company confidential
Regulations for the Digital Economy
Session 8: Digital Services, E-Governance and the Digital Economy
Commonwealth Broadband Asia Forum 2016
21st – 23rd Sept 2016
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With The Increase Of OTT Players, The Digital Economy And Value Chain
Have Become Very Complex And Global
Source: GSMA, AT Kearney
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Mobile Operators Are Now A Small Part Of The Overall Ecosystem
The bigger pie of the industry
Source: GSMA, AT Kearney
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The Fourth Industrial Revolution: The digital economy has potential to
add up to USD 1TRILLION to ASEAN GDP over the next 10 years
Source: AT Kearney Digital Revolution
6company confidential Source: News Articles, Axiata, GSMA, Analysys Mason
WhatsApp voice launched binq early 2015, others
like Viber, WeChat etc. available by end of 2013
MY: TOTAL SMS INDUSTRY REVENUES & ARPU(only Celcom, DiGi, Maxis)
MY: TOTAL VOICE INDUSTRY REVENUES & ARPU
(only Celcom, DiGi, Maxis)
Total Net Revenues in bn. US$, Monthly SMS ARPU per
Sub in US$
Total Net Revenues in bn. US$, Monthly Voice ARPU per
Sub in US$
2.4 2.2 1.9 1.60
2
4
0,5
1,0
-12,3%
0,9150,9240,743
0,5460,839
1,2
RevenuesAvg. ARPU
7.47.88.08.29.40
10
204
2
‘12‘11
3,6243,5053,677
‘10
-1,3%
‘14
3,634 3,483
‘13
RevenuesAvg. ARPU
WhatsApp messaging launched in late 2009 in the US
Challenges to the sector are considerable: Revenue from traditional
voice and SMS services is static / falling. OTT substitution will affect
future ability reinvest into network and innovative services
WhatsApp free voice calls: “The new service, could help wipe hundreds of
billions of dollars from the revenues of mobile carriers in the next five years,
say analysts”. - The Financial Times, February 2014
“Declining growth in operator voice and SMS revenues will accelerate to -6%
annually in the five years to 2025 reflecting continuation of the current
migration of comms to IP messaging platforms, and will become more
substitutive as smartphone penetration rises”. – GSMA, February 2016
“Global annual SMS revenues will fall to around US$97 Bn in 2018,
down from US$120 Bn in 2013... annual Asia Pacific SMS revenues
to drop from US$45.8 Bn in 2013, to US$38 Bn in 2018” –
Telecoms.com, November 2013
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Today’s economics of operating a mobile network is very challenging
Source: Annual reports, Axiata, Techneconomyblog.com
Typical Revenue & Site Distribution of MNOs
Urban Rural areasSuburban
0% 100%
20%
0%
60%
40%
80%
50%
100%
Cu
mu
late
d R
eve
nu
e (
Tra
ffic
)
Cumulated Sites
50% sites
In rural areas
serve less than
10%revenue
In Europe: Revenues for Mobile Operators declining yet capex commitments remain highest
Business case for infrastructure investment in rural areas become unviable
Source: Broadband Commission, State of Broadband Report 2015
“(Only) top four operators generate positive returns” – AT Kearney ASEAN Digital Revolution; based on study of 54 operators worldwide
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Meet High Quality Regulatory
Principles?
1. Long-term interest of consumers
allows regulators to balance a range of
competing aims e.g. affordability, service
quality, service choice and safety
2. Non-discrimination and technology neutral
ensures rival services compete on the merits
of the value that they offer consumers, rather
than on the basis of some unfair advantage
3. Innovation
ensure competitive incentives remain to
promote genuine innovation that creates
additional value for consumers.
4. Proportionality
ensure that regulation is intended to address
identifiable specific risk of harm.
5. Responsiveness
ensure regulatory frameworks evolves to
reflect technological, economic etc. changes
Business model
MNOs OTTs
• Regulated, licenced, high-
CAPEX, long-term and
nationally-based
• Focus on connectivity / services,
• Customer data for user
enrichment
• Unregulated, global and
“seasonal”
• Mostly centred around use of
consumer data (service not
‘free’)
• Applicable in line with domestic
laws
• Multiple licenses with >200
including obligations on rollout,
interconnection and CSR
• Usually no license needed;
maybe in home country
jurisdiction only
• Exposed to minimal
obligations
• Sector-specific fees e.g.
spectrum, USO, licence and
general corporate taxes
• Horizontal laws; sector obligations
• Rules on data localisation,
retention, disaster recovery and LI
• Uncertain enforcement
• Minimal restrictions on data
location, retention and LI
Licensing
Taxation
Privacy &
Security
Consumer
Protection
• Customer-centric obligations e.g.
transparency, contract info, QoS,
SMP, emergency services
• No specific enforcement
outside major countries
Current debate on Level-Playing-Field: Same Rules regardless of
difference in technology or business model adopted, for services that are
functionally or economically substitutable
Source: GSMA, Web Henderson, News articles
• No sector-specific taxes,
freedom to structure business
primarily for tax planning
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SSSR measures
adopted
SSSR proposed
or debated
There are increasing trends by policy makers to capture OTTs and non-
traditional providers under revised / new national laws and regulations
Examples of Revised OTT Treatment via SSSR rules*
• EU: Digital Single Market reform (‘16)
• MY, AU: Discussions on regulating Uber
• PH: Regulatory Framework for Uber (‘15)
• MX: Establishing OTT regulations
• ID: Proposed OTT regulations; e-coms law
• IN: Proposed regulation of Internet-based
domestic calling apps
• UK: Diverted Profits Tax (‘14)
• AU: Sharing Economy & Tax Guidance (‘15)
• OECD/G20: BEPS (’15/16)
• KR: To introduce “Google Tax” (‘16)
• IT: To introduce “digital tax” (‘16)
• NZ, AU: GST on online goods (‘16)
• EU: GPDR under market reforms (‘16)
• IN: Draft LI framework; new digital levy (‘16)
• FI: Information Society Code (‘14) incl. OTT
privacy, security & cons. protection
• BE: Claim Skype is a telecoms operator
• DE: Claim Gmail is a telecoms service
• EU, RU, DE: Antitrust claims
Addressing this will:
1. Meet long-term interest of consumers, promote digital innovation and ensure MNOs will be able to reinvest into the network.
2. Ensure international OTTs with relaxed rules will not impair the development of local OTTs
3. Ensure government to a certain extend will continue to have control on content, application services and customer data
Genera
lLic
ensin
gT
axation
Priv.; C
ons.
Pro
t.
Note:*non-exhaustive; Source: GSMA, Web Henderson, News articles
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Still early stages but proving to be gaining traction
Most enforcement cases or examples are based on competition and tax
evasion but expect the issue on licensing to further increase
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Mobile Financial Services can contribute to the Financial Inclusion agenda;
there are more people having a mobile phone than a bank account
High-level principles and recommendations
Secure top-level support and commitment to
achieve national level financial inclusion goals
Enable open and competitive landscape, allow
banks and non-banks to participate on equal
terms
Regulations to cater to the level of market
maturity and development state of MFS
Regulations to be risk-based and proportionate
to encourage market entry and MFS adoption
Strive for interoperable MFS systems when the
market is ready
Cross-regulatory coordination
Use-case: Digital Government finances for
economies of scaleOTC, Money transfers
Remittance
Disbursements (G2P, salaries), Bill payments
Savings, Insurance
Investment, Credit
1: Basic 2: Emerging 3: Deepening 4: Mature
Mobile Financial Services
Source: TRPC, Axiata
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Axiata is ready to support and play our part to grow Digital Economies,
pushing for cashless societies, smart cities, borderless digital services
and financial inclusion
The rapid innovation that characterizes the Internet and Digital Economy is an exciting opportunity for countries to accelerate
their economic development and leapfrog into the Fourth Industrial Revolution. Some topics to contribute to the discussion:
Equivalence
• Basis of regulation could be “Same Service,
Same Rules”, regardless of difference in
technology or business model adopted, for
functionally or economically substitutable
services; including application of taxation.
• Regulations could be rolled back where no
longer required. Sector-specific regulations
(e.g. licensing & authorizations tier
structures/categories) could be in time be
simplified or scaled-back.
• Reduction of sector-specific regulations and
increasing reliance on horizontal legislation
to consistently address issues like
competition, customer data privacy, data
retention, LEA.
Building Trust and Security
• National e-Identity system to authenticate
online transactions (e.g. banking, G2C
services). For simplicity and practical
implementation purposes, ‘sit’ within the
mobile SIM card.
• Regulations which are equivalent across
countries e.g. consumer protection, data
protection and privacy, proportionate KYC.
Larger ‘single market’ with have similar rules
will allow for greater innovation and cross-
border electronic payments and transactions.
• Coordinate national cybersecurity
management and monitoring between
various authorities or setup a regional
cybersecurity centre or agency.
Catalyse and Build
• With Mobile Financial Services, allow both
bank-led and non-bank-led models to work.
In certain markets, mandate interoperability
between service providers and open up
bottlenecks preventing greater adoption e.g.
Point-of-Sale Terminals, ATMs.
• Catalyse adoption with Government
payments and disbursements via m-money,
like G2C e-services which were introduced to
catalyse use of ICT.
• Showcase of smart-cities infrastructure
(enabled by IoT, M2M) possibly via PPP
models.