Trends in Telecommunication Reform 2010-11 Box 3.3: Transformative potential of wireless in broadband-based competition: the case of Austria In 2009, the Austrian regulator (RTR) found that significant fixed-to-mobile substitution in the Austrian residential broad-band market warranted withdrawal of ex ante regulation (i.e., bitstream access). In its wholesale broadband market analysis, RTR found that DSL, cable modem and mobile broadband connections are substitutes for residential consumers at the retail level. By including broadband connections over the three networks within the same relevant market, RTR determined that strong infrastructure-based competition – especially from mobile broadband – created a trend towards effective competi-tion in the retail residential market for broadband service in Austria. RTR noted that in Q1 of 2009, the total number of mobile broadband connections represented close to 35 per cent of all broadband connections, while DSL and cable modems represented around 40 per cent and 22 per cent respectively. For the period of 1Q2007-1Q2009, the mobile broadband growth rate was 19.6 per cent, outpacing the growth rate for DSL (3.4 per cent) and cable modem (0.7 per cent). RTR found that fixed and mobile broadband prices moved closely together, with fixed broadband providers directly reacting to price reductions implemented by mobile broadband providers Further, RTR found that pricing pressure from mobile broadband began reducing margins in 2007 for access-based competitors, leading to a decline in bitstream connections and the stagnation in ULL connections. Not surprisingly, RTR also found that 76 per cent of Austrian consumers (76 per cent) purchased stand-alone mobile broadband connections while only 24 per cent purchased it bundled with a fixed connection, indicating that consumers viewed both types of connections as substitutes rather than complements. In December 2009, the European Commission endorsed RTR's decision. Source: RTR, Abgrenzung des Marktes für Breitbandigen zugang auf Vorleistungsebene, November 2009; EC, Letter of 7 December 2009, Case AT/2009/0970. Spectrum policies should facilitate wireless broad-band deployments and should take into account the Over the next decade, in countries where wireline infrastructure is not widespread, wireless networks will play (and in some cases are already playing) a crucial role in broadband diffusion, particularly through third generation (3G) and fourth generation (4G) mobile ser-vices. expected increases in data traffic that wireless services will generate.19 As subscribers use wireless networks for broadband connectivity more intensely, throughput re-quirements In Morocco, for example, 3G connections sur-passed fixed broadband connections (ADSL) in 2009, will increase significantly not only on the access network, but also for backhaul and backbone connectivity. and by May 2010, more than doubled them (Figure 3.7, left). Most interestingly, mobile broadband accounts for almost all the growth in household penetration of broadband connections in Morocco (Figure 3.7, right). Figure 3.7: Mobile broadband development in Morocco Broadband subscriptions Broadband subscriptions per 100 inhabitants per 100 homes 4,7 5 20 3,7 4 3,2 15 10% 2,4 3 2,2 4% 1,7 10 1,5 2 1,5 1% 1,5 5 0,8 9% 8% 1 0,1 1,5 6% 6% 0 0 2007 2008 2009 mai/10 2006 2007 2008 2009 ADSL 3G Total ADSL 3G Source: Michael Minges, Crafting a Broadband Strategy for Developing Countries an Evidence-Based, Case Study Approach, Telecommunica-tions Management Group, Inc.20 92 Chapter 3