The Review of the Universal Service Fund System - … · The Review of the Universal Service Fund...
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1 The Review of the Universal Service Fund System Tariff Division, Telecommunications Business Department, Telecommunications Bureau, Ministry of Internal Affairs and Communications November 2005
Transcript of The Review of the Universal Service Fund System - … · The Review of the Universal Service Fund...
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The Review of the Universal Service Fund System
Tariff Division, Telecommunications Business Department,Telecommunications Bureau,
Ministry of Internal Affairs and Communications
November 2005
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Outline of Presentation
Current SystemBackground to the ReviewSummary to the Review
Scope of Universal Service Cost Calculation MethodologyContribution Methodology
Current SystemBackground Summary
Scope Costing Contributions
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Current System
Current SystemBackground Summary
Scope Costing Contributions
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The current system was introduced in June 2002.
Universal Service: Should ensure the provision of telecommunications services nationwide which are indispensable for people's daily lives.
（”Universal services” are stipulated in the applicable ministerial ordinance of the MIC.）
The telecommunication carriers shall make efforts to provide such services appropriately, impartially and stably.
Scope of Universal Service：Subscriber telephone services
（Subscriber line access, local calls, calls to remote islands under special tariff, emergency calls）
Type 1 public telephone services （Local calls, calls to remote islands under special tariff, emergency calls)
Current SystemCurrent System
5Current System
Revenue-Cost Methodology (Offset type)
Profit
Loss
Surpluses in profitable areas cannot cover losses in unprofitable areas therefore
support provided.
Revenue
Cost
↑revenue/cost per lineFor NTT East/West
Number of subscriber lines →
Carriers make contributions based on the amount of related revenue
After the USF system was introduced in June 2002, the fund has not been act ivated yet since there have been n o d e f i c i t s i n t h e un iversa l serv ices.
After the USF system was introduced in June 2002, the fund has not been act ivated yet since there have been n o d e f i c i t s i n t h e un iversa l serv ices.
Current System
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Background to the Review
Current SystemBackground Summary
Scope Costing Contributions
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Promoting competition throughout voice servicesThe penetration of mobile phones has exceeded that of fixed telephones. The rapid penetration of IP telephony.
Further competition in subscriber telephone services
Start of "dry Copper dedicated line" services
Transfer NTS cost to the basic fee cost
Background to the ReviewBackground to the Review
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2,691
3,825
4,731
5,9616,0776,133 6,022
5,456 5,6365,781 5,907 6,028 6,164
6,263 6,285 6,263 6,2236,196
5,1635,1595,1165,1005,226
5,8566,0456,153
5,245
5,453 5,627 5,7655,883 5,994 6,111
5,555
9,1478,6658,112
7,482
6,678
5,685
49 87 138 171 213433
1,170
1,951
943
1,541
8522387
527.6830.5
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
End of FY89 End of FY90 End of FY91 End of FY92 End of FY93 End of FY94 End of FY95 End of FY96 End of FY97 End of FY98 End of FY99 End of FY00 End of FY01 End of FY02 End of FY03 End of FY04
Fixed te lephone (Subscriber te lephone +ISDN)Subscriber te lephone
Mobile te lephone (cell phones + PHS)
Num ber of high speed/ultra high speedInternet subscribersIP te lephony
（Unit: 10,000 subscriptions)
(DSL+ CATV+FTTH+Wireless）
（preliminary figures）
（preliminary figures）
The number of subscribers to mobile and subscriber phones
reversedSubscriber line: 55,550,000Mobile phones: 56,850,000
（March 2000)
The number of subscribers to fixed lines and mobile phones
reversedFixed: 62,190,000Mobile: 6,,820,000（November 2000)
Transition of subscribers with respect to fixed telephone, mobile phones and broadband services
Competition throughout voice services (1) Background to the Review
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0
1,000
2,000
3,000
4,000
5,000
6,000
H10 H11 H12 H13 H14 H15 H16
fixed phonesmobile phones
H10 H11 H12 H13 H14 H15
mobile phones 836 1,135 1,453 1,631 1,752 1,884
7.5％
3,315
-17.0％
1,825
Compared to prev. FY － 35.8％ 28.0％ 12.3％ 7.4％ -3.1％
H16
fixed phones 4,575 5,016 5,573 4,935 3,995 2,836 Compared to prev. FY － 9.6％ 11.1％ -11.4％ -19.0％ -14.5％
（1 mil. hours）Transition in Traffic
Background to the Review Competition throughout voice services (2)
（FY04 are preliminary figures)
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NCC also has facilities that have equivalent functions to NTT East/West facilities
Dry copper
Company A
RT
NTT GC station
MDF
Subscriber’s port
ZC
GC
NTT East/West
Router
IP network
Company B
NGW
Dry copper
ZC
GC
Further competition in subscriber telephone services Background to the Review
Start of "dry Copper dedicated line" services
11Transfer NTS cost to the basic fee costBackground to the Review
IC carriers
Telephone poles
MDFconduit
(GC station)
(ZC station)
POI GC
ZCPOI
Feeder ＲＴ Subscriber’s port (SLIC)
Basic fee costs Call charge/connection charge
NTS cost
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Scope of Universal ServiceCost Calculation MethodologyContributions Methodology
Current SystemBackground Overview
Scope Costing Contributions
Summary of the Review
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Scope of Universal Service
Current SystemBackground Overview
Scope Costing Contributions
14Scope of Universal Service
Subscriber telephone services（Subscriber line access, special calls to remote islands,
emergency calls)
Type 1 public telephone services （local calls, calls to remote islands under special tariff, emergency calls)
(Services NOT supported by the fund…)
□ Local calls: - Promoted competition among carriers after carrier pre-selection (“My Line”)introduced.
□ Mobile phones: - Improvement of Networks through the competition among carriers - Rates are relatively high (almost double that of fixed phone call rate) - Requires huge capital investment to cover entire area
□ Broadband Services: - Improvement of Networks through competition among carriers - Still in the process of penetration although accessible household are increasing
Scope of Universal Services
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Current SystemBackground Overview
Scope Costing Contributions
Cost Calculation Methodology
16Issues facing current system of cost calculation methodology
Costs might increase as NTT East/West price fall
If 300 billion yen of NTS cost is transferred to the basic fee cost, it is possible that NTT East/West will incur a deficit regardless of the area. However, all losses can be covered by the fund.
Costing
17Issues facing current system of cost calculation methodology
Revenue
Cost
↑Revenue/cost per line
by NTT East/West
loss
profit
Number of subscriber lines→
Costing
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Subject of cost calculation：Support differences between the national average costs and the costs incurring from subscriber lines (4.9%). The threshold of the calculation will be 2 standard deviation above average cost of NTT East/West subscriber lines.
Cost calculation methodology：Use a Long Run Incremental Cost model to eliminate the inefficiencies of NTT East/West
Estimates for support payment：FY05 11 billion to 17 billion yen FY06 19.5 billion to 27.5 billion yen FY07 28 billion to 38 billion yen
Costing New Methodology for Cost Calculation
19New Cost Calculation Methodology
Revenue Basis
Benchmark Method
Telephone Number Basis
Earning Cost Method (Offset type)
Black
Red
Surpluses in profitable areas cannot cover losses in unprofitable areas
therefore support provided.
○ Promoted competition in urban areas ⇒Decrease of revenue caused by price reductions
○ Transfer of NTS costs ⇒Increase the cost
Changes in circumstances surroundingTelecommunication Business
Support the cost of “High Cost” area
revenue
cost
average costs
cost
4.9％
↑Costs per line for NTT East/West
Number of subscriber lines → Number of subscriber lines →
↑revenue/costs per line
For NTT East/West
Costing
20Analysis of the Historical Cost by NTT East/West
Subscriber density vs cost per line Cost per line vs number of lines
Costing
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
0 10,000 20,000 30,000 40,000 50,000 60,000
加入者密度[加入/km2]
回線
あたり費用
[円/月]
Cos
t per
line
[yen
/mon
th]
Subscriber density [subscribers/km2]
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000
加入者密度[加入/km2]
回線
あたり費用
[円/月
]C
ost p
er li
ne [y
en/m
onth
]
Subscriber density [subscribers/km2]
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000
回線あたり費用[円/月]
加入
者回
線数
対数平均：2,287円/月
対数平均+1σ：3,055円/月
対数平均+2σ：4,080円/月Num
ber o
f sub
scrib
er li
nes
Cost per line [yen/month]
Logarithmic mean: 2,287yen/month
Logarithmic mean + 1σ: 3,055yen/month
Logarithmic mean + 2σ: 4,080yen/month
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非高コスト地域高コスト地域非高コスト地域高コスト地域
Cost of Lines by AreasCosting
Areas relatively inexpensiveAreas relatively expensive
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Current SystemBackground Summary
Scope Costing Contributions
Contribution Methodology
23Contribution Methodology
Current system Beneficiary-pay principle Contribution basis: related revenues of telecommunications carriers
Issues in Current system Difficulty in grasping the related revenues accurately Requires huge outlay (ex. System renovation) to fully understandthe related revenues
New method: based on usage of telecommunications numbers
Contributions decided based on usage of telecommunications numbers allocated to each carrier.
Contributions
24Special Consideration and Information Disclosure to Users
Scale of carriers contribution and upper limit of contributions
Receive contributions only from telecommunication carriers that have profits exceeding 1 billion yen The amount of contribution should not exceed 3% of telecommunications revenue
Information Disclosure to Users The contributions of carriers will ultimately be covered by userrevenueIt is preferable to indicate that the contributions are being conducted properly by having the carriers disclose information to users concerning their contributions to the fund
Contributions
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Thank you for your attention.
