OH, EAST IS EAST, AND WEST IS WEST, AND NEVER THE TWAIN SHALL MEET: EXCEPT IN TELECOMMUNICATIONS ?

1. OH, EAST IS EAST, AND WEST IS WEST, AND NEVER THE TWAIN SHALL MEET: EXCEPT IN TELECOMMUNICATIONS ? A COMPARISON OF MAIN POLICIES AND REGULATORY ISSUES OF LIBERALISATION AND RESTRUCTURING OF THE TELECOMMUNICATIONS INDUSTRIES IN AN EU AND AN ASIAN COUNTRY. Sonya Liew LL.B (Hons), LL.M. (Distinction) University of Strathclyde Dr. Janina Heisz, LL.M. University of Hanover

2. The Differences of East & West German Social Statistics and Economy Social • population: 82.5 million (75.2 million German citizens, 7.3 million residents with foreign citizenship) Economy • Export-oriented economy (export value of 661,613 million Euro), strong international economic position (third rank in terms of total economic ouput),favorable inflation rate (0,6%), stable society • Currently lowest growth rate within EU (0.2% in 2002, in 2003 decrease of GNP of 0.1%) • Unemployment rate at 11.2% (June 2004)

3. Social Backdrop • South East Asian country aiming to be a developed country • Multicultural with population made up of Malay, Chinese, Indian and indigenous people • Population of Malaysia is in region of 23.5 million people Economy • Progression from a provider of raw material to a multi sector economy. • Ringgit pegged at RM 3.80 to USD 1.00 • Unemployment rate is about 3.4% Malaysian Social Statistics and Economy

4. German TelecommunicationsGeneral • 2003: 54.35 bn fixed line telephone channels (27.8 bn analogue; 11.43 million ISDN basic accesses; 123,300 ISDN primary rate accesses); 4.5 million DSL accesses via copper line; 107,000 public phones • 64.8 million mobile telephone users • UMTS: four mobile network operators; first services since February resp. 2004 (mobile phone) • 50% of the German population use the internet (75% of the users access net by narrowband); increased use of WLAN (25 companies, 1,200 publicly accessible hotspots, numerous non-profit regional projects) • VoIP : 8 companies offer services, continuing regulatory debate • Regulator (RegTP) took up work in 1998

5. German TelecommunicationsMarket Situation • Market dominance of Deutsche Telekom (43% direct and indirect state ownership): fixed telephony channels market share 94.3%, broadband market share 89% • 2,194 competitors, 525 companies with unrestricted network/voice telephony license; 343 companies offering fixed line voice telephony, investment of foreign companies on large scale; strategic partnerships between incumbent and competitors (mobile) • Incumbent strategies: optional tariffs (bundled tariffs) • Various business models: call by call and/or preselection, direct access over own carrier or access networks, resale • Employment: competitors: rise until 2001 (62,600 employees), 2003: 53,600 employees; Deutsche Telekom 1998: 179,000 employees, 2003: 173,300 employees

6. Malaysian Telecommunications • 2002 Fixed lines figures: – 4,669,900 • Mobile telephone lines – 9,241,400 • About 7.841 million Internet users • Major players in the industry : * Telekom Malaysia – incumbent * Maxis * Digi • 3G licenses awarded to Maxis and Telekom • Entire telecommunications industry governed by the Malaysian Communications and Multimedia Commission.

7. German Telecommunications Agenda • National and European initiatives to promote broadband penetration • Possibly: promotion of mobile broadband technologies (50% of the German population must be reached by the end of 2005) • VoIP • eGovernment plan „Bund Online 2005“, which corresponds with the European eEurope 2005 initiative

8. Malaysian TelecommunicationsAgenda • Bridging the digital divide between the rural and urban areas • National Broadband Plan – targeted 50% of Malaysian household broadband penetration by 2007 • Schoolnet Project – wireless satellite technology; 7,085 rural schools; 8,321 urban schools • Unbundling local loop – Malaysia has not yet unbundled its local loop

9. German Legal Culture • Democratic, federal, social state governed by the rule of law • Shaped by constitutional law, influenced by law of European Union and international law • Civil law system • Member of the European Monetary Union

10. Malaysian Legal Culture • British influence on the Malaysian legal system • Judiciary, executive and legislative components • Judiciary consists of Magistrate Courts, Sessions Courts, High Court, Court of Appeal and Federal Court • All laws are either codified into statutes or are in case law (usually referred to as Common Law)

11. German Regulatory Framework • First legal stage of breaking monopoly in 1989 • Telecommunications Act 1996: establishment of RegTP, chamber proceedings, sector specific ex-ante and ex-post price control, regulatory proceedings regarding the abuse of significant market power, interconnection proceedings, allocation of frequencies, consumer protection, specific data protection clauses • Decisions of RegTP subject to judicial review before administrative courts • Telecommunications Act 2004: abolition of licensing regime, reduction of sector-specific regulation, changes in access and rate regulation, restriction of rate approval procedures, consolidation of general control of anti-competitive practises, shortening of judicial proceedings, upcoming change of jurisdiction, modification of surveillance obligation

12. Malaysian Regulatory Framework • The Communications and Multimedia Act 1998 (CMA) • The Malaysian Communications and Multimedia Commission Act 1998 (MCMCA) – provides for a body to regulate the telecoms industry and convergence of communications and multimedia industry in Malaysia. This body is known as the Malaysian Communication and Multimedia Commission (MCMC) • Some of the regulatory functions of MCMC are: * Awarding licences * Assessing and managing telecoms spectrums * Registering certifying agencies for communication equipments; • The MCMC also oversees the different forums which encourages self regulation - Consumer, Content, Access and Technical Forums

13. German Telecoms problems • Anti-competitive market behaviour of the incumbent • Legal problems under Telecommunications Act 1996: * Cases regarding discriminatory proceeding not opened/lengthy investigations before proceedings were initiated * Lack of transparency of the regulator‘s proceedings * Lack of RegTP to remedy violations * Lengthy judicial revision of regulatory decisions * Delay of court decisions by interim proceedings regarding trade secrets of the incumbent and RegTP‘s obligation to submit entire files • General economic slowdown • Negative climate for investments due to comparatively high state involvement in the incumbent (43%) and slow transposition of the EU framework into national law (lack of a clear legal framework), specific problems (UMTS rollout)

14. Malaysian Telecoms problems • Untested waters • * Not many cases have been put before the courts. Encourage self regulation. • Teething problems for the 3G rollout • * Market may not be ready for 3G. Current handsets are still 2G or 2.5G. • A maturing and uninterested market • * Penetration rate is at 73% of the population between 15 and 64 year olds. Urbanites have more spending power although not the majority of consumers. • Reluctance of the incumbent to unbundle the local loop • Protracted legal recourse system

15. Differences of East & West • Similarities * Policy goals: enhancing competition, efficiency and protection of consumers * Similar obstacles of liberalization However: • Different socio-economic settings • Different history of restructuring and liberalisation • Different telecommunications market structures • Different governing policies • Different paces in tackling the problems of market restructuring

16. Possibilities For A Way Forward • Conclusions: * Consistent concept of regulation * Efficient regulatory tools * Monitoring the progress of liberalization * Creation of mechanisms to better and more swiftly adapt to changes * Abbreviate regulatory and legal proceedings