Unbundling in Access, Spectrum, Roaming, Cross-Holding, International Bandwidth Sharing -Telecom Regulation Potpourri

I will begin with a tit bit from New Zealand. I have written about NZ's National Broadband Plan and ongoing Review of its Telecommunications Act in a  post titled "More on Broadband Networks and Ecosystems-New Zealand's efforts." An article,  "Telecom unbundling key to regulator's copper conundrum." suggests that the tussle between lower wholesale prices for access to copper lines  to give customers' cheap services and "protecting the government-funded build of a nationwide fibre network" or encouraging the transition from copper to optic fibre. The regulator's consultation paper says that "[o]ur current view is that taking account of dynamic efficiencies, a UBA price above the median will best promote competition for the LTBEU (long-term benefit of end-users),"  

News from Europe suggests that the EC is finding ways to promote a genuine single telecommunications market. This would include a common authorization for service providers to operate throughout EU. Also included would be harmonization of inputs:  

"To deliver equivalent services across the EU, operators need harmonised access to basic “inputs” like fixed networks or spectrum. In particular this could involve:

(a) More coordination of spectrum assignment for mobile/wireless services, in particular to align timing and specific authorisation conditions, so operators can more easily organise pan-European activities. This would not need to entail pan-European licensing, and revenue generated from spectrum auctions/sales should remain with Member States.

(b) Harmonised “access products” – which would make it easier in practice to offer services that run across fixed networks in several Member States."

Removal of roaming charges across EU has been in the news lately.There is also talk about a single telecoms regulator with its many pros and cons.

Indian newspapers today write about the continuing clash between interest groups as regards spectrum re-farming and auctions and the likely fall out the new unified licensing norms with the forthcoming ban on same Service Area cross-holdings  wherein formal m development ergers are likely as between RCOM and RTL

And last but not lease an interesting development-cooperation  in South Asia in terms of leasing of international bandwidth. It is reported that India plans turn to Bangladesh for meeting its global telecom connectivity requirements. "It plans to lease nearly 100 gigabytes (GBs) of international bandwidth from two state-owned suppliers in Bangladesh."Bangladesh also proposes to leverage its proposed OFC links with India to address the international connectivity needs of landlocked SAARC countries like Nepal and Bhutan, (but the Indian government is yet to take a firm view on this.)"

Critiques claim that India should create its own cable landing infrastructure.

Wise Regulation, the Order of the Day

For quite a few days now Indian media is carrying the story about the sand mafia and the actions of an honest civil servant to prevent illegal mining. A though provoking viewpoint  has been presented on this issue in an article titled, "Between rock, sand and a hard place" in the Times of India on August 11, 2013. It states that, "[i]n several areas, Indian rules and regulations make honest business impossible. The only choice is illegal business or no business." The author of this article draws attention to the shortage of sand for a booming construction sector on account of " licensing and environmental bottlenecks." The latter creates an artificial scarcity that allows the mafia to step in and profit.I will leave readers to judge the merits of these arguments for themselves. 

Why am I writing about sand and construction? 

That is because in my view it reflects the same underlying problem that is  hampering economic activity in the country today. In a developing country that  is (let us accept it), still below par as far as institutional and administrative capacities are concerned, regulation has to be realistic, practical, simple yet sufficiently detailed in order to be unambiguous, leaving little room for arbitrariness/misinterpretation. It should be forward looking so as to not require too frequent review, but it should be reviewed when need be based on well laid down criteria. Most of all it should keep consumer welfare at its focus. 

Telecom Regulatory Authority of India's Chairperson (TRAI)  has recently commented on the controversial 3G roaming pacts among three large mobile operators in India. According to the Department of Telecommunications, these pacts replicate the characteristics of Mobile Virtual Network Operators' (MVNO) operations, something that is not yet permitted in India. The operators by sharing spectrum and infrastructure were able to provide 3G services to customers even in telecom circles where they had not won spectrum in the 3G auction. 

The TRAI Chief is quoted as having said that, " in a situation where there is no more spectrum available, it ay not be possible to continue with a regime where pacts for intra-circle roaming (ICR) in 3G services are not allowed..............This is a Catch-22 situation. How is it (closing down ICR) a solution?” 

The article on this issue goes on to say that,

According to [Mr] Khullar Indian law treats spectrum as a holy cow for some reason.

“I can understand that you don’t want to cap gains on assigned spectrum which is administratively allocated. But if everyone is buying spectrum on auction, why not permit trade in it? These are issues on which the government should no longer brook any further delay. A decision needs to be taken,” 

Again, I leave it to readers to form opinions. I would just like to highlight that I agree with the TRAI Chief that corrective regulation is the order of the day if consumer welfare and not regulation for regulations sake is our aim.

I also invite readers to go through previous posts on Telecom Regulation and the Market Efficiency Gap to appreciate the importance of effective regulation for growth and equity in telecommunications penetration.

Closing the market Efficiency Gap-Regulation and Competition

As I mentioned earlier closing the Market Efficiency Gap demands effective regulation and competition. In my view there is no point in utilizing public funds or USFs to take telecommunications to market segments that operators would willingly serve if they were facilitated through effective regulation and forced to as a result of healthy competition. This is one area where developing countries with overall institutional (implementation) weakness may fall short.

This makes it all the more important that they focus on putting in place sound laws and regulation modeled on international best practices but adapted to local context. This would ensures inter alia a level playing field  which precludes vested interests from rent seeking behaviour that is detrimental to the economy as a whole.

As an observer of worldwide developments in the area of telecom regulation I would like to draw the attention of readers to to some recent  news items:

The first is about investigation of several telecom giants for suspected abuse of dominance by the competition wing of the European Commission.  This can be read at:

http://www.theregister.co.uk/2013/07/11/european_commission_inspects_telcos_over_alleged_violation_of_competition_rules/

The second is about the likely  mandating of a reduction in access charges for fixed line grid by the Italian firm Telecom Italia SpA by the Communications Regulator of Italy. This article also speaks about the general trend towards reduction in network access charges (both fixed line and mobile) across Europe as a result of conscious efforts of regulators to enhance penetration.This is available at:  http://www.businessweek.com/news/2013-07-10/telecom-italia-is-said-to-face-about-6-percent-cut-in-grid-access-fees.

The third is about a  more liberalised M&A regime in Europe consistent with market conditions.  This includes a softening of attitude towards active infrastructure sharing. Ultimately increasing penetration is also about ensuring the financial health of the telecom opertaors. This can be viewed at http://www.mobileworldlive.com/fours-a-crowd.

An article  from the Indian Express dated 12.7.13 about present regulations relating to M&A in India may also be of interest to readers. This may be viewed at http://www.indianexpress.com/news/permit-spectrum-trade-m-as-will-follow-vodafone/1140801/