Intelecon Regulatory News

January 18, 2013

Turkey: Turkcell submits lowest bid in rural coverage tender

Acccording to a Telecompaper Europe article, Turkcell submitted the lowest bid (TRY 312.77 million, excluding VAT) for a tender held by Turkey's Ministry of Transport, Maritime Affairs and Communications to provide mobile coverage to Turkey's 1,799 unserved rural locations with a population lower than 500.

The investment and the operating expenses will be disbursed from the universal service fund of the Ministry. The network infrastructure resulting from the tender will also be shared by other operators. The tender process will be finalised after the evaluation of the tender commission.

Turkcell covers 99.17% of Turkey's population with about 32,500 base stations.

Intelecon comment: Mobile networks already cover over 99% of Turkey's population, but the remaining uncovered areas will receive financing from the universal service fund to ensure they are covered by mobile networks within three years. Turkey's universal service fund is financed from a variety of sources: 2% of the authorisation fees collected by the Telecom Authority; 1% of net revenues of all operators (except GSM); 10% of payments by GSM operators to the Treasury; 20% of administrative fines collected by the Telecom Authority; and, 20% of what remains in the budget of the Telecom Authority budget after all expenditures are deducted.

January 15, 2013

Thailand: New interconnection rate to take effect

According to the Bangkok Post, a new mobile interconnection rate of USD 0.0165 per minute for mobile voice service will take effect this month.

Mobile operators are currently setting different mobile interconnection rates ranging from USD 0.0165 to 0.0353 per minute, depending on agreements between the operators. The new interconnection rate will enable the National Broadcasting and Telecommunications Commission (NBTC) to start granting infrastructure-sharing licenses for telecommunications services by September.

Col Settapong Malisuwan, chairman of the NBTC's telecom committee, said infrastructure-sharing licenses will include mobile towers and fibre-optic networks. The licenses will offer both voluntary and compulsory features for infrastructure owners. Col Settapong said the licenses will encourage both TOT and CAT to share their networks with existing operators and newcomers alike. It also encourages TOT and CAT to focus on serving as network service providers rather than operators.

Col Settapong also urged TOT and CAT to discuss future network cooperation with their concessionaires before their contracts expire. The two state enterprises will not be allowed to book all concession-related revenue into their financial statements after December 2013, according to the Frequency Allocation Act.

Intelecon comment: There is a demonstrated relationship between mobile termination rates and mobile tariffs. In a 2010 study, "The Effects of Lower Mobile Termination Rates (MTRs) on Retail Price and Demand", Growitsch and Wernick looked at data from 61 mobile operators in 16 EU states between 2003 and 2008. The study found that lower MTRs are associated with lower average retail unit prices, and with greater minutes of use per month per subscriber. Furthermore, the authors conclude that, "The overall policy implication, in our view, is that efforts to drive MTRs to lower levels are appropriate and will tend to increase consumer welfare."

The NBTC's reduction of mobile interconnection charges should contribute to improved affordability for end-users of mobile voice services. As the rural population typically has lower incomes than the urban population, reduced mobile tariffs should be particularly helpful in improving the affordability of mobile service for people in rural areas of Thailand.

December 14, 2012

Peru: Congress approves mobile banking bill

According to an article at The Paypers, Peru's congress approved a bill creating a mobile banking transaction regulatory framework.

The bill allows only companies overseen by the financial services regulator SBS to issue e-money. Additionally, the bill ensures that there will be safeguards to protect the privacy and personal information of e-money users.

In Peru, mobile banking is considered a potential means of increasing the low penetration rate of financial services.

Intelecon comment: Peru appears to be adopting a bank-centric mobile banking model. As outlined in the "IFC Mobile Money Study 2011", undertaken by Intelecon with the IFC, "the advantages of this model for the bank are new client acquisition opportunities; new revenue streams from micropayments; and control over the system and, therefore, less risk." The disadvantages are that, "there is no clear incentive for banks to roll out this model, particularly if they have spent capital setting up a traditional banking infrastructure, including prepaid, credit, and debit cards."

December 10, 2012

Malaysia: Regulator to charge fee for wireless village broadband

According to a report from Bernama, the telecommunications regulator will institute a minimum fee for Wireless Village broadband by early 2014.

Malaysian Communication and Multimedia Commission, Industry Development and Resource Planning chief officer, Datuk Mohd Ali Hanafiah Mohd Yunus said the Commission is determining the rate, likely in the range of USD 1.65 to USD 3.30 per month.

"At present the service is free. So the charge will be very minimal and used for maintenance cost," Yunus said.

The Wireless Village initiative began in 2010 as a means to provide collective internet access to villages with inadequate coverage. It costs USD 13,000 to USD 16,300 to establish service in each village. Broadband tower construction cost between USD 130,700 and 163,300. Yunus said between 2010 and 2011, 1,850 Wireless Villages were established and 1,400 were in progress for 2012 and 2013.

MCMC has also developed other initiatives to enhance the use of broadband, such as Community Broadband Centres, Mini Community Broadband Centres, Tower (Time 3) and 1Malaysia Computers. Yunus added that MCMC works with operators to provide affordable broadband packages for as little as USD 8.15 per month.

Intelecon comment: Sustainability is a major concern with ICT4D projects around the world. Low income users have demonstrated a willingness to pay for telecommunications services that are valuable to them; whether or not the amount that users can afford to pay is enough to cover operating expenses is another issue. In a 2005 paper, "Integrating Social Development and Financial Sustainability: The Challenges of Rural Computer Kiosks in Kerala," the authors address the complexity of rural ICT initiatives by noting, "the implementation of ICTs for development is not simply a technical process of delivering services to the poor, but is a highly political process that involves tradeoffs and prioritization of particular goals to attain sustainability."

December 5, 2012

Brazil: LTE research to get additional support from Funttel

According to a Business News Americas report, the Brazilian government has allocated USD 16.6 million into the telecommunications technological development fund, Fundo para o Desenvolvimento Tecnologico das Telecomunicacoes (Funttel).

The resources are intended for existing strategic projects already supported by Funttel. The amount will be added to the USD 25.6 million allocated to the fund in the country's 2012 budget. According to Funttel's secretary Eder Alves, the additional funds will be used for research projects important to the government, such as LTE in the 450MHz band for serving sparsely populated areas.

"These funds will be very important for researchers to complete their work and transfer their knowledge to the Brazilian industry before June 2013, when operators will have to start offering rural broadband," said Alves.

Telefonica / Vivos CEO Antonio Carlos Valente said he is optimistic about the development of the technology.

"Worldwide, mobile telephony technology in the 450MHz band is usually CDMA. This will be a first time for LTE," he said.

In November, Telefonica signed an MOU with Sweden's AINMT for the development of LTE technology in the 450MHz band. TEF / Vivo acquired spectrum in the 450MHz band through a tender in June. The 450MHz band was auctioned specifically for the enhancement of rural broadband coverage.

Other operators, including TIM, and equipment manufacturers Huawei and Ericsson also announced plans to work on LTE technology for 450MHz, and to work with regulatory bodies such as 3GPP on standardization.

Intelecon comment: Brazil faces challenges in its efforts to extend broadband services to those living in remote, rural parts of the country. A significant competitive advantage of the 450 MHz band is that it can potentially provide services over wide areas at a lower cost than higher frequencies. According to the CDMA Development Group, there are commercial CDMA450 3G networks deployed in over twenty countries, and over 100 operators using CDMA450 2G or 3G technologies. According to the Global Mobile Suppliers Association (GSA), as of November 2, 2012, there were 113 commercial LTE networks in 51 countries.

November 26, 2012

Kenya: Regulator lowers mobile interconnection fees

According to a Reuters report, the Communications Commission of Kenya (CCK), Kenya's telecommunications regulator, lowered mobile interconnection rates by 35%.

Francis Wangusi, director general of the CCK, said the mobile interconnection rate has been reduced to USD 0.017 (1.44 shillings) per minute from USD 0.026 (2.21 shillings), backdated to July 1, 2012. Wangusi said the regulator planned to further reduce the rate to USD 0.013 (1.15 shillings) in July 2013 and to USD 0.011 (0.99 shillings) in July 2014.

"We're very keen to punish any uncompetitive behaviours. Any competitors that think they can use this to undercut others will be punished," Wangusi said.

India's Bharti Airtel triggered a price war in 2010 when its Kenyan subsidiary reduced tariffs by more than 50% to win customers from market leader Safaricom. An executive at a Kenyan operator said that revenues could be increased if none of the operators initiated a price war.

CCK data shows that Kenya had 29.7 million mobile subscribers and a penetration rate of 75.4% as of June 30, 2012. Safaricom had a mobile market share of 64%, compared with competitors Airtel, at 16.5%, Orange (Telkom Kenya) at 10.5% and Yu (Essar) at 9.0%.

Intelecon comment: There is a demonstrated relationship between mobile termination rates and mobile tariffs. In a 2010 study, "The Effects of Lower Mobile Termination Rates (MTRs) on Retail Price and Demand", Growitsch and Wernick looked at data from 61 mobile operators in 16 EU states between 2003 and 2008. The study found that lower MTRs are associated with lower average retail unit prices, and with greater minutes of use per month per subscriber. Furthermore, the authors conclude that, "The overall policy implication, in our view, is that efforts to drive MTRs to lower levels are appropriate and will tend to increase consumer welfare."

November 23, 2012

Comoros: Government to privatise Comores Telecom

According to a Telecompaper article, the government of Comoros has announced its plans to privatise Comores Telecom (CT), the incumbent telecommunications operator.

CT will be restructured by transferring its main assets to a new legal entity, Newco. The privatisation of Newco will entail the sale of 51% of the company's shares to an equity investor. The government will own 34% and the employees will own 15% of the new entity. The outside investor will be selected through an international competitive bidding process.

Intelecon comment: According to the ITU World Telecommunication/ICT Indicators 2012 database, Comoros had a mobile penetration rate of 28.7% in 2011, fixed penetration is only 3.1% and broadband is not widely available. The population of Comoros is around 754,000. In April 2008, a second mobile license was awarded to Comoros Gulf Holding.

With low mobile penetration and non-existant broadband, evidence suggests that the people and economy of Comoros would clearly benefit from significant new investment in its telecommunications sector. For instance, research has suggested that mobile duopolies result in higher prices for consumers when compared to markets with more competitors (e.g. this paper, "Regulation and Market Evolution in 2G Telecommunications Markets: Some Observations", from Heli Koski and Tobias Kretschmer of the London School of Economics, 2007).

November 2, 2012

Brazil: Anatel approves competition rules

According to RCR Wireless, the board of directors of Brazil's telecommunications regulator, Anatel, has approved the General Plan for Competition (PGMC), aimed at promoting competition and improving regulation in the telecommunications industry.

The PGMC establishes rules for sharing, interconnection fees, roaming and market dominance. Market dominance activities will focus on identifying operators with significant market power who would be required to share network access with smaller operators. The rapporteur for the case, Marcelo Bechara, named Telefonica, Oi, America Movil, CTBC and Sercomtel for the fixed telephony market and Oi, Claro, TIM and Vivo for mobile termination.

Under the PGMC, Anatel assumes that competition is the best regulator, but there is a need for measures to encourage competition, since there are providers possessing significant market power, which can prevent or hinder the entry of new players into the market. The plan requires Anatel to periodically evaluate dominant groups holding significant market power, monitor the necessity and appropriateness of regulatory measures, permanently oversee competition and intervene, when necessary, in conflicts between industry players.

Intelecon comment: According to the ICT Regulation Toolkit, "Competition is held to be the most efficient mechanism available for organizing, operating, and

disciplining economic markets." In addition, "Regulation acts as a surrogate for competition where competitive forces are weak (eg in forcing monopolies to reduce prices and increase output) or where there are significant externalities."

It appears that Anatel is taking positive steps towards maximizing the influence of market competition in shaping the telecommunications sector, only stepping in where there is evidence of rent-seeking or market failure.

October 11, 2012

Kyrgyzstan: Twelve operators awarded 4G spectrum

According to reports from TeleGeography and Tazabek, Kyrgyzstan's National Communication Agency has allocated spectrum for the provision of WiMAX and LTE services to twelve companies.

AsiaInfo, Global Telecom Asia, Totel, Aknet, Kurulush Invest, T-Com, Fraton Plus, Aytel, Foris Telecom, WTT, Saima Telecom and Intranet have been awarded spectrum.

To accelerate internet development in Kyrgyzstan, the Agency has simplified procedures for obtaining spectrum permits. Another digital development thrust is the promotion of advanced wireless technologies such as WiMax, 3G and LTE. Kyrgyzstan has deployed LTE network technology and commissioned 58 base stations in Chui oblast. As well, in Chui oblast, Bishkek, Osh and Karakol there are 65 WiMAX base stations.

Intelecon comment: According to the ITU, in 2011 Kyrgyzstan had mobile broadband penetration of 4.1% and fixed broadband penetration of 0.3%. According to Telecompaper Asia and Tazabek, internet penetration currently totals 43.7% in Kyrgyzstan. At the end of June 2012, mobile subscribers exceeded 6.3 million, for a 115% mobile penetration rate. There are six mobile operators in Kyrgyzstan.

According to the Global Mobile Suppliers Association, there are now 105 commercial LTE networks in 48 countries around the world. The WiMAX Forum announced that the global WiMAX subscriber based surpassed 20 million in the middle of 2011.

October 5, 2012

Nicaragua: Seven companies interested in new mobile licenses

According to a TeleGeography report, Orlando Castillo, the head of Nicaragua's telecommunications regulator Telcor, says that seven companies have paid the USD 3,000 registration fee to participate in the upcoming tender for two mobile licenses.

Castillo confirmed speculation that Chinese company Xinwei Telecom Enterprise Group and Costa Rica's state-owned power and telecommunications company Grupo Instituto Costarricense de Electricidad (Grupo ICE) are among the interested parties. The tender is expected to take place in mid-November.

In September, Telcor launched the tender for two mobile licenses in the 1785MHz-1805MHz band. Both licenses will allow the introduction of LTE technology and favour operators prepared to focus on rural areas. Business News Americas reports that the winners will be required to invest USD 800 million in building new networks. Today, Nicaragua has two mobile operators, Claro and Movistar.

Intelecon comment: The move away from the current mobile duopoly should result in benefits for the people of Nicaragua. Research has suggested that mobile duopolies result in higher prices for consumers when compared to markets with more competitors (e.g. this paper from Heli Koski and Tobias Kretschmer of the London School of Economics). As well, in a 2008 paper, "Econometric Evidence on the Impacts of Privatization, New Entry, and Independent Industry Regulator on Mobile Network Penetration and Expansion", Yan Li analyzed 1991-2006 mobile market data from 29 OECD countries and China. Li found that, "the third-to-fifth entries are jointly associated with the highest penetration (the effects start to decline after the fifth entry), and the third entry is also associated with the fastest network expansion."