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

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.

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

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

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

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

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

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

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

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

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

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.

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

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

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

Thank you !