Emerging Trends in Telecom/ ICT Licensing Dr. V. Sridhar IIIT-B - - PowerPoint PPT Presentation

Emerging Trends in Telecom/ ICT Licensing

• Dr. V. Sridhar

IIIT-B vsridhar@iiitb.ac.in www.vsridhar.info

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18 Nov 2019 TRAI ASEAN Capacity Building Workshop

What are the basic Principles of Telecom Regulation and Licensing What is the emerging role of Regulator? What are the futuristic Licensing and Regulatory Models?

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18 Nov 2019 TRAI ASEAN Capacity Building Workshop

Why Regulate ICT Sector?

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Regulatory needs under different market types

• Limited regulation as Government or State Owned Operators provide

service, as well as in most cases as a regulator. The erstwhile PTTs in Europe and DoT in India are examples Public Monopoly

• Notable example being erstwhile AT&T and the Bell Operating Companies in

the U.S. The private operators needs to be regulated especially for Quality and Price of services Private Monopoly

• Most telecom markets wherein there are oligopolies that necessitate

regulation on tariffs, universal service obligation, and prevent anti- competitive practices Partial Competition

• Most Internet and digital market places wherein there is little barrier to entry

and exit that does not necessitate regulation; only applicable in case of violation as ex-poste Full Competition

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Need for Regulation

• In the areas of pricing, quality of service and non-discriminated

service offerings To protect Consumer Interests

• Reduce barriers to entry and exit; prevent anti-competitive

behavior including predatory pricing and collusion; to reduce market failures To foster effective competition

• To provide equitable services across geographies, gender,

demographics, and societies To provide universal service

• To encourage innovation and promotion of new technologies

and their adoption in the industry and society To promote technologies and innovation

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Why Regulate Telecommunications?

• More liberalized telecom market

○

Need to attract private sector: competition management

■

When the government or PSUs fail

○

Growth of alternative communication services

■

And promote innovation

• Internet (VoIP, IPTV), mobile (VAS)
• Development of International trade in telecommunication services

○

Bring in foreign investment

■

Foreign telcos, global service providers

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18 Nov 2019 TRAI ASEAN Capacity Building Workshop

When to Regulate..

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Types of Markets

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Number of Firms?

One Firm Monopoly Landline Service Cable TV Service Few Firms Oligopoly Mobile Service DTH Service Many Firms Differentiated Products Over The Top Services WhatsApp Facebook Identical Products ??

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Externalities and Market Efficiencies

• An externality refers to the uncompensated impact of one person’s actions
• n the well-being of a bystander.

○

Externalities cause markets to be inefficient, and thus fail to maximize total surplus.

• An externality arises...

. . . when a person engages in an activity that influences the well-being of a bystander and yet neither pays nor receives any compensation for that effect.

○

When the impact on the bystander is adverse, the externality is called a negative externality.

○

When the impact on the bystander is beneficial, the externality is called a positive externality.

Negative or positive externalities need regulatory intervention

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Excludability and Rivalrousness

• When thinking about the various goods in the economy, it

is useful to group them according to two characteristics:

○

Is the good excludable?: Mobile Service

○

Is the good rival? FM Radio, Public Wi-Fi

• Excludability

○

Excludability refers to the property of a good whereby a person can be prevented from using it.

• Rivalry

○

Rivalry refers to the property of a good whereby one person’s use diminishes other people’s use.

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“The best things in life are free. . .” However, there is no Free lunch

• Free goods provide a special challenge for economic analysis.
• Most goods in our economy are allocated in markets…
• When goods are available free of charge, the market forces that

normally allocate resources in our economy are absent

○ When a good does not have a price attached to it, private markets cannot ensure that the good is produced and consumed in the proper amounts ○ In such cases, government policy can potentially remedy the market failure that results, and raise economic well-being.

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What to Regulate?

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What to Regulate? Competition Level Many Few Price Ceiling Floor Universal Access Subsidize Rural Services Interconnection Local National International Scare Resource Radio Spectrum Mobile Service Satellite Service Privacy

Taxonomy of what to regulate

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Type of Regulation: Ex Ante Regulation

• Ex ante regulation is anticipatory intervention
• Ex ante regulation uses government-specified controls
• to:

○ Prevent socially undesirable actions or outcomes in markets, or ○ Direct market activity towards socially desirable ends.

• Ex ante regulation is mainly concerned with market structure, i.e.

○ the number of firms and level of market concentration, entry conditions, and the ○ degree of product differentiation.

• Ex ante regulation often takes the form of sector specific regulation.

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18 Nov 2019 TRAI ASEAN Capacity Building Workshop

Type of Regulation: Ex post Regulation

• Ex post regulation addresses specific allegations of anti-

competitive behavior or market abuse.

• Ex post regulation aims to redress proven misconduct through a

range of enforcement options including fines, injunctions, or bans.

• Ex post regulation is mainly concerned with market conduct — the

behavior of a firm with respect to

○ both its competitors and its customers.

• Ex post regulation often takes the form of competition laws.

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18 Nov 2019 TRAI ASEAN Capacity Building Workshop

Regulatory Organization and Processes

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Telecom Regulatory Organization: India

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Org Structure of FCC

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https://www.fcc.gov/sites/default/files/fccorg-08112017.pdf

EU Telecom Regulation

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Body of European Regulators for Electronic Communications (BEREC)

The Regulatory Process

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TRAI Posts Pre-Consultation Posts Consultation Paper Conducts Open-house Sessions Submits Recommendations to DoT Telecom Commission of DoT Examines the Recommendations Telecom Commission Submits Policy Proposals to the Ministry of Communications and IT Ministry of Communications and IT finalizes the Policy and gets Cabinet approval, if required

Either suo moto or

• n request from

DoT Stakeholders Response

Licensing Telecommunication Services: A way to regulate

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Methodology of License Assignment

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License Assignment

Lottery Beauty Parade Fee Based Auction Single Stage Sealed Bid Multi-stage Sealed Bid Incentive Fixed Fee First Come First Serve

Licensing Objective

• Regulating Provisioning of an essential public service

○

Emergency service (911, E-911 service in the US)

• Expansion of networks and services

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Rural area coverage

• Regulating market structure

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Determining network operators allowing for efficient supply of telecom services

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Allocation of scarce resources

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Establishing a competition framework

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Different types of licenses in the ICT sector

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ICT License Telecom Access License Fixed Landline Cellular Mobile Virtual Network License Landline Mobile Long Distance National International Internet Service Internet Telephony Satellite Very Small Aperture Terminal Satellite Telephony Over The Top Communicatio n Public Mobile Radio Trunking Broadcasting Cable TV Direct to Home Over The Top Broadcasting FM Radio

Balancing Certainty and Flexibility

• License conditions should be flexible to allow

sector growth, and future regulatory reform

○

License period in India – 20 years

○ Amendable/ non-amendable clauses ○ Clause 5.1 of UL: ■

The Licensor reserves the right to modify at any time the terms and conditions of the License, if in the opinion of the Licensor it is necessary or expedient to do so in public interest or in the interest of the security of the State or for proper conduct of the Telegraphs. The decision of the Licensor shall be final and binding in this regard

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Roll-out Obligations

For 3G

For Broadband Wireless Access

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Future of Licensing and Regulation

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OTT Services

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OTT Services Communication Peer-to-Peer Synchronous Voice calls Asynchronous Text, Audio and video messaging One-to- Many Broadcasting Synchronous Radio Televisi

• n

Live Video Asynchronous Time- shifted Video On deman d Video

Taxonomy of OTT Services.

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Physical Networks (Landline DSL, Mobile Broadband, Satellite Broadband, FM/AM Radio, Satellite Broadcasting, Over The Air Broadcasting, Cable Television) Internet Protocols (TCP/UDP and IP) OTT Communication and Broadcasting Services

Technical architecture of OTT Services

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18 Nov 2019 TRAI ASEAN Capacity Building Workshop 31 OTT services are not licensed services OTT services are inherently non- jurisdictional OTT services use Internet which is a shared network OTT services can be provided at much lesser prices to end consumers OTT services consume scarce resources such as radio spectrum OTT services mimic very closely the traditional telecom services OTT services provide alternative communication services for customers OTT services are substitutes of traditional telecom services OTT services are innovative and provide consumer benefits OTT services collect consumer data and hence might violate privacy of individuals OTT services are innovative and continue to evolve OTT services are large in numbers compared to traditional telecom services OTT services do not pay any regulatory fees though they provide services to consumers OTT services are mainly provided by global firms OTT services use “zero price” model

Challenges in regulating OTT services

The dimensions of Open Access

Open Access

Access Level Right of Way Ducts Physical Unbundling Bit Steam Access Resale Ownership Public Public Private Partnership Private Structure Vertical Separation Vertical Integration

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Questions?

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