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ITU Strategy and Policy Unit News Update 
Monthly Flash - September 2003
  

Issue 3 September 2003   


Previous editions

In this edition

MOBILE OVERTAKES FIXED (www.itu.int/mobileovertakes)
1. 
 Mobile: The network of choice
2.  Policy and Regulatory objectives in a predominantly mobile world
3.  Case in point: Wireless Local Area Networks
4.  Related links about "Mobile overtakes Fixed"


In 2002, mobile subscribers worldwide outnumbered fixed-line subscribers - a cross-over  which is having a significant impact both on  access to basic telecommunication services, and on information and communication technologies (ICT).The impact is not only a technological one however, but can also be seen from an economic and social development  perspective. In response to the strong interest expressed by ITU Member States and Sector Members in the topic of mobile overtakes fixed, and of the strong perceived need for the telecommunication industry to adapt to this new market environment, the ITU Strategy and Policy Unit (SPU) has carried out extensive research on the topic, which it is pleased to present in this newsletter. The information contained herein also contributes to information dissemination within ITU for increased intersectoral awareness of new industry developments. 

As part of the resources developed by SPU for free access by all interested parties, a background resources website  has been created on  "Mobile overtakes Fixed", including, inter alia, a background paper on "Mobile Overtakes Fixed: Implications for Policy and Regulation " , as well as a host of other interesting links and articles on the subject. The articles below present some of the highlights of recent research activities on the topic. A list of useful links on specific related topics is also provided at the end of this newsletter.

1.Mobile: The network of choice

The year 2002 marked an historic turning point in the history of telephony, for it was the year when mobile subscribers overtook fixed-line subscribers worldwide (see Figure 1). The rise of mobile telephony to overtake fixed has brought with it a huge number of implications, but perhaps the most significant impact is on access, both to basic telecommunication services, and to information and communication technologies (ICT), as a tool for economic and social development. It is also noteworthy that the phenomenon of the mobile cross-over has taken place across geographic criteria such as countries, regions, and continents,  across socio-demographic criteria such as gender, income, or age, and across economic criteria such as price premium for mobile (micro) or GDP per capita (macro).

Figure 1: Mobile as the new global network

Mobile and fixed telephone subscribers worldwide, 1983- 2003 and countries with more mobile than fixed telephone subscribers, 2002 

Note:  In the upper chart, 1983-2002 is based on real data; 2003 on projections. In the lower chart, countries that are shaded had more mobile users than fixed lines, as at year-end 2002

Source: ITU World Telecommunication Development Report, 2002; ITU World Telecommunication Indicators Database and ITU projections.

It is also significant that the greatest impact of mobile communications on access to telecommunication services—in other words, increasing the number of people who are in reach of a telephone connection of any kind—can be seen in developing countries. This is partly because cellular networks can be built faster than fixed-line networks and can cover geographically challenging areas. Mobile services have served to boost competition, and prepaid models have opened access to mobile cellular for those who would otherwise not qualify for telephone subscription plans.

In countries where mobile communications constitute the primary form of access, increased exchange of information on trade or health services is contributing to development goals; in countries where people commonly use both fixed-line and mobile communications, the personalized traits of the mobile phone are changing social interaction.

Increasingly, mobile is not only overtaking fixed, but also substituting for it: in such cases, users have a mobile phone only and have no fixed-line subscription. In developed countries, this may be through choice. In developing ones, it may be the only possibility for individuals to have their own phone. This has created a whole new set of paradigms for users, regulators and providers alike. It is important to note that while there may be a similar percentage of mobile-only users in countries as diverse as, for example, Finland and Uganda, the reasons for this development are clearly different for each of them, depending on whether they are developed or developing economies, and so are the implications.  

Below are excerpts from the SPU background paper on Mobile Overtakes Fixed: Implications for Policy and Regulation. The "Mobile overtakes Fixed" background resources website may be found at www.itu.int/mobileovertakes.

Download background paper on Mobile Overtakes Fixed: Implications for Policy and Regulation


2.  Policy and Regulatory objectives in a predominantly mobile world

Policy and regulatory objectives

The formulation of policy and regulatory objectives is a precondition for setting policies. In telecommunications, some of the widely accepted objectives are to:[i] 

  • promote universal access to basic telecommunication services;

  • foster competitive markets to promote efficient supply of telecommunication services, good quality of service, advanced services and efficient pricing;

  • prevent abuses of market power such as excessive pricing and anti-competitive behaviour by dominant firms;

  • create a favorable climate to promote investment to expand telecommunication networks;

  • promote public confidence in the telecommunication market through transparent regulatory and licensing processes;

  • protect consumer rights, including privacy rights;

  • promote increased telecommunications connectivity for all users through efficient interconnection arrangements;

  • optimize use of scarce resources, such as the radio spectrum, numbers, and rights of way.

The changing environment does not actually alter these objectives per se, but it does entail changes in the means of achieving them. In an era of convergence and interchangeable technologies, some institutions, such as the European Commission for example, have changed their approach to reach these objectives to a technology-neutral regulatory approach.

It is notable that divergent opinions often do not concern the objectives but the means to reach them. The view that asymmetrical regulation as adopted for fixed-line telecommunications is not appropriate for mobile is widely accepted. However, there are differing opinions on the question of whether the mobile industry should be regulated at all. Some argue that there is sufficient competition to let market forces develop freely. Others argue that there is market failure and a rationale for regulatory intervention in mobile markets, for example at the wholesale level concerning fixed-to-mobile termination rates.

 Absolute and relative relationship of fixed and mobile, and directions of growth

The fixed-mobile cross-over is a relative relationship. Absolute numbers can look quite different, even when the relative numbers are very similar. Two of the first countries where mobile overtook fixed, Cambodia (in 1993) and Finland (in 1998), are a good example as they present a similar relative ratio, but absolute teledensities that lie at opposite ends of the spectrum. Based even on this much information, policy and regulatory objectives will obviously have to be quite different for these countries, in spite of the fact that the same phenomenon has taken place in statistical terms.

Directions of growth are equally essential for the assessment of policies and regulations. In developing countries, the diffusion of cellular infrastructure may be an inhibitor to growth in the wireline infrastructure. This may not be desirable with regard to providing Internet access. Some regulators place conditions on mobile licences, such as the requirement that mobile operators build out fixed infrastructure as part of the licence conditions (see Box 1).

Box 1: Conditions for mobile licences

Lessons from rollout requirements

There are more and more examples where licences for mobile services have inbuilt rollout requirements. In the Philippines, mobile operators must provide fixed or semi-fixed wireless lines; in South Africa, mobile operators must provide public payphones; in Morocco, the second GSM licence included build-out requirements in rural areas.[ii] The specificities of such requirements can be central to the results that are achieved. In the Philippines for example, the location for the roll-out targets were not specified, with the result that operators concentrated on areas and customers with high potential returns that may have attracted other investors as well. Conversely though, overly demanding fixed build-out obligations that are imposed on mobile operators in this manner may be counter-productive, possibly leading to unused capacity and inefficient use of spectrum.

Cellular operators are increasingly expanding their services to include fixed when, for example, focusing on the rollout of services to rural, remote, and low-income areas. Examples of this development can be found in Ghana (Western Wireless), Uganda (MTN), and Venezuela. When cellular operators get the option in their licences to provide fixed-wireless services within their operating areas this may allow them to serve rural areas at an incremental rather than at full cost. It may become one strategic direction in order to address the gap in urban and rural access in developing countries.[iii]

Among lessons learned from previous regional concessions are: the benefits of packaging lucrative areas with higher-cost areas in order to attract investors to balance network expansion; technology neutrality of the services that are bundled under one licence; and preferential access to scarce resources such as the allocation of frequency spectrum free of charge in rural areas.[iv]

Source: ITU Research.

In developed countries, mobile growth rates have been slowing down, but more interesting is a decrease in fixed lines in some countries. Fixed-line installations are subject to cycles, typically increasing when consumers request second lines, or when a lot of new businesses are emerging. From the business customer point of view, this can change in times of economic slowdown or recession. However, a steady increase in mobile-only customers and a decrease in fixed-line customers will certainly have to play a part in policy and regulatory considerations.

Maturity of telecommunication markets and the effects on policy objectives

Experience has shown that emerging markets often develop best in a competitive environment that is characterized by very little regulatory intervention. Asymmetrical regulation can be applied in order to protect immature markets and give them the opportunity to evolve.

The maturity of the market affects such factors as market definitions and remedies for anti-competitive behaviour. In turn, market definitions influence the assessed level of maturity. In an intermodal comparison, mobile communication markets do not appear as mature when compared with their wireline counterparts. From an intramodal perspective however, 2G markets are highly mature compared to 3G markets.

For the remainder of this paper, implications the fixed-mobile cross-over based on policy and regulatory objectives will be analysed from three different perspectives: the relationship between governments and operators—and implications for spectrum policies, numbering management, as well as universal service policies; the relationship between operators and their implications for competition policy; and the relationship between operators and consumers and the implications for pricing and billing, privacy, and consumer and data protection.


Download background paper on Mobile Overtakes Fixed: Implications for Policy and Regulation


[i] See Intven, Hank/Oliver, Jeremy/Sepulveda, Edgardo (Eds.) (2000):  Telecommunications Regulation Handbook, http://www.infodev.org/projects/314regulationhandbook/index.htm: p.1.

[ii] See Navas-Sabater, Juan/Dymond, Andrew/Juntunen, Niina (2002): Telecommunications and information services for the poor. Toward a Strategy for Universal Access: p.30.

[iii] See Navas-Sabater, Juan/Dymond, Andrew/Juntunen, Niina (2002): Telecommunications and information services for the poor. Toward a Strategy for Universal Access: pp.38.

[iv] See Navas-Sabater, Juan/Dymond, Andrew/Juntunen, Niina (2002): Telecommunications and information services for the poor. Toward a Strategy for Universal Access: p.33.


3. Case in point: Wireless Local Area Networks 

 

 Diffusion of WLANs

Wireless local area networks (WLAN) are one way to provide wireless connectivity. A differentiated set of Institute of Electrical and Electronic Engineers (IEEE) standards has been developed in order to make use of unlicensed spectrum, e.g. in the 2.4 GHz and the 5.8 GHz frequency bands. One trend is clear: WLANs are spreading rapidly. They have developed from private WLAN on university campuses and office buildings, to include public WLANs (“hotspots”) in train stations, airport lounges, coffee shops and parks and free community networks that share their bandwidth in their respective neighbourhoods. WLAN Internet service providers can be any of the incumbent, fixed-line ISPs, mobile operators, or new businesses that act as intermediaries and aggregate WLAN connectivity. Even railway companies, banks, and retail stores are entering the WLAN ISP market, for example in Japan.

In the Asia-Pacific region in particular, a daily increase is occuring in WLAN hotspot announcements. In the United States, free community networks are reaching out to the wider population and are posing a threat to the business models of the providers, who calculate their charges for an individual rather than for a community service. WLANs offer value to the user, and its unlicensed status allows for bottom-up rather than top-down innovation (see Box 2).

Box 2: Wi-Fi in Bhutan

Wireless connectivity for developing countries via WLANs

Wi-Fi, or Wireless Fidelity—local area networks using radio technologies based on the IEEE 802.11b or 802.11a standards—is generally thought of as a technology for mobile Internet users in developed economies. Wi-Fi is commonly perceived as wireless broadband for jet-setting business people, students and trendy dot-comers and hotspots are located in busy, urban places such as airports, college campuses and coffee shops. But Bhutan may prove this elitist image of Wi-Fi wrong. It is almost as though the predominant religion there, Bhuddism, extends even into communications: where “Gross Domestic Happiness” is as important as Gross Domestic Product: a source of delight for some, who appreciate the aspects of Wi-Fi that run counter to commercial and economic systems (Wi-Fi is often free, and typically operates in unlicensed frequencies). They have been helping Bhutan test the appropriateness of Wi-Fi technology in remote mountain villages.

Bhutan is probably one of the most difficult nations in the world to ‘wire.’ It is predominantly rural, with mostly mountainous terrain. Some 80 per cent of the population lives in around 6’000 villages—many without telephone service. The nation’s telecom operator, Bhutan Telecom (BT), has been looking at alternative technologies for providing telephone service. Wi-Fi meets a number of BT’s goals. It supports Internet Protocol (IP) that can both meet voice telephony needs (using Voice over Internet Protocol, VoIP), as well as data communications requirements. As BT notes, delay in implementing telephone service in rural areas “may have been a godsend as recent technological developments may offer a much more cost-effective alternative for the provision of rural access.[i] Another motive for moving to new technology is that manufacturers are discontinuing the Digital Radio Multiple Access Subscriber System (DRMASS) that BT has been using for rural telecommunications, and equipment will no longer be available.

A project in Bhutan has been exploring the feasibility of Wi-Fi for this mountain kingdom. There is ample spectrum available in the kingdom. Results of a first pilot project were very promising. There was scarce radio interference and power requirements using solar power and batteries were sufficient due to the lower energy requirements of the Wi-Fi equipment.[ii] The pilot project has now been extended to 14 villages as part of US$ 300'000 project. Depending on the evaluation, the technology may be extended to more villages. [iii]

Source: ITU Asia-Pacific Telecommunication Indicators, 2002.

Most governments around the world have not voted for the licensing of the unlicensed spectrum. On the contrary, regulatory authorities in countries such as France and Great Britain, as well as the Republic of Korea and Japan have announced their intention to free more spectrum[iv]. In Hong Kong, China, the regulator OFTA announced the introduction of class licenses for WLAN providers in November 2002.

Download background paper on Mobile Overtakes Fixed: Implications for Policy and Regulation

[i] See Dorj, Thinley (2001): IP Based Rural Access Pilot Project. http://www.bhutan-notes.com/clif/bt_rural_access_pilot.html.

[ii] See Branscomb, Harvie (2002): Pushing Unlicensed Wireless to the Limit: Aspen to Antarctica and Burning Man to Bhutan. http://itc.mit.edu/itel/meetings/jun02/Branscomb_jun02.pdf

[iii] “Implementation of the Tokyo Declaration and Action Plan for Asia-Pacific Renaissance through ICT (in context to Bhutan).” http://www.aptsec.org/aiis/AIIS-2/Presentation/Session%206/6-6/Bhutan%20-%20ict.doc

[iv] See ART (2002): WiFi: ART adopts the texts allowing the use of wireless LANs. http://www.art-telecom.fr/communiques/pressrelease/2002/13-11-2002.htm.

 

 


4. Related Links about "Mobile Overtakes Fixed"

 

Interconnection
International roaming
Pricing and billing
Competition in mobile markets
Licensing and spectrum policy
Mobile data communications
Consumer protection and privacy



For further information on Policy and Strategy Trends, please contact: ITU Strategy and Policy Unit, International Telecommunication Union, Place des Nations, CH-1211 Geneva 20 (Switzerland). Fax: +41 22 730 6453. E-mail: spumail@itu.int . Website: www.itu.int/spu/

 

 

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