Competing Mobile Networks Drive Greater Innovation and Investment

London: The GSMA today released a new report that predicts a move away from traditional mobile network competition towards single wholesale networks¹ would stifle innovation, restrict investment and take-up of mobile broadband services and ultimately be against consumer interests. Developed by Frontier Economics, the report, “Assessing the Case for Single Wholesale Networks in Mobile Communications”, examines whether single wholesale networks could meet a government’s objective for improved coverage and explores more effective ways to achieve the same goal.

The report analyses the historic performance of countries with a single network compared to those with multiple competitors to consider how a single wholesale network would likely perform in practice. It finds that in countries with competing networks, 3G covered 36 per cent more population and that overall coverage increased three times faster than in those served by a single network².

“In 2000, there were as many countries served by a single mobile network as there were those with competing networks. Today only 30 countries, representing less than three per cent of the world’s population, are served by a single network,” said Tom Phillips, Chief Regulatory Officer, GSMA. “Network competition has produced unprecedented growth and innovation in mobile services, with 3.7 billion unique mobile subscribers globally in 2014, more than US$1.7 trillion of total worldwide investment since 2002 and mobile 3G broadband coverage reaching over half of the world’s citizens³. This indisputable success story should continue in the era of mobile broadband, across the globe and particularly in emerging markets.”

Comparing Single Wholesale Networks with Network Competition
Advocates of single wholesale networks argue they can respond to issues such as inadequate or slow coverage in rural areas, inefficient use of spectrum and a lack of incentives for the private sector to maximise coverage or investment better than the model of network competition. However, the report demonstrates that the existing approach of network competition offers better long-term benefits:

• Network Coverage – Some supporters of single wholesale networks claim they will deliver greater network coverage than network competition. The new report finds this often reflects the existence of public subsidies and other forms of support for the monopoly wholesale network model rather than any inherent advantage over competing network operators.

• Innovation and New Services – The report finds that, in practice, single networks typically take 12 to 18 months longer to perform upgrades and embrace new technologies such as 3G, limiting the availability of new services for consumers, reducing quality and increasing costs.

• Uncertainty for Investors – When initially established, single wholesale networks would have to co-exist for some period with existing networks. This will likely lead to a distortion of competition in the market, increasing uncertainty both for those investing in the single wholesale networks and for those investing in existing networks, leading to less investment in mobile broadband services.

• Impact of Monopolies – In the longer term, single wholesale networks would need to evolve into regulated monopolies to meet their key objectives. As monopolies, single wholesale networks will always have incentives to keep prices high and limit investment and will have little impetus to innovate. Although regulation of the network may attempt to overcome some of these problems, experience shows that this will be difficult in practice and will not match the performance of competing networks. 

• Subsidising Network Competition – Although publicly-funded single wholesale networks could be used to deliver coverage in areas into which privately funded competing networks might not be able to serve, the report suggests that policy makers should consider measures to extend the benefits of network competition to those areas rather than replacing competition with monopoly. This includes imposing coverage obligations at the time of licence award for new spectrum, particularly in low frequency 700MHz and 800MHz bands, and other forms of subsidy such as the award of contracts to cover particular areas using public funds.

Policy makers in a number of countries have been considering establishing a single wholesale network instead of relying on competing mobile networks to deliver 4G mobile broadband services, but there are currently no nationwide initiatives in action.

“No single wholesale network has been fully implemented in any country in the world yet and designing, financing and implementing these networks will likely prove highly challenging. We believe that a radical departure from the approach of licensing competing mobile operators, favoured by policy makers for the past 30 years, would harm a nation’s consumers, businesses and economy,” added Phillips.

To access the report please visit: www.gsma.com/publicpolicy/public-policy-resources. The GSMA’s policy position on single wholesale networks can be found here: mph.gsma.com/publicpolicy/handbook/business-environment.

-ENDS-

Notes to Editors
¹ While there are variations in the single wholesale network proposals discussed by different governments, these can be generally defined as government-initiated network monopolies that compel mobile operators and others to rely on wholesale services provided by the single wholesale network as they serve and compete for retail customers. Most of these proposals specify at least partial network ownership and financing by the government.

²This takes into account empirical evidence from more than 200 countries over a 15-year period, which shows that network competition has driven mobile network coverage for 1, 2 and 3G networks further and faster than has been achieved by single networks.

³ Source: GSMA Intelligence. Mobile 3G broadband coverage refers to coverage that could be potentially accessed by global population versus the number of actual worldwide mobile broadband subscriptions.

About the GSMA
The GSMA represents the interests of mobile operators worldwide. Spanning more than 220 countries and territories, the GSMA unites nearly 800 of the world’s mobile operators with 250 companies in the broader mobile ecosystem, including handset and device makers, software companies, equipment providers and Internet companies, as well as organisations in industry sectors such as financial services, healthcare, media, transport and utilities. The GSMA also produces industry-leading events such as Mobile World Congress and Mobile Asia Expo.

For more information, please visit the GSMA corporate website at www.gsma.com. Follow the GSMA on Twitter: @GSMA.

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