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Fixed-Mobile Convergence Regulatory Point of View Daniel Rosenne Director General, Ministry of Communications, Israel rosenned@moc.gov.il Presentation Agenda What is Fixed-Mobile Convergence? Market realities: Mobile versus Fixed The future: unified regulation Example: the case of Israel

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fixed mobile convergence

Fixed-Mobile Convergence

Regulatory Point of View

Daniel Rosenne

Director General, Ministry of Communications, Israel

rosenned@moc.gov.il

presentation agenda
Presentation Agenda
  • What is Fixed-Mobile Convergence?
  • Market realities: Mobile versus Fixed
  • The future: unified regulation
  • Example: the case of Israel
  • Conclusions.
fixed mobile convergence different meaning from different views
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.

fixed mobile convergence it s all about competition
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.

fixed mobile convergence it s all about competition7
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?
mobile tariffs paradox
Mobile Tariffs Paradox
  • Simple economics:
    • Marginal investment per customer:
      • Fixed: US $1000-1500.
      • Mobile: US $300-500.
    • Operating expense: similar for both.
  • 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.
why regulation
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’.
fixed mobile convergence regulator s role

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

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.
key regulatory action points 1
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.

key regulatory action points 2
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.

israel s telecommunications
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).
telecommunications services market 1998
Telecommunications Services Market - 1998

Cable

TV

International

Long-Distance

Internet services

Terminal Equipment

& Business Systems

2%

2%

7%

Cellular

Telephony

11%

38%

Fixed Services

40%

Total telecom services market ~ $ 3.7 billion

israel s mobile operators
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%)

the mobile boom israel telecommunications services revenues 1995 1998 us m
The Mobile Boom:Israel Telecommunications Services Revenues, 1995-1998 ($US M)

2,000

Fixed

1,500

Mobile

1,000

International

500

CATV

0

1995

1996

1997

1998

israel s mobile services growth
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.
israel s regulatory issues concerning fixed mobile convergence
Israel’s Regulatory Issues Concerning Fixed-Mobile Convergence

Open Issues

  • Symmetrical air time
  • Cost-based mobile interconnect tariffs
  • Enhanced competition:
    • Additional mobile operators
    • 3G frequencies allocation.

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)
summary market related points
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.
summary regulatory points
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.
regulation it s all about competition
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.
the regulatory equation
The Regulatory Equation

FMC = CBI+ONP

FMC: Fixed-Mobile Convergence

CBI: Cost Based Interconnect

ONP: Open Network Provision

for more information about israel s telecommunications http www moc gov il
For more information about Israel’s telecommunications:http://www.moc.gov.il
the end
The End

Thank you for your attention