3) Implications of Technological Developments for Market
Liberalisation
3.1
Over the past forty years major technological advances have reduced long-distance transmission costs by 90% or more. Even today this trend continues with develop- ments in fibre optic technology. Fibre optic transmission rates have increased from 45 megabits per second (MBPS) to over 2.2 gigabits per second (GBPS) today. Considerably more traffic can now be transmitted along the same fibre pair.
3.2 The implication of this development for operators is a significantly reduced cost-to- serve for long-distance communication. An example of this decrease is the cost-per- circuit (voice path) between New York and London. The cost-per-circuit on TAT 7 (the seventh Trans-Atlantic cable) was US$23,167 as recently as 1983. By 1986 this had fallen to US$8,873 on TAT 8, and the 1992 TAT 9 cable was predicted to cost only US$4,476 per circuit (see Exhibit 5). Dr Charles Kao of the Chinese University of Hong Kong, an expert in fibre technology, has estimated that the cost of the actual raw fibre has fallen to approximately one cent per metre.
Exhibit 5: Decreasing Costs of Transatlantic Telephony
EXAMPLE OF INCREASING CABLE CAPACITY -
TRANSATLANTIC (TAT) ROUTE
COST PER VOICE CHANNEL ON TRANSATLANTIC (TAT) ROUTES
CABLE CAPACITY NUMBER OF VOICE
CHANNELS
40000
30000
20000
10000-
TAT 1
TAT 5
TAT 2 TAT 3 TAT 4
COST PER VOICE
CHANNEL
US$
600000
TAT
TAT 1
450000
-TAT2
300000
TAT
TAT 6
TAT 7
150000
TAT 5
TAT 6 ($25k) TAT 7
TAT &
·(59%).
1956
1960
1964
1968
1972
1976 1980
1984
1988
1956
1960
1964
1968
1972
1976
1980
1984
1988
YEAR
YEAR
Source: US Industrial Outlook
3.3 The combination of a global increase in the use of international facilities and the declining cost of the infrastructure has resulted in sharply reduced costs for interna- tional calls. Unfortunately, the improved economics of international traffic have not necessarily resulted in significantly lower tariffs. Only in those markets where international competition has emerged are we beginning to witness aggressive tariff decreases. However, international switched services remain one of the most profitable segments for service providers.