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InternationalTelecommunicationUnion
Regulatory trends & challenges
OECD experts meeting
““Towards a Services Trade Restrictiveness Index (STRI)Towards a Services Trade Restrictiveness Index (STRI)””Paris, 10 December 2008
The views expressed in this presentation are those of the author and do not necessarily reflect the opinions of the ITU or its Membership.
Youlia Lozanova Regulatory and Market Environment DivisionBDT, International Telecommunication Union
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Agenda
1st wave of regulatory reformTowards a 2nd wave of regulatory reform Regulatory challenges todayNew strategies to stimulate growth in ICTs: infrastructure sharing
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0
1
2
3
4
5
6
7
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
in b
illio
ns
0
20
40
60
80
100
120
140
160
nb c
ount
ries
Mobile broadbandInternet usersMobile cellular subscribersFixed lines
1st wave of regulatory reform
Creation of separate regulatory authority
Opening markets to competition
Licensing multiple operators (service-specific licences)
Lowering entry barriers
Promoting new business models
Privatization of incumbent operators
Flexible, accurate, transparent and non-discriminatory interconnection models
Subsidies to universal access providers for fixed-line services
Creating a level-playing field for investment (minimizing regulatory risk, tax incentives, etc.)
Source: ITU World Telecommunication/ICT Indicators Database and ITU Telecommunication Regulatory Database
Growth in ICTs, in billions, 1995-2007
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It’s all about convergencefrom static market environments to dynamic fast-paced innovationfrom heavy-handed regulation to light-touch regulationfrom narrowband to broadbandfrom fixed to mobile (mobile pervasiveness) + fixed-mobile convergencefrom wired to wirelessfrom distinct to convergedfrom sometimes-on to always-on from PSTN to IP (NGN)
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6 710 11 11 11
13
2022 23
27 28 29
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Effective regulation
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43
86
106
124137
148 152
1990 1995 1998 2000 2002 2004 2006 2008
Growth in the number of regulators worldwide
Source: ITU Telecommunication Regulatory Database
Regulatory reform has been key to ICT development and enabled the move towards convergenceImportance of independent and effective regulatorExtending powers of regulatorsConverged regulators
Separate regulator, OECD countries
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0%10%20%30%40%50%60%70%80%90%
100%
Basicservices
Mobilecellular (2G)
Internetservices
Wirelesslocal loop
DSL 3G FixedWireless
Broadband
Monopoly Competition
CompetitionA competitive market environment is key to promote investment, spur growth and extend connectivity
Removing market entry barriers & open access policies may speed up market development and provide a win-win scenario for investors, service providers & consumers
Additional reforms could ensure a level-playing field for all market players
Competition in selected services, 2007
Source: ITU Telecommunication Regulatory Database
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PrivatizationPrivatizations of incumbent operators worldwide, 1997
Source: ITU World Telecommunication Regulatory Database
The designations employed and the presentation of material in this map do not imply any opinion whatsoever on the part of the ITU concerning the legal or other status of any country, territory or area or any endorsement or acceptance of any boundary.
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PrivatizationPrivatizations of incumbent operators worldwide, 2007
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Changing sector structure
After a big boom in 1990sPrivatizations have slowed Still a considerable number of state-owned fixed-line incumbents in some developing regions
0
20
40
60
80
100
120
140
160
1991 1993 1995 1999 2001 2005 2007
nb o
f cou
ntrie
s
Private State-ow ned
Evolution of status of fixed-line incumbents, world
Source: ITU Telecommunication Regulatory Database
A new kind of re-structuring?Separation of legacy fixed line operators’ non-replicable or bottleneck assets into a new business division which provides wholesale accessThis wholesale access division is kept separate from the incumbent’s own retail divisionsAustralia, Ireland, Italy, Mongolia, New Zealand, Sweden and U.K. How relevant is functional separation to developing countries?
Functional separation
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Enabling the move towards IP General regulatory framework:
Ensuring a level playing field Creating incentives for investmentTechnology and service neutrality in licensing & development of converged licensing frameworks Developing the enforcement capacity to resolve disputes, revoke licenses and impose sanctionsOpen & non-discriminatory accessTransparency Simplifying processes (licensing, etc.)Removing regulatory/licensing barriers to facilitate the transition from 2G to 3G and beyondSpectrum sharing & spectrum tradingSpecific incentives (tax policies, etc.)Subsidies: grants for community planning efforts, subsidized or low-interest loans
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2nd wave of regulatory reform
Efficient and independent regulator with extended powersFrom separate telecom & broadcasting regulators towards converged regulators
LicensingFrom service-specific licenses towards general authorizations, unified & class licencesFrom technology-specific towards technology-neutral licences
SpectrumFrom administrative approach towards flexible spectrum allocation practices (sharing, trading, etc.) to create new access networks that deliver both voice and broadband cost-effectively
Network & bottleneck facilitiesFrom exclusive ownership towards passive & active infrastructure sharingOpen access to network and bottleneck facilities (fiber backbones, LLU) International gateway liberalization
Universal access & servicesFrom fixed-line voice towards broadband universal access
Flexible, transparent & simplified proceduresFacilitate market entryStimulate innovation
Spurring competition
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VOIP
Most successful converged service to-date
Key factor for its success: low cost(both for MVNOs & users)
Strong growth is expected to continue
Fixed-line/VOIP substitution
VOIP over mobile
Estimates of international VoIP traffic
Source: ITU Background Paper on the status of VOIP worldwide, 2006
0
5
10
15
20
25
30
35
40
45
50
1996 1999 2002 2005 2008
% o
f tot
al in
t'al m
inut
es
Yankee Gp.
Telegeography /PriMetrica
Tarifica
Delta Three WP
Delta Three White Paper
Analysys
Yankee Gp.
ITU
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VOIP: regulatory treatment
Regulatory responses vary:
VoIP has been made illegalVoIP is unregulatedThe absence or lack of regulationVoIP may be subject to similar/same regulation as PSTN, or some forms of VoIP are subject to some/all of the same regulation as PSTN, depending on the technology used VoIP may be subject to its own set of regulations,with its own specific licenses.
Source: ITU Telecommunication Regulatory Database
Number of countries allowing some type of VoIP
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Regulatory challenges todayCompetition policy
Significant market power will not go away in an NGN environmentOpen access is key to growth in the sector
InvestmentUnbundle or share: what impact on investment in ICTs?
PricingWill NGN offer prices that are significantly lower than those available today?Spectrum pricing, MTR
Bundling and billing:How to distinguish real price of bundled services?
Interconnection Will current interconnection models work in an NGN?To regulate or not IP interconnection? IP & VoIP interconnection: towards cost-based pricing and flat rates?
Net neutralityHow to deal with traffic prioritization?
New converged servicesWhat level of universal service obligation to impose?To regulate or not content, and how?
SecurityCybersecurity threats, privacy and identity management issues
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Aim to connect all the world to broadbandCost single biggest reason to shareDeveloping countries seek to leverage mobile infrastructure boom into mobile broadband boomDeveloping countries also seek to build IP-based backbone and backhaul networksDeveloped countries seek to leverage fixed line investments and upgrade to Fibre to home, building or curbBoth share the same goal: to expand network deployment and development by cutting costs Sharing can only take place in a competitive, transparent and non-discriminatory market & regulatory environment
New business models: sharing
74%
56%
44%
Infra
stru
ctur
esh
arin
g fo
rm
obile
oper
ator
s is
perm
itted
Infra
stru
ctur
esh
arin
g is
man
date
d
Col
ocat
ion
ism
anda
ted
ITU World Telecommunication Regulatory Database
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Sharing: myth & reality
What it is:Using infrastructure sharing together with Universal Access strategies within a competitive frameworkReducing costsAllowing new players to provide broadbandRelying on time-tested competition principlesAbout allowing markets to workConsumers getting service
What it’s not:An attempt to put infrastructure back in the hands of monopoly providers or to stifle competition A strategy to lessen competition or to sell less equipment About markets not workingLimiting consumer choicesA limit on facilities-based competition
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Trends in Telecommunication reform 2008:
Six Degrees of Sharing
Chapter 1: Market and regulatory trends in the ICT sectorChapter 2: Six degrees of SharingChapter 3: Extending open access to national fibre backbones in developing countriesChapter 4: Mobile network sharingChapter 5: Spectrum sharingChapter 6: International sharing: International gateway liberalizationChapter 7: The emergence of functional separationChapter 8: International mobile roamingChapter 9: IPTV and mobile TV: New regulatory challenges for regulatorsChapter 10: End-user sharingChapter 11: Conclusion:
Looking to the futurewww.itu.int/publ/D-REG-TTR.10-2008/en
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www.itu.int/treg
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www.itu.int/icteye
