The document discusses the calculation of universal service obligation (USO) costs in Austria. It outlines Austria's USO, which includes access at a fixed location, directories, and public payphones. It then describes the cost calculation scheme used, which involves determining avoidable costs, forgone revenues, and indirect benefits to calculate the net costs. The main reasons for USO deficits in Austria are the low subscriber densities and high costs in some rural areas. The document also briefly discusses the options for financing USO and benchmarks from other European countries.

1. Universal Service Costs Peter KLUNE Prague, 23 rd May 2007

8. Cost calculation scheme (1/2) Avoidable costs - foregone revenues = direct net costs + indirect benefits = overall net costs Those costs which would not arise if there would be no universal service obligation Revenues which would not accrue if there would be no universal service obligation Benefits, including intangible benefits, which relates to the provision of universal service elements Costs of universal service Benefits of universal service Net costs of universal service

9. Cost calculation scheme (2/2)

11. Forgone Revenues Local area 1 local area 2 calls to mobile national calls intern. incoming traffic international calls active calls passive calls Fixed fees RT+WS margin xDSL 1 2 2 2 3 4 - loss of installation national calls calls from mobile 3 3

12. Indirect benefits Life cycle effects Non USO services Ubiquity Volume discounts Advertising Customers may not be profitable now, but may become so in the future The benefit that accrues of having a USO presence and infrastructure and thereby being able to offer non-USO services at marginal cost Cost savings e.g. in equipment made as a result of providing the USO The advantages of having a nationwide presence as a result of being the USP The benefit of being able to advertise e.g. on payphones and bills Brand/corporate reputation The enhancement of the brand and image through leveraging the USO role

14. Reasons for unprofitable areas poly centric e.g.: Mettmach dispersed with centre e.g.: Sillian in Tyrol subscriber density/type of area

15. Reasons for unprofitable areas high costs and low revenue

18. European benchmarks “ Unlikely to be an undue financial burden on BT as a result of USO” „ No significant competitive disadvantage for Telefónica“ 2002 about 1,1% of wire line revenues (only ES) 2003 about 0,7% of wire line revenues 2002 about 0,1% of revenue (group) Source: Cullen International and own calculations Only preliminary values

20. Thank you for your time Questions? Peter KLUNE Regulatory Affairs TELEKOM AUSTRIA AG Lassallestraße 9 A-1020 Austria › E-Mail [email_address]  Phone +43 (0)59059 1 16012   Fax +43 (0)59059 91 16012   Mobile +43 (0)664 629 61 76