ITU 2004 4 th Annual Private Sector cooperation meeting in the Arab region

1. ITU 2004 4th Annual Private Sector cooperation meeting in the Arab region National Regulatory Authorities and Private Sector Operators: Approach to working together for mutual benefit Alan Horne Vice Chairman InterConnect Communications Chairman, Eurostrategies

2. Introduction • The approach taken by national regulatory authorities, incumbent operators and new operators in working together can greatly assist or inhibit the growth of the sector. • The presentation will cover • Characteristics of Arab Region • Future • Sector Issues; • Approach by Regulators; • Approach by new Operators; • Approach by incumbent operators;

3. Characteristics of Arab Region • Low fixed line tele density • Higher mobile tele density for significant room for growth • Young or non existent competition • Young or non existent regulator • State owned fixed operator • Mobile operator as a subsidiary of fixed • Significant potential for growth • Opportunity to leapfrog more developed markets

4. EU Average 81% There is significant room for growth in fixed and mobile

5. Future Government Policy Maker < 50% Ownership Regulator Policy Law Decrees Individual Services Licence Class Licences Interconnection Regulation Retail tariff Regulations Number Management Frequency Management NeCo NeCo Competition Regulations Interconnection Clearing House ISPs Operator 1 Voice, Data Fixed & Mobile Operator 2 Voice, Data Fixed & Mobile Operator n Voice, Data Fixed & Mobile ISPs ISPs Hosts ISPs ISPs ISPs TV Equip Suppliers Radio ISPs ISPs ISPs ISPs ISPs Number Portability Clearing House Mobile, fixed wire, fixed wireless, WiFi, cable, broadcast customers

6. Future • Class Licences for most types of operations; • Particular licences only for infrastructure development; • Three or four national infrastructure providers, each competing on relatively equal terms; • Operators able to sell any type of service (fixed/mobile, voice/data) and use any type of technology; • Other service providers offering indirect access; • Customer able to change service provider and keep number; • Prices cost orientated; • Universal service fund set up to support service provision to uneconomic areas;

7. Criteria for Success Licensed Operator Mobile Operator Retail Services Fixed Line Services Mobile Services ISP Services Leased Services Fixed Line Operator Account Separation Non discrimination Transparency Carrier Services Department Operating Network Data Operator ISP

8. Strong Regulation in definitive areas • Regulator controls: • Numbers; • Spectrum; • Regulator sets regulations for: • All wholesale prices of operators with SMP in such services; • Basic retail prices for operators with SMP (e.g voice, internet access, leased lines) • Creation of Fair Competition is essential to success.

9. Key Responsibilities of Regulator • Encourage competition; • Issue licenses and enforce compliance; • Establish rules of interconnection; • Create and administer the numbering system; • Supervise tariffs of providers with SMP; • Resolve complaints from consumers; • Act as a mediator and arbitrator to resolve disputes between licensees; • Ensure any anti-competitive behavior is stopped; • Assist educational, health care institutions and disabled; • Facilitate the access of disabled persons to Telecommunications Services;

10. Economic and financial model • An economic and financial model of the industry is required in order to assist in making sound Regulatory decisions. • The model should take account of: • Affordability and demand (GDP, income per household, income per person, spend on telecommunications); • Number of mobile operators; • Number of fixed operators; • Market share; • Cost of provision of service; • Profit and return on investment by operators; • Income to Exchequer; • Costs to customers; • Income to operators.

11. Resulting benefits to all stakeholders • Consumer • Choice of supplier; Lower prices; Improved services; Easier access to new systems and services. • Government • Increased value of assets; Increased volume of usage; Increased direct fees from sector; Increased indirect fees from improved business performance • Operators • Improved economy of scope and scale; Regulated interconnection and wholesale prices. • ISPs and Value Added Resellers • Ease of market entry; Wholesale interconnection prices

12. Sector issues (1) • Incumbents are facing losing their monopoly position and/or an erosion of their market share; • New entrants face anti competitive actions by incumbents; • Mobile services are substituting for fixed voice eroding fixed line revenues;; • High speed data remains the biggest opportunity for the fixed line service but even this is being challenged by wireless techniques; • Economies of scale and scope can be obtained by offering fixed and mobile services; • Technology neutral licensing is required in order to enable operators to be efficient and be competitive; • Government policies on e-commerce relies upon cost effective and universal availability of internet at the lowest cost.

13. Sector Issues (2) • Adoption of EU style legislation and regulation in markets where it may not be appropriate; • Imposition of “old style” EU regulation; • Implementation of regulation in very rapid time scales; • Need to participate in consultation processes and respond to consultation documents; • Need to provide detailed information to regulators (and their consultants); • Inexperienced regulators; • Lack of sufficient experience and processes within the group to manage all the regulatory challenges; • Politically motivated decisions;

14. Approach by Regulators (1) • Consultation by the NRA with all interested parties so as to maximise; • Appropriate Policies, Rules, Guidelines, Licence terms; • Decisions balancing all parties positions; • Market sector decisions e.g. issuing of new licences; • Consultation Process: • Defined deadlines for responses and decisions so as to provide certainty; • Manage issues so as not to overload industry; • Open and transparent, confidential responses being the exception; • Employment of qualified people able to work on equal terms with the best in the operators. (Requires competitive remuneration policy);

15. Approach by Regulators (2) • Good web site offering access to all: • Policies, Rules, Guidelines, Licence terms; • Consultations; • Decisions; • Licensed operators (and links to their web sites); • Spectrum and Number allocations; • etc • Work with the industry through consultation process and working groups so as to avoid poor regulation; • Have an effective dispute resolution process so as to quickly deal with disputes which are harmful to the development of the sector

16. Approach by new Operators (1) • Initially focus on an area of business which can win the customer over due to good quality of service. • Try to obtain Technology neutral licences and have a freedom to provide any service over any technology; • Work with the incumbent and seek win win deals; This will only work if the incumbent is taking a forward looking approach.

17. Approach by new Operators (2) • Ensure the Regulator fully understands the services and critical requirements of success especially where the incumbent is being relied upon for interconnection and Leased lines. • Participate in consultation processes and do not underestimate the time to work with the Regulator as well as with the incumbent;

18. Approach by incumbent operators (1) • Seek the opportunities that opening up of the market brings: • In general an increase in the size of the market; • New players seeking to purchase capacity and other services; • Separate wholesale and retail businesses: • Have account managers for other licensed operators; • Separate financial accounts; • Understand costs and offer every conceivable service to the new entrants; • Have the retail businesses focus on Major accounts; • Develop a strong broadband offering and take the market by storm;

19. Approach by incumbent operators (2) • Establish Regulatory Group: • Ensure compliance with licence conditions; • Co-ordinate all communications with NRA; • Work with all parts of the business to understand importance of working with Regulator and responding to consultations; • Seek out and prevent anti competitive actions before complaints from OLOs • In other words a total shift in emphasis

20. Conclusion • Ministries, Regulators and Operators need to work together and keep an open mind; • A formal Consultation Process is essential; • The regulator should set up working groups to involve all interested parties for all major decisions; • Regulator must be able to offer competitive salaries to keep the best people; • Policies need to be set which enables rapid growth of competitive market; • Creating technology neutral licences and enabling fixed and mobile services to be offered by same company enables economies of scope and scale • Appropriate Regulation and structural changes within the operators are required to assure fair competition

21. Creative and positive attitude by Regulators and Operators will result in benefit to all stakeholders – simply put the cake will get bigger

22. InterConnect Communications Ltd Merlin House Station Road Chepstow NP16 5PB United Kingdom Telephone: +44 (0) 1291 638400 Fax: +44 (0) 1291 638401 Email: info@icc-uk.com Website: www.icc-uk.com