Presentation by Rory Macmillan at GSR09

Moderator: Dr. K. Shehadi, Chairman and CEO, Telecommunications Regulatory Authority (TRA), Lebanon

GSR Discussion Paper on Connectivity, Openness and Vulnerability: Challenges facing Regulators, [presentation]
Mr. Rory Macmillan, Founding Partner, Macmillan Keck

Interactive panel discussion:

• Competition, consumers and content: time for converged regulators or greater cooperation?
• Balancing expectations of various stakeholders
• Understanding market transformation to cope with convergence, addressing new regulatory challenges

Three elements

Connectivity We have almost 100% penetration globally with mobile. This is one to one connectivity. The internet is increasing as well and it is many to many communication. 10% increase in broadband equals a 1.3% growth in GDP.

Openness What does it mean, ducts, LLU, Net Neutrlaity. All in all not an easy element

Vulnerability

Revolutions in Network archintecture. We now see telecoms as platforms and the end-to-end argument. You have the IP-hourglass where IP goes over everything and everything over IP. We see a wider range of technologies both in the fixed and in the wireless networks. We have more and more global competition and all kinds of services and applications companies competing with even more problems emerging when content is included. Regulators will have to deal with this.

Competition is the most important element. Regulators need to stimulate this. Regulators need to reduce the costs of physical elements of networks. One of the most important one is spectrum. Coase has argued that we should introduce more trading in spectrum and make it a tradable commodity. It shouldn’t be monopolized by the state or the military. The challenges are to identify what bands and how. But in order to do so Regulators will have to wrestle with broadcasters and military.

Regulators can assist in reducing the costs of building out new physical networks. The Lebanese TRA is an example where it tried to simplify the application for permits. In West Africa we’re using high voltage electricity networks to guide fiber past. Portugal has a reference duct powers.

Soft regulations works as well. For instance rules on how indoor wiring needs to be done.

We also see a change of the role of government where it is a seed investor in new networks. It used to get out of investment, but now it is back again and this creates new problems for regulators. Regulators have already problems with regulators and this may be more in the future.

How open should governments be. How many spectrum licenses. Do we have natural monopolies? How to regulate competition. Focus on the backhaul, how to regulate non-dominant and dominant operators symmetric and asymmetric. Tricky discussions on what to do with the opening up of fixed networks as it may be good business. Both KPN and Benoit Felten of the Yankee Group have argued in this favour

Key issues in vulnerability. Regulators often have no legal powers in many cases to deal with these issues. SIM card registration. Lots of soft power. Lawful interception.

All in all we can say that regulators are faced with a myriad of problems that go up and down the network stack, where it is hard for them to find their role. They have to deal with the wider ICT Ecosystem. It is necessary to identify durable regulatory principles. Regulatory process in a contentious environment.  Regulation is preemptive dispute regulation.

Panel

Panelists:

• Dr. A. Badawi, President, National Telecom Regulatory Authority of Egypt (NTRA), Egypt
• Mr. N. Curien, Autorité de Régulation des Communications Electroniques et des Postes (ARCEP), France (presentation)
• Mr. H. Osuna, President, Comisión Federal de Telecomunicaciones (COFETEL), Mexico
• Mr. R. Mangtani, Director of Regulation, GSM Association

Mod: Do you still see a split between content and networks or is it coming together.

Mex: We are very much up with convergence and want a free flow of content. We need to be forward looking and the changes in the technology sector. This sector comes up with new ideas continuously.

Mod: Do you think that opening up the network is bad for investment? Like some incumbents say.

Mex: If you start with an open mind as an investor you may see that open networks may deliver a higher yield than if you have a closed mind.

Mod: How do you see the benefits of Converence

Egyptian Regulator: (reads a pre-preapared statement that doesn’t really answer anything) Technology and convergence offer new opportunities. And with that there will be new problems and regulatory will often not be able to keep up. New laws need to be technology neutral.

Mod: Maybe France can tell us if it is good to regulate content en telecoms by two different different regulates

ARCEP: we will defend the French language and switch to French. The telecom regulator is more an economic regulator. The content regulator is traditionally more political working on the importance of the role of the French content etc. Maybe in the future we will be integrated as things do change. New laws do dictate that we cooperate as regulators in France. Another element is frequencies and that is where we meet more. It is clear with the Digital dividends and here we have a digital coordination council. So there we meet. Third element is that content isn’t traditional audio visual content any more. It is now on the internet. It may not be wise any more to have regulators who are focussing on different networks.

Mod: What do you think of Next Generation Access. Can the Mobile networks get access and promote this?

GSMA: First I want to correct mr. MacMillan, intelligence needs to be in the network as well as in the edge. For instance we need Session Border controllers. Now, going on we need the new networks based on 3G and 4G and we will be competing with the fixed network

Mod: Mob providers have had a privileged relationship with the customer. Do you see it as a problem that the customer is becoming more liberated

GSMA: well we are opening up a lot more. Walled Garden’s are going away.

Mod: Rory what do you think? Are mobile operators doing enough?

Rory: well it all depends on the audience here… are the operators, or regulators… (laughter). But coming back to the edge and center debate. It is now about doing things in the right place in the network. This may be in the core, but also in the edge. It is about where competition can be usefully supported. The judgement regulators have to make is whether it should allow some control. You can look at Carterphone, but also at iPhone. It is a difficult question.

Mod: I do feel that mobile operators hate to loose their control of the customer.

GSMA: Just look at the iPhone. 2 billion itunes downloads without the operator being involved.

Egypt: Openness increases traffic and increased traffic creates revenues for operators. However we haven’t heard much from mobile operators about this yet as mobile data isn’t that popular yet in my country.

Mexico: we’re in much the same situation as Egypt, though maybe a different phase. More and more companies are understanding that the increase in usage is the result of openness. Consumers will choose the network is the most open.

France: Convergence is a win-win for all. It fills the networks, fixed and mobile. It is a win for consumer if they get more free access. If they get richer access. We need to find a balance so that disputes between stakeholders don’t destroy what we have. We have two large integrated operators in France SFR and France Telecom. Their long time survival depends on their integration. We are very fortunate in France to have effective competition. We do see that all operators are investing in France in new network. The incumbent as well as the challengers. The incumbent may threaten not to , but the challengers make sure they need to.

Mod: on the aspect of vulnerability to what extend have regulators failed until now. We do see a bit of self-regulation.

Rory: the whole control issue has flipped. The customer is now in charge. It used to be the telecomprovider. Customer demand is also firing the innovation in dealing with the vulnerability issue. It is an open question if they regulator should be involved. It is about trust in the end. I wonder if trust is a currency. Trust has to be earned. The more competition the more possibility to earn trust. So regulation may not be.

Comments from the floor:

Gentleman: Licensing is itself very restrictive. We should open it up. Also we should look at our billing structure. Billing is now voice and time based. Data is not really part of it. We need to change our billing relationship in order to make clear that the future lies in data. Gentleman from Middle East. We have this vision as a regulator that the customer will own its own terminal and than choose its own network. We have new building developments where we have convinced the facility provider and the builder to build in the fibre networks from day one and to open this up to all networks. Gentleman from Africa: we agree that competition stimulates development. But competition also brings risks. So what should the regulator do on tarrif structures as there is now risk. Secondly convergence has effect on QoS. What should the regulator do to stimulate QoS. Gentleman from the middle east: I think that IMS will deliver a solution to the vulnerability problems. Operators will need to implement this and deliver the future fixed mobile integration. The next generation IMS will deliver also many controls for content players in the network. Gentleman from Wimax forum: reads a prepared statement. Next generation mobile is here already. Countries can benefit from this technology as soon as regulators assign 2.3Ghz and 2.5Ghz to Wimax operators. Gentleman from the Middle East: We don’t know where convergence is now. We should question the role of the regulator. The regulator is often required to negotiate with the government for instance to get military frequencies. On the other hand we have to be scary enough to the private sector. We have to be multiple things. Technology Neutral is not the answer when it means technology ignorant. Regulators should look like the government, but they should consist of ex-private sector people. They should understand the technology and business well.

ARCEP: Two comments… what the consumer want is to have everything and for a low price (all you can eat) The network also doesn’t care anymore what the content costs. The big issue is therefore to look at the cost of connectivity.

Mexico: We need to change our frame of mind on how to deliver connectivity and not just voice.

Egypt: Convergence is necessary for developing nations. Escpecially if they hope to leap frog.

GSMA: We need convergence, but we need to be aware of the regulatory problems that for instance cloud services bring.