1. TELECOMMUNICATIONS INDUSTRY IN THE DEVELOPING NATIONS: PROBLEMS AND ISSUES CHRISTIAN NICOLAI Undersecretary of Telecommunications CHILE International Telecommunications Society 15th Biennial Conference September 4-7, 2004 BERLIN, GERMANY

2. Christian Nicolai2 PROBLEMS AND ISSUES Increase the coverage of the network Fostering the introduction of new services Better services and lower costs for users Conditions for investment Keep the world class platform for business Avoid populist pressures Avoid investors negotiation attempts

3. Christian Nicolai3 CHILEAN TELECOMMUNICATIONS

4. Christian Nicolai4 CHILEAN TELECOMMUNICATIONS

5. Christian Nicolai5 CHILEAN TELECOMMUNICATIONS

6. Christian Nicolai6 PROBLEM D1D1 S1S1 Q1Q1 P1P1

7. Christian Nicolai7 PROBLEM D1D1 D2D2 S1S1 Q1Q1 Q1Q1 P1P1 P1P1

8. Christian Nicolai8 PROBLEM D1D1 S1S1 S2S2 Q1Q1 Q2Q2 P1P1 P2P2

9. Christian Nicolai9 PROBLEM D1D1 D2D2 S1S1 S2S2 Q1Q1 Q2Q2 Q1Q1 Q2Q2 P1P1 P2P2 P1P1 P2P2

10. Christian Nicolai10 POSSIBLE APPROACHES DEMAND: –Increase of Personal Income –Change in Income Distribution –Subsidies –Change in Consumption Pattern (Placement or Relative Prices) SUPPLY: –Decrease in Costs: Technologies, QoS, Bundling –Subsidies MARKET: –Look at the market and let the river flow (Regulation)

11. Christian Nicolai11 POSSIBLE APPROACHES DEMAND: –Increase of Personal Income –Change in Income Distribution –Subsidies –Change in Consumption Pattern (Placement or Relative Prices) SUPPLY: –Decrease in Costs: Technologies, QoS, Bundling –Subsidies MARKET: –Look at the market and let the river flow (Regulation)

12. Christian Nicolai12 POSSIBLE APPROACHES DEMAND: –Increase of Personal Income –Change in Income Distribution –Subsidies –Change in Consumption Pattern (Placement or Relative Prices) SUPPLY: –Decrease in Costs: Technologies, QoS, Bundling –Subsidies MARKET: –Look at the market and let the river flow (Regulation)

13. Christian Nicolai13 WHAT DO WE HAVE DONE IN CHILE SUBSIDIES: –1994 The FDT (Telecommunications Development Fund) was created. –Objective: to subsidy public telephone projects with social return in rural and low income urban areas. It allows the companies to extend the network to residential or business lines (without subsidies). –At 2000 the goal was achieved: more than 6.000 public rural telephones were installed, with 2.2 millions people been reached by public phones. –Leverage: US$ 7.5 private per US$ 1 from state.

14. Christian Nicolai14 WHAT DO WE HAVE DONE IN CHILE SUBSIDIES: –2001 the law was changed in order to develop public access to Internet and other telecommunication services. –2002 first and second processes that achieve 291 municipalities of 341. –Next step: connection for rural schools in a joint effort with the Education Ministry –This year the process started in August 16 and should cover 400 to 600 rural schools with broadband access to Internet

15. Christian Nicolai15 WHAT DO WE HAVE DONE IN CHILE CHANGE IN CONSUMPTION PATTERN: –Moving to a digital culture –Digital Agenda for 2010. 2004-2006 Action Plan (34 Initiatives) –Education: “Enlaces” and “www.educarchile.cl” for students and teachers –ICDL certification: 40.000 –Digital Literacy: 320.000 people in the year 2004 and 500.000 in 2005 –E- Government: 170 on-line transactions (G to C) (goal is 300 in the period)

16. Christian Nicolai16 WHAT DO WE HAVE DONE IN CHILE

17. Christian Nicolai17 WHAT DO WE HAVE DONE IN CHILE LOWERING COSTS: –Commercial Aperture –Competition –Cost Based Tariffs –Promotion of New Technologies –Promotion of New Services –Pushing the Digital Agenda

18. Christian Nicolai18 WHAT DO WE HAVE DONE IN CHILE SUBSIDIES: –FDT: Telecommunications Development Fund

19. Christian Nicolai19 WHAT DO WE HAVE DONE IN CHILE REGULATION: –General Principle: Except for Interconnection Charges, Prices are Free –Correction of Market Distortion –Regulation of Services instead of Technology –Tariffs based on Efficient Firm Cost Model –Tariffs based on Direct Costs –Regulated Interconnection

20. Christian Nicolai20 WHAT ELSE? LOW PENETRATION: New Technologies Subsidies Services Bundling QoS KEEP THE PACE: New Technologies Competition over Existing Networks

21. Christian Nicolai21 FUTURE ACTIONS UNBUNDLING IP WiFi AND WiMax AND SO ON CONVERGENCE FDT GOVERNMENT ATTITUDE

22. Christian Nicolai22 THANK YOU