21/04/2008

Insee

SPPI telecommunication in France 23rd Voorburg Group Meeting Aguascalientes, Mexico 22-26 September 2008 Denis Gac Insee

Definition of the service

› CPA 2008 › › › › 61.1 subsidiary telecommunications services 61.2 wireless telecommunications services 61.3 telecommunications services via satellite 61.9 other telecommunications services › Business to business only Page 2 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Definition of the service

› › On each occasion this may include: The use, maintenance and access to the following transmission systems –Voice –Data –Texts –Sounds –Images › Access to the internet telephone files SMS radio TV Page 3 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Pricing unit of measure

› › › › › › A>

Telephone:

the prices are based on –

The distance of the call

–

The time of the call

–

The length of the call

–

The network coverage of the operator

–

The networking costs

the prices, however, are not individualised "FIXED RATES" system there are a number of different fixed rates Page 4 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Pricing unit of measure

› › › B> data

transmissions

– depend more on the volumes which are transferred – on the speed of the transfer – on the security of the transmissions prices negotiated between operators and clients private prices › › C>

TV and radio transmission

prices negotiated between operators (not very many) and clients (not very many) Page 5 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Market conditions and constraints

– Size of industry (sectoral perspective) Number of companies Turnover (billions €) Persons employed

Telecommunications

Fixed line and mobile telephony Internet service providers Transmission of radio TV programmes Other telecommunication activities

2309

1539 527 103 140

56510

50931 1788 2388 1403

149562 136115 3595 6176 3676

Source: INSEE/ EAES 2005 – This is a very concentrated market: The first 10 companies represent 84% of the turnover, that is almost 44 billion € (2005) Page 6 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Market conditions and constraints

– According to the EAE source (sectoral survey) ‐ Corporate customers ‐ Management customers ‐ Household customers 29.6% 0.3% 70.1% – The proportion of telecoms services is growing in the budget of households 1.4% en 1992 (15 billion €) – 2.4% en 2006 (24 billion €) – The monthly bill per client is growing by 3% a year.

› Page 7 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Market conditions and constraints

Companies represent just 1/3 of the turnover for the sector 30000 25000 20000 15000 10000 5000 0 Page 8

household corporate

Source : ARCEP (regulation authority) 23 rd Voorburg Group meeting - Aguascalientes - MEXICO other data added value services wireless internet wired septembre 2008

Market conditions and constraints Telecommunications (without TV and radio) annual revenue by industry (millions €):

45000 40000 35000 30000 25000 20000 15000 10000 5000 0 wired wireless 2001 2002 2003 2004 2005 2006 others data transport added value services wireless internet wired Source : ARCEP (regulation authority) Page 9 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Y

Market conditions and constraints

–The market in France France Telecom Orange

(FT)

SFR Bouygues Neuf Cegetel Coriolis Debitel Eutelsat TDF Globecast Colt Verizon AT&T Free Wanadoo Telecom Italia General public Corporate operators 23 rd Voorburg Group meeting - Aguascalientes - MEXICO FAI

(FT)

septembre 2008

Market conditions and constraints

› Special conditions or restrictions – The mobile telephone is the driving force behind the market, and there is a constant variation in service offers – The fast-growing market continues to lead to mergers and acquisitions, a situation that must be monitored – New services are appearing (voice on IP, ADSL, IP-PN on MPLS pour transport de data) – New operators (MVNO) – Fixed line telephony lacks speed and subscription represents more than half of the turnover in this sub-sector – The operators sell networking services which we do not take into account (intermediate use).

Page 11 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Market conditions and constraints

› Recordkeeping practices – As regards

telephony

, ARCEP (an authority regulating electronic telecommunications) conducts a survey on all the operators every quarter: the information we need for the assessment of our rates is given to us by agreement.

– For the sub-sectors which are not entirely covered by these surveys

(audiovisual transmissions and data transmission),

this process is carried out by following the usual method, that is to say by selecting companies and questioning each company at their offices.

Page 12 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

› ›

Standard classification structure

ARCEP nomenclature –Transmission of messages or data ‐

Fixed line telephony services

‐

Internet access services

‐

Mobile telephony services

‐

Information services

‐

Dedicated network services, transmission of data

‐

Added value services

‐

Renting of terminals

‐

Secondary incomes

Additional nomenclature (INSEE) –Other telecommunications services ‐

Television transmission services

‐

Radio transmission services

‐

Other telecommunications services

–Cable transmission of radio and TV programmes ‐

Cable transmission of radio and TV programmes

Page 13 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

National accounts concepts

– The same classification is now given by the accountants and the managers of the price rates: ‐ 642C Telecommunications (not audiovisual transmissions) ‐ 642D Transmissions of radio and television programmes – Up to 2004, the telephony consumer price rate was used in order to reduce the price, (a stable rate): but is it impossible to make a consistent volume of production which is growing twice as fast as CA, with a price rate that does not change?

– A price rate based on unit values (a rate that decreases) allows consistency with CA and the amount of minutes.

– Since 2005, the production price rate has been used (although this is not yet widespread) Page 14 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Pricing methods

– There is a continuing debate on the subject of the best method for the calculation of this rate: – unit value?

– – rate method?

bill method?

– Another debate: is a consumer price rate the same as a production price rate? – For

telephony

, the SPPI /France service has chosen the "unit values" method, ‐ as recommended by the "methodological guide" ‐ by the note "price indexes for telecommunications services" (G Deuchars - US BLS et K Moriya Bank of Japan) 2001 + (Bordé/Gorko 1999) ‐ and according to the experiences of the other countries – (the CPI /France service, however, has chosen a combination of rate method and bill method) – The advantage that one can see in this is the reduction of the operators response charge through the quarterly recovery of ARCEP files Page 15 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Pricing methods

– Fixed line telephony – – – – Mobile telephony – – Internet – Data transmission – TV and radio transmission national international to mobile subscription calls SMS access price per minute (ARCEP) price per minute (ARCEP) price per minute (ARCEP) official rate (France Télécom) price per minute (ARCEP) price of SMS price of access (ARCEP) (ARCEP) survey of 7 companies/40 quotations survey of 6 companies/40 quotations Page 16 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Pricing methods

– in telephony and internet: unit prices ‐ Quarterly ARCEP survey figures ‐ ‐ Laspeyres rate ‐ rebased annually (proportion of companies rebased annually) ‐ supporting the companies involved throughout the year –in the transmission of data (IP-VPN), TV, radio ‐ ‐ ARPA (average revenue per access) ‐ ARPL (average revenue per line) Page 17 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Quality adjustment methodology

– The unit price method is designed, in theory, to overcome difficulties in adjustments in the service quality – However, in this case we are dependent on the detail in the available information level – The service category that is detailed should be as precise and homogenous as possible, which is not always the case: ‐ Call price by distance ‐ ‐ Call price by time slot Call price by length of calls… – Unfortunately we are limited by the nature of the case and available detail.

Page 18 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Quality adjustment methodology

–Unresolved questions ‐ Will special offers (unlimited calls to certain numbers) and the widespread use of fixed rates which incorporate several kinds of service (tripleplay, quadrupleplay) be compatible with our calculation method? (in these kinds of fixed rates there is also a TV service…not our field). Fixed lines and mobiles will soon be on fixed rates.

‐ The modification of the calculation method would require a considerable technical and methodological investment Page 19 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

Comparing SPPI with turnover/output

–Turnover: ‐ With the market being extremely concentrated, the size of the turnover does not present great difficulties.

‐ Exchanges of services between companies can lead to double accounts (call terminations, rent of large market lines between operators) which are absent from the calculations of the price rate.

‐ Frequent mergers on the market must be monitored closely for the calculation of average prices –Output: ‐ ARCEP regularly issues information on call volumes. The price rate calculation based on unit prices is in accordance with this production approach.

– Page 20 23 rd Voorburg Group meeting - Aguascalientes - MEXICO septembre 2008

SPPI

indices de prix telephonie et autres transmissions

120 110 100 90 80 70 60 T 1 20 02 T 3 20 02 T 1 20 03 T 3 20 03 T 1 20 04 T 3 20 04 T 1 20 05 T 3 20 05 T 1 20 06 T 3 20 06 T 1 20 07 T 3 07 T 1 20 08 Page 21 23 rd Voorburg Group meeting - Aguascalientes - MEXICO indice des prix consommation des menages ensemble telephonie entrep TRANSMISSIONS transmission + telephonie série longue septembre 2008

Summary

–The subject of telecommunications is a sensitive one, and a consensus has not yet been reached between operators, the regulator, consumer associations and statisticians, both regarding the level (international comparisons, between operators) and development.

–This rate is therefore not used around France, due to the fact that there are differing interests: ‐ Operators: a big reduction!

‐ Regulator: prices should come down more!

‐ Consumer associations: prices are going up!

‐ Statisticians: ???

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