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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. What is Fixed-Mobile Convergence? Market realities: Mobile versus Fixed The future: unified regulation

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Fixed-Mobile Convergence

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  1. Fixed-Mobile Convergence Regulatory Point of View Daniel Rosenne Director General, Ministry of Communications, Israel rosenned@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 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.

  6. MobileVersus Fixed: Market Realities

  7. 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?

  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? • Let’s 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. • Regulator’s goal - foster competition, for the ultimate benefit of consumers’.

  11. 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.

  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 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

  17. 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%)

  18. 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

  19. 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.

  20. 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)

  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 - 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.

  25. The Regulatory Equation FMC = CBI+ONP FMC: Fixed-Mobile Convergence CBI: Cost Based Interconnect ONP: Open Network Provision

  26. For more information about Israel’s telecommunications:http://www.moc.gov.il

  27. The End Thank you for your attention

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