5 differentiate if one person has multiple lines, or if one line is used by multiple persons. Thus, using the number of subscribers may over or understate access.

Basic data are reported in table 2. As expected there are pronounced differences in the access rate between developed and developing countries, with the former displaying an average access rate approximately 6 times the latter’s. Theoretically, reform policies, such as introducing private capital and establishing an IRA, are expected to increase access rates.

**<u>Table 2: Average performance 1990-2003</u>**

||**Mea**|**ns**|**Number**|**of Observatio**|**ns**|
|---|---|---|---|---|---|
||**Developing**|**Developed**|**Developing**|**Developed**|**Total**|
|Telephone Subscribers per 1000 people|123<br>(171)|709<br>(363)|2073|647|2720|
|Price of Local Phone Call (US cents/10,000 GDPpc)|169<br>(466)|6<br>(6)|1570|446|2016|
|Annual Residential Subscription Fee (US$/10,000 GDPpc)|958<br>(1891)|76<br>(38)|1650|461|2111|
|Annual Business Subscription Fee (US$/10,000 GDPpc)|1387<br>(2632)|101<br>(60)|1623|453|2076|
|Phone Faults (reported faults/100 mainlines)|73<br>(96)|19<br>(17)|1094|328|1422|
|Telephone Mainlines per Employee|68<br>(57)|175<br>(111)|1787|600|2387|

Source: Own calculations using ITU data. Standard deviations in parenthesis. Countries were classified in developing and developed according to their 2001 GNI per capita.

Regarding affordability, the only information available for a large set of countries is the average price and occasionally, the tariff structure. The information is however widely seen as not reliable since it does not account for many of the “informal” alternatives available to phone users—e.g. calling cards. This may be why only three of the previous cross-country studies have tried to document the impact of reforms on prices. We use the price of a 3-minute local phone call in US cents and the monthly subscription fee (for residents and for business) in US dollars as our proxies for affordability. An issue with these indicators is that they do not take into account prices in the mobile segment, thus, we are using proxies for affordability only in the fixed line market. However, these are the best data available at the moment.

The specific definitions offered by ITU for the selected affordability variables are as follows: The price of a local call refers to the cost of a peak rate 3-minute fixed line call within the same exchange area using the subscriber's own terminal (i.e. not from a public telephone). The monthly residential (business) phone subscription fee refers to the recurring fixed charge for a residential (business) subscriber for using the public switched telephone network. The charge should cover the rental of the line but not the rental of the terminal (e.g. telephone set) where the terminal equipment market is liberalized. In some cases, the rental charge includes an allowance for free or reduced rate call units. If there are different charges for different exchange areas, the largest urban area is used.

Table 2 shows that a local phone call normalized to GDP per capita was about 30 times higher in developing countries than in developed ones, while the annual cost of a