OUR TELECOMSWORK

We apply economics to markets, organisationsand policies.

We use economics to help clients improve performance, make better decisions and keep ahead of the competition. Our expertise is broad, covering not just micro-economics but finance, statistical modelling, game theory, market research and even the psychological side of economics. We work with a wide range of clients from across both the private and public sectors. With projects spanning the globe, we have worked in almost every area imaginable with businesses ranging from fertilisers and oil rigs to handbags and iPads.

We distil complex issues to focus on what matters to our clients. We help them make credible arguments and good decisions based on robust economic evidence. While our analyses may be complex, the advice we provide is clear, honest and delivered in plain language.

We build strong relationships with our clients, many having worked with us since Frontier was created in 1999. We appreciate that big decisions with substantial financial implications can rest on our analyses. For clients to be comfortable making those decisions we know we must continually earn their trust.

Frontier Economics is one of the largest economics consultancies in Europe with offices in Brussels, Cologne, Dublin, London and Madrid.

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CONSUMER

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The evolving telecommunications landscape presents continuous challenges to businesses and governments.Frontier’s telecommunications practice helps clients achieve their goals amid the industry’s constant change.

Telecommunications continues to transform the world. Disrupting traditional industries, it is globalising markets and creating opportunities for new forms of public service delivery.

Driven by technological innovation and massive capital investment, industry players face complex pressures. Policy makers seek to promote competition and improve access to new technologies by developing new regulatory initiatives.

While responding to these, service providers try to stay ahead of the market and meet ever evolving consumer demands.

At Frontier, we combine our skills as expert economists with our deep sector knowledge to help both sides meet their goals. We help service providers compete fairly, innovate and grow. We also help policy makers set policies that protect consumers while allowing the industry to thrive.

Formed in 1999, the expertise within our practice has grown along with the industry. With over 25 dedicated professionals, and access to a pool of more than 170 consultants, we bring to bear a huge bank of experience across numerous issues and wide ranging international jurisdictions.

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As trusted partner to many world leading service providers and policy makers, our uncompromising delivery underpins our success.

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180 clients across 50+

countries provide us a

broad global perspective 300+ years of combined

experience give us a huge

pool of knowledge 66% of our work is repeat

business showing that we

continually earn client trust

Frontier economists are seasoned experts bringing their in-depth understanding of

technical complexities to bear in the face of continuous industry changes.

Our belief in the economic and social benefits that a thriving telecoms sector brings underscores our work, as showcased on the following pages. While experience and skill are bedrocks of our offering, we believe that it’s our unwavering passion for the sector that drives our uncompromising client service, relentless curiosity and forensic attention to detail.

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Setting the right policy framework. Constantly increasing demand for data requires significant, continual investment in next generation fixed and mobile networks. At the same time, ever more blurred boundaries between communications, content and applications raises complex challenges for established investment models.

Government policies need to provide the right incentives for efficient investment, while ensuring that consumer interests are promoted and protected. The key challenge often is to find a framework that can balance different objectives.

We help policy makers develop frameworks that meet their overall objectives and reflect their local circumstances.

We assist service providers to convincingly explain market impact to improve and sharpen policy.

We build on our knowledge of what works and, equally importantly, what doesn’t, across different countries and sectors to develop recommendations that maximise the chances of successful policy interventions.

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Frontier in action:

Developing concrete policy measures Frontier advised a government in the Middle East on the development of its Fourth National Telecommunications Policy Statement. As part of this we analysed how closely the sector was meeting government objectives and considered how changes in technology and consumer demand would further affect the sector over the next five to ten years. We used our analysis to put forward a series of concrete policy measures to help the Government achieve its goals. This included considering the possible creation of a new national broadband entity, spectrum policy, a net neutrality policy and cyber policy, within an overall goal of promoting the country’s development as an ICT hub.

Providing unique empirical analysis of single wholesale networks For the GSMA, Frontier assessed the potential impact of moving to single wholesale networks (SWNs) in the mobile industry. Our report looked at SWN proposals in Mexico, South Africa, Kenya, Rwanda and Russia. It considered the main costs and benefits of moving away from network competition towards regulated SWNs. The report provided a unique empirical analysis of performance of global mobile markets, assessing the link between competition and coverage and take-up of mobile services.

Discovering if access based, broadband service competition delivers for the consumer One of the most hotly debated issues of the last decade has been how to promote faster broadband take-up: does infrastructure based competition (inter-platform) work better than access based (intra-platform) competition? The US chose inter-platform, thus removing incumbent operator obligations to offer access to their networks. In Europe, such obligations have been maintained. Curious as to which form of competition has been best for consumers, we used ten years of broadband price, quality and take-up data to investigate. We found that access at deeper levels of the incumbents’ network can deliver more benefits, but this depends crucially on the level of infrastructure based competition.

Understanding the implication of net neutrality on client businesses Frontier analysed and developed economic models to understand the impact of net neutrality on market dynamics for our clients and their consumers. We evaluated the potential impact of different net neutrality policy options on competition, investment incentives, broadband penetration and prices. We then concluded that the case for strict net neutrality rules, preventing all types of differentiation for access to broadband distribution platforms, was unproven.

Based on our experience of economic consultants, Frontier is at the top. They exceeded expectations

providing economic advice that was relevant and practical.

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Delivering effective regulation.Rapid technological development and shifting competition means that regulators need to assess the competitive dynamics in their market on an ongoing basis, adjusting or withdrawing regulation where necessary.

Regulatory remedies have evolved to reflect market changes. The traditional tools of price approvals, price control and obligation-to-supply are now complemented with new tools such as ‘equivalence’ of wholesale products and margin squeeze tests.

We have worked with policymakers and service providers - both fixed and mobile - on a wide range of market reviews and remedies, from the implementation of traditional price caps, to examining the merits of complete de-regulation of interconnection rates.

Our analysis builds on our broad international experience but relies on the assessment of the local environment to provide specific market insights.

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Frontier in action:

Removing unnecessary regulationFrontier helped a European incumbent make a cogent and compelling argument to its regulator as to why retail regulation of telephony and broadband markets was no longer required. Frontier analysed, in detail, market developments and the impact of cable operators to demonstrate the case for deregulation. Our work contributed directly to the regulator’s decision to then deregulate these markets.

Influencing wholesale price regulation Frontier reviewed a proposed price control for unbundled local loop services for two of the largest buyers in Europe. We presented the results of our analysis in the context of the regulator’s objectives and the economic characteristics of the networks. The final prices, set on appeal, reflected our arguments and resulted in a significant reduction in our client’s wholesale payments.

Calculating costs for wholesale bitstream access For the regulatory authority in Spain, Frontier developed a bottom-up cost model for wholesale bitstream access (WBA) products delivered over an NGN. The model was developed to calculate the cost of a new WBA product designed by the regulator, delivered over fibre and copper networks (including FTTH) and providing three service quality levels: best effort; “gold” for the provision of services to business users; and “real time” for the provision of VoIP services. Our model calculated the costs of these services under different economic depreciation profiles and when combined with a separate fixed access model, was used to determine regulated access charges.

Setting appropriate fibre broadband marginsThe European Commission has proposed that dominant European network operators can freely set their wholesale access prices for fibre based broadband, as long as there is sufficient margin between their retail and wholesale prices, and the wholesale product is offered under equivalent terms to the dominant network operator’s downstream arm and its rivals. In one of the first countries to implement a fibre based margin test, we critically assessed the merits of the regulatory proposal, focusing on the principles underlying the range of products that should be included in the test. We also examined if and how TV content costs should be included. The model has been used to inform the regulation of regulated prices under the EU framework.

You have some of the smartest people around and the ability to communicate complex ideas

to our stakeholders in a clear, engaging and compelling way.

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Managing competition concerns.There is growing competition in many traditionally regulated telecommunications markets. At the same time, convergence has blurred the boundaries between content and communications markets with increasing delivery of ‘over the top’ services (OTT).

While it is increasingly possible to withdraw some regulation, these trends are behind a growing concern that players may leverage competitive advantage across different parts of the supply chain.

As a result, competition law, rather than sector specific regulation, is increasingly relied upon to tackle potential anti-competitive behaviour.

At Frontier we have an unparalleled combination of competition policy expertise, regulatory experience and telecommunications market knowledge.

We have worked on more than 60 competition cases in the sector, including some of the most high profile mergers, joint ventures (JVs) and competition investigations in Europe and beyond.

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Frontier in action:

Successfully supporting a JV in new mobile marketsFrontier was the economic adviser on a major mobile payments and advertising JV between the three largest UK mobile operators. This venture was expected to bring the mobile operators directly into competition with major OTT players such as Google and Apple. We successfully convinced the Commission that the merger would not raise competition concerns, by developing a novel analysis showing that the JV parties had limited ability and minimal incentive to behave anti-competitively in undeveloped and nascent markets.

Supporting a fixed incumbent in a refusal to supply/margin squeeze investigationFrontier supported a major European incumbent operator in its response to a European Commission investigation into possible margin squeeze abuse and refusal to supply broadband network services. We helped the our client successfully argue that no abuse had taken place, through preparing a series of defence papers examining detailed market definition, market power and the model of competition in the specific country.

Advising clients on the impact of mobile mergersFrontier has significant expertise in assessing the economic impact of mobile mergers, having advised across most European mergers since 2010. Leveraging this experience, we prepared a high profile analysis of mobile consolidation for the GSMA. It examined the potential positive impact that consolidation could have on mobile investment and the implications of this for the approach of competition authorities to the overall assessment of the merits of mobile mergers.

Defending a pay TV provider against an allegation of anti-competitive behaviour Frontier supported a European Pay TV provider to successfully argue that an exclusive agreement for the distribution of content via Satellite based pay TV did not constitute an abuse of a dominant position or an anti-competitive agreement. We helped the provider explain that the free-to-air broadcasted content was similar to the content offered by the pay TV provider. As such, the exclusive agreement would only affect a very small part of the market and therefore any potential impact would be negligible.

370In fines imposed on

telecommunications operators by the European

Commission for abuse of dominance positions

since 2002.

MILL

ION

31The benefit derived

by our client as a result of Frontier’s work mitigating

the impact of a fine imposed by the Commission

Not only is Frontier highly effective but they are a pleasure to work with too. By combining industry and competition expertise with an understanding

of how courts work they deliver what is needed in a highly professional manner.

MILL

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Achieving positive dispute resolution.Disputes are part of modern commerce. Arbitration is increasingly being used to resolve disputes including those between two or more service providers and those between service provider and regulator.

We work with service providers and regulators in dispute, either in damages cases or when appealing key regulatory decisions.

For example, we have extensive experience supporting litigants in disputes.

In over 150 cases, we have provided ex-pert written reports and oral testimony.

We provide evidence on the economic effects of the matter under dispute or quantify the impact of actions to help calculate damages claims.

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Frontier in action:

Providing expert report and testimony before the UK Competition Appeals Tribunal Frontier’s senior team members have acted as expert witnesses on a large number of cases, including providing written and oral testimony on potential overcharging in the supply of Ethernet business connectivity services in the UK, before the UK’s Competition Appeals Tribunal.

Providing expert advice on an arbitration case before the Paris Court Frontier provided expert economic support in an arbitration concerning a revenue sharing agreement between a fixed and a mobile operator in Eastern Europe. We worked within a team of lawyers and engineers, providing robust economic arguments demonstrating the mutual and wider economic benefits that arose from the agreement. Having provided an extensive quantitative analysis calculating the damage caused by the breach of the agreement, the case was successfully settled out of court for our client.

Calculating damages arising from a network outage For a regulatory authority, we reviewed a claim for damages made by a licensee following a network outage arising from alleged damage caused to its network by a second licensee. This involved reviewing the licensee’s estimate of the direct costs of repairing its network and preparing an estimate of the scale of any indirect damage caused to the licensee, for example as a result of the network outage causing it to lose customers. Our analysis was then used by the regulator to settle the dispute.

Advising a regulator in a dispute over interconnection prices Frontier provided expert advice to a major sector regulator in Asia, regarding an appeal of a decision on the setting of interconnection rates. We prepared an expert report, with a detailed analysis of the relevant markets, assessing dominance and considering whether the conduct restricted competition. We also supported the regulator and external counsel in making key decisions regarding the case procedure, including issues of disclosure of economic evidence.

Frontier’s advice is informed by their wide European experience, technically strong and

presented in a clear and user-friendly way – which makes it all extremely valuable.

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Ensuring the efficient use of spectrum.Spectrum is valuable. The ever increasing spread of devices and applications, while transforming lives, is significantly increasing the demand for the spectrum on which these services rely.

Spectrum is a shared, finite resource. With one person’s use potentially interfering with another’s, it needs to be managed carefully. Governments thus play an important role in ensuring that spectrum is allocated efficiently and consistently.

No two spectrum award processes are the same, with each reflecting the specific circumstances of the local jurisdiction and the spectrum to be awarded. Frontier has played a key role in advising on the appropriate strategies to award spectrum.

We have helped policy makers design award processes to meet their long term objectives while taking into account current levels of competition and existing operator holdings. For service providers, we have advised on auction design options during the development of the award process and developed spectrum auction strategies to secure their preferred lots.

We have also helped design spectrum management policies, estimating its value across applications, from point to point links, to mobile and broadcasting uses.

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Frontier in action:

Designing spectrum auctionsFrontier has advised regulators and bidders across Europe and internationally on the design of 4G spectrum auctions, including spectrum packaging and policies to ensure competition in downstream markets.

Valuing spectrumFrontier advised a major mobile operator in the UK in response to a consultation on 4G spectrum auction design. Frontier successfully argued that the regulator’s approach, which reserved a large proportion of spectrum for certain operators, was not needed to achieve a competitive mobile services market. The regulator subsequently relaxed the auction design measures and our client was able to gain the spectrum they required to implement their network strategy.

Setting spectrum licence feesFrontier produced a report for a major UK mobile operator proposing a framework for effectively setting mobile operator licence fees for non-auctioned spectrum. Our analysis enabled us to put forward spectrum fees that would maximise economic benefits and drive efficient use, and provided significant savings for our client.

The costs and benefits of repurposing spectrum Frontier developed an assessment for ComReg of the costs and benefits of repurposing 700MHz spectrum from terrestrial broadcasting to mobile use, with our work being used directly by ComReg in its Spectrum Management Strategy. Taking into account expected growth in mobile data traffic, we estimated the costs that mobile operators would save by having access to the 700MHz band and contrasted this to the potential costs that broadcasters and PMSE users would incur by moving out of the band.

Frontier wrote a landmark piece on licensing of spectrum that has been extremely well

received in Russia and is already circulating broadly among operators in several countries.

Demand for mobile data in 2030 could be 45 times higher than in 2014 (GSMA) 45x

2014

2030

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Supporting strategic and valuation decisions.

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Commercial imperatives drive telecommunications providers to merge, to reassess pricing and channel strategies and to renegotiate with their suppliers. When making such moves, companies need comprehensive due diligence and quality market analysis. To appropriately value potential opportunities and develop suitable strategies, a deep understanding of the commercial and regulatory environment is essential.

Frontier draws on broad sector and strategic expertise to provide insightful, critical advice. The international scope of our work with industry leading clients gives us a first-hand understanding of global trends and the local imperatives which will impact strongly on client strategic decisions.

Our proactive analytical tool set is bespoke for each project. It enables us to effectively assess competitive, regulatory and commercial market dynamics. It allows us to examine strategic business plans and financial models, assessing and quantifying transaction risks for our clients.

Frontier in action:

Negotiating an MVNO dealFrontier advised a leading European retailer during its re-negotiation of a Mobile Virtual Network Operator (MVNO) agreement with a large mobile operator. Understanding the relative strengths and weaknesses of each party is an important part of every business negotiation. Therefore, we analysed network costs and assessed the profitability of each party, identifying the relative bargaining positions of the MVNO and its host operator. The information we were able to deliver supported a successful and mutually beneficial negotiation. Due diligence for privatisation of a telecoms assetAs part of the due diligence process for the privatisation of an integrated telecommunications operator, Frontier developed a financial model to value network and retail assets. We estimated how different regulatory regimes would impact the valuation of the underlying assets. Our model enabled our client to assess the regulatory risks involved in the deal.

Reviewing the impact of EBRD investmentsFrontier led a study to evaluate the impact of telecommunications projects signed by the European Bank for Reconstruction and Development’s ICT team between 2006 and 2011, focusing on Eastern Europe and the former CIS. Our report examined a number of case study investment projects and assessed the impact of the investments against four criteria, including the extent to which they supported the development of competitive telecommunications markets; and identified key success factors for future projects.

Pricing of transmission servicesWholesale access is an important part of network industries such as broadcasting. Frontier has advised several major broadcast operators on their transmission infrastructure access pricing strategies. Getting the price right requires careful consideration of the underlying economics. Our advice has enabled clients to successfully maximise the value of their network assets. For instance, we advised a broadcast operator on the financial impact of different forms of price regulations by building a financial model and advising them on the different forms of regulation that could be adopted. This allowed our client to understand the key aspects their regulatory strategy should focus on.

Frontier’s client commitment makes them a strategic partner.

Their engagement and industry knowledge are key elements of the added value they bring.

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Where you can find us.

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For more information please visit:www.frontier-economics.com