1

Highlights of the OECD’s Communications Outlook 2007:

Focus on Mexico

Dimitri Ypsilanti

Directorate for Science, Technology and

Industry,

OECD

2

Objectives of Communications Outlook

Provide most recent comparable data on the performance of the communication sector –consistent time series;

Highlight main trends in recent policy issues and market structures;

Provide range of indicators showing developments in telecommunication market size, network dimensions, Internet and broadband infrastructure, and main trends in pricing;

3

Policy issues / market structure Changing landscape

– Substitution in market: fixed - mobile – Success of unbundling– Competition from new technologies (VoIP)– Mobile and broadband increase– Shift in policies to emphasise convergence

Convergence– Growth in “multiple play”– Network & service convergence beginning (FMC)

“Growth through transformation”– Telecommunication companies becoming media

companies– Media companies becoming telecommunication companies

4

Growth in Consumption: household expenditures on communication equipment and services

70

80

90

100

110

120

130

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Index 1995 = 100Communications

Health

Audio-visual; photographic and informationprocessing equipmentEducation

Transport

Restaurants and hotels

Recreation and Culture

Housing, water, electricity, gas and otherfuelsAlcoholic beverages, tobacco and narcotics

Furnishings, households equipment androutine maintenance of the houseFood and non-alcoholic beverages

Clothing and footwear

5

Access growth 1997-2005

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

1997 1998 1999 2000 2001 2002 2003 2004 2005

Fixed telecommunciation paths (voice) Mobile Other broadband Cable DSL

Subscribers access (millions)

6

Growth in Main Lines: Selected Countries

GDP per capita, USD, 2005

Czech Republic 12 113

Hungary 10 941

Mexico 7 292

Poland 7 920

Turkey 5 045

OECD average 29 881

0

5

10

15

20

25

30

35

40

45

50

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Access lines per 100 inhab.

OECD

Hungary

Poland

Czech Republic

Turkey

Mexico

7

Telecommunication Investment as percentage of telecommunication revenue

0

20

40

60

80

100

1997 1998 1999 2000 2001 2002 2003 2004 2005

%

Mexico

OECD

Hungary

Poland

Czech Republic

Turkey

8

Telecommunication investment per capita

0

50

100

150

200

250

1997 1998 1999 2000 2001 2002 2003 2004 2005

USD

OECD average

Hungary

Czech Republic

Poland

Mexico

Turkey

9

Growth of mobile

0

100

200

300

400

500

600

700

800

900

1,000

1997 1998 1999 2000 2001 2002 2003 2004 2005

Mobile (subscription) Mobile (prepay) Mobile (3G)

Mobile subscribers (millions)

10

Growth in mobile subscribers (per 100 inhabitants)

0

20

40

60

80

100

120

140

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Mobile subs. per 100 inhab.

Czech Republic

Hungary

OECD average

Poland

Turkey

Mexico

11

Relative Market shares in mobile: 2005

41 45

78.9

35

63

40 33.2

14

31

22

19 21.84

34

15

0%

20%

40%

60%

80%

100%

Czech Republic Hungary Mexico Poland Turkey

4th operator

3rd operator

2nd operator

1st operator

12

Main trends in pricing Trends

– Prices for all telecommunications services falling– Surplus spent on new telecommunication services– Move towards flat-rate pricing – Broadband speeds increasing while prices fall

Bundling– Triple play bundled prices: video, voice, data– Bundling fixed and mobile services

• Orange, BT, KT, Swisscom

New telecommunication basket methodology– Fixed– Mobile

13

Fixed (residential): low usage

Source: OECD Communications Outlook 2007

0

100

200

300

400

500

600

700

800USD PPP

Fixed Usage

14

Fixed (residential): medium usage

Source: OECD Communications Outlook 2007

0

200

400

600

800

1000

1200

Polan

d

Czech

Rep

ublic

Turk

ey

Hungar

y

Slova

k Rep

ublic

Mex

ico

Portu

gal

Greec

e

New Z

eala

nd

Belgi

um

Austra

liaIta

ly

Fran

ce

Finl

and

Spain

Austri

a

Nether

land

s

Irela

nd

Germ

any

UK

Luxe

mbo

urg

Japan

Switzer

land

Korea

Norway

Sweden USA

Denm

ark

Icel

and

Canad

a

USD PPP

Fixed Usage

15

Fixed (residential): high usage

Source: OECD Communications Outlook 2007

0

200

400

600

800

1000

1200

1400

1600

1800

2000

Polan

d

Czech

Rep

.

Turke

y

Hunga

ry

Slova

k Rep

.

Portu

gal

Mex

ico

Gre

ece

Belgiu

mIta

ly

Finlan

d

Austra

lia

Franc

eSpa

in

New Z

eala

nd

Korea

Japa

n

Austri

a

Nethe

rland

s

Luxe

mbo

urg

Unite

d Kin

gdom

Ger

man

y

Irelan

d

Switzer

land

Sweden

Icela

nd

Denm

ark

Norway

Unite

d Sta

tes

Canad

a

USD PPP

Fixed Usage

OECD basket of residential telephone charges, high usage, August 2006

16

Fixed (business): SOHO

Source: OECD Communications Outlook 2005

0

200

400

600

800

1 000

1 200

Czech

Rep

ublic

Poland

Austra

lia

Mex

ico

Slovak

Rep

ublic

Turke

y

Spain

New Z

ealan

d

Portu

gal

Hunga

ry

Belgium Ita

ly

United

King

dom

Franc

e

Japa

n

Finlan

d

Greec

e

Austri

a

Canad

a

Irelan

d

Nethe

rland

s

Germ

any

Switzer

land

Sweden

Luxe

mbo

urg

Denm

ark

Korea

Icela

nd

Norway

United

Sta

tes

USD PPP

Fixed Usage

OECD business basket for small office and home office (SOHO), August 2006

17

Fixed (business): SME

Source: OECD Communications Outlook 2005

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

45 000

Mex

ico

Czech

Rep

ublic

Polan

d

Austra

lia

Slova

k Rep

ublic

Turke

y

Spain

Gre

ece

Portu

gal

Japa

nIta

ly

Hunga

ry

Unite

d Kin

gdom

New Z

eala

ndO

ECD

Belgiu

m

Finlan

d

Korea

Franc

e

Austri

a

Nethe

rland

s

Irelan

d

Canad

a

Sweden

Switzer

land

Luxe

mbo

urg

Ger

man

y

Denm

ark

Icela

nd

Unite

d Sta

tes

Norway

USD PPP

Fixed Usage

OECD business basket for small and medium-sized enterprises (SME), August 2006

18

OECD Basket of international telephone charges, August 2006

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50USD PPP

Business

Residential

19

Broadband subscribers per 100 inhabitants (1999 – June 2006)

0

2

4

6

8

10

12

14

16

1999 2000 2001 2002 2003 2004 2005 Jun-06

OECD average

Czech Republic

Hungary

Poland

Turkey

Mexico

20

Broadband prices per Mbit/s, Oct. 2006

81.1337.47

34.0128.49

16.0313.98

12.498.90

6.506.07

5.315.04

4.544.18

3.623.383.303.18

2.982.782.74

2.612.20

1.891.76

0.820.59

0.420.35

0.22

Turkey

Greece

Mexico

Hungary

Czech Republic

Slovak Republic

Poland

New Zealand

Luxembourg

Austria

Ireland

Iceland

Canada

Switzerland

United Kingdom

Belgium

Netherlands

United States

Norway

Denmark

Germany

Portugal

Spain

Italy

Australia

France

Finland

Korea

Sweden

J apan

192.85163.72

222.31133.49

76.1861.58

236.4478.93

32.3957.89

22.2037.18

90.4713.7714.50

65.9243.87

20.7452.91

71.7042.67

146.2458.89

27.54165.02

27.3379.97

9.8397.47

77.64

0.1 1 10 100 1000

TurkeyGreeceMexico

HungaryCzech Republic

SlovakPoland

New ZealandLuxembourg

AustriaIrelandIcelandCanada

SwitzerlandUnited Kingdom

BelgiumNetherlands

United StatesNorway

DenmarkGermanyPortugal

SpainItaly

AustraliaFranceFinlandKorea

SwedenJapan

Range of broadband prices per mbit/s, October 2006, all platforms, logarithmic scale, USD PPP

21

Broadband prices per monthly subscription, Oct. 2006

52.3645.14

37.4437.1836.4536.3535.5635.51

33.0832.4431.50

29.0023.1622.4321.8521.1121.10

20.0119.9919.8719.49

18.1817.63

16.8616.8516.3615.93

12.5311.1110.79

Mexico

Spain

Portugal

Iceland

Hungary

Greece

Turkey

Korea

Poland

Czech Republic

Slovak Republic

United Kingdom

Canada

Belgium

Germany

Austria

Australia

Norway

Luxembourg

J apan

Finland

Ireland

Italy

New Zealand

Netherlands

France

United States

Switzerland

Denmark

Sweden

802.65226.95

74.1663.26

218.88334.36

288.2357.07

149.84372.23

265.1656.41

92.8367.56

58.02110.58

98.62148.79

88.2449.78

58.6744.02

47.10115.97

78.8338.31

191.2055.65

105.1046.74

1 10 100 1000

MexicoSpain

PortugalIceland

HungaryGreeceTurkeyKorea

PolandCzech RepublicSlovak RepublicUnited Kingdom

CanadaBelgium

GermanyAustria

AustraliaNorway

LuxembourgJapan

FinlandIreland

ItalyNew ZealandNetherlands

FranceUnited States

SwitzerlandDenmarkSweden

Broadband price ranges, October 2006, all platforms, logarithmic scale, USD PPP

22

Mexico’s Performance

Slow network growth – insufficient competition Insufficient investment High relative prices Weak performance in broadband Need to improve data on market performance Foreign investment restrictions (Canada, Korea,

Mexico); No local loop unbundling: Mexico, New Zealand

(2007); Switzerland (2007)