This new report, which will be launched at Telecom 99, presents an analysis of trends and developments in the global telecommunication sector, backed by official statistics from the world's leading source of telecommunication information. These statistics monitor the main telecommunication indicators as well as multimedia statistics such as personal computers, Internet hosts and television sets for more than 200 economies worldwide.
The global boom in mobile cellular communications has been truly astounding. At the end of 1998 there were more than 300 million subscribers around the world, up from just 11 million in 1990. By the end of this decade there will be more than half a billion mobile users. Mobile cellular already accounts for over one third of all telephone connections. It seems highly likely that the number of mobile cellular subscribers will surpass conventional fixed lines during the first decade of the next millennium. Both devel oped and developing countries are sharing in this revolution: in developed countries, users are flocking to mobile cellular as a complement to existing fixed lines; in developing nations, mobile cellular is emerging as a substitute for shortages of fixed lines (see Figure 1 and Box 1).
The mobile cellular boom has revolutionized the concept of telephony in a number of ways. First and foremost, with mobile, users no longer call a place but a person. Small, portable handsets have liberated users from the cord that fixed telephones to a geographic location making them reachable anytime, anywhere. Beyond this, compared with fixed telephones, mobile cellular typically offers a greater variety of options in terms of features and tariffs.
Mobile cellular was the first telecommunication market segment where private ownership and competition were introduced in many countries. Start-up mobile cellular companies are almost always backed by foreign, strategic investors. This combination of competitive markets, private ownership and foreign investment has created an appropriate environment for rapid growth. But the market has been driven, as much as anything, by rampant demand. When mobile phones were first introduced in the early 1980s, they were mainly confined to cars, constrained by weight and power requirements. But as mobile phones became lighter, cheaper and more attractive, they have left the car and entered the briefcase, the handbag and the pocket. A modern portable typically weighs a few hundred grams, is brightly coloured, has a small screen and more features than the average user might use in a lifetime. Mobile phones have as much in common with fashion accessories as plain old telephones. The success of mobile has been a triumph of technology married with marketing.
Note — "Developed Asia-Pacific" in the right chart refers to Australia, Hongkong SAR, Korea (Rep. of), Japan, New Zealand and Taiwan-China.
Source: ITU World Telecommunication Indicators Database.
Figure 1 — The mobile cellular boom (worldwide mobile cellular subscribers, and share by region (1990-1998))
Regulation of mobile cellular services has tended to be minimal. For instance, fewer than half the countries replying
to an ITU questionnaire in 1999 stated that their mobile operators had universal service/access obligations or that
their mobile tariffs were regulated. The relative lack of cellular regulation is partly due to the belief that fixed
networks have been too regulated, stifling innovation and network growth. Since mobile has developed at a time
when this belief has become commonly accepted, regulation has been limited. A related factor is that mobile cellular has
typically been defined as a value-added service, falling outside the regulatory scope of basic voice telephony.
Box 1 — A tale of two countriesCambodia, with a population of 10.3 million, is a poor (1996 GNP per capita: USD 300), mainly agriculture-based economy in South-East Asia. Finland, with a population of 5.1 million, is a wealthy (1996 GNP per capita: USD 23 240), industrialized Nordic nation. These two countries could hardly be more different from a cultural, economic or geographic perspective, yet they have one thing in common: they both have more mobile cellular than fixed telephone subscribers. Mobile cellular came to Cambodia in late 1992. Within a year, mobile subscribers had already surpassed the number of fixed telephones in the country. The main reason was that the fixed network had been extensively damaged during years of civil war. It was logical to exploit the advantages of mobile cellular (e.g., there are no wires to lay which is particularly useful in a country like Cambodia endangered by many land mines) in order to provide rapid access to communication facilities. No less than five companies operate mobile cellular services in Cambodia, and all these are backed by strategic foreign investors, an important consideration in a developing nation like Cambodia. A wireless local loop (WLL) system is also in use for fixed service. The spread of mobile communications has happened so quickly that serious questions are being posed about the viability of expanding the fixed network, despite the fact that Cambodia has one of the lowest teledensities in the world. As a result of mobile growth, Cambodia has surpassed 31 other countries in overall telephone penetration over the past six years. Cambodia illustrates the case that leaping straight to wireless is a viable option for rapidly expanding telecommunication access in developing countries with low levels of fixed infrastructure. Finland is in some ways a curious place to be the world leader in mobile phone penetration. It is not the richest country in the world (for example both Japan and Switzerland have a GNP per capita twice that of Finland while all of its Nordic neighbours have a higher GNP per capita). Furthermore, Finland does not particularly stand out when the factors that are normally believed to drive rapid mobile phone growth are considered. For example, while there is competition, it was essentially a duopoly until 1998. In contrast, Sweden has had three mobile competitors for some time and the United Kingdom four, yet they both lag behind Finland in mobile phone penetration. Three other factors seemed to have driven the Finnish mobile craze.
What Finland illustrates is that mobile cellular penetration may exceed fixed line penetration even in countries that have already attained a high level of telecommunication development. In the past, a family would have obtained one fixed telephone connection. Today, it is not inconceivable that each member of the family will own their own mobile phone. |
Note — Analogue systems include: AMPS (Advanced Mobile Phone System), NMT (Nordic Mobile Telephony), TACS (Total Access Communications System). Digital systems include: CDMA (Code Division Multiple Access), GSM (Global System for Mobile), PDC (Personal Digital Cellular), PHS (Personal Handyphone System), TDMA (Time Division Multiple Access).
Source: ITU adapted from Dataquest, Ericsson, GSM MoU, CDMA Development Group.
Figure 2 — Alphabet soup (distribution of mobile cellular subscribers by technology (1998) and handset sales by supplier (1998))
In developing countries, the lack of regulatory skills and in some cases, the absence of an independent regulator, have narrowed the latitude for encouraging mobile operators to enlarge overall accessibility to communications. This begs the question of whether mobile cellular has grown so fast because of limited regulation or whether it would grow even more rapidly with it.
There is a need for some degree of mobile regulation, if for no other reason than to ensure services can operate without interference. One way this has traditionally been done is by limiting the number of operators. Frequency constraints, coupled with the high level of initial investment required (either because of significant licence fees, network construction expenditures or both) suggest that there are high barriers to entry and that the mobile cellular industry could never be a textbook example of a perfectly competitive market. As a result, there may be some areas where competition will not work as intended. For instance market distortions could arise, particularly in pricing, unless there is some form of regulatory oversight.
Mobile has emerged as a mini-industry in its own right with 1998 service revenues of USD 154 billion. At current trends, the value of mobile revenue will overtake total fixed line revenue worldwide (international and domestic) in about the year 2004. Indeed, revenues from fixed line telephone service have been in decline globally since around 1996. Were it not for revenues from mobile, the telecommunications sector would be shrinking rather than growing.
As stated earlier, it is not a question of whether mobile cellular subscribers will overtake fixed telephone lines,
but when. In poor countries, mobile is being used to rapidly install badly needed telecommunication infrastructure. In
rich countries, the functionality of mobile appeals to users long-tied to their fixed telephones. This explains why the
number of new mobile subscribers has surpassed new fixed ones every year since 1996. Last year there were almost twice
as many new mobile subscribers as fixed ones. Sometimes, towards the end of the next decade, the number of mobile
telephone subscribers will exceed fixed lines. The crossover point could occur much sooner if mobile prices — which
are currently considerably above costs — come down and if the new IMT-2000 global mobile standard — to be introduced
commercially in some countries in just a few years — takes off. The success of mobile is something to ponder. It will
have taken the mobile industry a little over two decades to reach one billion subscribers; fixed networks will have
taken more than one hundred and twenty years to reach the same number.
The death of cellular monopolies in Western EuropeDecember 1998 was a landmark in the evolution of the mobile cellular industry in Western Europe. Switzerland became the last country in the region to adopt mobile cellular competition when the first new market entrant, diAx, commenced commercial service on Christmas Eve 1998. The lack of competition had expressed itself most visibly through high tariffs, with Swiss mobile cellular prices among the steepest in the world. Tariff options were limited with no bundling of free minutes or handset price subsidies. diAx introduced the concept of bundling free minutes with its tariffs. With a special promotion (that has proved to be ongoing), diAx effectively doubled the number of minutes that could be purchased for the same price. As a result, diAx's tariff for 100 minutes of use is half that of Swisscom's and among the lowest in Europe. Orange entered the market as a third competitor in June 1999; in response both Swisscom and diAx lowered their prices. Swisscom, which had only changed its mobile prices once between 1995 and July 1998, has made three reductions in less than a year (including the introduction of lower rates for mobile-to-mobile calls). Despite historically high tariffs, Switzerland has achieved a fairly high mobile penetration rate (around a quarter of the population at the end of 1998, ranking it nineteenth in the world) although this is much lower than would be predicted by its relative wealth. With lower tariffs as a result of competition, demand will rise (diAx gained 300 000 subscribers in the space of just six months), and the Swiss penetration rate could eventually reach the level of the Nordic countries. |
Since the beginning of the 1990s, more than 150 countries have introduced new telecommunications legislation, or modified existing regulations, says a new report to be launched at Telecom 99. This second edition of Trends in telecommunication reform, published by ITU's Telecommunication Development Bureau (BDT), explores the theme of convergence and regulation. In particular, the report takes a close look at the impact of digital convergence on the reform of the telecommunications sector, notably on national regulatory re gimes. The following is an extract from the executive summary.
New legislation has given rise to new, separate telecommunication regulatory agencies around the world. As of August 1999, there were 84 separate regulators, compared with only ten at the start of the 1990s. Nine of these regulatory bodies have been established since the middle of 1998.
Europe has currently the largest number of separate regulators, followed by the Americas and Africa (see Figure 1). Another 15 are expected by the end of 2000.
The governing structure of the new separate regulators, despite significant national and regional diversity, seem to point to a new model for telecommunications regulatory bodies. Among the nine regulators created from July 1998 to August 1999, six were established as collegiate bodies (for example, a commission) composed of between five and 11 members. This emerging trend is in clear contrast with the approach mainly adopted prior to July 1998, in which the great majority of new separate regulators (70 per cent) were headed by a single person (for example, a director-general).
The convergence of services and markets necessitates a convergence of laws, and may also necessitate the convergence of institutions or at a minimum, mandate coordination. In Asia, Malaysia and Singapore's regulators have been most progressive, bringing under one entity, all communication and information technology-related functions.
Malaysia's Communications and Multimedia Act may be, for the time being, a unique piece of legislation. But, perhaps also, a representative of the type of legislative reform to take place in other countries in the beginning of the next millennium. Malaysia's Act groups telecommunications, broadcasting and the computing industries into one industry with one regulator. Other countries, such as Namibia and China are establishing single ministries to deal with convergence and a new regulator may come later.
While the increase in regulators and legislative reform is certainly encouraging, new technologies and services are moving faster than the bodies that regulate them. Convergence is not a simple issue for telecommunication regulators.
The challenge is to determine ways to regulate technologies that are continually evolving and more importantly to determine the role of the regulator in a converged sector. The challenge for regulators, as we enter the next millennium, is to develop consistent and relevant regulations which do not inhibit the growth of the sector, but rather encourage technological innovation.
Source: ITU World Telecommunication Regulatory Database.
Figure 1 — Booming growth of regulators, 1990-1999
Since 1997, the percentage of Asian countries that have privatized their operators increased to almost 55 per cent. In Europe, of the 53 European ITU Member States, almost 50 per cent partially privatized their operators by mid-1999.
With more than 20 countries that have privatized their incumbents, the Americas region has the largest number of fully privatized operators. African countries have moved quickly in reducing local and foreign private ownership limitations. As a result, of the 42 African Member States, 14 have privatized their operators and another eight have plans to privatize in the near future. In contrast, in the Arab States, there are presently no fixed-link operators which are 100 per cent privately-owned.
Many countries have increased private sector participation in their telecommunication sectors by allowing new market entrants which are privately-owned. In general, even countries that are reluctant to privatize their operators have been willing to allow new entrants and have even encouraged private sector participation in cellular and other value-added services. As a result, most of the cellular networks around the world are at least partially owned by foreign investors. Recent estimates reveal that more than 100 cellular networks around the world have investments from foreign sources.
Licensing of new entrants has been used also as a way of increasing private investment in the Internet service provider market in most countries around the world.
Perhaps the single most important characteristic of emerging licensing frameworks is the degree of diversity among them. The differences reflect a wide variety of views from one country to the next on the functions and objectives of licensing. It is clear that there is no perfect approach.
Partly this is due to the fact that each country must build its liberalization programme on the foundation of the particular governmental and industry structure that already exists. Other factors then come into play, including the overall objectives of the licensing process: to control the rate of competitive entry, to minimize or maximize foreign investment, to promote infrastructure investment, to maximize revenue production, to attract advanced services for multinational business, or to minimize adverse economic impact on a national carrier.
The diversity of licensing regimes is an important regulatory issue in the age of globalization. Asymmetrical licensing regimes may impede the growth and implementation of global services, and make more complex the transition to new generation regulatory frameworks that will be required for the age of cybernetworks. Pressure will increase for greater simplicity and harmonization.
In spite of this diversity of licensing regimes across the world, most licences granted today are built around central notions of the public interest. There are three themes underlying individual country licensing regimes: ensuring the availability of public services, promoting the expansion of telecommunications infrastructure, and controlling competitive entry and/or anti-competitive conduct. These themes are not mutually exclusive. All three are usually addressed within a country's licensing scheme.
The report further looks at issues of universal access, interconnection, pricing services on digital networks, and
numbering in a digital world.
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