Open Access, Incentives and Superhighway

Transcription

1 Open Access, Incentives and Superhighway Hon David Butcher October 2014

2 Open Access in Asia Open access: wholesale networks must interconnect with networks, many owned by bundled (network and services) utilities Many ideas are hangovers from fixed line monopolies can incumbents be encouraged to allow access to competitors? origin of the problem and solutions This presentation shows that many problems are a legacy of fixed utilities acting as monopolists Broadband is forcing change, understanding drivers can speed it up broadband is creating a natural separation: networks - services

3 Vertical Organisation technology based Licenses followed the vertical matrix, Matrix was based on technologies, Response was to block competition, Infrastructure a competitive advantage and a barrier to competition

4 Services Bundled with Infrastructure blocked Competition Vertical Matrix Telecom Broadcast ISP VAS Etc etc Retail and Billing Barrier to Competition Local Trunk Retail and Billing Local Trunk Retail and Billing Local Trunk Retail and Billing Local Trunk Retail Retail and Competitive and Service Billing Billing Local Local Monopolistic Infrastructure Trunk Trunk Exchanges Exchanges Exchanges Exchanges Exchanges Exchanges Competitive Service Broadband separates infrastructure and services Creates a Platform for Competition

5 Technology Neutral Licensing Old licenses were issued based on specific technologies, and services Began in Malaysia and Singapore Technology-neutral; service-neutral Broadcasting license Content Services Applications Services Services Facilities Service Licence Licence A particular service through a designated technology and vertically integrated for the provision of that service The technology neutral framework promotes vertical separation between facilities, network, applications, and content

6 Different Business Characteristics mean that different investors are required Product Life Complexity Information Risk Return Capital Required Company long low public low low rate high Service Company short high private high high rate low Best Investor low risk pension fund high risk venture fund

7 Facilities and cable sharing - Split Retail Hong Kong and UK, Australia and New Zealand shared towers India Chinese Wall Service Company PREVIOUSLY Competes with new competitors Bundled Telecom Company Company and Services Markets - Barrier to Services competition to Competitors High rate of return Low rate of return

8 NETCO SERVCO Demarcation NETCO SERVCO NETCO FTH FTH FTH FTH FTH Secondary Cables Primary Cables CCC-Cross connection cabinet M D F ISP D S L A M DSLAM DSLAM SWITCH (Exchange) Competitor Competitor M U L T I P L E X O R Trunk Line

9 Mobile - NETCO SERVCO Demarcation SERVCO Antennae SERVCO /Switch NETCO Tower NETCO Fiber Transmission SERVCO Base Station

10 Service competition on a broadband digital platform Service Application VoIP Hosting & Content IP Transit IP VPN Transport Internet IP CORE / VPNs Broadband Internet Platform GPRS SCDMA DSL TDM IXC CDMAWCDMA Ethernet Access WLAN Frame/ X.25

11 Changes with Separation Incentive to block is removed Infrastructure not competitive advantage barrier to competition ended has incentive to Maximise Traffic An operator of a broadband network is service neutral incentive is to maximise revenue by maximising traffic Service Provider Incentive to offer Quality Service A service operator s incentive is no longer to block competition, but to maximise the QUALITY of customer service to maximise revenue Simplification of regulation Principal role of regulation is to increase transparency Parties that do not join Miss out on lower cost transit and better quality

12 Case: Mongolia Huge space small population priority to serve at low cost

13 Mongolia Widely dispersed small population, legacy copper fibre chosen solution now pervasive Policy: netco-servco split (largely implemented) sale of service business should qualify to join superhighway Implementation too many staff and too much debt loaded onto network company no new capital business is now managing towers for private mobile companies high quality private city broadband networks

14 Cambodia

15 Cambodia fibre squeeze 2007 priority completion of fibre network Cambodia squeezed - high MB charges Thai and Vietnam operators Japan and China offered financial support if a legal framework in place minister rejected opportunity to join submarine cable Unable to comply with donor conditions, support lost Fibre from Vietel, Private Chinese operator and Telecom Cambodia Internet exchanges introduced 2014 Awaiting Legal Framework market is restructuring - one operators abandoned by owners ties between Vietnam and Cambodian operators internet access remains expensive

16 Bangladesh Law Change Extraordinary success story in <9 years, Bangladesh increased subscribers from aprox 1 million, to 78 million (July 2011) an increase of 18 million in that year. mobile achieved 98% demographic and 90% geographic coverage the largest single contributor to the government budget Digital Bangladesh Policy private investment in fibre to the home Backtrack widespread idea licenses were issued cheap (ignoring investment) led to a major change in regulatory direction 2080 adverse impact on investment efforts to mitigate BTRC seeking amendments

17 Adverse Impact of Regulation Y by Y investment US$ million annual $ change an estimate US$ period moving average Source:AMTOB - AT Capital Research compiled in Bangladesh Telecoms Sector, AT Capital Research

18 Myanmar New Licenses Government of Myanmar decided to increase competition by issuing two new mobile licences A transparent process set up International advisers were appointed +9 groups expressed interest Successful bidders Telenor and Ooredoo Process added great credibility to the government decision making Other ministries want to copy process Internet service remains weak and competition required

19 Summary Superhighway should be designed to create incentives to join and incentives to provide good service Recognise the dual nature of the telecommunications business: facilities management and customer service Decision making should be technology neutral The force of coercive comparison encourages slow partners to join Make maximum use of technically and regulatory compliant existing infrastructure