1. Global trends in telecom development Tim Kelly (ITU) CTO Annual Council, Gaborone, 20 September 1999 The views expressed in this presentation are those of the author, and do not necessarily reflect the opinions of the ITU or its membership. Tim Kelly can be contacted by e-mail at: Tim.Kelly@itu.int.

2. Global trends in telecom development The state of the industry Fixed-lines Mobile The Internet The state of the market Increasing competition Private sector participation Independent regulation The shape of things to come The changing telecom development gap The industry in 2005 Key policy issues

3. 0 250 500 750 1'000 1'250 1'500 19951996199719981999200020012002200320042005 Subscribers (million) 0 50 100 150 200 250 300 Billions of minutes of intl traffic Fixed main lines Mobile subscribers Total int'l traffic Projection of growth trends, fixed and cellular subscribers and intl traffic, 1995-2005 Source: ITU.

4. Domestic fixed- line revenues, 59.2% International revenues, 8.8% Mobile service revenues, 21.2% Other (incl. Internet, leased lines, telex), 10.6% 1998 Telecom service revenue. Total = US$724b The changing pie: Global telecom service revenue, 1998 Source: ITU World Telecommunication Development Report 1999: Mobile cellular (forthcoming)

5. 0 100 200 300 400 500 600 700 800 900 1000 90919293949596979899000102 Service revenue (US$ bn) ActualProjected Domestic Telephone/fax Int'l Mobile Other: Data, Internet, Leased lines, telex, etc Projection of revenue growth (US$bn) Source: ITU.

6. Internet hosts (million) July 1993-July 1999 Compound Annual Growth Rate = 61.8% Source: ITU Challenges to the Network: Internet for Development, 1999, Network Wizards. 1.8 3.2 8.2 16.7 26.1 36.7 56.2 Jul-93Jul-94Jul-95Jul-96Jul-97Jul-98Jul-99

7. Canada & US 64.1% Europe, 24.3% LAC* 1.2% Africa 0.5% Developing Asia-Pacific 2.9% Other 4.6% Australia, Japan & New Zealand 7.0% Distribution of Internet hosts, January 1998 Source: ITU Challenges to the Network: Internet for development, 1999.

8. The state of the market Increasing competition Around two-thirds of telecom subscribers now have a choice of operator More than 99 per cent of mobile and Internet subscribers now have a choice of operator Dominantly private-ownership 19 out of top 20 top public telecom operators are partially or fully private-owned Of the top 20 mobile operators, 16 are fully- private, 3 are partially private, 1 is state-owned Independent regulators There are currently 84 independent regulators (only 12 in 1990)

9. Degree of competition by service, 1999 (ITU Member States) Source: ITU Telecommunication Regulatory Database. 0% 10% 20% 30% 40% 50% 60% 70% 80% Basic services CellularCable TVISPs MonopolyDuopolyCompetition

10. Degree of competition in basic services, 1999, by region Source: ITU Telecommunication Regulatory Database. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% AfricaAmericasAsia- Pacific Arab States Europe MonopolyDuopolyCompetition

11. 0 10 20 30 40 50 60 70 80 90 100 199519971999200120032005 Local Long distance International Countries Increasing competition: By no. of countries, by service, 1995-2005 Source: ITU Telecommunication Regulatory Database.

12. 35% 46% 74% 85% 1990199519982005 Mono- poly Compe- tition 4142948 Number of countries permitting more than one operator for international telephony Percentage of outgoing international traffic open to competition Note: Analysis is based on WTO Basic Telecommunications Commitments and thus presents a minimum level of traffic likely to be open to competitive service provision. Source: ITU, WTO.

13. Recent privatisation transactions Source: ITU Telecommunication Regulatory Database. Note: Some countries made sales in several tranches (e.g., Spain)

14. Telecom Privatisations in Africa Source: ITU Telecommunication Regulatory Database.

15. 0 20 40 60 80 100 120 140 160 1991199319951999 PrivateState-owned Countries Ownership status of the incumbent Source: ITU Telecommunication Regulatory Database.

16. Separate regulatory bodies, worldwide, 1998 Source: ITU Telecom Regulatory Database.

17. The development gap is shrinking but also shifting The share of the telecom market of Low & Lower-middle income countries: Fixed-lines: 1984 = 13%; 1998 = 27% Mobile: 1990 = 1.4%; 1998 = 12% Internet hosts: 1993 = 0.1%; July 1999 = 1.7% Some LDCs and CIS Republics are falling further behind in fixed-line networks No growth or decline between 1995-98 in Afghanistan, Armenia, Burundi, DPR Congo, Haiti, Kazakhstan, DPR Korea, Kyrgyzstan, Sierra Leone, Somalia, Tajikistan, Uzbekistan, Zambia

18. Source: ITU World Telecommunication Indicators Database. The future is here, its just not evenly distributed William Gibson Teledensity 1996 27.8 to68.3 (46) 8.6 to27.8 (45) 1.4 to8.6 (47) 0 to1.4 (48)

19. Forecasting to 2005 Projecting forward current trends By 2005, there could be: 1.4 billion telephone lines 1.1 billion cellular telephone subscribers 400-500 million Internet users These could account for: 250 billion minutes of intl voice/fax traffic 2.5 trillion minutes of total voice/fax traffic 1000000 Gigabits (1 Petabit) per second of Internet traffic Services market of around US$1.1 trillion Equipment market of around US$400 billion

20. Forecasting to 2005 Identifying discontinuities By 2001, less than 10% of intl traffic will use accounting rate system Domestic interconnect fees will be dominant mode Major price cuts in international calls after 2002/2003 Availability of new infrastructures Impact of Internet pricing model (distance and duration independent) Mobiles exceed fixed-line phones in most OECD countries by 2004/2005 Introduction of third generation mobiles after 2001 Generational shift, as new users reject fixed-lines

21. The intl telecoms market in 2005: Some educated guesses The premium of an international call over a domestic call (currently >300%) will be <20% Internet-like pricing structure Traffic flows will be dictated by a small number of hubs connected to multiple fat pipes Major hubs in New York, London and Hong Kong? Major alliances will own a smaller share of the market as infrastructure owners resell capacity Market significantly bigger by volume, but only slightly bigger by revenue Telecom development gap will shift Gap between middle income countries and LDCs

22. Key policy issues to be tackled Interconnection How to manage the transition to a multi-player environment? Internet Who really sets the rules? Who really gets benefits? International settlements How to transition to a cost-oriented system while providing a soft-landing for developing countries? International infrastructures How to ensure equal access at competitive rates? Investment How to increase investment, esp in LDCs?