International telecommunications update
23 January 2003, Zurich
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INTUG - EVUA International telecommunications update 23 January 2003, Zurich |
| introduction |
I thought it might be best to use the INTUG
Priorities for 2004
as the framework for identifying progress and problems:
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| mobile networks |
Mobile networks remain the top priority in 2004.
We had a useful discussion on Tuesday afternoon about whether the mobile
network operators were getting "too big for their boots". I would have to
say that if they can afford David Beckham, they can afford to buy very large
boots. International mobile roaming International roaming remains at the top of the list within the mobile sector, largely because of the scale of the market abuses and the problems in getting them addressed. There are three ways to do this:
I might add that this faces considerable cultural barriers. It never fails to amaze me when I hear people who are obviously roaming in a foreign country engaged in banal or irrelevant conversations: "we are on the bus from the airport to the hotel". Such counter-economic behaviour seems deep-seated and will be hard to stop. Negotiations with the operators have proved almost impossible. They continue to maintain that roaming is a premium service. GPRS roaming is so expensive that nobody can afford it. At that price they charge nobody cannot conceive of an application. It is complicated by roaming being only one part of a mobility package comprising access, origination and termination. There are very few alternatives such as Transatel and Dot-Dash. The INTUG complaint about international mobile roaming charges was made five years ago, by Allan Fischer-Madsen, then our Vice-Chairman for Europe. It remains an open case at the Competition Directorate of the European Commission. Roaming is included in the European Union electronic communications directives that took effect in July 2003. It has been adopted as a priority by the European Regulators Group (ERG) in its workplan for 2004 and is under active consideration there. I believe the IRG Mobile Working Group meets today and tomorrow in Brussels. Both DG Competition and the ERG face the same problem, that "joint dominance" is a difficult juridical test to pass. At the invitation of BELTUG, I made a presentation on roaming to users in Belgium last month. Apparently, I upset at least one MNO that was in the room. (I do not think they share my sense of humour.) The MNOs are still heavily reliant or roaming revenues to sustain ARPUs and they know it. There are consultants in the background working out how to make more money from roaming. Sometimes they are foolish enough to ask me questions. There are also financial analysts, wondering if roaming revenues will go up or down and how this affects share prices in the next couple of quarters. The failure of the regulators to act on voice roaming charges has allowed the abuse to be extended to data. The prices for GPRS are punitive. (It is interesting to compare Europe with the USA where cdma2000 1X is competing with EDGE on a continental basis at affordable prices.) We have to expect worse on new services, on MMS, Rich Voice and location-based services. There is no recognition by the operators that Europe is a single market. There are no roaming charges in China, in the USA and in India. We are stuck with a model of Europe that was created by the Congress of Vienna that re-drew the borders after Napoleon. Fixed-to-Mobile termination rates The good news is that the market definition for mobile termination has been nailed down. A number of authorities have accepted it, so that it has become an issue more of implementation than of how to tackle the problem. Nonetheless, the MNOs still trying to evade by regulatory means. They claim that they need the money to pay for David Beckham, to fly financial analysts to Monza to watch Formula One, to build 3G networks and so on. Apart from a few of our friends from Scandinavia, I doubt many of you have been to the Åland Islands. It is a favourite stop on the ferry between Stockholm and Turku because it is not in the European Union and so entitles passengers to a duty free allowance. Likewise, it has its own GSM operator that is to have the price of calls determined by the Finnish NRA. Vodafone UK is nothing if not imaginative in its representations to NRAs. It managed to contrive the interesting argument that competitive pressures forced it to maintain high prices for termination rates. It seems that the competition in the call origination market is so vicious that Vodafone can only survive by jacking up termination rates. INTUG has just submitted a short paper to OFCOM seeking to have 3G termination rates subject to regulation. This is purely for voice but I fear we will have to come back to the regulation of other 3G services. Germany remains adamant that it will not regulate F2M. It is not necessary and German consumers are so clever that, despite the total absence of advertisements, they know the prices of such calls and create pressure to lower them. Short Message Service In November, a French consumer group, l'Union Fédéral des Consommateurs (UFC), made a complaint about SMS charges:
National roaming We are seeing the disappearance of national roaming charges in India, creating a single national market. India has been a late developer in mobile and while it still lags China, it shows signs of having finally got the right levels of competition in place. |
| regulatory best practice |
As is well known, INTUG makes regular contributions
to a variety of bodies notably to
I spoke in Washington at the FCC and in Colombia at the Comisión de Regulación de Telecomunicaciones (CRT). Vivienne Peters attended the ITU's annual Global Symposium for Regulators (GSR) last month in Geneva. I will be participating in ITU workshops on broadband and mobile information society in March. |
| liberalization |
This year has seen work at the OECD on peer
reviews of liberalisation in Germany and in France. The results will be published
covering all economic sectors, but with a chapter in each on telecommunications.
Their publication will be opportunities to influence the national debates
on telecommunications. I will come back separately to the issue of work at the OECD on broadband. The European Commission published its Ninth Report of the implementation of telecommunications regulation. The team under Peter Rodford now approaches its tenth report one in which we will have the opportunity for substantial input from national associations. The Commission has recently published a report on the accession countries and will include the new member states in the Tenth Report at the end of the year. |
| universal access |
After the expenditure of vast efforts and at
absurd cost, the first phase of the World
Summit on the Information Society was held in Geneva in December. The
second phase is due in November 2005 in Tunis. This allowed for discussion
of the issues concerning the digital divide and how they might be addressed. The European Union will have to conduct a review of the scope of universal service by July next year. However, member states must first complete the transposition of the Universal Service Directive. Problems there. France as a single unit. A key question here will be the inclusion of "broadband" and if so what sort of broadband. South Korea will introduce an obligation of 10Mbits/s as universal service, possibly this year. The European Union is unlikely to go so high, possibly initially opting for 256kbits/s, then ratcheting it up in subsequent years. |
| broadband |
If you set to one side the definition, "broadband"
is the fastest technology to be adopted in the OECD, much faster than say
tcolourelevision or even mobile telephony. Broadband has been launched in
a very wide range of countries, with Morocco one of the most recent additions. Yet there are massive variations. Some countries are much faster than others at adoption. A significant factor is that those countries have competition between cable networks and the PSTN. A potential ceiling on adoption comes from home PC ownership, that may be a tough limit to raise in the short term since it depends on cultural factors. On 14 January 2004, Japan announced its December 2003 ADSL figure to be 10.3 million lines, as against 5.6 million twelve months before. To this we must added 900,000 Fibre To The Home (FTTH) lines and 2.4 million cable modems. These are lines at speeds of 8, 12, 26, 40 and 45 Mbits/s. Tthere was a slightly crazy competition last year to increase line speeds between Yahoo! BB, eAccess and NTT, with the collaboration of the manufacturers. Free on-net calls between broadband customers have been a significant driver, since they attract customers and create a strong network effect. It is very unpleasant for smaller competitors. (If one imagines Telenet and Belgacom offering this in Belgium, the life expectancy of other broadband providers would be short.) It has also reduced significantly the revenues for conventional telephony, forcing more and visible reliance on broadband revenues. In December, I was somewhat thrown by the Koreans asking what they had done right. What was confusing the Koreans was that Europe was not trying to catchup with them, though Japan was. What broadband they could see here was very patchy and the vast majority was not what they consider broadband, what I sometimes call "bonsai broadband". They are frustrated at seeing a market of 400 million rich Europeans to whom they cannot sell broadband hardware or services now or in the near future. The primary difference from Europe is the desperate rush in Asia for economies of scale, in networks, in hardware and in services. The fear is that some rival will grow faster and ultimately eat your company for breakfast. The government sanction is that the big are, within fairly generous limits, allowed to dine on the small. The bigger network allows:
It is not simply a matter of build it and they will come, it requires pricing at a level that will attract very large numbers of customers, combined with support services that can add that many customers. With a sort of characteristic reaction that drives me to despair, the view of France Telecom to the success of Fibre To The Home (FTTH) in Japan was to ask for tax breaks. They claim it was this sort of policy which caused the Japanese success. If you think understanding the corporate tax system in France is difficult, then try the Japanese system. In fact, it is competition between operators, with Tokyo Electric Power Company (TEPCO) as one of the big players. Electricity companies know how to run cables and have a commendably long-term view of investments in infrastructure. We need to tear down the walls of the C19th nation states of Europe to achieve a single market in telecoms. The two-year old directives will not do that, they may not even achieve much harmonisation. The USA has been substantially tied up in court battles. The only certainty is that the lawyers will get richer. However, faced with an impasse in the legal system, competition in the markets has become more important and progress is being made. Some early positioning for FTTH is underway. The battles in the USA have produced a by-product, that is weaponry that can be used in battles elsewhere. Much of the material has turned up in Europe or in Australia. The recent debates on local loop unbundling in Hong Kong SAR and in New Zealand have had some weighty US tomes thrown in. Some of it originating from Bob Crandall at the Brookings Institution in Washington, DC. The last time I met him was in Hong Kong where he was arguing against ,unbundling despite broadband in HK being one ttwelfthof unit cost of broadband in DC. New Zealand was a latecomer to the LLU debate, almost the last in the OECD. There is a fairly strong political sense there that regulation is a bad thing per se, combined with a strong attachment to "property rights", which to the outsider can seem antediluvian. Yet both are real and visceral political reactions. There was very limited political support for unbundling with even the main business organisations expressing opposition. Some alternative operators with wireless technologies and the utility companies had tried to take advantage of the pretty awful broadband offers of the incumbent. So they were argued against unbundling. The final decision was, unsuprisingly, to reject unbundling. The documents on this amounted to over four hundred pages from the NCA alone. To further complicate matters New Zealand is a very small market in a very remote location, with an incumbent operator than controls the local loop, the middle mile and the international Internet connectivity. Xtra, a subsidiary of the incumbent, offers Xtra JetStream Home 500, a 256kbits/s services for NZ 49.95 per month with a download cap of 0.5Gb, then NZ$ 0.20 per Megabyte. By comparison, in Hong Kong, Netvigator, a subsidiary of PCCW, offers a 6Mbits/s service with 200 hours per month for HK$ 398 (EUR 40) per month. There remain many issues on broadband, concerning rural deployment, with the growing role of Wireless ISPs, and the introduction of services for SDSL and VDSL. |
| leased lines |
Leased lines remain on the agenda as they have
for twenty-five years. We raised the issue in November at ITU-T Study Group
3, our anniversary presentation. There is no evidence of the implementation
of cost orientation and non-discrimination, despite these being included
in Recommendation D.1 adopted in 1991. Last month at the OECD we had a presentation by some new entrants concerning the provision of leased lines in Asia-Pacific. In particular they complained about the prices of tail circuits there. It was a little strange to have British Telecom and France Telecom arguing in favour of greater access for new entrants. The issue will, I believe, be taken up at APECTEL in March in Hong Kong. ECTA has recently published a scorecard on interconnect leased lines, with a view to pushing the European Commission to more robust action. Leased lines are also an issue on the workplan of the European Regulators Group (ERG). |
| IP telephony |
The OECD has just published a detailed study
on international telephone rates. It shows sharp declines in prices and
some heavy discounting. One response to this has been to bundle long distance and sometimes international calls as flat rate monthly package. It avoids a fight over the price per minute on key routes. It is a particularly interesting response to Voice over Internet Protocol (VOIP) services. In turn that is creating a complexity of services, qualities and prices that are ever harder to sort through. In the last eighteen months developments in Japan have broken new ground in a comparatively conservative market. In August 2002 Yahoo! BB launched a VOIP service with free on-net calls and calls to the Japanese PSTN and to the USA for about two cents per minute. It took until February 2003 for the incumbent, NTT to offer a similar service. Then in August 2003 some Japanese operators agreed to peer voice traffic; you cannot call it "bill and keep". This was facilitated by the assignment of the the 050 number range for VOIP and by the availability of conventional and cordless handset thatplu directly into the ADSL and cable modems. The pros and cons of peer-to-peer applications are well known as are the efforts of the content owners to protect the content that they have purchased from others. They have resorted to legislation, litigation and by trying to limit the technology. One of the biggest players in this is Sharman Networks the developers of KaZaA. Some months ago they launched Skype. The last time I checked had achieved over six million downloads and typically over 100,000 users online. Skype offers free peer-to-peer voice "telephony". Perhaps the best know, if not necessarily all that large, of the US offers is Vonage. This offers a US$ 34.00 unlimited calls in the USA and Canada or US$14.99 for 500 monthly minutes in USA and Canada. Rates to call other locations are very competitive. A Vonage number is a conventional US telephone number, but can be used outside the state, so you can live in California and have a 202 number for Washington DC. It will also work on a broadband connection if you are in Brussels or in Zurich. There are a whole set of highly complex regulatory issues being discussed at the ITU-T in Study Group 3 in APECTEL and elsewhere. The FCC has opened a process leading towards a regulatory framework. Crucial questions concern the future viability of universal service funds and the operators. I hope to come back to a meeting later in the year to discuss the regulation of IP telephony on corporate networks, it is an area where INTUG is active. We will also need to address questions of how to ensure quality needed for call centres and similar systems. |
| Numbering |
There has been considerable progress on Mobile
number Portability (MNP). USA in November and Korea at the beginning of
this month. In both cases a considerable outburst of competition and some
unpleasantness in the advertising campaigns. On the other hand, France, back
in the summer, managed to introduce a procedure that is slow, bureaucratic
and singularly ineffective. There is very little progress on the European Telephony Numbering Space (ETNS). The incumbent operators and the mobile operators have succeeded in killing this dead in order to protect their revenues from national services for freephone, local rate and premium rate calls. Recently, we have found that regulators will act on the assignment of short codes for SMS and mobile networks. This should ensure their availability in a way that is fairer and more equitable. It should also coever new services such as premium rate MMS. |
| Conclusions |
As ever there is some progress, but there remain
many problems with some of these quite new. A number of issues appear to
require years of work, some will requires heightened political pressure,
some require action on more specific levels. Asking the operators to behave
nicely or to be "good chaps" is a very weak signal, against the very strong
signal of regulation, one which they manipulate. If you are serious about
a message you put it in the regulation. There are important and sometimes vast differences between Europe, North and South America, Africa and Asia in what can be done and how it can be done. For all that people talk of globalisation, and some products and services achieve it, it is not yet well advanced in the policy processes, they are still deeply set in national cultures. Many of the debates are extremely detailed, you require a passable knowledge of telecommunications, economics and competition law even to read the documents. This favours the big players who have substantial regulatory teams and can buy in consultants, economists, lawyers and the like. It allows them to produce massive documents and obliges governments and regulators to respond at the same sort of level of detail. They have not so much achieved "regulatory capture" as raised a barrier to entry, so that only the wealthy, the knowledgeable and the long-lived can enter the game. Some people argue that users should confine themselves to a few broad principles in their representations. However, there is no proof that this works and considerable evidence that it does not, at least in countries where lobbying and litigation prevail. One problem is that the incumbent operators, fixed and mobile alike, all claim to promote those same high level principles. They favour competition, market opening, universal access and ICTs as a spur to economic growth. They do not say directly that they do so only on terms that favour themselves and disfavour their rivals. The established operators know the rhetoric and they can argue it very well. They can commission reports that appear to prove that they are achieving or will achieve those principles and the policy goals of the country. They will and do lobby at every level, from the lowest functionary in the NRA to the head of state. They will wine and dine politicians to ensure that their willingness to support political objectives is well understood. They will present choices to ministers that, if they want to achieve world class telecommunications, they need a world class national champion at the expense of some small delay in competition or some small competitors. The problem for users is how to counter the overwhelming power of the self-serving propaganda of the operators. It can be achieved at two levels, but grappling with them in the detailed policy debates and at a higher level in the setting of goals and objectives. Governments are sufficiently strong in Asia to be able to exert their will. They are better able to look at the wider picture and to have their view prevail. In the USA or in Europe, the government cannot draw breath without the operators being aware of it and considering what to do in response. Radical change is not easily on the agenda because of preemptive strikes by operators. There is important independent analysis undertaken by the OECD through its secretariat and, to a much lesser extent, by the ITU Strategy and Policy Unit. Equally, university centres can be useful if they are not captured through sponsorship by operators. However, they need evidence and analysis, including a knowledge of the realities of the market, with access to real users. You cannot escape the arguments, you can only work to find ways of maximising your success at all the different levels, political, regulatory and commercial. You have to consider the time frame whether the issue can be dealt with in real-time or only after the event. |
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