The CRTC has issued a wireless code for operators in a bid to make it easier for subscribers to understand their contracts and their basic rights

Canada’s telecoms regulator the Canadian Radio-television and Telecommunications Commission (CRTC) has issued a code of conduct for mobile operators in a bid to make it easier for subscribers to understand their contracts and their basic rights.

The code will apply to new contracts for smartphones, tablets and other mobile devices starting on December 2, 2013.

The CRTC recently undertook a public consultation, attracting over 5,000 participants. The code addresses the main frustrations that Canadians shared with the CRTC, the regulator said. These included the length of contracts, cancellation fees, roaming charges and other industry practices.

As a result, the CRTC’s code will enable consumers to terminate their wireless contracts after two years without cancellation fees, even if they have signed on for a longer term contracts; cap extra data charges at $50 per month and international data roaming charges at $100 per month; and have their smartphones unlocked after 90 days, or immediately if they paid for the device in full.

In addition, consumers will be able to return their smartphones within 15 days and specific usage limits if they are unhappy with their service; accept or decline changes to the key terms of a fixed-term contract and they will receive a contract that is “easy to read and understand”.

The code will apply to all service providers in Canada.

“Every day, Canadians rely on wireless devices while in their homes, at their jobs, at school or travelling abroad,” said Jean-Pierre Blais, chairman of the CRTC. “The wireless code will contribute to a more dynamic marketplace by making it possible for Canadians to discuss their needs with service providers at least every two years.”

“The wireless code is a tool that will empower consumers and help them make informed choices about the service options that best meet their needs. To make the most of this tool, consumers also have a responsibility to educate themselves,” he added.

In April this year, three of Canada’s smaller operators announced their withdrawal from industry body the Canadian Wireless Telecommunications Association (CWTA). Wind Mobile, Public Mobile and Mobilicity voiced their mounting frustration with the CWTA’s “consistent bias” in favour of Rogers, Bell and Telus on a wide variety of issues.

The LTE North America conference is taking place on the 21st-22nd November 2013, in Dallas, Texas, USA. Click here NOW to download a brochure for the event.

The impending EU roaming legislation will likely affect operators from 2015

Starting this week, European operators are looking at the development of a coherent strategy to prepare for the arrival of roaming MVNOs in 2014. From May 14 to June 3, the Body of European Regulators for Electronic Communications (BEREC) is holding a public consultation on draft guidelines in relation to regulated retail roaming services.

The latest set of regulation proposals, if implemented, will bring fundamental change to the structure of the European roaming market, requiring European mobile network operators to open their networks to providers of voice and data roaming services acting as MVNOs, from July 2014.

The new Roaming Regulation includes a provision to allow retail customers to request roaming services from a separate roaming provider than the one providing their domestic mobile services – a process known as decoupling. In particular, domestic providers are required to enable their customers to access regulated voice, SMS and data roaming services provided as a bundle from any alternative roaming provider. Domestic and alternative roaming providers must also allow their retail customers to access local data roaming services provided directly on a visited network – known as decoupling in the visited country.

Two types of decoupling models are considered in the regulation. For the first type of decoupling, where regulated voice, SMS and data roaming services are provided as a bundle, the Single-IMSI solution has been chosen. Under the Single-IMSI proposal the separate sale of roaming services is technically still provided by the domestic provider , which serves as the host mobile network operator to the alternative roaming provider. The separate sale of roaming services is provided on a wholesale basis to the alternative roaming provider, which resells the services to the roaming customer at the retail level. This basic option of resale of retail roaming services does not allow the alternative roaming provider to control which visited networks are to be used in preference to others.

For the second type of decoupling – data roaming services provided directly on a visited network – the basic requirements are the implementation and activation of the processing of data roaming traffic in the visited network and the requirement not to prevent the manual or automatic selection of a visited network.

Paul Lambert, Senior Analyst at Informa Telecoms & Media, said that based on past experience with roaming-regulation proposals, operators should expect the roaming market to change as of July 2014 in the ways described.

But he notes that although the proposals lay the foundation for an intensifying of competition in the European roaming market, there is at present little appetite – if any – among telecoms and non-telecoms firms to enter the market as roaming MVNOs. “Although this is likely to change as July 2014 nears – presuming the regulation in its current form comes into effect – European operators’ roaming revenues don’t look set to be eroded by new roaming MVNOs until 2015 at the earliest,” he said.

The main strategic choice operators face is whether to actively recruit roaming MVNOs for voice and/or data services, or simply comply with the bare-minimum requirements of the regulation.

“Operators have to decide if they see a benefit in extending their reach into other European markets by setting up their own roaming MVNOs.
“Given the strong likelihood that the regulation will come into effect in its current form, operators should seriously consider whether their roaming interests will be best served by actively pursuing agreements with the companies that would most benefit from entering the European roaming market as MVNOs,” Lambert added.

The Galaxy SIII: How much is it really worth?

US operator T-Mobile has revamped its retail offering, abolishing handset subsidies for premium devices in favour of an interest-free scheme that separates the cost of the device from the cost of network service. Annual  service contracts have also been withdrawn. The pricing overhaul is expected to be one of a number of announcements made by T-Mobile at a press event later on Tuesday, although the changes have already been made on the operator’s online retail portal.

Customers who want to buy Samsung’s flagship SIII smartphone will have to make a downpayment of $69.99 and 24 subsequent $20.00 payments. They can also opt to pay $549.99 for the device up front. On Verizon Wireless the SIII is available for $199.99 on a two-year contract, although Verizon’s online store suggests that price has been cut from $599.99.

Financing plans for devices are popular in a number of emerging markets, where consumers may have comparatively limited spending power. But in recent years there has been a trend towards financing plans in mature markets as well. Informa Telecoms & Media has identified 140 operators using such plans around the world.

Handset subsidy has long been viewed by operators in these markets as a cycle of dependency that needs to be broken. Historically operators have been wary of changing their stance for fear of losing customers to competitors that retain subsidies. But  an increasingly challenging economic environment coupled with regulatory pressure on longer-term contracts that allow subsidies to be recouped now seems to be changing the picture.

The gamble for operators is that cutting annual contracts, as T-Mobile has, might encourage greater churn among the crucial high-spending segment; the upside of device subsidy was greater operator control over the customer.

Skype is being pressured to register as a communications operator

French communications regulator ARCEP was gunning for internet telephony player Skype this week, which it suggests is committing a criminal offence by not declaring itself as a communications operator.

ARCEP said it has requested several times that Skype declare itself as an electronic communications operator, but the company has failed to do so thus far.

“The fact of engaging in the business of electronic communications operator, and particularly the fact of providing a telephone service to the public, also implies compliance with certain obligations, which include the routing of emergency calls and implementing the means required to perform legally ordered interceptions,” the regulator said. “Failure to comply with this obligation does, however, constitute a criminal offence.”

The French regulator has since moved to report Skype to the public prosecutor in Paris.

According to Luca Schiavoni, policy and regulation analyst at Ovum, this latest move is an example of the uncertainty that surrounds the definition and regulation of VoIP services. VoIP is exercising increasing pressure on voice revenues, and providers of these services should expect to be regulated in the same way as traditional telephony.

“The French telecoms sector keeps showing signs of strengthened competition across fixed telephony and broadband, where VoIP is increasingly being taken up instead of traditional voice services. Ovum predicts that from 2012 to 2020 VoIP will cost the global telecoms industry $479bn in lost cumulative revenues.

“Regulators must resolve the dilemma that seems to be the basis of the conflict between Skype and ARCEP: whether or not a player such as Skype can be seen as an electronic communications provider, as defined in the EC’s Directive of 2002. There needs to be more clarity in the way electronic communications services are defined, and a simplified and standardized framework where possible.

“The slow progress toward a common treatment in the EU may slow the deployment of VoIP because providers must come to terms with the different regulatory environments. Certainly VoIP is one area where a harmonised approach is desirable, and we expect such an approach to be established as telephony services gradually migrate toward VoIP technology.”

Telenor did not bid for spectrum in Mumbai in the November 2012 when the 2G licences were reauctioned

Norwegian operator group Telenor will cease operating in Mumbai, after being told by India’s Supreme Court to shut down its operations in the city. The operator’s Indian subsidiary, Uninor, will lose around 1.84 million customers as a result. Its total subscriber base in India was 42.07 million at the end of December 2012, according to Informa’s WCIS.

In February 2012, the country’s Supreme Court cancelled 122 2G licences that had been allocated in 2008 amidst allegations of corruption. While Telenor appealed this decision, the Supreme Court has now ruled that all GSM licences that were sold in 2008 will remain cancelled. Telenor said it would not appeal this ruling.

Telenor did not bid for spectrum in Mumbai in November last year when the 2G licences were reauctioned, claiming that the reserve prices were set were too high. In fact no operators bid, meaning that Mumbai, along with the capital Delhi, will continue to be served only by the country’s incumbent operators, such as Bharti Airtel and Vodafone.

Telenor will have the opportunity to bid for spectrum in Mumbai in March this year, when the remaining 2G licences will be auctioned once again. However, a spokesperson told Telecoms.com that Telenor will not participate.

“With no temporary license made available until the next auction, we are not participating,” the spokesperson said. “We have close to two million customers in Mumbai currently, and it is not an option to start from scratch.”

They added that Telenor kept its Mumbai services operational in the hope that the price would come down and that it would have been granted a temporary license until a new auction was finalised.

“As such, the impact of the ruling is that we are continuing operations in six circles of Maharashtra and Goa, Gujarat, UP East, UP West, Bihar and Jharkhand and Andhra Pradesh,” added the spokesperson. “Fresh spectrum for 20 years has already been secured for these circles in the auction held in November 2012. However, we are regrettably closing operations in Mumbai.”

Anubhuti Belgaonkar, senior analyst at Informa Telecoms & Media, sympathised with Telenor’s plight.

“Telenor now has no licence, no operations and no customers in Mumbai. Had it been allowed to continue operating in the circle, it would at least have had a customer base as a foundation, but now it has  had to close its network down completely,” she said.

Red tape is hindering the telecoms sector in some countries more than others

Competition and investment in the global telecoms industry is being held back by inconsistent regulatory frameworks, according to research firm Ovum.

The firm assessed and ranked the regulatory performance of 11 countries across three geographic areas in the second iteration of its annual Regulatory Scorecard. It noted that countries ranking low across the board were those with generally less competitive markets. The lack of competition is often due to the uncertainty around the frameworks that are in place, according to analyst James Robinson.

“In Japan and South Korea, for example, the relationship between the government and the regulator could be perceived as too close. Independence from political involvement is important in ensuring a credible national regulatory authority (NRA), whose decisions may be challenged through an effective appeals process.”

Although Ovum’s highlighted similarities between countries within the same geographic region, it said that significant differences occur across regions in most areas of regulatory activity. For instance, the regulation of the wholesale fixed sector differs from country to country, and from region to region, mainly due to the varying uptake of copper- and fibre-based fixed broadband.

Countries within the same region are often ranked very differently. For example, Mexico appears significantly below its counterparts in South and Central America for almost every respect of the regulatory environment.

“While Colombia and Brazil are making progress in setting out a stable framework which reflects the industry’s developments, the regulatory process in Mexico appears confusing and slow. This inevitably leads to inefficiency in most areas of regulation,” said analyst Luca Schiavoni, the other co-author of the Scorecard.

By contrast, spectrum policy is one area in which current best practice can be observed across most countries, the report stated.

Consumers complained that they were not warned about possible price rises

UK regulator Ofcom has launched a consultation into methods of protecting consumers from mid-contract price increases for fixed, broadband and mobile services. The consultation comes on the heels of a review in which Ofcom studied more than 1,600 consumer complaints in a six-month period about changes in tariffs for what consumers believed were fixed-price contracts.

The regulator is proposing that customers should be allowed to walk away from their service contracts without penalty should their service provider decide to raise the price of the contract during its term.

“This proposed change would address consumer concerns that it is unfair that providers are currently able to raise prices, while they themselves have little choice but to accept the increase or pay a penalty to exit the contract,” Ofcom said in a statement. “Ofcom would also expect providers to be transparent about the potential for price increases so consumers can make an informed choice when entering the contract.”

Ofcom added that it had considered a blanket ban on price rises in fixed contracts but thought that such a move might be a breach of European legal frameworks.

Northstream predicts that during 2013 European regulators will increasingly accept operator consolidation in order to facilitate better market dynamics and growth for both larger and smaller players. This will be the catalyst to revitalise the European market, boost network investments moving forward and allow regained competiveness and sustainability.

For quite a while, third and fourth place operators in many European markets have been struggling to match the profitability of their larger cousins; and have often been driving prices down in the attempt to alleviate market pressure. This has triggered a spiral effect where leading players have had to follow, causing new price reductions, and so on, and leaving lesser room for increased infrastructure investments. As of today, despite growth in users and traffic, overall combined operator revenues in Western Europe are at 2005 levels. At the same time, demand for faster data access, improved coverage and higher quality requires increased investments in network modernisation and LTE. That equation is hard to balance. In an attempt to compensate for flat lining revenues; European operators have increasingly adopted network sharing to reduce CAPEX and OPEX. However, these models have not been sufficient in easing margin pressure. This is partly because regulations have limited the level to which networks can be shared.

In complete contrast, the mobile network business in the U.S. is much healthier and the two leading players, AT&T and Verizon, dominate the market.  AT&T recently announced it would increase CAPEX 10 per cent to $22bn in 2013. The operator said it would also maintain that level for another two years. Presumably, much of this will be invested into a continued LTE network upgrade. This has been possible due to less price intensive competition; and increasing revenues and ARPU as a result of new service launches. For example, AT&T has launched a program called Mobile Share, enabling sharing of a data plans across devices. This service allows them to push LTE subscriptions and in turn raise ARPU. Consumers also do not appear to be shying away from spending a little more for the increasingly valuable service level they enjoy.

Investors and operators have understood that some level of consolidation will ultimately help market dynamics. Now we believe the time has come when European regulators will fully grasp this as well. Otherwise the region will continue to fall behind in LTE network rollout. This is to the detriment of not only operators, but also for consumers.

See Bengt’s previous predictions:

#1 – Advent of Device sector dominance to impact evolution of Mobile industry R&D

Paolo Bernado

The Brazilian government will continue to require that a significant portion of telecoms network equipment is manufactured locally as it seeks to harness the sector’s growth to create jobs and local wealth, according to the country’s minister for communications.

Speaking at the Ericsson Business Innovation Forum in Sao Paulo on Wednesday, Paulo Bernardo said that targets for wider deployment of broadband require sustained investment from both public and private sectors. As an example he pointed to more than 80,000 rural schools that must be given connectivity inside the next three years.

He said that, in Brazil, the state is responsible for over 50 per cent of investment in innovation and was committed to creating the right environment for continued private sector participation. In return, he said, the government expects technology developed locally to be available at a low enough cost to make connectivity across some of the most challenging geography in the world truly viable.

“The treasury has been removing taxes from equipment and civil construction works because to reach our objectives, and our national broadband plan next year, we need infrastructure available at fair prices,” he said. “We have policies that will demand products made in Brazil because it helps create jobs and trade. In my opinion this is a policy that is here to stay; it is reasonable for companies to invest to develop here in Brazil.”

Sergio Quiroga da Cunha, Ericsson’s head of Latin America said that Brazil’s original suggestion that all LTE technology deployed in the country be locally produced simply wasn’t possible. While the vendor does manufacture equipment and conduct R&D locally, and is the only large network vendor to do so in its own factories, he said, many components have to be imported. Instead the firm gets tax breaks for guaranteeing that its products contain up to ten per cent of locally produced hardware, he said.

But investment alone cannot guarantee that Brazil’s targets will be hit. Quiroga da Cunha said that a fund for the universalisation of telecoms in Brazil, created by collecting 0.4 per cent of operator revenues since currently sits at almost $5bn but is not being tapped because “nobody is sure how to use it”.

One thing is clear, he said: greater density of mobile networks is essential in Brazil. Currently there are only 60,000 cell sites in the country and, while much of Brazil is sparsely populated or uninhabited, this number needs to more or less doubled before the kind of coverage and capacity that the market requires is available.

One problem, he said, is that “site acquisition is a nightmare. 99 per cent of the time you can be guaranteed a refusal for planning applications for a new site.” It was a point echoed by Minister Bernardo, who said he was constantly battling with regional and municipal governments whose planning legislation made it impossible to expand and densify the network. “We have many cities where they say we cannot have antennas near schools. But how can I connect a school if not with an antenna nearby? We need to change this, the law has to help us.”

The LTE Latin America conference is taking place on the 13^th-14^th May 2013 at the JW Marriott Marquis, Dubai. Click here to pre-register for the event.

The focus was on two questions: Do you think it would be possible for Asean to become a free roaming region? And if so Why? And what steps need to be taken for Asean’s telcos to agree to a no roaming fee agreement?
Whilst ‘free roaming’ is not completely free calls, most likely this is a quirk of translation, the idea of lower roaming calls being championed by a regulatory spokesperson certainly has resonance in the European region.

The stance taken by Tifatul Sembiring is very similar to that taken by Neelie Kroes, the European Commissioner for Digital Agenda. Miss Kroes has expressed her desire that the EU’s roaming rates reach parity with national markets and has undertaken legislation action to achieve this including three rounds of implemented regulation. Clearly legislative bodies around the world have begun to see the EU approach as something of a blueprint for their own actions toward roaming and as such there may well be the impetus to drive down roaming costs in the ASEAN regions.

However one must also consider the operator perspective. I previously wrote about immense profitability of roaming, particularly international roaming. As such there is little impetus from the operator perspective to make ‘roaming-free’.

In Europe regulation has brought some reduction in costs. This legislation has forced operators to cut both retail and wholesale rates and most recently has put in place processes to open the market to competition. But these developments have only come after repeated requests and exhortations by the EU to reduce roaming rates were ignored. This process has been ongoing since 2005 and clearly demonstrates the level of resistance surrounding reducing roaming rates.

As well as operator resistance to retail roaming rates reductions we must also consider the wholesale market in ASEAN. If retail rates fall what happens to the charges made between operators to interconnect and payments made to international transit providers (although this would be less of an issue between ASEAN countries) to facilitate the roaming call? Costs must be met somehow.

Sembiring’s concerns also focus upon cross border roaming where calls are unintentionally connected as roaming (inadvertent roaming). His argument follows that without roaming charges there would be no inadvertent roaming. But cutting roaming charges it not the only option to tackle this problem. In Latin American countries have taken a different approach including providing specific border tariffs and SMS warnings when roaming is about to occur. As between 4-5 per cent of the population of Latin America live in border regions this is a particular issue for them.

The LatAm region is of further interest in regard to pan-regional initiatives. The Integration of Regional Infrastructure in South America (IIRSA) group has worked toward delivering a pan-regional roaming tariff called, quite unoriginally, the South American Roaming Agreement, which provides a discounted rate between LatAm countries but at a slight premium to a national call. This provides a fairer proposition to customers while keeping operators relatively happy.

There are some justifications for radically cutting roaming charges. It is a mechanism to encourage consumers to make use of roaming services. As a heavily underpenetrated segment in roaming consumers react positively to cuts based on their high price elasticity.

Another justification is the potential that cheap roaming might encourage increased cross-border data use. As the most expensive form of roaming and the activity most likely to lead to bill shock (large unexpected bills while roaming) customers generally just turn off their device when out of the country. Reducing roaming fees might discourage consumers from simply turning off their data and roaming capabilities when abroad. The upshot of this would be greater use of data and the potential to generate premium revenues through data service purchase.

A further model of ‘free roaming’ is to use it as an incremental service revenue generator. In this model the sale of cellular services is not the aim but rather to drive uptake of other services that might not even be related to mobile. These models have been leveraged by multi-play operators as a mechanism to diversify and increase the perceived value of the services they offer, improving the richness of their service suite. In this way free roaming could be added as a loss-leader to generate revenue for a services or goods not directly related to the service being offered. This supplemental service approach can lose money or be nill-profit as its ultimate aim is to sell additional non-related services.

However with all of these models some form of payment and some form of differential between in-country and out of country charging is preferable. It is unlikely any one of these alternate strategies could be leveraged without a premium roaming charge being in place. As such it would appear Sembiring is posturing in much the same way that Kroes has done in the EU in order to encourage a process of reducing roaming costs from the operators within the ASEAN regions.

Vervaayen accused regulators of focusing too much on cutting prices and, in doing so, removing the incentive for operators to invest in next-generation networks.

His argument is not a new one and was similar to the message delivered by mobile operator CEOs at this year’s Mobile World Congress. But the fact that Vervaayen has chosen a colorful image of a “digital desert” to describe the scene in Europe suggests that the message from the telecoms industry is not getting through to governments and regulators. It is also a message that appears to have little resonance with the media.

Europe’s rise and fall
It has been clear for some time now that Europe’s telecoms technology and manufacturing industry is in decline. The likes of NSN, Alcatel Lucent and Nokia are struggling to remain profitable and have shifted most of their manufacturing into Asia. Huawei and Samsung have become global powerhouses in telecoms infrastructure and devices respectively and their success has been at the expense of the European players. The US wireless infrastructure business has collapsed even more spectacularly than Europe’s but North America as a whole has become a stronger and more influential player on the global telecoms scene thanks to the rise of west-coast Internet, software and device businesses.

Now, however, it’s Europe’s operators themselves that risk stagnation and ultimately decline. Companies such as Vodafone, France Telecom, Deutsche Telekom and Telefonica have always been viewed as global heavyweights. But a combination of saturated markets and economic downturns means that these companies are seeing their businesses stagnate in their core European markets. To protect their margins, these companies will continue to focus on cutting costs rather than growing revenues. Indeed, most of these operators seem more intent on selling their assets where they are either the third or fourth operator or where they own minority stakes rather than acquiring new ones.

So, to what extent should the European Union be held in any way responsible for the demise of the telecoms sector and what can or should European institutions do to help it?

Part of the problem lies in the fact that Brussels did so much 20-25 years ago to help Europe become the heartbeat of the global mobile market. The creation of GSM and associated spectrum allocations, the expansion into GSM1800 and the introduction of three- and four-operator markets enabled Europe to set the pace in the global mobile market. As European technology and policies were adopted in other continents, European companies followed and grew fat on the opportunities that they presented.

The reversal in the fortunes of the European players dates from the auctioning of 3G spectrum at the start of this century. 3G license fees took tens of billions of euros out of the European telecoms market.

The rise and fall has been less pronounced in the fixed business. The regulatory focus has been introducing competition via LLU and, at the same time, trying (with limited success) to persuade the incumbents to invest in next-generation access networks.

Brussels has not explicitly said that it is now satisfied with the level of competition in fixed and mobile markets although its policies do indeed suggest that this is the case. For example, there has been no attempt in LTE spectrum auctions to reserve frequencies for new operators. Furthermore, EU officials have recognized that EU consumers cannot assume that the price of telephone services will continue to fall as rapidly as has been the case in recent years and that the price of some services could even go up.

Populist policies
Despite all this, Brussels continues to give the impression – both via its words and its deeds – that it is regulating an uncompetitive sector.

The unrelenting pressure on mobile termination rates has led to the erosion of a huge revenue stream for telecoms operators. More recently, the European Parliament approved new EU roaming prices caps and the opening of this market to structural competition. Meanwhile, the pressure that it is exerting on fixed operators to upgrade their access networks to fiber as part of the “Digital Agenda for Europe” will require a colossal investment program with no guarantee of payback (although it should be noted that the Commission has now power to enforce its targets for fiber).

When it comes to LTE, Europe’s days of leading the world in terms of spectrum harmonization and launch schedules are long gone. Launches in Europe have been extremely low key and there is no commonly-agreed position across member states in terms of spectrum allocation and licensing.

It is almost as if policy makers in Brussels are failing to think through the implications of these policies, or non-policies, on companies – telecoms operators – which are already operating in competitive markets. Or maybe they are well aware of the implications but do not consider it either to be in their interests or their remit to factor this into their policies.

The language used by EU policy makers suggests that they still consider telecoms operators to be bloated, inefficient businesses with little or no interest in their customers. Neelie Kroes likened the response of European operators to the most recent action on roaming to that of naughty children and criticized them for the “outrageous margins” on roaming services.

The problem for European telecoms operators here is that Brussels is merely tapping into a populist impression – reinforced by the media – that telecoms operators are inclined, wherever and whenever they can, to rip off their customers.

The benefits that competition has brought to consumers and businesses as a result of strong and transparent regulation should not be forgotten (see fig.). Europeans have cheaper telecoms services than in many parts of the world because, typically, there are four or more operators competing to provide different services. We take affordable, reliable mobile, telephone and broadband services for granted. And when it comes to specific policy areas – for example, roaming – Europe has (belatedly) done an excellent job in bringing down excessive prices. In doing so, it has provided one of the very few examples of where Brussels has developed popular policies in a market where national politics has failed.

Assessing regulatory trends and the health of the European telecoms sector from the 1980s to the 2010s

(Industrial) policy vacuum
So, if European politicians are more interested in populist policies and focus solely on the interests of consumers, who is going to look after the wellbeing of European operators, network vendors and device manufacturers?

For the time being, it doesn’t look as if any European institutions or senior policy makers are taking up the cause of Europe’s beleaguered telecoms sector. But at some time, sooner or later, there will be a groundswell of support for policies that support Europe’s telecoms companies as well as its citizens.

There could be any number of catalysts. It could be the takeover of a large European operator group from a telco in the emerging world (last month, Mexico’s America Movil made an approach for Dutch telco KPN). Or it could be the takeover of Nokia, Europe’s last handset manufacturer; or of NSN, one of the world’s top three wireless infrastructure vendors. Both have announced huge job cuts in recent months.

Alternatively, the realization that Europe is in decline could come from an assessment of the state of the region’s digital infrastructure. The rollout of fiber is painfully slow because of uncertainty over the extent to which incumbent operators will be forced to open access to other service providers. Europe was the first region in the world to roll out mobile broadband networks using HSPA but, in many countries, network coverage and capacity leave much to be desired. And when it comes to LTE, Europe is well behind the US, Japan and South Korea which, between them, account for more than 90% of LTE subscriptions.

The growing influence of US Internet companies is another theme which could provide a stark comparison with the state of Europe’s own technology giants. European telecoms operators have, until now, benefitted from the strong demand for fixed and mobile access to the Internet. But, as more people become connected, so the risk that they will use “free” services to communicate with each other, rather than buying operators’ voice and messaging services, will increase.

European telcos are trying to fight this battle on two fronts. Firstly, they are talking about working together on both technical and commercial issues to build a platform for innovation that is an alternative to third-party developers and to explore the potential for entering into revenue or cost-sharing relationships with so-called “over-the-top” players. Secondly, they are looking to change the way in which they charge for data (Internet) access to compensate for the loss of voice and messaging revenues.

However, their attempts to collaborate are being frustrated by the threat of intervention from the EU on competition grounds. The Commission has already asked for information about the activities of the so-called E5 group of operators – Deutsche Telekom, Telefonica, France Telecom, Vodafone and Telecom Italia.

The question of how operators charge for data access touches on the broader theme of net neutrality. The Dutch regulator has already stopped its mobile operators from charging their customers additional fees for services such as VoIP. The Commission itself has not announced its own net-neutrality policy yet although Neelie Kroes did say last month that she would be looking to establish a framework which both ensures that Internet users can always choose full Internet access and allows operators to offer different types of packages.

Digital scapegoat?
However guilty European institutions might be of falling short in supporting our telecoms industry, the harsh reality is that the demise of our telecoms sector is largely due to two other factors:

1.An evolution away from telecoms-centric standardization to Internet standards and standards-making bodies.
2.The shift to lower-cost manufacturing in Asia and the growing power and influence of Asian technology groups.
Back in the days of GSM, standardization initiatives and intellectual property rights gave European firms a massive advantage over Asian and, to a lesser extent, US technology firms. But, over the years, this advantage has been eroded as standardization initiatives have become more global – and the center of gravity for industry standards has shifted over the Atlantic to North America as the telecoms industry has started to embrace IP.

In the case of intellectual property rights, European firms still have strong portfolios of patents for mobile telephony but, in a smartphone age, patents in IT and computing can be equally important and leading players need to be strong in both areas.

The shift to low-cost manufacturing in Asia has been going on for a long time and has helped European companies to lower their costs. But the growing power and influence of ZTE and Huawei has been hugely damaging to them; with their lower staff costs and access to attractive lines of credit, it has been extremely difficult for the European firms to compete. In handsets, South Korea’s Samsung has overtaken Nokia’s position as the world’s largest manufacturer.

Creating a climate for investment
So, the decline in the power, influence and profitability of European telecoms firms cannot, by any means, be blamed on regulation. But it is true to say that the regulatory focus on the interests of the consumer rather than the health and wellbeing of the sector as a whole has come at the expense of European telecoms firms.

The one bargaining chip that European operators retain in their discussions with regulators relates to the political objectives around high-speed broadband. Brussels realizes that, in order to achieve its political goal of modernizing Europe’s telecoms infrastructure, it cannot afford to completely ignore the interests of the firms that will have to build these networks in the near future.

In recent months, European operators have been talking to Neelie Kroes and other senior EU officials about creating a climate which will allow them to persuade their shareholders that there is a justification for stepping up investment in next-generation networks.

Their discussions will have included a number of the issues raised in this article.

Informa Telecoms & Media expects that, when the Commission puts its proposals before the European Union and Parliament in late 2012 or 2013, it will give telcos some freedom to offer different types of Internet services from just the “plain vanilla” access. This will, potentially, allow them to migrate their revenues away from voice- to data-dependency.

However, this will not in itself help the telecoms industry build a path towards recovery. The telecoms industry needs to do more to demonstrate its importance to European citizens – be it in terms of providing jobs, building infrastructure that makes countries more competitive or providing affordable mobile and broadband services – in order to help change the public perception about the telecoms sector. This is going to be the most effective way of influencing national and European regulators, and the institutions that they are accountable to, and getting them to understand that the European telecoms industry is not something that can be taken for granted.

Western Europe is to be overwhelmed by strict EU regulations

European operators will face a challenging time ahead as Western Europe is overwhelmed by strict EU regulations, with the price of voice calls falling by 46 per cent and data roaming services cut from average costs of around $4 to just $0.26 by 2014.

These regulations have been a long time coming with the EU attempting to threaten, cajole and even embarrass European operators into cutting roaming charges which in some extreme cases see mark-ups in thousands of percent.

Analyst Paul Merry, author of Informa Telecoms and Media’s latest analysis of the roaming market said: “The Western European market is expected to continue to grow but at a considerably slower rate than it had. The region is expected to generate $12.5bn by 2016, $6bn less than the Asia-pacific region over the same period.

European operators will also be heavily impacted by the decisions made in meetings between the European Parliament, the European Council and the European Commission on local break-out, also known as decoupling. This process involves giving access to alternate roaming providers that might include MVNOs or even manufacturers should they so wish – Apple has been touted as a potential alternate provider. Access must be provided to these players with owning operators using having to facilitate the process of porting their existing numbers so they can be used while roaming . This decision will effectively open the market to specialist roaming providers and MVNOs increasing competition for European roaming operators in a single broad sweep.

Merry continues, “The only reason Europe is not in freefall is due to a combination of the vagaries of the region which sees consumers being a relatively underpenetrated segment and one that is likely to be encouraged to experiment with roaming as prices fall and the exaggerated effect of economic recovery. This recovery, expected in the latter stages of the forecast period, has a disproportionate effect on roaming revenues. In effect the market saw an artificial and almost immediate drop in usage as the downturn took hold and the market recovery and growth over the forecast period is actually a reflection of the return to pre-downturn levels rather than an indication of the health of the roaming market in the region.

In contrast the Asia Pacific roaming market is being driven by a voracious demand for mobile services from the business sector in developing countries and less exposure to the global banking system. In addition the strong manufacturing basis in these countries is driving business travel as contracts are negotiated and sales established increasing the aggregate number of business roaming calls. These factors will combine to see a positive CAGR of 8.63 per cent in the region over the 2011-2016 period.

Undoubtedly the influence of regulation will have a paradigm shifting effect on the roaming industry in Europe but its reverberation will be felt throughout the world as legislators seek to encourage roaming use and protect end users from excess charging and bill shock using Europe’s approach as a guide.

Everything Everywhere says that service revenues would have grown were it not for the impact of MTR cuts in the UK

Everything Everywhere, the company formed by the merger of Orange and T-Mobile in the UK, has posted a drop in service revenue of 2.5 per cent to fall to £1.5bn in its first quarter earnings statement.

The firm blamed the drop on the impact of regulated mobile termination rate (MTR) cuts. Last year, the UK’s Competition Commission decided to increase the speed at which mobile termination rates must fall, from 4 pence per minute to just 0.65 pence per minute by 1 April 2014. It said that, excluding the impact of these cuts, revenue would have grown by 2.9 per cent.

Nonetheless, CEO Olaf Swantee was buoyed by the performance, and described its current churn rate, which stands at 1.2 per cent as “industry-leading”.

“We are seeing improved underlying service revenues, driven by rapid data revenue growth, as we successfully upgrade customers to smartphones and higher value postpaid agreements,” he said.

He added that the firm expects to make “major strides” improving its network experience, such as better signal sharing and faster 3G data services, when it launches its LTE services, which it is hoping to bring to market by the end of this year by refarming its 1800MHz, pending approval from regulator Ofcom.

“We continue to make progress in reducing costs and simplifying the business.  In the first quarter we initiated our network optimisation programme to streamline the number of network masts.

During the quarter, Everything Everywhere also completed on a series of other business integration projects including restructuring its head offic, the consolidation of the Orange and T-Mobile warehouses and handset supply chain and improved product availability. The firm plans to reduce its head office space by 38 per cent and Swantree said the operator remains on track to achieve its targeted £3.5bn  net present value (NPV) in cost savings by 2014.

To reduce the risk of this happening mobile operators in Europe are keeping the cost of wholesale mobile data high enough to deter any MVNOs from offering a service that is attractive to heavy data users. Wholesale prices tend not to be regulated so it is pretty easy for operators to set a pricing structure that would prevent, for example, an MVNO from setting a high retail price for SMS and voice services and a competitive price for data.

But what if regulators did start setting price caps for data wholesale tariffs? Might this be enough to encourage the likes of Apple and Google to enter the MVNO business?

This is precisely what the European Union is in the process of doing for roaming services. And if new players such as Google or Apple enter the roaming data business, as Informa Telecoms & Media believes they will, might this not give them the appetite – and a backdoor into – the national mobile data market?

New EU roaming proposals

In late March the European Parliament, Council and Commission agreed to new wholesale and retail price caps for roaming services for the period July 2012 to June 2017. The glide path for data roaming will see the maximum price of wholesale data fall to €0.05 per megabyte by July 2014 compared with a retail price cap of €0.20 per megabyte. These prices are interesting on two levels. First, the difference between the wholesale and retail price caps means that there is a significant opportunity for new players to compete in the data roaming market so long as they can build enough volumes to justify the investment in setting up a roaming MVNO. Secondly, the price of €0.05 per roaming megabyte is, according to research by Informa Telecoms & Media, about the same price that many mobile operators are offering MVNOs for national data services.

The new EU roaming regulations – which will be ratified within the next few weeks – is designed to help both existing “national” MVNOs and future “roaming-only” MVNOs – to compete with operators in providing roaming services to end users. In the same way that national MVNOs buy national voice and SMS services at a discount of around 50% on retail prices, they will now be allowed to buy roaming services at a discount of 50-70% on the retail price cap.

“Roaming-only” MVNOs will be able to enter the market from July 2014 by offering (voice, SMS and data) roaming services to people who want to stay with their existing operator for their national services. The Commission wants the industry to develop a technology which puts a second identity (dual-IMSI) on mobile users’ SIM cards which allows them to have separate providers of national and European roaming services while retaining the same number for both. There is a variation on this approach which relates only to data roaming. The concept is called “local break-out” with the idea being that when someone crosses an EU –border they can then subscribe, on the spot, to a mobile data service provided by one of the networks in that country. The visited network operator would set the price for the service but it would appear on the bill provided by the user’s home network operator.

European regulators are still trying to figure out the best technical approach for allowing these dedicated “roaming” MVNOs to enter the market. There is some concern that the cost of implementing the dual-IMSI approach will outweigh the benefits in terms of lower costs to mobile users.

Data offers the best opportunity for new players

But the local-breakout option is relatively straightforward and easy to implement from a technical perspective. The real question here is who will have the brand, the marketing reach and the distribution channels to pitch their roaming-only services to end users. We are doubtful that many existing MVNOs can compete in this space because they do not have good enough access to those mobile users who might be interested in buying a mobile-only data service. Another possibility is travel companies, insurance firms or airlines who could offer roaming packs on intra-European flights. But we believe that the most likely players to enter this space are either the operators themselves or smartphone OEMs via their application stores.

Most smartphone users today turn off data roaming when they arrive (or before they arrive) in a foreign country. With an activated data connection many data applications run in the background without the mobile user even benefitting from using service. So, it is possible to run up a high mobile roaming bill even without using the service because most roaming data price plans are charged on a per-megabyte basis.

This is frustrating for smartphone vendors because it means that their customers cannot use their devices when, arguably, a data connection could be most useful to them. There is massive pent-up demand for data roaming services because when people are away from home they could use the Internet for a whole range of communications, information and entertainment services that they may be able to access at home using other media. In the case of Google, no data connection means no advertising revenues.

Data roaming could also be a lucrative opportunity for players such as Apple or Google. By the end of this year there will be close to 100 million Android and 50 million iPhone users in Western Europe. The profile of iPhone and Android users correlates closely with mobile roamers because they are mostly high-end consumers and business users. Furthermore, both Google and Apple would be able to market roaming services via their applications stores, Google Play (formerly Android Marketplace) and Apple’s Applications Store.

Neither Google nor Apple has commented on this potential new opportunity but we think it inevitable that they will assess its potential. The easiest way for them to enter the market would be either to set up an MVNO business themselves and go around negotiating deals with operators in each country or, what  is more likely,  to work with an operator or MVNO (or MVNE) who already has these agreements in place.

If Apple or Google do enter the market, and their customers like the idea of buying a service from them rather than the operators, it would only be logical for them to look to start providing services in national markets. As we pointed out earlier, operators can use wholesale pricing approaches to prevent an MVNO from being competitive in the retail market. But such is the level of competition between operators in many European markets that it is quite feasible that one operator would take the view that it has more to gain than to lose by acting opportunistically and becoming the preferred wholesale partner of a smartphone OEM. Once this happens then Apple or Google will have the chance to become fully-fledged providers of mobile services.

Zhang admitted taking more than $1m in bribes over 15 years

A former deputy general manager at China Mobile has been sentenced to death by the Chinese state, having been found guilty of corruption.

Zhang Chunjiang, who was detained late in 2009, confessed to having accepted US$1.16m in bribes between 1994 and 2009 when he held senior positions at the Liaoning Provincial Postal Administration, China Netcom and lastly China Mobile, when he was also party chief.

The death sentence is suspended for two years and may be commuted to life imprisonment pending good behaviour, because Zhang confessed to the crimes, and the money was returned. Zhang has also been expelled from China’s Communist Party.

According to local news reports, the chief engineer of Chinese telecoms regulator the Ministry of Industry and Information Technology, Su Jinsheng, has also been detained in connection with the case.

A wide-ranging investigation into corruption in the Chinese telecoms sector was announced in May this year when it was announced that as many as 60 people were under investigation. Chinese media outlets have reported that a number of those detained have had their passports confiscated by China’s Central Commission for Discipline Inspection.

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Verizon wants the FCC to overturn its data roaming decision

Verizon Wireless is suing US telecoms regulator, the Federal Communications Commission (FCC), in a bid to have it overturn a decision forcing larger operators to share their data networks with smaller players. Verizon claims that the decision – passed by a 3-2 vote in April – exceeds the Commission’s authority and represents an “arbitrary, capricious abuse of discretion”. The telco is calling on the court to reverse the new regulations.

Under new rules approved by the FCC in April, AT&T and Verizon are required to share their data networks with smaller operators. Network sharing arrangements for voice calls are already mandatory; prior to the passing of the disputed regulation, network sharing for mobile data was arranged on a voluntary basis. The new ruling also means that network sharing prices will be set by the FCC.

At the time the regulation was passed, Verizon VP for public affairs, Tom Tauke, said the action represented “a new level of unwarranted government intervention in the wireless marketplace.” Verizon said it already had 40 data-roaming agreements in place and that it had also formed “an industry-leading spectrum-sharing partnership with rural carriers to expand the reach of 4G services in rural areas.” According to the FCC, AT&T and Verizon were the only telcos that voiced opposition to the roaming agreement.

Rural wireless carrier representative body, the Rural Cellular Association (RCA), has said that it is not surprised by Verizon’s response. President and CEO Steven K. Berry said that Verizon had fought competitive policies for a long time, adding that “they have opposed data roaming, they have opposed interoperability and they have opposed putting an end to exclusive handset deals.” According to Berry, the FCC’s authority “is clear, as the data roaming Order was adopted in light of the long standing recognition that the FCC has authority over the public airwaves and a duty to oversee their use in the public interest.”

Calling Verizon’s action the “equivalent of a tag-team match”, Berry claimed that “If AT&T is not there to fight a logical competitive policy decision, then Verizon will step in to complete the tag-team operation for the duopoly.”

the auction will begin on February 28th, 2011

The Swedish telecoms regulator, PTS, has set a date for the auction of wireless broadband spectrum in the 800GHz band, making the announcement on the eve of the first anniversary of the commercial introduction of LTE. The auction will begin on February 28^th 2011, with interested parties required to apply for participation by the end of January.  Nordic carrier TeliaSonera launched the world’s first LTE service in Stockholm and Oslo on December 14^th last year.

In total, 2 x 30MHz of spectrum is being made available, split into six licences of 2 x 5MHz each. A spectrum cap means that no one bidder can win more than 2 x 10MHz of the total available spectrum, as the regulator wants to ensure that at least three carriers win spectrum. Sweden currently has three mobile operators.

PTS is also imposing a coverage requirement on one of the licences in a bid to help meet the objectives of the Swedish government’s Broadband Strategy programme.

The conditions attached to this licence state that the winning bidder must deploy service so that all permanent homes and businesses that are currently without broadband service are covered by the new rollout. This deployment will be given a fixed cost, decided at the auction—it will be no less than SEK150m ($22.13m) and no more than SEK300m ($44.2m).

The successful bidders for the technology neutral licences must also undertake to remedy any interference that arises with Swedish TV broadcast services.

Sweden was one of the first countries in the world to get a commercial LTE service, when national carrier TeliaSonera launched in Oslo and Stockholm a year ago. Since then TeliaSonera has premiered LTE services in Finland and Denmark. The carrier’s operations in Lithuania, Latvia, Uzbekistan and Estonia have all launched 4G trials, it said.

Afghan Wireless said it believes there are significant opportunities in the rural parts of the country

Afghanistan is gearing up to begin deployment of next generation mobile technology – either 3G or 4G – as early as next year.

The Afghanistan Telecom Regulatory Authority (ATRA) is currently in talks with the country’s four mobile carriers to gather opinion on the allocation of spectrum for next generation services. It is not yet certain whether the regulator will simply allocate spectrum to the operators or whether an auction will take place, however the aim is to have commercial 3G services in Afghanistan by the end of 2011. There is believed to be some discussion as to whether it would be a better move to leapfrog 3G and go straight to 4G.

ATRA recently posted a tender for a consultant to provide technical assistance for the valuation of frequencies to be licensed to mobile operators for 3G and WiMAX. The role would include an assessment of the readiness of the Afghanistan telecom marketplace for the introduction of 3G services; and recommendations for appropriate licensing fees for 3G spectrum and for WiMAX spectrum.

At the end of September, the market’s mobile operators counted some 13.5 million subscriptions between them, equating to 44 per cent mobile penetration. The market leader is Roshan, which has four million subscribers, but there is close fought competition with Afghan Wireless, which has 3.8 million and MTN with 3.6 million. Etisalat had two million subscribers as of the end of September.

The war torn nation’s telecoms industry has come a long way since 2002, when there was no mobile service, and is now approaching 60 per cent mobile coverage. But Afghan Wireless maintains there is a clear opportunity to expand into the underserved parts of the country and reach a larger segment of the rural population.

The second placed operator recently contracted Nokia Siemens Networks to increase coverage, particularly in rural areas, and provide a range of new mobile services with enhancements to the operator’s 2.5G network, including subscriber data management and charging and billing platforms. NSN said that Afghan Wireless will also benefit from lower operational costs with the deployment of integrated packet-based transport capability that supports increased voice and data traffic on the installed base of network connections. The company will also roll out a subscriber data management solution, in order to generate insights on end-user behavior and develop services catering to the specific needs of different users.

Operators lose battle against roaming price caps

Four of Europe’s largest mobile operators – Vodafone, Telefónica O2, T-Mobile and Orange – lost their battle with European authorities on Tuesday, after the European Court of Justice ruled that roaming caps can stick.

The Roaming Regulation established maximum prices that can be charged by mobile operators for calls received and made by a user outside their home network, and is based on 2007 proposals seeking to reduce roaming charges by up to 70 per cent. But in 2009, the four carriers challenged the validity of the EC’s Roaming Regulation before the High Court of England and Wales. This court then asked the Court of Justice whether the EC’s regulation was in fact legal.

As it turns out, not only is the regulation legal, “it is proportionate essentially to the objective of protecting consumers against high charges and is justified on grounds of subsidiarity”.

The Court pointed out that before the Commission proposed the regulation, it carried out an exhaustive study of alternatives and evaluated the economic impact of various types of regulation. “The average retail charge for a roaming call in the Community at the time the regulation was adopted was high (€ 1.15 per minute, which was more than five times higher than the actual cost of providing the wholesale service) and the relationship between costs and prices was not such as should have prevailed in fully competitive markets,” the Court said. “The tariff provided for in the regulation is significantly below that average charge and is set in relation to the ceilings for the corresponding wholesale charges, so that the retail charges reflect more accurately the costs incurred by providers.”

Regulatory approval allows France Telecom to consolidate its position in Egypt

Egypt’s financial regulator has granted approval for the purchase of the stake it doesn’t already own in the country’s leading carrier Mobinil by France Telecom’s Orange. For some time the deal has been the subject of a spat between France Telecom and Mobinil’s other principal shareholder, Egyptian player Orascom Telecom.

The dispute began in 2007, when Orascom initiated a lawsuit seeking to force the French carrier to transfer its Mobinil shares over to Orascom. However, the court ruled in France Telecom’s favour and required Orascom to transfer its stake in Mobinil’s holding company to the French incumbent.

Mobinil is about 51 per cent owned by ECMS, a holding company that was jointly owned by Orascom and France Telecom, but under was ruled in July to be owned exclusively by France Telecom. Orascom also owns 20 per cent of Mobinil directly.

Since the court order, France Telecom has been trying to pitch an acceptable offer to buy minority shareholders out of ECMS. However, the French firm has seen its efforts rebuffed by the Egyptian Capital Market Authority (CMA) for being too low.

Now, with an offer of 245 Egyptian Pounds per share, Orange, the CMA has finally given its blessing to the deal.

At the end of September 2009, Mobinil had 23.4 million subscribers, according to figures from Informa Telecoms & Media’s WCIS.