Fixed-Mobile Convergence

transcript

STATE OF ISRAEL

MINISTRY OF COMMUNICATIONS

Regulatory Point of ViewDaniel Rosenne

Director General, Ministry of Communications, Israel

rosenned@moc.gov.il

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MINISTRY OF COMMUNICATIONSPresentation Agenda

What is Fixed-Mobile Convergence?

Market realities: Mobile versus Fixed

The future: unified regulation

Example: the case of Israel

Conclusions.

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What isFixed-Mobile

Convergence?

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Fixed-Mobile Convergence: Different Meaning from Different Views

Consumers:Seamless Services, regardless of type of network.

Incumbent Operators:One stop shopping/one bill - bundling of fixed and mobile services.

Mobile Operators:Integrated services - cellular service positioning as fixed replacement.

Regulators:Ensuring fair competition - Fixed versus mobile, Mobile versus value added services.

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Fixed-Mobile Convergence:It’s All About Competition

Competition for voice minutes: Fixed versus Mobile.

Competition for value added services revenues: Mobile versus value added service providers.

Competition for content revenues: Mobile versus value added service providers versus content providers.

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MobileVersus Fixed:

Market Realities

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Fixed-Mobile Convergence:It’s All About Competition

When mobile offers: Similar tariffs: Additional competition. Similar services: Data services. Same quality: as fixed.

Can mobile substitute fixed? YES!

When will it happen?

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Mobile Tariffs Paradox

Why are mobile tariffs higher than fixed tariffs?

Let’s face reality: tariffs are not pushed down, neither by market forces, nor by regulatory action.

Simple economics: Marginal investment per customer:

Fixed: US $1000-1500. Mobile: US $300-500.

Operating expense: similar for both.

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Towards Unified Regulation

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Why Regulation?

Market controlled by limited number of dominant operators.

Abuse of market power by discrimination and unfair practices will eliminate competition.

Regulator’s goal - foster competition, for the ultimate benefit of consumers’.

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Fixed-Mobile Convergence: Regulator’s Role

Protect consumers’ interests.

Abolish artificial and historical barriers to competition.

Reduce entry barriers to new entrants, especially for innovative new players.

The meaning of “Fixed-Mobile Convergence” is a need for unified regulation for fixed & mobile markets.

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Key Regulatory Action Points (1)

Cost-based interconnection:

eliminating market distortion resulting from different methods for mobile and for fixed interconnection tariff setting.

Symmetrical airtime:

eliminating discriminatory practices resulting from charging different airtime tariffs from mobile subscribers and from fixed subscribers.

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Key Regulatory Action Points (2)

Open network access:

allowing long distance and value added service providers access to the mobile network, similar to their fixed network access.

Prevention of discriminatory bundling:

ensuring transparent bundling, in a non-discriminatory manner.

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The Case of Israel

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Israel's Telecommunications

2.8 million main telephone lines(47% penetration).

2.5 million mobile customers, on three networks, Pelephone, Cellcom & Partner/Orange. (42% penetration).

1.1 million Cable-TV connected households. (3 operators, 70% of passed households, 90% household coverage).

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Telecommunications Services Market - 1998

InternationalLong-Distance

CableTV

Terminal Equipment& Business Systems

Internet services

CellularTelephony 38%

Fixed Services 40%

Total telecom services market ~ $ 3.7 billion

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Israel’s Mobile Operators

Pelephone: 800 MHz NAMPS and CDMA. Operations since 1987. Bezeq (50%), Motorola (50%).

Cellcom: 800 MHz TDMA. Operations since 1995. BellSouth (34%), Safra Brothers (34%), Discount Investments (12.5%), PEC (12.5%), private investors (7%).

Partner/Orange: 900 MHz GSM. Operations since 7 October 1998. Hutchison (46.67%), Matab (20.31%), Elbit.com (16.5%), Tapuz (16.5%)

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The Mobile Boom:Israel Telecommunications Services Revenues, 1995-1998 ($US M)

1995 1996 1997 1998

International

Mobile

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Israel’s Mobile Services Growth

High growth - 2.5 million subscribers, compared to 125,000 in January 1995.

Key stimulators for the explosive growth: Low tariffs: ~ US $0.11 to 0.23/minute air

time, ~ $11 to 29 monthly charge.(300 min average monthly bill - $56 to 74)

Calling Party Pays (CPP), in operation since 1994.

High quality, nationwide coverage. Fair competition.

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Israel’s Regulatory Issues Concerning Fixed-Mobile Convergence

Achievements Structural separation,

preventing discriminatory bundling

Calling party pays

Cost-based fixed interconnect tariffs

Open access, to fixed & mobile networks (including pre-selection/dialing parity to international long distance providers)

Open Issues Symmetrical air time

Cost-based mobile interconnect tariffs

Enhanced competition: Additional mobile

operators 3G frequencies

allocation.

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Conclusions

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Summary - Market Related Points

Fixed-Mobile convergence has several meanings: For incumbent Telco: one stop shopping. For competing Celco: fixed substitute. For consumers: additional competition? better service?

more service offerings? lower prices?

Mobile will not be true substitute to fixed, unless: Mobile prices will be similar to fixed. Mobile service offering will be similar to fixed, including

data services. Mobile will offer fixed quality.

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Summary - Regulatory Points

Competition in telecommunications services is still limited, and should be promoted.

In the context of “Fixed-Mobile Convergence”, regulators’ role is to prevent abuse of market power by discrimination and unfair practices.

The key issues are: Cost-based interconnection. Symmetrical airtime. Open network access. Prevention of discriminatory bundling.

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Regulation - It’s All About Competition

The future - from convergence to integration.

Regulation - uniform rules and principles for fixed and mobile.

Re-alignment of competitive positions - Mobile and fixed Incumbent and new operators.

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The Regulatory Equation

FMC = CBI+ONP

FMC: Fixed-Mobile Convergence

CBI: Cost Based Interconnect

ONP: Open Network Provision

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For more information about Israel’s

telecommunications:

http://www.moc.gov.il

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The EndThank you for your attention

Fixed-Mobile Convergence

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