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Regulation and Spectrum Policy

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© Copyright Ovum Consulting 2009
Regulation and Spectrum Policy
Open Mobile Summit
10 June 2009
Stewart Anderton
020 7551 9153
Ovum Consulting
stewart.anderton@ovum.com
2
© Copyright Ovum Consulting 2009
Agenda
EU Framework Review
EU Institutional reforms
Functional separation
Spectrum: policy and spectrum demand
Internet rights
3
© Copyright Ovum Consulting 2009
The path to the EU Telecoms Regulatory Framework reform
2005 2006 2007 2008 2009 2010
Adoption by the
Commission of
proposals
Negotiation in EP and Council
Transposition of
directives in member
states?
Adoption by the
Commission of
revised
Recommendation on
relevant markets
Call for input on
Directives and
Recommendation on
relevant markets
Commission
communication launching
public consultation
Draft revised
Recommendation on
relevant markets
Three possible scenarios:
1) Agreement is found on 12 June 2009 (next
meeting of Council of Telecoms Ministers)
2) The EP and Council enter a period of conciliation
which could result in a deal albeit with a slight delay
3) No agreement is found and the entire package
sent back to the drawing board under a new EU
parliament in the Autumn
Application of Recommendation
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© Copyright Ovum Consulting 2009
EU Framework Review: an update
A range of consumer protection
measures
Consumers will have the right to port their
number (both fixed and mobile) within 1 working
day
Consumer contracts must specify information on
the minimum service quality levels, as well as on
compensation and refunds if these levels are not
met.
Functional separation as ‘a remedy of
last resort’
A national regulator can use this tool as an
exceptional measure which must be first agreed
with BEREC.
Spectrum policy
Harmonisation measures to promote use of
digital dividend for wireless broadband
Flexibility to allow innovative spectrum use –
especially to overcome the broadband divide
New GSM directive will allow re-farming of the
900 MHz band
Next Generation Access
Specific guidelines will follow but essentially
‘riskiness of investments’ will be taken into
consideration so a fair rate of return can be
earned
Balance between infrastructure and service
competition re-assessed. New rules on sharing
of passive elements (ducts, poles etc.)
Institutional reforms
Harmonisation measures: the EC gains the
power to oversee remedies proposed by NRAs
to avoid inconsistent regulation that goes
against the single market. Binding decisions
could follow…
BEREC will replace ERG and decisions taken
by a simple majority for opinions and two-thirds
majority in other cases
Recognition of the right to internet
access…
No restrictions on internet access without prior
ruling by judicial authorities
Due to content rights issues
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© Copyright Ovum Consulting 2009
Institutional reforms
© Copyright Ovum 2009
EECMA BERT BETR GERT BEREC
European Electronic
Communications
Market Authority
Commission Proposal
of November 2007
To replace a “defective”
ERG
Established by
Regulation under
Community law with
own budget
ToR include Network &
Information security
A budget of €10m in
year 1 and €28m in
year 3 (2012)
Body of European
Regulators in
Telecoms
European Parliament
First Reading
September 2008
ToR reduced: No role
on security, minimal
role in spectrum policy,
Commission and NRAs
“obliged to take utmost
account of views and
opinions expressed”
Precise funding to be
agreed but in
principle1/3 from EU
budget, 2/3 from NRAs
Body of European
Telecoms Regulators
(The Body)
Commission Revised
Proposal November
2008
ToR further reduced:
Commission will not be
obliged to take utmost
account of views and
opinions expressed”
Budget of €3.5m in
year 1 and €5.5m from
year 2
Group of European
Regulators in
Telecoms
Council Common
Position February 2009
To focus on market
analysis procedure
(Article 7). NRAs would
need to justify
departing from GERT
opinion on a particular
remedy
Established by
Regulation but not a
Community Agency or
with a legal personality
– an advisory group of
NRAs
Body of European
Regulators for
Electronic
Communications
Outcome of Co-
Decision in May 2009
Will replace from
summer 2009 the ERG
Decisions will be taken
by a simple majority (or
2/3 majority) prepared
by an independent
office with expert staff
NRAs must consult
BEREC before taking
decisions
NRAs should have
greater independence
from political
interference
1st 2nd 3rd 4th 5th and final!
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© Copyright Ovum Consulting 2009
Degrees of separation
Accounting separation
Functional separation
Structural
separation
Separate ownership
Independent governance
and operations
Accounting rules for
regulatory controls
Accounting Separation is the preparation of separate ‘sets of financial statements’ for different
business lines of the dominant operator. Its objective is to provide transparency over the
interaction and transactions between those lines (e.g. intercompany transfer pricing)
Functional separation requires a vertically-integrated operator to establish a business unit to
service its upstream wholesale customers which is separate from its own downstream
operations. Via operational and management separation this is aimed to ensure the provision
of fully equality access products and to facilitate the monitoring of anticompetitive practises
Structural separation ( “ownership unbundling” or “divesture”) requires the vertical integrated
operator to separate its network infrastructure from those units offering services using this
infrastructure.
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© Copyright Ovum Consulting 2009
Functional separation
Functional separation contains elements of behavioural and structural remedies
Benefits
may facilitate control of discrimination and anticompetitive behaviour
reduces the level of information asymmetry available to allow/enable anticompetitive practises
provides incentives for engaging in efficient pricing at wholesale level
more flexible - the boundaries of FS can be changed in time if things don’t work as expected
Costs
the network company may still have incentives to discriminate against downstream competitors
Increase transaction costs between two part of the business
requires a strong regulator and has significant implementation costs
Questions
impact on investments decisions
NGN deployment might change network architecture radically in a way that is difficult to predict today
what’s access in an NGN world?
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© Copyright Ovum Consulting 2009
Spectrum policy - 1
Digital Dividend (UHF Bands IV and V: 470-
862 MHz)
Ongoing work in EC, ERG and the Radio
Spectrum Policy Group (RSPG) consultation1
closes 30th June and provides summary of
national status; CEPT and WRC also.
Primary interest in 790-862 MHz (the 800 MHz
band). Lower digital dividend bands more suited
to broadcasting
Opportunities for digital broadcasting, wireless
broadband, mobile multimedia/TV and other
services
Harmonised policy needed to maximise
economies, support ecosystem and reduce
cross border interference
Technology neutrality policy is expected
DTT / migration programme varies by country
A technical and socio-economic challenge to
achieve optimal solution
EC study on digital dividend in process
1
http://rspg.groups.eu.int/_documents/documents/meeting/
rspg19/rspg09_272_draft_Opinion_digitaldividend.pdf
2.6 GHz mobile expansion band
Allocated for future mobile broadband
services by ITU World Radio
Conference.
Attractive for UMTS/LTE and mobile
WiMAX
Spectrum has been allocated in some
countries (HK, Norway Sweden), other
awards planned for late 2009 and
2010
Complexities may cause slippage. E.g
lengthy consultation processes;
litigation by operators, uncertainty
about political / regulatory objectives
LTE and HSPA community keen to
use the band …. and the 900MHz
band too.
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© Copyright Ovum Consulting 2009
Spectrum policy - 2
One argument for the use of DD and
900MHz spectrum is to help overcome
broadband coverage gaps
900 MHz band
Allocated to GSM in most of Europe
Reallocation complicated by existing
licences e.g. UK 900MHz spectrum held
by O2 and Vodafone
… but what is the demand for spectrum?
Commitment to move to technology neutrality – opening up for UMTS900, WCDMA and LTE
Boost WCDMA deployment, leading to est. €1.6 billion capex savings
Ovum UMTS900 study for GSMA:
Advantages for rural coverage and in-building reach
UMTS900 offers between 50% to 80% percentage increase in the coverage area per Node-B
(km^2) compared to UMTS2100, leading to capex and opex reductions
UMTS900 overlay network can improve ‘coverage holes’ in today’s UMTS2100 networks
Interest in 900 MHz band for LTE services – for same reasons…. Technology neutrality
Harmonised use helps ecosystems
Source: http://www.ant.developpement-durable.gouv.fr/article.php3?id_article=396
Gaps in ADSL coverage – typical example in France
20km
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© Copyright Ovum Consulting 2009
Mobile broadband – demand for spectrum
Huge growth in mobile broadband take-
up, since 2007 – and forecast to continue
Stimulated by devices with improved user
interfaces, new applications, strong
marketing and (too?) low prices
28% 3G broadband users use mobile BB
exclusively as their consumer broadband1
But – talk of mobile broadband providing
10’s Mbps performance are misplaced
Challenges:
User expectations for a consistent
performance
Cell density
Backhaul demand – FTT Node?
Universal / national coverage
Harmonised policy needed to enable
devices and services economies of scale
1 Ovum report for UMTS Forum: LTE Mobile Broadband Ecosystem:
The Global Opportunity
Total Mobile Broadband Users - Top 10 in Europe
0
20
40
60
80
100
120
2008 2009 2010 2011 2012 2013 2014
Connections(Million)
Germany Italy UK France
Spain Russian Federation Poland Netherlands
Belgium Austria
Source: Ovum
Source: LSTI
LTE Cell Download
Performance
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© Copyright Ovum Consulting 2009
Internet rights
On 6 May 2009 the EP unexpectedly
decided to reinstate an amendment relating
to Internet rights – something the Council
has so far been against.
Amendment 138/46 forbids the
disconnection of Internet access without
judicial oversight.
Consumer rights activists were unimpressed
because the wording allowed the decision to
be made without requiring the intervention of
a court
Regardless of the net neutrality issues – the
decision will affect the mobile services:
product definition – can ‘all you can eat’
packages be sustained?
pricing vs performance vs QoS
The issue is hot in France and the UK:
ISPs are reluctant to act as the middle
man
France: Three strikes and
you’re out!
UK: Digital Britain/Digital
Rights Agency
Law was passed on 14 May. It creates an
agency that can block users internet access
for 2 – 12 months for persistent downloading
of copyrighted material. No court is
consulted.
ISPs may be required to collect information
on internet users that repeatedly download
copyrighted material and to make that
information available to rights holders
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© Copyright Ovum Consulting 2009
In summary
The new EU Framework review:
is the culmination of detailed debates – but is ultimately dependent on the NRAs to make it succeed
is consumer-centric, which may be a challenge for operators and service providers
if approved by the Council of Telecoms Ministers on Friday, will take until mid/late 2011 to transpose
into national legislation
Provides the basis for significant increases in mobile broadband services.
But….
the business model for mobile broadband is still immature and developing
HPSA is preparing the route for LTE, which will provide the opportunity for capex and opex reduction
WiMAX is finding a role in Europe to provide services to areas poorly served by ADSL
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© Copyright Ovum Consulting 2009
Thank you