC MSC

Min {Costs (Inv+Op)}

s.a.- Meeting of demand

- Conservation of flow

- Capacities

- Switches

- Links

Network designNetwork design: : Switch location modelSwitch location model

Page 36: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 36 -

DatabaseCosts December

2002

Cost trendsover time

Usefullifetime

Cost ofnetwork

componentsCAPEXOPEX

Administrativecosts

Operacionalstaff costsNetwork

design

Demandprojection

Economiccost by

component

NPV=0

TariffTariff calculationcalculation: : Economic costEconomic cost

Page 37: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 37 -

This is a tool for stimulating the impact of a change in access charges on the various tariffs

To do this, it finds out the new financial equilibrium of the enterprise

Demand equilibriumDemand equilibrium: : General descriptionGeneral description

Page 38: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 38 -

Elasticities Unit

SUBTELRecommended

value

Equipment price ηA-0.56

Mobile-fixed price η mf -0.49

Mobile-mobile (own network) price ηmmp-0.49

Mobile-mobile (other operators) price ηmmo-0.49

Fixed-to-mobile price ηfm-0.40

Crossed APP ηAP-0.03

Demand equilibriumDemand equilibrium: : Values usedValues used

Page 39: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 39 -

Change in access charge

Change in revenue

Recover revenue to maintain financial equilibrium

Via equipment subsidies

Via new tariffsVia traffic

Change in demand

Demand equilibriumDemand equilibrium: : Functional descriptionFunctional description

Page 40: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 40 -

• Delta revenue

( )0 1 0oo mIN CA CA F −∆ = − ⋅

• Recovery by flows

( )11 1 0

oo m oo mR CA F F− −∆ = ⋅ −

• Recovery by subsidies

( ) ( ) AAAAAA DSCDSCR 00112 ⋅−−⋅−=∆

• Recovery by prices

( ) ( )31 1 0 0

1 1 0 0

1 1 0 0

mf tf mf mf tf mf

mmo mmo mmo mmo

mmp mmp mmp mmp

R P C F P C F

P F P F

P F P F

∆ = − ⋅ − − ⋅

+ ⋅ − ⋅

+ ⋅ − ⋅

Demand equilibriumDemand equilibrium: : Detailed descriptionDetailed description

Page 41: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 41 -

• Flows

1 01 0

0

1

mfmf mf

mf mfmf

P PF F

P

η −

= ⋅ +

0 11 0

0

1

mmommo mmo

mmo mmommo

P PF F

P

η −

= ⋅ +

0 11 0

0

1

mmpmmp mmp

mmp mmpmmp

P PF F

P

η −

= ⋅ +

DemandDemand equilibriumequilibrium: : Detailed descriptionDetailed description

Page 42: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 42 -

• Subscribers

0 1 1 0 1 0 1 01 0

0 0 0 0

1 1 1 1

A Ap Ap Ap

A A mf mf mmo mmo mmp mmpA A

A A mf mmo mmp

S S P P P P P PD D

C S P P P

η η η η − − − −= ⋅ + + + + −

• Financial balance equation

321 RRRIN ∆+∆+∆=∆

Demand equilibriumDemand equilibrium: : Detailed descriptionDetailed description

Page 43: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 43 -

( ) ( ) ( )( ) ( ) ( )

( )( ) Ammpmmpmmp

mmommommo

mftfmfmftf

AAAAA

FP,F

FP,F

FCP,FC

DSC,,,DCRIN

0001

001

001

0011

⋅−⋅+

⋅−⋅+

⋅−−⋅−+

⋅−−⋅−=∆−∆

A1

mmp1

mmp1

A1

mmo1

mmo1

A1

mf1

mf1

mmp1

mmo1

mf1

A1

A1

SPP

SPP

SPP

PPPSS

Demand equilibriumDemand equilibrium: : Financial balanceFinancial balance

Page 44: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 44 -

( )

2 2 2 2

1 0 1 0 1 0 1 0

0 0 0 0

1

. .

0 : Ecuación de balance financiero

mf mf mmo mmo mmp mmp

mf mmo mmp

p p p p p p s sMin

p p p s

s a

F p

− − − − + + +

=r

1 1 1 1 1, , ,mf mmo mmpp p p p s = r

Initial disruption of systemPrices based on self-financing for each service

Demand equilibriumDemand equilibrium: : Financial balanceFinancial balance

Financial balance equation

r

r

Page 45: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 45 -

OutputsOutputs: : Tariff decreesTariff decrees

Page 46: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

- 46 -

Comparison of Comparison of time time bandsbands

46

Current time structure

Time band Workingdays Saturdays

Sundaysand holidays

00:00 - 08:59 Reduced rate Reduced rate Reduced rate

09:00 - 13:59 Standard rate Standard rate Reduced rate

14:00 - 19:59 Standard rate Reduced rate Reduced rate

20:00 - 23:59 Reduced rate Reduced rate Reduced rate

Proposed time structure

Time band Workingdays Saturdays

Sundaysand holidays

00:00 - 07:59 Night rate Night rate Night rate

08:00 - 13.59 standard rate Standard rate Reduced rate

14:00 - 19:59 standard rate Reduced rate Reduced rate

20:00 - 23:59 Reduced rate Reduced rate Reduced rate

Traffic distribution:

Standard rate : 61.4%

Reduced rate : 33.5%

Night rate : 5.1%

Traffic distribution:

Standard rate : 57.9%

Reduced rate : 42.1%

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Estructura Horaria Cargo de Acceso ($/min)

120.3

87.184.2

65.3

43.5

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Former scheme Tariff decrees 2004-2009

Standard rate

Reduced rate

Night rate

Access Access chargescharges: : New pricesNew prices

Access charge by time band (USD/min)

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- 48 -

Access Access chargescharges: : Falling pricesFalling prices

Cargo de Acceso 2004-2008 ($/min)

72,70

105,10105,10

76,4678,8080,0080,40

50,00

60,00

70,00

80,00

90,00

100,00

110,00

0 1 2 3 4 5 6

Access charges 2004-2008 (USD/min)

Page 49: Regulation of interconnection tariffs – Access … 1 - Paramaribo, May 2004 Regulation of interconnection tariffs – Access charges Mobile tariff process in Chile by Roberto Baltra

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Paramaribo, May 2004Paramaribo, May 2004

ENDRegulation of interconnection tariffs –

Access charges for mobile tariffs in Chile

by Roberto Baltra Torresby Roberto Baltra TorresHead of Economic RegulationHead of Economic Regulation

GOVERNMENT OF CHILEMINISTRY OF TRANSPORT AND TELECOMMUNICATIONS

UNDER-SECRETARIAT OF TELECOMMUNICATIONS