Fixed-Mobile Convergence

1
Fixed-Mobile Convergence

• Regulatory Point of View
• Daniel Rosenne
• Director General, Ministry of Communications,
  Israel
• rosenned_at_moc.gov.il

2
Presentation Agenda

• What is Fixed-Mobile Convergence?
• Market realities Mobile versus Fixed
• The future unified regulation
• Example the case of Israel
• Conclusions.

3
What isFixed-Mobile Convergence?
4
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.

5
Fixed-Mobile ConvergenceIts 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.

6
MobileVersus Fixed Market Realities
7
Fixed-Mobile ConvergenceIts All About
Competition

• Can mobile substitute fixed?

YES!

• When will it happen?

• When mobile offers
• Similar tariffs Additional competition.
• Similar services Data services.
• Same quality as fixed.

8
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?
• Lets face reality tariffs are not pushed down,
  neither by market forces, nor by regulatory
  action.

9
Towards Unified Regulation
10
Why Regulation?

• Market controlled by limited number of dominant
  operators.
• Abuse of market power by discrimination and
  unfair practices will eliminate competition.
• Regulators goal - foster competition, for the
  ultimate benefit of consumers.

11
Fixed-Mobile Convergence Regulators Role

• Protect consumers interests.
• Abolish artificial and historical barriers to
  competition.
• Reduce entry barriers to new entrants, especially
  for innovative new players.

12
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.

13
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.

14
The Case of Israel
15
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).

16
Telecommunications Services Market - 1998
International Long-Distance
Cable TV
Terminal Equipment Business Systems
Internet services
2
2
Cellular Telephony
7
38
11
Fixed Services
40
Total telecom services market 3.7 billion
17
Israels 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)

18
The Mobile BoomIsrael Telecommunications
Services Revenues, 1995-1998 (US M)
2,000
Fixed
1,500
Mobile
1,000
International
500
CATV
0
1995
1996
1997
1998
19
Israels 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.

20
Israels Regulatory Issues Concerning
Fixed-Mobile Convergence

• 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)

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

21
Conclusions
22
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.

23
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.

24
Regulation - Its 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.

25
The Regulatory Equation

• FMC CBIONP

FMC Fixed-Mobile Convergence CBI Cost Based
Interconnect ONP Open Network Provision
26
For more information about Israels
telecommunicationshttp//www.moc.gov.il
27
The End

• Thank you for your attention