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Telecommunications Liberalization and Regulatory Framework in Lebanon Re-farming for Broadband Lebanon

Telecommunications Liberalization and Regulatory Framework in Lebanon Re-farming for Broadband Lebanon. Dr. Imad Y. Hoballah Commissioner, Board Member, Head of Telecommunications Technologies Unit Telecommunications Regulatory Authority (TRA) Lebanon www.tra.gov.lb.

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Telecommunications Liberalization and Regulatory Framework in Lebanon Re-farming for Broadband Lebanon

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  1. Telecommunications Liberalization and Regulatory Framework in Lebanon Re-farming for Broadband Lebanon Dr. Imad Y. Hoballah Commissioner, Board Member, Head of Telecommunications Technologies Unit Telecommunications Regulatory Authority (TRA) Lebanon www.tra.gov.lb

  2. Although reform has started with TRA establishment, most telecom markets in Lebanon are stagnant and suffer from lack of competition Indicators Penetration Number of Service Providers Private / State-Owned Level of Competition Mobile Market 30% 2 State-Owned Monopoly Fixed Market 60% (*) 1 State-Owned Monopoly Internet Market 32.5% (*) ~ 16 Private Competition ADSL Market ~ 4.5% (*) ~ 8 Private through MoT Local Loop / Ogero Limited Competition (*) per household TRA Lebanon – Existing Market 3- Nov - 2008

  3. The Lebanese fixed and mobile services markets have been stagnant and the data and internet services market have been constrained Weaknesses Strengths • No competition • No incentive to upgrade the infrastructure and introduce new technologies • Low penetration rate • Stagnant growth Fixed • Relatively good copper infrastructure • Regionally competitive price per minute 1 • Pent up demand for mobile services • High mobile revenues per user • No competition • Lag behind in terms of new technologies (e.g. MMS, EDGE, 3G) • High connection and subscription charges • High per minute prices • Limited choice in mobile packages, Low QoS • Saturated mobile network /no upgrade • Low Penetration Mobile 2 Broadband • Relatively competitive • Lucrative segment • New wireless technologies deployed • Pent-up demand for data and internet services • ADSL services were recently launched • Access is hindered by incumbent operator • Until recently, high international bandwidth prices • Moving towards certainty with regulatory framework 3 International Access • No competition • No transparent allocation spectrum • Limited capacity • High prices for retail • Future expansion Plans ( I-ME-WE) 4 • 3 TRA Lebanon – Existing Market 3- Nov - 2008

  4. 35% 30% 25% 20% 15% 10% 5% 0% 2000 2001 2002 2003 2004 2005 2006 2007 Fixed line penetration Mobile penetration Broadband penetration Internet penetration Penetration of telecommunications services in Lebanon between 2000 and 2007 has increased very slowly Source: Globalcomms, operator data, ITU, Arab Advisors Group TRA Lebanon – Existing Market 3- Nov - 2008

  5. The telecommunications market is still underdeveloped compared to other countries Fixed Line Penetration vs. GDP per Capita (2005) Mobile Penetration vs. GDP per Capita (2005) Internet Penetration vs. GDP per Capita (2005) PSTN Penetration Mobile Penetration Internet Penetration GDP per Capita (USD/ Year) GDP per Capita (USD/ Year) GDP per Capita (USD/ Year) Sources: Economist Intelligence Unit, interviews with industry TRA Lebanon – Existing Market 3- Nov - 2008

  6. The cost of a mobile pre-paid/prpostpaid minute in Lebanon is among the highest in the region due to the lack of competition and the legacy of high taxes Mobile Prepaid Peak On-net Minute Rates (2006) (US$ per peak minute) Mobile Postpaid Peak On-net Minute Rates (2006) (US$ cents per peak minute) More than double the regional rate 60% higher than the regional rate 3- Nov - 2008 Note: All Rates corresponds to the lowest first minute rate TRA Lebanon – Existing Market

  7. A typical internet user in Lebanon will spend six to eight times more than users in similar countries due to low download ceilings Source: Operators Websites TRA Lebanon – Existing Market 3- Nov - 2008

  8. The penetration of DSL services in Lebanon is the lowest in the region, due in part to a late start 3- Nov - 2008 TRA Lebanon – Existing Market Source: Operators Websites

  9. Lebanon shouldhave much higher broadband connectivity given its GDP per capita Broadband Connectivity versus gdp per capita Broadband Penetration (subscribers per 100 inhabitants) 2007 GDP per capita (US$, 2007) Source: UN E-Government Readiness Survey, 2008 TRA Lebanon – Existing Market 3- Nov - 2008

  10. Only a limited range of applications and services is offered in Lebanon Indicative Application Bandwidth Demand (Mbps) Current Limit on Residential Broadband Telepresence Virtual Reality 5 second CD download Quality Video Streaming Multi-Channel TV Video on Demand Video Streaming Multiplayers game Video Conference MP3 streaming Online games Teleconference Web Surfing VOIP • Estimation of bandwidth requirements for the UK households: • By 2008, demand for the most bandwidth intensive households could reach 18 Mbps downstream and 3 Mbps upstream • By 2012, the bandwidth demand for the most intensive bandwidth households could reach 23 Mbps downstream and 14 Mbps upstream Email 0.01 0.1 1 10 100 Source: New Zealand National Broadband Strategy , Broadband Stakeholder Group UK TRA Lebanon – Existing Market 3- Nov - 2008

  11. The delay in the implementation of Law 431 and in the establishment of the TRA could explain the lack of competition in the market TRA Lebanon – Existing Market 3- Nov - 2008

  12. Outline The Telecom Market Today – The Urgent Need for Re-from Lebanon’s Telecom Reform TRA Vision, Roadmap, and Progress Current Broadband Market Broadband Spectrum Re-farming Next Steps and the Way Forward TRA Lebanon 3- Nov - 2008

  13. The GoL, recognizing the need for reform, has committed to open the telecom sector to competition and has recognized it as an important lever for economic development International  Conference for  Support to  Lebanon” - Paris III Conference • “… there is a need to reduce the cost of production resulting mainly from unreliable supply of electricity, the high cost of telecommunication …” • “The Government of Lebanon will implement reforms in order to improve competitiveness and reduce the cost of doing business in Lebanon…” • “The government will seek a greater private sector role in sectors such as telecommunications…” • (§ 56)إن قطاع الاتصالات هو محرّك أساسي للاقتصاد الوطني وهو يسهم في تعزيز الإنماء المتوازن. ولبنان يعمل على تقديم رؤية لهذا القطاع تهدف إلى بناء مجتمع المعلوماتية من أجل مواكبة ثورة الاتصالات العالمية وريادتها في المنطقة، والحكومة اللبنانية تلتزم في هذا السياق بتحرير قطاع الاتصالات وفتح السوق لاستثمارات القطاع الخاص والمنافسة وحماية حقوق المستهلك. البيان الوزاري للحكومة 2008 حكومة دولةالرئيس فؤاد السنيورة Telecommunications Law 431 / 2002 • The TRA is charged with promoting competition in telecommunications (Telecommunications Law, Art. 5.1(C)). • The Law provided for the liberalization of the telecommunications market by privatizing state-owned telecommunications entities and opening the market to private sector investments and competition. The GoL Governmental Declarations in 2005 and 2008 commit the Council of Minister (CoM) to the liberalization of telecommunications 3- Nov - 2008 TRA Lebanon – Liberalization Benefits

  14. Reform of the telecom sector entails the restructuring of the market, the establishment of an independent regulator, and a top notch regulatory framework Competitive Market Structure Reform and Liberalization of the Telecom Sector Clean and Stable Regulatory Framework Independent Regulatory Authority TRA Lebanon – Regulatory Environment 3- Nov - 2008

  15. After Telecom Law 431 The Telecommunications Law 431 requires the creation of a proper structure for a competitive telecommunications market Before Telecom Law 431 Ministry of Telecommunications • MoT • Policymaker • Set the general guidelines for telecom policy • Recommend to CoM the award of some individual licenses (mobile/fixed, int’l voice, UMTS) • Review and propose to CoM • Pricing of Radio Frequency • TRA annual budget • Approve TRA budget & other TRA documents as per Law 431 1 3 • TRA • Regulator • Develop/implement regulations • Award telecom licenses • Ensure competition and prevent anti-competitive behavior • Manage on behalf of GoL radio frequencies Policymaker Regulator Operators • MoT: policymaker, regulator and service provider • CoM: Arbitrary regulatory role (e.g. issuing all licenses) • No formal regulatory regime • Operators • Incumbents & New Entrants • Provide telecom services to the public • Install own and manage telecom networks and facilities • Abide by TRA regulations, decisions and licenses 2 3- Nov - 2008 TRA Lebanon – Regulatory Environment

  16. Telecom Law 431 also calls for additional structural reforms Restructuring of MoT – NOT YET STARTED MoT Current Structure Mandated Structure Under the Telecom Law The TRA views the creation and privatization of Liban Telecom as a major step in the history of the telecommunications sector and a central component of future growth LT TRA Lebanon – Regulatory Environment 3- Nov - 2008

  17. As a first step in assuming its duties as per the Telecom Law (Law 431), the TRA has defined its mission statement and objectives TRA Prerogatives ( Non-exhaustive list) • Issue Regulations and draft Decrees (Art 5) • Liberalize the market and take any necessary measure to reach a competitive market (Art 30) • Manage Radio Frequency, Interconnection agreements, numbers, equipment import, etc.. (Art 29) • License telecommunications service providers and radio frequency bands (Art 20) • Resolve disputes between service providers (Art 43) Mission Statement • To establish a regulatory environment that enables a competitive telecommunications market to deliver state-of-the-art services at affordable prices to the broadest spectrum of the Lebanese population • إيجاد بيئة مُنظِمة من شأنها أن تساعد سوق الاتصالات في تقديم آخر ما توصلت إليه التكنولوجيا في مجال خدمات الاتصالات بأسعار تنافسية، ومعقولة، وعلى أوسع نطاق ممكن للمواطن اللبناني وللشركات اللبنانية. TRA Lebanon - Mission 3- Nov - 2008

  18. Coordination exists between the TRA and other government entities HCP • TRA Inspection Powers • Consumer Protection • MoU to effect privatization • Import authorization Ministry of Justice Customs • TRA Budget • Customs fees for import of telecom equipment Ministry of Finance Ministry of Economy and Trade Work in Progress Ministry of Public Works and Transport • TRA Advice on all Telecom Matters • Frequency Fees • TRA Budget Ministry of Telecommunications • Frequency Assignment • Rights of Way TRA Work in Progress Ministry of Information Ministry of Interior • Frequency Assignment • Broadcasting Municipalities Ministry of Defense • Frequency Assignment • Import authorization • Frequency Assignment • Import authorization • Rights of Way TRA Lebanon - Coordination 3- Nov - 2008

  19. Outline The Telecom Market Today – The Urgent Need for Re-from Lebanon’s Telecom Reform TRA Vision, Roadmap, and Progress Current Broadband Market Broadband Spectrum Re-farming Next Steps and the Way Forward TRA Lebanon 3- Nov - 2008

  20. Major steps of the Liberalization Roadmap Capacity Building - Building the Institution and Transitioning Responsibilities Creating Liban Telecom (LT) • Executed an MOU with the Higher Council for Privatization (HCP) to ensure smooth privatization and licensing • Launched the Mobile Privatization and Licensing Tender Process in November 2007: • Finalized the Financial Model for the license valuation • Developed the Online Data Room and answered bidders’ Questions • Prepared financial, legal and technical due diligences and conducted site visits • Finalized the RFA • Drafted the Mobile License • Prepared the draft Sale and Purchase Agreement Mobile Market Broadband and ISP/ DSP Market • Re-issued licenses for the Internet Service Providers (ISP’s) and Data Service Providers (DSP’s) in accordance with Law 431 • Authorized the use of new services including IPTV • Issued a Re-farming plan for Consultation – Ready for different regulations Regulatory Framework TRA Lebanon - Competitive Market Structure 3- Nov - 2008

  21. REGULATORY FRAMEWORK Regulations that are needed to ensure the success of liberalization have been put in place Draft Ready Stage Consultation Stage Final Review (TRA Board) Drafting Stage Issued Spectrum Refarming Guidelines Unbundling Regulation Spectrum Pricing Opinion SMP Regulation Liberalization Roadmap • Decisions: • VSAT • Trial IPTV • Spectrum trial Allocation for MoT / OGERO Administering and Implementing the NNP Accounting Separation Regulation Broadband Policy Statement Licensing Regulation VOIP Policy Statement Interconnection Regulation Type Approval Regulation Pricing Regulation Quality of Service Regulation National Roaming National Numbering Plan Interconnection Interim Pricing Decision Spectrum Management and Licensing Regulation Regulatory Framework for establishment of call centers Consumer Affairs Regulation Lebanese National Frequency Table TRA Lebanon - Clean and Stable Regulatory Framework 3- Nov - 2008

  22. DraftLiberalization Roadmap proposes introducing competition across all telecom markets while allowing LibanTelecom some exclusivity over some services 3 * 1 ** *** 5+ Open licensing Market Review License Award Notes • * Liban Telecom expected • ** TRA is still considering the appropriate number of NBLs to issue • *** Two for the mobile licenses, one for Liban Telecom and two others for the NBLs for data traffic only TRA Lebanon – Liberalization Roadmap 3- Nov - 2008

  23. LIBAN TELECOM The TRA views the creation, corporatization, and privatization of Liban Telecom as a major step in the history of the telecom sector and a central component of liberalization and future growth Establishment Plan for Liban Telecom Sale of up to 40% to a strategic partner Full sale of Liban Telecom Shares! Corporatization Undefined time Maximum Two Years TRA plan for Liban Telecom’s licensing and exclusivity rights as proposed in the Liberalization Roadmap LT’s establishment End 2008* 1 /1/2009 - TBD* 1 /1/2010 - TBD* End of exclusivity on international public voice services End of exclusivity on basic telephony services Mobile License TRA Lebanon – Liban Telecom Fixed License 3- Nov - 2008

  24. MOBILE The Mobile Auction was suspended in January 2008, but could be held within 8 weeks from a GoL decision to+ 5 (Mths) November 2007 to January 2008 Licensing Process Freeze to+ 2 (Mths) to+ 3 (Mths) GoL Decision to Re launch Process Technical & Pre-Auction Financial Bids Due Auction – Announcing two winning bidders Handover completed Crucial phase that should be completed smoothly and in the specified time Mobile Auction Launch: RFA published • Most of the preparatory work for the auction has been completed: • Executed an MOU with the Higher Council for Privatization (HCP) to ensure smooth privatization and licensing • Launched the Tender Process for privatization and licensing of mobile in November 2007: • Finalized the Financial Model for the license valuation • Developed the Online Data Room and answered questions submitted by bidders • Prepared financial, legal and technical due diligences and conducted site visits • Finalized the RFA • Drafted the Mobile License • Prepared the draft Sale and Purchase Agreement ( SPA) TRA Lebanon - Mobile 3- Nov - 2008

  25. BROADBAND TRA's objective is for Lebanon to become a global leader in broadband communications within 10 years What is Broadband? Broadband refers to a wide range of technologies supporting the delivery of innovative interactive services, equipped with an always-on functionality, providing enough local bandwidth and capacity allowing the simultaneous use of voice, data, and video services Residential Services in 2013 Business Services in 2013 For around US$40/month up to 10Mbps speed triple play services: High speed Internet – surfing and data transfer Digital Entertainment – video Voice Communications – voice For around US$ 600/month up to 1Gbps speed triple play services: High speed Internet and data transfer Digital Entertainment – video and teleconferencing Voice Communications – voice TRA Lebanon - Broadband 3- Nov - 2008

  26. Outline The Telecom Market Today – The Urgent Need for Re-from Lebanon’s Telecom Reform TRA Vision, Roadmap, and Progress Current Broadband Market Broadband Spectrum Re-farming Next Steps and the Way Forward TRA Lebanon 3- Nov - 2008

  27. Broadband Statistics - Middle-East • BB penetration in Lebanon is very low – room to expand Source: www.internetworldstats.com/middle.htm, ITU data Sept/2007 Notes: Some figures are probably dated since for example UAE is known to have reported double the penetration by mid-2008 Re-farming for Broadband Lebanon 3- Nov - 2008

  28. Existing broadband penetration in Lebanon is low by international benchmark Broadband Statistics – WorldwideLebanon is still 4 times lower than the Average Re-farming for Broadband Lebanon 3- Nov - 2008

  29. Current Internet Status in LebanonInternet penetration increased from 6% to 25% (32%) Re-farming for Broadband Lebanon 3- Nov - 2008

  30. Broadband Background - Lebanon • For 10 years the MoT partnered with the private sector to provide data connectivity and internet services • Spectrum was being authorized on an annual basis – no clear licensing policy • Limited ADSL services despite the fast growth with close to 60K-70K subscribers served by the incumbent operator/private sector. The incumbent (Ogero) is the only fixed operator with ~70% ADSL market share on the local loop. Unbundling and Bit-Stream models provided. Five private DSPs contributing to ~30% of market share • Wireless BB is provided by 4 private DSPs with end-to-end wireless access and backhauling using microwave – no fiber • Coverage ranging from national in the FWA corporate market to limited urban coverage for personal broadband internet market with “3” players offering portable nomadic broadband in a multiplayer ISP-DSP scenario • “17” ISP’s, “5” DSPs, and “1” fixed line operator, and “2” mobile (GPRS & limited EDGE) constitute the regulated data & internet market players • Non-regulated market players (incl. WISPs) & illegal local cable operators serving residential users using ISM 2.4 GHz & some licensed spectrum bands • Mobile broadband (3G) is not yet available Re-farming for Broadband Lebanon 3- Nov - 2008

  31. Spectrum used by DSPs include (same DSPs have large portions of the spectrum): 1.9GHz: TDD UMTS band allocated to provide personal broadband using proprietary technology (I-burst) 2.2GHz (legacy TDMA PMP systems since 1999 but being migrated since 2003) 2.5 - 2.69 GHz: IMT Prime spectrum; allocated by MoT for FWA (to evacuate) 3.4 - 3.6GHz: Prime Spectrum for FWA and BWA including WIMAX 3.6 - 3.7GHz: Used for some FWA without being authorized 5GHz used heavily by unlicensed WISP’s and some DSPs 24-26GHz FWA high capacity PMP backhauling Limited Residential Broadband Wireless coverage in major cities & GBA Lack of initiatives to ensure rural access to broadband wireless A number of unlicensed wireless ISPs serving residential & SOHO internet markets Occasional interference on some bands from cross boarders and operators and unlicensed WISPs Broadband Wireless Spectrum – Current Status Re-farming for Broadband Lebanon 3- Nov - 2008

  32. Outline The Telecom Market Today – The Urgent Need for Re-from Lebanon’s Telecom Reform TRA Vision, Roadmap, and Progress Current Broadband Market Broadband Spectrum Re-farming Next Steps and the Way Forward TRA Lebanon 3- Nov - 2008

  33. BROADBAND Lebanon has to improve its telecom infrastructure and open it to competition Therefore Fixed MoT Infrastructure: currently the only provider of national internet and data transmission, however needs major upgrade of national and international capacity. Competition National Broadband Licenses:Provide a best in class alternative national networks (core, metropolitan and access), enabling the national transmission and provision of high speed communication Broadband Access Licenses:Unleash competition on the access level and provide more choices to consumers ( e.g. incumbent data service providers) • The TRA proposed plans to issue licenses (through an international public auction) in order to establish across Lebanon best in class core, metropolitan and access networks : • Two new NBLs (+ LibanTelecom) • Unrestricted number of Broadband Access Licenses (for existing DSP and new licenses) taking into account limitations in the availability of spectrum resource TRA Lebanon - Broadband 3- Nov - 2008

  34. BROADBAND Spectrum The TRA is paving the way to meet a growing spectrum demand Spectrum Planning and Refarming • Planning Objectives • Efficient spectrum distribution - Optimize the use of spectrum • Introduce new national and regional operators to the market • Open gates for new technologies and services • Reserve spectrum for future needs taking into consideration technology evolution • Define frequency bands and bandwidth that can be offered for TV distributors • Maintain a smooth migration plan from analog to digital TV transmission • Secure minimum committed spectrum to the existing operators • Spectrum Re-farming • Re-farming plan for the bands 1.9, 2.3, 2.5, 3.5, 5 and 26 GHz is studied with primary focus on the 2.5 GHz band that has been designated as extension band to IMT and on the 3.5 GHz band which may considered in future as an extension to IMT • Auction model for broadband networks is being studied by the TRA in order to realize goals defined in the liberalization roadmap by introducing new operators (2NBLs, 5-6 BAL) • Re-farming for the 12 GHz and 26 GHz bands will be studied as a solution to the cable TV distributors TRA Lebanon - Broadband 3- Nov - 2008

  35. Questions to Address – PlanningWhat are the policies? • Policies • Government • Telecommunications • TRA • Broadband, Spectrum Policy, Re-farming, Infrastructure and Rights of Way (RoW) • Broadband Policy and Licenses • Objectives • Fiber vs. Wireless • Mobile vs. Fixed • Types of Licenses • Types of Services • Number of Licenses/Packages (short and long term) • National vs. Regional Licenses/Packages • Obligations Coverage/ Deployment Re-farming for Broadband Lebanon

  36. Questions to Address – PlanningHow to treat existing operators? Treatment of existing operators Basis for decisions (legal, other) Licenses (type, renewals, and transition) Bands and spectrum (Smin: number of bands, size, price, issues) Continuity of services - Ensuring continuity of services/minimum interruption Transition and Migration - Schedule, dependencies, consumer services, cost, Interim period - duration per band, per operator, and per service Pricing (revenue sharing, auction, auction derivatives, AIP, averages, benchmarking) Technology neutrality vs. ensuring coexistence conditions Size of the spectrum per operator (DSPs, NBL, etc.) Auction(s) - sequencing, design, number, timing, dependencies (LT, Mobile, etc.) Re-farming for Broadband Lebanon 3- Nov - 2008

  37. A Spectrum Policy harmonizing bands & national interest according to best practices/ITU Spectrum Policy. Guidelines, Handbook National Frequency Allocation Table (LNFT-Final version issued) Spectrum pricing in the different bands (regulations, auctions, auction-related, AIP, ..) Re-farming for bands of interest ( BWA plan under consultation) Re-farming bands Assigned/allocated spectrum per package (minimum, maximum, short and long term) Reserved spectrum per band Migration plan from Analog to Digital TV broadcasting (consultation soon) Clearing as much spectrum sub 6GHz to be offered for new services or reserved Develop and implement spectrum licensing regulations - Universal, Technology, infrastructure, service, duration, obligation, treatment of licensing requests (new, renewals) Establish Enforcement & Inspection Regime - regulations, monitoring, inspection, enforcement, illegal operators & cable providers, etc. Develop position for Lebanon in ITUactivities and working parties Build capacity and resources Spectrum MilestonesThe TRA had to pave the way Re-farming for Broadband Lebanon 3- Nov - 2008

  38. Spectrum Management Objectives • Enable liberalization of, and competition for, telecommunications (including radio communications) services and equipment • Boost economic growth, create employment, promote general welfare • Ensure transparency in spectrum award process ensuring best value • Reallocate spectrum to meet new regulations while minimizing impact on services and consumers • Support national security and defense needs • Enable the realization of public policy objectives on enviornmental safety (including emergency services), cultural (including broadcasting), social and economic development • Harmonize spectrum use with international developments & ITU-R • Stimulate technological innovation and competitiveness Re-farming for Broadband Lebanon 3- Nov - 2008

  39. Issue new licenses for long periods and reserve spectrum for future use Establish a Re-Farming Plan for important bands like 2.5 GHz and 3.5 GHz in order to be auctioned for new technologies and services Technology neutrality principle where possible while ensuring: Interference management and compliance to technical conditions is met (challenge ) Equivalent services can be delivered using different technologies. Let the market decide which services to deliver to consumers Use spectrum ceilings to ensure a minimum of 3 players in the market Make a distinction in a short term cap (auction period) and long term cap (after M&A) Give operators sufficient time for transition into the new situation Reserve sufficient spectrum for future use (LTE) Keep the auction design and the auction process as simple as possible Minimize the complexity of the assignment process as much as possible. TRA Spectrum Approach to Broadband Lebanon Re-farming for Broadband Lebanon 3- Nov - 2008

  40. Substantial investments in broadband access and fiber optic backbones are required to accelerate broadband deployment The Liberalization Roadmap outlines issuing licenses in 2009 with a view to establishing across Lebanon – in the cities/rural areas – access to high speed core, metropolitan & access networks National Broadband Licenses - services barring Liban Telecom exclusivity Up to 2 licenses to be issued with fixed (fiber) and wireless access capabilities Build own infrastructure to offer BB services using any technology for a core network (linking nodes in the main cities), metropolitan networks (covering towns and cities), and access networks (i.e., connecting metro and core networks to points of presence (POPs) Include sufficient amount of ‘access’ spectrum, and int’l gateway rights Roll-out coverage obligations to provide national coverage over most of the territories Universal Service Obligation!! Access obligation is modest due to competition/BALs but core obligation is more stringent Broadband Access Licenses (National and Regional) Build access infrastructure Offer customers the same telecommunications services as the NBLs Some would be with radio spectrum bands to deploy wireless access technology This can trigger investments in infrastructure and actual deployment Competition will help speed up deployment, improve service and reduce prices Proposed Broadband Licensing FrameworkAccelerating Broadband Lebanon 3- Nov - 2008 Re-farming for Broadband Lebanon

  41. Outline of broadband spectrum packaging • Maximum spectrum (Smax) • Short Term: 30 MHz on 2.5 GHz and 35 MHz on 3.5 GHz • Long Term:, when we expect that the reserved spectrum will be made available, to 60 MHz on 2.5 GHz and 56 MHz on 3.5 GHz, with effect not before 2 years following the NBL and BAL auctions 3- Nov - 2008 Re-farming for Broadband Lebanon

  42. The total spectrum for each of the 2 NBL licences is: 20 MHz of 2.5 GHz and 21 MHz of 3.5 GHZ The spectrum for the mobile operators (optional choice of 1x10 MHz TDD each for the 2 Mobile operators and Liban Telecom) and the reserved spectrum for future use (50 MHz) are combined into one reserve area of 2 x 40 MHz blocks Remaining spectrum for the BAL auction(s) after accounting for reserve spectrum, the minimum spectrum that is expected to be allocated to 4existing DSPs (denoted by Smin, four times 21 MHz in the 3.5 GHz band), and guard-bands, is expected to be 55 MHz in the 2.5 GHz, and 35 MHz in the 3.5 GHz band. It is proposed that: The 2.5 GHz band will be packaged into national packages (National Broadband Access Licence(s) (NBALs)). The remaining 3.5 GHz spectrum be arranged as 3 blocks of 7 MHz, sold as a single NBAL, and 1 block of 14 MHz The 1 block of 14 MHz in the 3.5 GHz band will be auctioned in the form of regional blocks (Regional Broadband Access Licence(s) (RBALs)) In Greater Beirut, the 14 MHz package in the 3.5 GHz band will be available as 2 blocks of 7 MHz to all bidders Outline of broadband spectrum packaging (cont’d) 3- Nov - 2008 Re-farming for Broadband Lebanon 42

  43. Several alternatives have been considered in terms of: the number of licences; and the amount of spectrum each licence contains The preferred option has been identified – currently working on Sequencing of auctions Auction formats (sealed-bid vs. ascending) and their properties There are two main auction formats that are typically used for allocating spectrum: Single-round Sealed Bid (SSB) Multi-round Ascending Auction (MAA) Criteria for choosing between the two auction formats Revenue maximization, uncertainty about spectrum value (asymmetries of information) Strength of competition for licences (i.e. expected # of bidders vs. #of licences) Scope for collusion New entry Simplicity (for the auctioneer and the bidders) Auction Overview (in progress) 3- Nov - 2008 Re-farming for Broadband Lebanon

  44. Proposed Migration Plan for 2.50-2.69GHz Band Long Term licensing NBL TDD Spectrum Transition Stage NBL TDD Spectrum Current Occupancy 3- Nov - 2008 TRA – Confidential TRA Strategy

  45. Outline The Telecom Market Today – The Urgent Need for Re-from Lebanon’s Telecom Reform TRA Vision, Roadmap, and Progress Current Broadband Market Broadband Spectrum Re-farming Next Steps and the Way Forward TRA Lebanon 3- Nov - 2008

  46. Next Steps • Finalize Consultation • Issue Final Re-farming policy • Issue BB Policy • Issue RFA • Run Auctions • TRA Commitments • The TRA is committed to taking the country back to the international telecommunications scene through a successful market liberalization • The TRA is committed to building a thriving, innovative, and competitive telecommunications market which includes the most technologically-advanced networks and provides services at internationally competitive prices and quality • The TRA is committed to promoting the interests of Lebanese consumers in the market to make sure they are getting good quality of service at affordable and competitive prices and that their right to safe, secure and confidential access to telecommunications is safeguarded TRA Lebanon – TRA Commitments 3- Nov - 2008

  47. Timeline

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