Broadband and telecom

OECD Internet Access Price Comparison August 2001

 

Results of the comparison by hours per month included in basket:

20 hours

30 hours

40 hours

Always on

The cost of accessing the Internet continues to fall across the OECD. Between September 2000 and August 2001 the price of 20 hours of Internet access, at peak times fell by 6%. At off-peak times the price fell by 7%. For 40 hours of Internet service the price at peak rates fell by 7% and 8% at off-peak times.

Although prices, in the majority of OECD countries, fell between surveys, in some instances price rises reflected higher telephone line rental charges introduced as part of price rebalancing. These countries included Greece, Hungary, Iceland, Italy, Mexico and Sweden. Line rentals were also increased in a number of other OECD countries, but were offset by reductions in usage charges or Internet Service Provider (ISP) charges.

Subscription free Internet access was introduced in the Czech Republic and Korea substantially reducing prices for 20 hours of service during off-peak periods. Although line rentals rose slightly in Korea the charges for Internet dial-up access fell sharply. In Australia, the increase in competition following the launch of Southern Cross Cable and consequent falls in backbone pricing, led to substantially lower retail Internet access prices. In Portugal a substantial reduction occurred at off-peak times due to off-peak charges coming into effect earlier in the evening. Internet access prices also fell in France, Germany and the United Kingdom.

Internet access prices rose in some countries during the survey period. In Belgium the outcome of a court case, in November 2000, was that prices for dial-up Internet access rose in that country. Although a special offer from Belgacom would have reduced the impact of these rises, at peak times, it was only available for two months (July-August 2001) and is, therefore, excluded in these comparisons.

Unmetered tariffs for dial-up services also became available in Finland and Portugal. In Germany an unmetered offer from the incumbent telecommunication carrier, although popular with users, was withdrawn. The introduction of unmetered tariffs in the United Kingdom has had a major impact on usage. Leading ISPs now report that average online times in the United Kingdom are equivalent to markets that have traditionally had this service and this has provided a substantial boost to electronic commerce.

Countries in the OECD where unmetered offers are now available from 12 incumbent telecommunication carriers include Australia, Canada, Korea, Mexico, New Zealand, Portugal, United Kingdom, United States. In Finland, Hungary, and Spain unmetered dial-up services are available at off-peak times. In Japan unmetered access is available via ISDN or at some off-peak times for dial -up users. France is expected to introduce unmetered dial-up Internet access during 2001.

Unmetered tariffs are also becoming available by Digital Subscriber lines (DSL).

In several OECD countries the lowest level subscriber packages for DSL are less expensive than 40 hours of peak Internet use (i.e. ISP fee plus usage but excluding line rental). These include Belgium, Japan, Luxembourg, Hungary, Iceland, Sweden and Switzerland. This is not always because DSL is inexpensive as it can also reflect the fact that PSTN usage charges for dial-up access are high at peak times.

At 30 hours, at peak rate, DSL also represents a less expensive option in Belgium, Luxembourg, Hungary, Iceland, Sweden and Switzerland. Only in Sweden are prices for DSL less expensive than for 20 hours of dial-up Internet access at peak times.

At off-peak times DSL is less expensive than 40 hours of dial up service only in Japan and Sweden. This reflects relatively inexpensive prices for DSL in these two countries.

Background

For consumers and small businesses, the most significant costs for engaging in electronic commerce are the prices of local communication access. For a user accessing the Internet, via dial-up service, the following basic charges apply -- public switched telephone network (PSTN) fixed and usage charges and the charges of an Internet Service Provider (ISP). The OECD compares these prices for the largest telecommunication operator in each Member country. The representative ISP, chosen for the comparisons, is the Internet service provided by the largest telecommunication operator.
The OECD comparisons use only the existing prices that were in place as of August 2001 for the largest telecommunication carrier in each country. The baskets for 20, 30 and 40 hours do not include changes that have been announced, but were not yet available in the market. The 'always-on' basket includes some announced offers where the charges have been confirmed.

Methodology

The Internet basket includes one monthly line rental for a residential user. Usage charges are defined in blocks of one hour for the 20, 30 and 40 hour baskets. For 20 hours of usage, the price is the equivalent of 20 calls of one-hour duration at peak or off-peak rates. For the 'always-on' basket, usage is defined in 30 calls of five-hour duration.
Discount schemes (or special access number pricing) and tax rates are applied to these charges. The access pricing selected represents the best available offer for the applicable online time (this can be a different discount scheme for peak or off-peak service). The ISP charge is the best available rate, from the largest telecommunication operator, for that amount of service. For further explanation of the methodology and past comparisons, please consult the OECD Communications Outlook series.

Basket Elements

  • Fixed charge: the fixed charge comprises the monthly line rental for a residential user

  • Usage charge: the price of local telephone calls (or special rates for Internet access) to an ISP for residential users.

  • ISP charge: the price of Internet access from the largest telecommunication operator.

  • Discount schemes: the best available scheme for each basket is selected.

  • Tax: the value added tax rate.

  • Peak: the price of local calls at 11:00 hours during weekdays.

  • Off-peak: the price of local calls at 20:00 hours during weekdays.

Local Call Pricing Structure

The predominant model for pricing local calls in the OECD area is measured service. In other words, the cost increases in proportion to the duration of the calls. The main exceptions are Australia, Canada, Mexico, New Zealand and the United States. In Australia, users pay a flat rate per local call irrespective of the duration. In the United States, residential users in large part have unmeasured local rates. The OECD basket uses a price option available in New York where calls are unmeasured but incur a set-up charge (i.e. similar to Australia). Residential users in Canada and New Zealand have unmeasured local calls and in Mexico they receive 100 local calls as part of the standard subscription. Where line rentals include a certain number of free units these are applied against the usage costs (e.g. Turkey). In some countries the telecommunication carriers bundle the metered local call prices with the ISP charge for a certain amount of online time. This online time is purchased in advance and users pay additional charges if they exceed this amount. This, for example, occurs in France.

 

 

 

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