TELECOMMUNI CATI ON SECTOR TARI FF REGULATI ON I N BOLI VI A SUPERI NTENDENCI A DE TELECOMUNI CACI ONES [OFFI CE OF THE SUPERI NTENDENT OF TELECOMMUNI CATI ONS] (SI TTEL) La Paz, 14 June 2005 TARIFF REGULATION PRINCIPLE Freedom to set prices and tariffs Tariffs regulated by means of price REGULATION ceilings determined on the basis of baskets of services FORMULA TP 1 = TP 0 * [(1 + X) * (IPC n / IPC n-1) ] Superintendencia de Telecomunicaciones www.sittel.gov.bo 1
Reform of the sector Competitive markets Reduction of barriers Asymmetrical regulation Regulation of services I ntermediaries Regulation of rural sector Phase 2 Bolivia’s model for 2002 Amendment of the opening markets Telecommunication Act 2001 Opening of the market, end of exclusivity and competition in long distance and local Long distance and local: exclusivity 1995 to 2001 Tariff rebalancing Phase 1 Expansion 1999 End of transition period Modernization 1995 Concession contracts, start of Quality tariff regulation 1994 Telecommunication Act Management by the private sector Regulation by the State TARIFF REGULATION Markets without competition Superintendencia de Telecomunicaciones www.sittel.gov.bo 2
TARIFF REGULATION BASKETS OF SERVICES SERVICE BASKET CEILINGS √ A: New installations √ Local B: Local service √ C: Other services √ A: New installations √ Mobile (cellular) B: Mobile service √ C: Other services √ D: Long-distance service Long distance √ E: Other services √ A: Local service Public telephones √ B: Long-distance service √ Telegraphy A: Telegraph service √ Telex A: Telex service √ Circuit leasing A: Installations √ B: Circuit leasing service √ Data transmission A: Installations √ B: Data transmission service Superintendencia de Telecomunicaciones www.sittel.gov.bo PRICE CEILING FORMULAE Transition period Effective period FORMULA: FORMULA: ∑ ∑ = = TP P * alfa TP P * alfa jn ijn ijn − jn ijn ijn − 1 1 SUBJECT TO: SUBJECT TO: ≤ TP TP P jn IA jn ∑ = ijn ≤ VT alfa * F jn ijn n − P 1 ∆ ≤ 2 ∆ ijn TP IPC − 1 jn n WHERE: WHERE: [ ] [ ] = TP TP * F * F * ... * F jn = − − TP TP * F * F *...* F jn j 0 n n 1 n z − − IA j 0 n n 1 n z IPC IPC − = + n 1 − = + F ( 1 X ) * n 1 F ( 1 X ) * n IPC n IPC − n 2 − n 2 Superintendencia de Telecomunicaciones www.sittel.gov.bo 3
TARIFF REGULATION: PHASES Periods following the End of the transition period (four years) Transition period transition period • Price ceiling formula • Restrictions changed for the includes restrictions on approval of tariff changes. approval of tariff changes. • Price ceilings set for each • Standard price ceilings set operator and each service. for services (same price • Individual productivity factors ceiling for all operators). for each operators. • Standard productivity factor for all operators and services. • Tariff rebalancing. Superintendencia de Telecomunicaciones www.sittel.gov.bo ENFORCEMENT OF THE PRICE CEILING REGIME Now • The weighted average tariff is checked against actual or projected demand to see whether it falls below the adjusted price ceiling calculated by SITTEL. • The tariffs actually applied are checked to determine whether they were higher than the maximum tariffs approved. • The proposed variation in tariffs is checked to ensure that it does not exceed the control factor. Superintendencia de Telecomunicaciones www.sittel.gov.bo 4
TARIFF REGULATION: CHANGES Following Law 2342 (2002) Before Law 2342 Amendment of Law 1632 • Asymmetric regulation: • Regulation of services services provided by where there is no operators with a dominant competition. market position. • Regulation of end-user • Regulation of end-user services. services; interconnection charges and prices for elements and services that support interconnection. Superintendencia de Telecomunicaciones www.sittel.gov.bo TARIFF REGULATION: DOMINANT OPERATORS Long Public telephones Circuit Data Local distance Basket A Basket B leasing transmission � � � � � ENTEL S.A. � � COTEL LTDA. � � � � COMTECO LTDA. � � � � COTAS LTDA. � � COTEOR LTDA. � � � COTES LTDA. � � COTERI LTDA. � � COTEMO LTDA. � COTEGUA LTDA. � � COTECO LTDA. � � � COTEAUTRI LTDA. � � COTAP LTDA. � � � COTABE LTDA. � � � COSETT LTDA. Superintendencia de Telecomunicaciones www.sittel.gov.bo 5
TARIFF REGULATION: ITEMS FOR FUTURE ACTION • Ex post tariff regulation, on the basis of market structure. Prior approvals would be eliminated in all cases. • Possibility of modifying initial price ceilings, via two means: - At the request of one of the parties involved - Automatically. TARIFF REGULATION: ITEMS FOR FUTURE ACTION • Tariff regulation for interconnection charges and certain disaggregated elements and services that support interconnection, with price ceilings, with reference to: - Ceilings for interconnection charges: long-run incremental cost (LRIC) or benchmarking - Ceilings for disaggregated elements and services that support interconnection: economic cost - Establishment of a transition period for the adjustment of charges to the ceilings established. Gradual correction of any distortions, by consensus. 6
TARIFF REGULATION: ITEMS FOR FUTURE ACTION • Tariff regulation in rural areas: symmetrical - Incentives for the provision of services (free frequencies, exemption from payment of regulation fees, interconnection charges that may include a subsidy) - Regulation of all operators - Price ceilings adjusted periodically to take account of changes in the Consumer Price Index - Revision of price ceilings every three years. THANK YOU! www.sittel.gov.bo 7
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