All over the world, mobile network operators are providing the essential connectivity that people and businesses expect. In recent years, the industry has adapted to major changes brought about by the convergence of technologies and services, and by the emergence of internet platforms and services. Telecommunications markets have broadened and competition has increased as a result.
In most countries, however, mobile operators are still subject to regulations designed for the ‘voice era’. These rules and obligations restrict their ability to innovate, invest and compete on equal terms in the digital ecosystem.
Policymakers should strive to create an enabling business environment that fosters competition and protects consumers without impeding commercial activity or economic progress. This will require a fresh look and a revision of regulations so they better reflect today’s technologies and markets.
The following pages contain a number of policy topics that affect mobile operators, laying out the key points of debate and formally agreed industry positions. As the mobile industry continues to roll out 4G networks and initiate 5G trials, the need for pro-investment policies and modernised regulatory regimes has never been greater.
Resetting policy and regulation to drive the digital economy
From shopping to entertainment to managing household finances, digital technologies have fundamentally altered human behaviour, and consumers presented with the opportunity have been quick to integrate digital tools into their daily life. Many governments, recognising the value of mobile to society, have implemented bold policies to cultivate the digital economy, while extending connectivity to underserved communities.
A holistic policy framework that reflects the changing digital landscape while reducing costs and barriers to network deployment will deliver the best outcomes for society and the economy. If regulatory policies and institutions fail to adapt, markets can become distorted in ways that harm competition, slow innovation, and ultimately deprive consumers of the benefits of technological progress.
Figure 1 identifies four key areas for policy action: infrastructure investment, regulation, promoting their digital economies and demonstrating digital leadership.1
1 GSMA Report: Embracing the Digital Revolution — Policies for Building the Digital Economy (February 2017)
Regulation — to focus on the area most applicable to this handbook — needs to be rethought for the digital and mobile age. However, reform has not kept pace with the converged and highly dynamic digital ecosystem. Emerging technologies are driving new business models, blurring the boundaries between once-distinct markets. Regulatory systems developed during the early years of mobile telecoms are still in place in many countries, and such regulation can actually do harm by slowing innovation and technological and market advances today.
The good news is that policymakers recognise the need to change. In many jurisdictions, such as the European Union, reforms are underway that will protect competition and consumers without impeding social and economic progress. We must not allow tomorrow’s technologies to be stifled by yesterday’s regulations. By updating the regulatory framework, policymakers can ensure that government and industry are aligned to create a growing and inclusive digital society for all.
Mobile services are a key enabler of socio-economic development, and achieving ubiquitous access to mobile services for citizens is a major government policy objective in most countries. Mobile operators often have roll-out obligations in their market area to ensure widespread national coverage.
To deliver continuous mobile coverage in dense urban areas and across rural expanses, mobile network operators must build and manage an array of base stations— free-standing masts, rooftop masts and small cells — equipped with antennae that transmit and receive radio signals, providing voice and data services to their customers in the area. The deployment of 5G will include the greater use of small cells to provide high-capacity and low-latency connectivity.
A variety of requirements and conditions, including electromagnetic field (EMF) exposure limits, must be met to secure permits for base-station deployment. Requirements can be defined at the local, regional and national level, even though the local authority (e.g., the municipality) is typically the point of referral. The process in some countries leads to significant delays and cost variances.
What antenna permitting processes should governments implement to avoid undue delay in infrastructure installation?
What reference point should be used by governments to define safe EMF exposure limits?
How can a balance be struck between national objectives for mobile connectivity for citizens and the decisions of municipalities?
Can processes be streamlined for the approval of small cell antennae and modifications to existing sites to achieve the necessary network densification?
Governments that enable mobile network investment and remove barriers to the deployment of network infrastructure will accelerate the provision of mobile services to their citizens.
By defining explicit, nationally consistent planning approval processes for mobile base stations, governments can avoid lengthy delays in network deployment. We support mechanisms that reduce bureaucratic inefficiencies, including exemptions for small installations, colocations or certain site upgrades, ‘one-stop shop’ licensing procedures and tacit approval. Governments can lead by example by improving access to government-owned land and buildings.
Base-station exposure guidelines should be aligned with international standards as recommended by the World Health Organization (WHO) and International Telecommunication Union (ITU). Additional arbitrary restrictions related to environmental impact should be avoided.
Infrastructure costs place a high threshold on entry into the mobile sector. If policies are short-sighted, and if taxes and licence fees are not in keeping with actual market dynamics, then operators may not have the means, or the will, to roll out new technologies and to reach rural areas. Such policies delay the social and longer-term economic benefits experienced by citizens.
GSMA EMF and Health website
GSMA Base Station Planning Permission in Europe website
World Health Organization Electromagnetic Fields website
FCC Initiative: Leading the World Toward a 5G Future
ITU-T K.Suppl.9 on 5G Technology and Human Exposure to RF EMF ITU-T K.Suppl.14 on The Impact of RF-EMF Exposure Limits Stricter than the ICNIRP or IEEE Guidelines on 4G and 5G Mobile Network Deployment
GSMA Report: 5G, the Internet of Things (IoT) and Wearable Devices: What do the New Uses of Wireless Technologies Mean for Radio Frequency Exposure?
GSMA: Arbitrary Radio Frequency Exposure Limits — Impact on 4G Network Deployment
GSMA Video: Mobile Networks Are Necessary to Deliver a Better Connected World
GSMA Report: LTE Technology and Health
GSMA Report: Improving Wireless Connectivity Through Small Cell Deployment
GSMA Report: Delivering the Digital Revolution
Radio Frequency Policies for Selected Countries
a 50m around hospitals, schools and homes for old people
b Proposal under public consultation
c ICNIRP with lower limit in urban areas and in ‘sensitive areas’ d Not within 20m of schools and playgrounds
e Recommendation to minimise exposure in schools, day-cares or healthcare facilities located within 100m
f Adopted ICNIRP in 2008 and changed to 10% of ICNIRP on 1 September 2012
g Lower limit in playgrounds, residential dwellings, schools and areas where people are >4 hours per day
h One installation; total exposure must not exceed ICNIRP 1998
Community networks can be defined as a ‘do it yourself’ approach to connectivity: local, community-owned (or community-managed) networks that address specific and local connectivity needs. They are usually established in areas that are not commercially viable for mobile network operators to cover and typically operate on a small scale, addressing discrete market failures. As such, in these types of areas, they can be effective complements to connectivity efforts driven by mobile network operators.
Advances in technology have reduced the barriers to network deployment and management. This has enabled non-operators to build and deploy mobile and internet connectivity solutions. Largely technology-neutral, they are designed to meet the specific needs of the community or setting. This can include using modular and simplified infrastructure, renewable energy, a variety of backhaul methods (including an ISP or Wi-Fi backbone, VSAT and WiMAX), and leveraging open connectivity standards. Community networks often utilise Wi-Fi technology in unlicensed spectrum, although very few countries have assigned spectrum specifically for their operation.
Community networks are generally funded through mechanisms such as crowdfunding, local financial contributions, the donation of connectivity expertise and equipment, and sometimes customer usage fees. They a specific solution to often unique geographical, commercial, and/or logistical challenges to delivering connectivity. As such, they are often highly context-specific, limiting their scalability or generalisability as well as their ability to invest in new innovations and address cybersecurity risks effectively. Only a few community networks have established a financially sustainable business model over the long-term.
What role can community networks play in a national connectivity approach?
How can mobile network operators leverage community networks to support their rural connectivity strategies?
How should community networks be supported and regulated to ensure high-quality, local connectivity while maintaining a level playing field with mobile network operators?
Community networks can play a useful role and complement mobile network operators’ efforts to expand coverage, as they provide an opportunity to deliver the transformative benefits of connectivity to locations that are not commercially viable for mobile network operators. By doing so, they can drive ICT usage, increase digital skills, enable the development of local businesses, and increase uptake of digitally delivered public services within the communities that they serve.
That said, community networks, and any associated policies that underpin this approach, should not impair or discourage the deployments of larger-scale commercial network operations. Community networks also have limitations. For example, they typically do not have the resources and expertise to sustain investments in new innovations or to address cybersecurity risks as effectively as scaled commercial networks. Regulatory uncertainty or constraints can both limit the potential of community networks and hamper the rollout of larger-scale commercial connectivity networks.
A level playing field is essential, and regulation should equally empower community networks and mobile network operators to drive greater connectivity and accelerate digital inclusion. Regulation and supporting policies applied to community networks should not disadvantage mobile network operators. Specifically:
- Where Wi-Fi is not able to provide a suitable solution, voluntary spectrum sharing can be an interesting opportunity to open up access to new spectrum for community networks but needs careful planning to succeed. It is essential that the approach chosen protects the needs of incumbents, supports the needs of new users and avoids limiting the future evolution of the spectrum band;
- Voluntary spectrum trading, through secondary market transactions, should also be considered to enable spectrum access for community networks and countries should have a regulatory framework that allows operators to engage in voluntary spectrum trading.
- Spectrum that is set-aside for community networks in mobile bands may be underused. As a result, it may not just waste a valuable resource but also threaten the success of commercial networks (i.e., reduced coverage, slower rollouts and worse performance).
Mobile phones are the most widely adopted consumer technology in history. A large part of this success can be attributed to how competition in the mobile industry has helped drive innovation.
The rise of the digital economy and explosive growth in smartphone adoption have brought innovation and disruption to traditional mobile communications services. These changes are also impacting existing policy frameworks and challenging competition policy (which includes government policy, competition law and economic regulation).
Despite the influence that new market dynamics are having on the mobile sector, the industry is still subject to the contradictions of a legacy regulatory system. This has resulted in services that are in competition with each other — such as voice services offered by mobile operators and those offered by internet players — being regulated differently.
These differences can be seen in how economic regulation (ex-ante) and competition law (ex-post) are applied to the sector. For example, a regulator’s jurisdiction may be limited to the telecommunications sector, and not extend to internet players. As a result, regulators often fail to take wider market dynamics into account during the evaluation and decision-making process. Equally, a failure to understand the complex value chain can affect how competition law is applied.
Current competition policy is also being challenged by the competitive advantage conferred on some companies through their ability to collect and analyse large troves of data. This, combined with powerful network effects and the tendency for markets to tip in favour of dominant platforms, can harm consumers, hinder competition and stifle innovation. The ability of competition policy and enforcement to deal with issues arising in data markets is therefore key to the competitive development of the whole digital economy.
How should markets be defined in the digital age?
How can standard competition tools be applied in the digital age?
Are traditional significant market power (SMP) access remedies still appropriate?
GSMA Competition Policy website
GSMA Handbook: Competition Policy in the Digital Age
GSMA Competition Policy in the Digital Age: Case Studies from Asia and Sub-Saharan Africa
GSMA Report: The Data Value Chain
The mobile industry supports competition as the best way to deliver economic growth, investment and innovation for the benefit of consumers. Excessive regulation stifles innovation, raises costs, limits investment and harms consumer welfare through the inefficient allocation of resources, particularly spectrum.
To ensure that competition and innovation thrive, it is essential that policymakers create a level playing field across the digital ecosystem. All competitors providing the same services should be subject to the same regulatory obligations, or absence of such obligations. This should be achieved through a combination of deregulation and the increasing use of horizontal legislation to replace industry-, technology- or service-specific rules.
Regulators and competition authorities must fully recognise the additional dynamic competition that exists in the digital age. Internet players adopt new and different business models to offer services to customers. Examples include advertising-supported services that make use of sophisticated internet analytics. Regulators and competition authorities need to understand these models, and map their competitive impact before imposing regulatory obligations or competition law commitments.
Otherwise, services that are in competition with each other may end up being regulated differently. For example, players that adopt traditional, better understood business models may find themselves subject to enhanced scrutiny.
Taking into account these new types of competitors when conducting market assessment reviews may show that there is a much greater level of competition in communication services markets than is currently recognised by regulatory and competition authorities. This type of analysis could demonstrate the potential for regulatory policy goals to be achieved through competition law, with the result that ex-ante regulation could be lessened, or may no longer be needed.
Indeed, it is a basic principle in economic regulation that regulation should not be imposed if competition law is sufficient to deal with the issues identified. As a result, a degree of deregulation of licensed providers is likely to be justified. Also, there is potential for competition law itself to be improved, to make it more effective. The GSMA published a report titled Resetting Competition Policy Frameworks for the Digital Ecosystem. This sets out 15 detailed recommendations to adapt competition policy to the challenges of the digital age, and is summarised on the following pages.
Competition in Digital Markets
The global economy is undergoing a major transformation. The rapid take-up of technologies including mobile communications, digital platforms, big data, cloud computing and social media are changing the nature of the products and services and the ways people interact. This transformation disrupts existing business models and industries, while offering substantial potential to enrich lives and raise living standards.
Competition in digital markets is different from competition in traditional markets. It has the following specific features:
- Waves of investment and innovation and rapid technological progress.
- Quality and product features that are often more important to customers than price.
- Winner-takes-all outcomes where new entrants offering innovative products or services may be able to leapfrog established firms.
- Economies of scale and strong network effects in the supply of digital services.
- Multi-sided markets and platforms, with distinct groups of users on the different sides benefitting from the presence of the other.
- Large-scale data gathering and analysis, with the potential for anticompetitive effects, especially where it contributes to the quality of service.
These differences challenge the existing policies and call for a reset of the competition framework and a more nuanced approach to competition policy for the digital ecosystem.
Resetting Competition Policy Frameworks: Recommendations
The GSMA advocates that governments adopt the following recommendations to ensure their competition policy frameworks remain relevant for dealing with issues of abuse of market power and market failures in the digital economy.
From the outset, mobile markets have been characterised by a vibrant, competitive market structure that drives investment and innovation.
Today, demand for robust, high-speed, high-quality mobile broadband continues to grow. This drives mobile operators to make large investments in network infrastructure and services at regular intervals to provide consumers with improved offerings at lower costs. For example, while operators are continuing to invest in their 4G networks, they are already starting to invest in the spectrum and technology required to roll out 5G networks.
The high level of competition in the markets for mobile services has also seen the tariffs charged to mobile users fall steadily and significantly over the past few years. At the same time, consumption of mobile services, particularly mobile data, has grown steadily, with the result that users today typically get more for their money.
In order to preserve competition, help drive innovation and support the wider societal benefits that mobile connectivity delivers, policymakers must ensure that the right economic conditions are in place to support investments. In particular, they must recognise the competitive nature of today’s mobile markets, avoid regulating prices and steer clear of interventions aimed at engineering market structures. Instead, they should allow market mechanisms to determine the optimal mobile market structure.
Some regulators have used spectrum caps — limits on the amount of spectrum one entity can hold — to influence market structure, however, spectrum caps can generate unintended consequences including inefficient allocations of spectrum and/or reduced incentives to invest, ultimately resulting in poor outcomes for consumers, and as such they must be considered carefully.
At the same time, competition authorities tasked with assessing the impact of proposed mobile mergers must take full account of the dynamic efficiencies (and accompanying wider societal benefits) arising from mobile mergers.
Can mergers between mobile operators bring significant consumer benefits in mobile markets and wider society?
GSMA Report: Assessing the Case for In-country Mobile Consolidation
GSMA Report: Assessing the Case for In-country Mobile Consolidation in Emerging Markets
GSMA Report: Assessing the Impact of Mobile Consolidation on Innovation and Quality — An Evaluation of the Hutchison/Orange Merger in Austria
GSMA Report: Assessing the Impact of Market Structure on Innovation and Quality in Central America
When assessing mobile mergers, policymakers should consider the full range of static and dynamic benefits that can arise from mergers, including price effects, innovation, the use of spectrum and investments over both the short and longer term.
Investment and Quality of Service
Competition authorities should consider placing greater emphasis on how mergers may change an operator’s ability to invest. Growing demand for data services requiring ever increasing bandwidth means constant investment in new capacity and technology is needed
Positive spill-over effects in the wider economy
Improvements in digital infrastructures support economic growth by positively affecting productivity across the whole economy.
Greater benefits than network sharing
Competition authorities have often argued that network sharing represents a preferred alternative to mergers. While the pro-competitive nature of network sharing agreements can only be assessed on a case-by-case basis, it is worth noting that network sharing agreements are not always feasible between the merging parties because of an asymmetry of assets (such as spectrum holding) or a different deployment strategy.
- There is no robust evidence to suggest that four-player markets have produced lower prices than three-player markets in Europe and elsewhere over the past decade.
- Mergers can accelerate the transition between technology cycles in the mobile industry (technology cycles being responsible for significant reductions in unit prices), leading to improvements in quality and driving service innovation.
- As the market moves from voice to data, the global volume growth rate on mobile networks is accelerating. This calls for more concentrated market structures than in the past in order to meet the investment challenge and drive mobile data unit prices down so as to keep the demand for mobile data services growing.
Effects of remedies on investments and use of spectrum
- In some cases, if operators are compelled to provide third parties with access to their networks, this could reduce rather than sharpen incentives to invest as a result of the merger, thus significantly reducing benefits to consumers. In addition, in the three cases (Ireland, Germany and Austria) where a network entry option was made available by the European Commission’s Directorate-General for Competition, nobody took the option, even though this was arguably offered on favourable terms.
- Remedies that involve reallocating network assets or reserving spectrum for other operators could in some cases deter investment and lead to underutilised or misused resources.
Dynamic Benefits In Mergers
Recently there has been heated debate about the effects of consolidation on the performance of mobile markets, following mergers in key European countries, including Austria, Germany, Ireland and the United Kingdom.
Some argue that consolidation has a detrimental effect on competition and prices. Others argue that if consolidation does not take place, mobile markets will not achieve the necessary scale and so fail to attract sufficient investment.
In the past three years multiple studies have analysed how mergers impact investment. For example, a 2017 GSMA report1 analysed the impact of the Hutchison/Orange merger in Austria in 2012 on coverage and quality of service. We found that within two years Hutchison was able to accelerate population coverage of its 4G network by 20 to 30 percentage points as a result of the merger. Also, 4G download and upload speeds increased by 7 Mbps and 3 Mbps respectively within the same time period. The quality of mobile networks in Austria improved as a whole, with 4G download and upload speeds increasing by more than 13 Mbps and 4 Mbps in 2013 and 2014 respectively, and 3G download speeds increasing by 1.5 Mbps after 2014.
Since 2015, at least seven other studies2 have examined the relationship between market structure, innovation and investment, as measured by operators’ capital expenditure (capex). None found that increasing market concentration drove lower investment per operator or lower total country investment.
A first set of studies has found that investment always increases with market concentration, suggesting that the Hutchison/Orange merger would have had a positive effect on Austrian consumers via more investment.
CERRE (2015) found that, on average, a 10 per cent increase in the Herfindahl-Hirschman Index drives a boost of 24 per cent in merged operators’ capex. In 2016, Jeanjean and Houngbonon found that markets with four players average 14 per cent lower investment per operator versus those with three players and that an increase in the number of operators tends to decrease investment. DG Competition (2017) finds that investment per operator increased as a result of the five-to-four merger in the United Kingdom in 2010, although no statistically significant effect is found when analysing investment per subscriber.
A second set of studies (Houngbonon & Jeanjean, 2016 and HSBC, 2015) suggests that greater market concentration increases capex per operator only when operators’ profit margins are below 37 per cent to 44 per cent — with operators in most four-player markets being below this threshold, including Austrian operators before the merger. These studies suggest that the introduction of competition initially has a positive effect on investment, but that as mobile markets become less concentrated, it has a negative effect. Other studies have found that investment does not depend on market structure (WIK, 2015 and Frontier, 2015), suggesting that a mobile merger would have a neutral effect on outcomes such as network quality and coverage.3
One of the key findings is that post-merger, there is evidence that concentration leads to greater investment. While many believe that consolidation is likely to lead to a reduction of investment by operators, the evidence actually points to increased investment. This is because larger operators enjoy economies of scale that help when it comes to extending coverage and undertaking network upgrades. They also have greater financial strength — due to larger profit margins and improved access to complementary assets and commercial partnerships — and expect higher returns from their investments.
1 GSMA Report: Assessing the Impact of Mobile Consolidation on Innovation and Quality
2 CERRE (2015), Frontier (2015), Houngbonon & Jeanjean (2015), Houngbonon & Jeanjean (2016), HSBC (2015), WIK (2015), DG Competition (2017)
2 CERRE (2015), Frontier (2015), Houngbonon & Jeanjean (2015), Houngbonon & Jeanjean (2016), HSBC (2015), WIK (2015), DG Competition (2017)
3 Though WIK (2015) found that market structures which provide higher profit margins and larger economies of scale (both enhanced by market consolidation) boost total capex per country
Common in many countries, infrastructure sharing arrangements allow mobile operators to jointly use masts, buildings and even antennae, avoiding unnecessary duplication of infrastructure.
Infrastructure sharing has the potential to strengthen competition and reduce the carbon footprint of mobile networks, while reducing costs for operators.
Infrastructure sharing can provide additional capacity in congested areas where space for sites and towers is limited. Likewise, the practice can facilitate expanded coverage in previously underserved geographic areas.
As with spectrum trading arrangements, mobile infrastructure sharing has traditionally involved voluntary co-operation between licensed operators, based on their commercial needs.
Should regulators oversee, approve or manage infrastructure-sharing arrangements?
What role should governments play in the development and management of core infrastructure?
Governments should have a regulatory framework that allows voluntary sharing of infrastructure among mobile operators.
While it may at times be advantageous for mobile operators to share infrastructure, network deployment remains an important element of competitive advantage in mobile markets. Any sharing should therefore be the result of commercial negotiation, not mandated or subject to additional regulatory constraints or fees.
The regulatory framework of a country should facilitate all types of infrastructure sharing arrangements, which can involve the sharing of various components of mobile networks, including both so-called passive and active sharing.
In some cases, site sharing increases competition by giving operators access to key sites necessary to compete on quality of service and coverage.
Infrastructure sharing agreements should be governed under commercial law and, as such, subject to assessment under general competition law.
Access to government-owned trunk assets should be available on non-discriminatory commercial terms, at a reasonable market rate.
Types of Infrastructure Sharing
Infrastructure sharing can be passive or active. Passive sharing includes site sharing, where operators use the same physical components but have different site masts, antennae, cabinets and backhaul. A common example is shared rooftop installations. Practical challenges include availability of space and property rights. A second type of passive sharing is mast sharing, where the antennae of different operators are placed on the same mast or antenna frame, but the radio transmission equipment remains separate.
In active sharing, operators may share the radio access network (RAN) or the core network. The RAN-sharing case may create operational and architectural challenges. For additional core sharing, operators also share the core functionality, demanding more effort and alignment by the operators, particularly concerning compatibility between the operators’ technology platforms.
Infrastructure sharing optimises the utilisation of assets, reduces costs and avoids duplication of infrastructure (in line with town and country planning objectives).
It may also:
- Reduce site acquisition time.
- Accelerate the roll out of coverage into underserved geographical areas.
- Strengthen competition.
- Reduce the number of antenna sites.
- Reduce the energy and carbon footprint of mobile networks.
- Reduce the environmental impact of mobile infrastructure on the landscape.
- Reduce costs for operators.
Copyright is the basis for creative professionals such as artists, musicians, writers, filmmakers and composers to earn income, get recognition and receive protection for their works. The original intention of copyright was to encourage the development of new creative work. This is still the case today, but the emergence of digital technologies has radically changed the way creative content is produced, distributed and accessed by consumers.
Since the launch of its Digital Single Market (DSM) strategy in March 2015, the European Commission has published several proposals to improve cross-border access to content online, create wider opportunities to use copyrighted materials in education, research and cultural heritage and to create a better functioning copyright marketplace.
The proposal on temporary cross-border portability of online content services came into force on 1 April 2018. Now, suppliers of these services, when provided against remuneration, have to allow consumers to temporarily access content they have legally subscribed to in their member state of residence while staying in another EU member state. Providers are not requested to execute rights clearance or obtain additional copyright licences when so doing.
In the meantime, the European Commission’s proposals on the modernisation of copyright in the DSM and on the extension of the Satellite and Cable Directive’s broadcasting rules to other infrastructures, such as mobile networks and the open internet (‘technology-neutral retransmission’), are still being fiercely debated. For example, now that consumers increasingly wish to access content online via their mobile and also across borders, the latter point has become problematic.
In addition, there is heated discussion related to the perceived ‘value gap’ between rights holders and online platforms as well as the issue of intermediary liabilities. One question that has arisen is whether there should be a neighbouring right for press publishers so that they receive remuneration when their news snippets are used. If this were put in place, news aggregators and possibly social networks and search engines would have to conclude licensing agreements with press publishers to be able to display news snippets. Similarly, the issue of whether online service providers should have to monitor and address (including via the use of content recognition technologies) the unlawful use of copyrighted content continues to be hotly debated.
These proposals have now been adopted by the European Parliament and will be at the centre of negotiations among EU co-legislators to finalise the copyright reform before the next European elections.
Furthermore, the European Commission has proposed new rules to compel internet platforms to remove terrorist content within one hour once it has been flagged by national competent authorities. These rules follow on from previous non-binding measures aimed at tackling illegal online content.
The mobile industry recognises the importance of proper compensation for rights holders and supports the creation of fair, incentivising business models that respect the right balance. However, the GSMA cautions against putting the ‘ISP liability regime’ of the eCommerce Directive into question by having to take measures to prevent the availability of copyright infringing content.
The exemptions from liability for intermediaries contained in the eCommerce Directive are core principles that guarantee users the freedom and confidentiality of communications and the freedom to access information, and offer legal certainty to internet service providers.
These principles are key, not only for the functioning of the information society and for the provision of innovative services in the DSM, but also for an effective fight against illegal content online. This fight requires, in most instances, contextualisation of different types of allegedly illegal content and must be weighed against the citizens’ fundamental right to freedom of expression and access to information as well as privacy and protection of personal data.
Regarding access to content, the GSMA is in favour of extending the retransmission right in a technologically-neutral manner, including IP-based retransmission over the internet to different devices. However, the GSMA cautions against introducing a broadly-designed country-of-origin approach for broadcasters’ rights clearance in respect of simulcasting, catch-up and similar services as this may negatively impact financing models, the contractual freedom of rights holders and service providers, and ultimately consumer choice.
Any new legislation should avoid double-paying, for redistributing content to its users (e.g., via licences).
Should online service providers have to monitor and address 'illegal content' or the unlawful use of copyrighted content?
Who will be in the best position to make a reliable decision on what constitutes ‘illegal content’?
How can access to content in the digital age be guaranteed and how can the clearance of rights be facilitated in a way that balances the interests of all stakeholders?
REGULATION (EU) 2017/1128 of 14 June 2017 on Cross-border Portability of Online Content Services in the Internal Market
European Commission Modernisation of EU Copyright Rules website
European Commission Recommendation on Measures to Effectively Tackle Illegal Content Online European Commission Communication on Tackling Illegal Content Online — Towards an Enhanced Responsibility of Online Platforms
The mobile ecosystem has been a major driver of economic progress and welfare globally. Countries around the world continue to benefit from the improvements in productivity and efficiency brought about by the increased take-up of mobile products and services. As a result, GSMA Intelligence predicts mobile will generate five per cent of global GDP by 2022, equating to $4.6 trillion of economic value.
Without the immense efforts of the mobile operator community, many of the adopted technologies in 2G, 3G and 4G would not have been successfully developed, implemented or adopted on a mass scale.
At no point in history has telecommunications technology had a greater impact on peoples’ lives than now. The public has become heavily reliant on mobile telecommunications technology and the mobile operators’ abilities to deliver such services. Mobile telecommunications services provided by the operator community have become fundamental to everyday existence.
However, in the past few years, we have seen radical changes in the licensing of telecommunications technology (i.e., the prime use of patent portfolios in telecommunications). Initially patents were used to preserve a company’s ‘Freedom to Operate’ (i.e., its ability to bring its products to market by seeking large portfolio cross-licences). Increasingly, patents have become tradable and income-generating assets (via the ‘Secondary Patent Market’), capable of being asserted against start-ups, small and large companies, and, in some specific cases, to stifle competition.
Now that patents have become tradable and income-generating asset, can they still be looked upon as a tool to support and promote innovation?
Are Patent Assertion Entities (PAEs) having a negative effect on competition?
GSMA Report: The Rise of ‘Predatory Patent Practices’: A Major Escalation in Patent Assertion Entities Activity — A Telecommunications Operators’ Perspective (2017)
The Secondary Patent Market has greatly encouraged the rise in non-innovating, non-practising, patent monetisation and licensing or enforcement entities, known as PAEs. Usually, PAEs are purchasing patents (rather than developing and licensing technology) to be asserted against manufacturers and operators already using the technology.
There are a number of reasons mobile operators’ networks have become a premium target for so-called patent trolls in Europe, America and Asia. These include:
- The complexity of mobile operators’ networks.
- The scale of investments needed to build them.
- The level of revenues they generate.
- The reliance of these networks on technology based on standards.
The multiple costs associated with PAEs’ litigation and threats of injunction (as leverage in demands for disproportionately high licensing fees) have a detrimental effect on mobile network operators’ businesses, as well as mobile telecommunications innovation and standardisation.
Increasing PAE litigations and adversarial/ litigious licensing negotiations highlight the requirement for greater clarity in relation to the licensing of standard-essential technology. These efforts should focus on:
- The public’s heavy reliance on mobile telecommunications technology and the mobile operators’ abilities to deliver such services.
- That fact that disruption to these services, even in part, will have a severely negative effect on people's lives.
- The importance of maintaining the integrity of mobile telecommunication services and ensuring continuous investment and adoption of new technologies in the telecommunications market.
The need to incorporate appropriate rules and regulations into the relevant frameworks governing the seeking and granting of injunctions in predatory patent assertion cases (in order to allow the judiciary to consider the above points).
International mobile roaming (IMR) allows people to continue to use their mobile device to make and receive voice calls, send text messages and email, and use the internet while abroad.
Telecoms regulators and policymakers have raised concerns about the level of IMR prices and the lack of price transparency, which can cause consumer bill shock.
In December 2012, during the revision by the International Telecommunication Union (ITU) of the International Telecommunications Regulations (ITRs), several governments requested that the revised treaty include provisions on transparency and price regulation for mobile roaming. However, on balance, ITU member states concluded that roaming prices should be determined through competition rather than regulation, and text was included in the treaty to reflect this approach.
In the European Union, roaming regulation has been in place since 2007. From mid-June 2017, ’Roam-Like-At-Home’ has been introduced in the EU. When offering roaming, mobile operators in a given EU country must include ’Roam-Like-At-Home’ by default in contracts. Travellers can call, text and surf on their mobile devices when abroad in the EU for no extra charge on top of the price they pay at home. Operators can implement ‘fair use' policies to prevent the abuse of regulated roaming services.
Bill shock and certain high roaming prices have also attracted the attention of international institutions such as the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organisation (WTO). Additionally, regional and bilateral regulatory measures are either in place or being considered in many jurisdictions.
Some policymakers believe IMR prices are too high. Is regulatory intervention the right way to address this?
What measures can be taken to address concerns about price transparency, bill shock and price levels?
What other factors affecting roaming prices do policymakers need to consider?
IMR is a valuable service delivered in a competitive marketplace. Price regulation is not appropriate, as the market is delivering many new solutions.
The mobile industry advocates a three-phased strategy to address concerns about mobile roaming prices:
Transparency. In June 2012, the GSMA launched the Mobile Data Roaming Transparency Scheme, a voluntary commitment by mobile operators to give consumers greater visibility of roaming charges and usage of mobile data services when abroad.
Removal of structural barriers. Governments and regulators should eliminate structural barriers that increase costs and cause price differences between countries. These include double taxation, international gateway monopolies and fraud, all of which should be removed before any form of IMR price regulation is considered.
Price regulation. Governments and regulators should only consider price regulation as a last resort, after transparency measures and innovative IMR pricing have failed to address consumer complaints, and after structural barriers have been removed. The costs and benefits of regulation must be carefully assessed, taking into account unique economic factors such as national variances in income, GDP, inflation, exchange rates, mobile penetration rates and the percentage of the population that travels internationally, as well as incidence of international travel to neighbouring countries, all of which have an impact on IMR prices.
The mobile industry is a highly competitive and maturing industry, and one of the most dynamic sectors globally. In the past decade, competition between mobile operators has yielded rapid innovation, lower prices and a wide choice of packages and services for consumers. Imposing roaming regulation on mobile operators not only reduces revenue and increases costs, but it deters investment.
Mobile termination rates (MTRs) refer to the fees charged by operators to connect a phone call that originates from a different network.
The setting of regulated MTRs continues to be the focus of regulatory attention in both developed and developing countries, and many different approaches have been developed for the calculation of appropriate termination charges.
Regulators have generally concluded that the provision of call termination services on an individual mobile network is, in effect, a monopoly. Therefore, with each operator enjoying significant market power, regulators have developed various regulations, most notably the requirement to set cost-oriented prices for call termination.
How should the appropriate, regulated rate for call termination be calculated?
Is the drive towards ever-lower mobile termination rates, especially in Europe, a productive and appropriate activity for regulators?
Once termination rates have fallen below a certain threshold, is continued regulation productive?
What is the long-term role of regulated termination rates in an all-IP environment?
Regulated mobile termination rates should accurately reflect the costs of providing termination services.
Beyond a certain point, evidence suggests that a focus on continued reductions in MTRs is not beneficial.
The setting of regulated MTRs is complex and requires a detailed cost analysis as well as a careful consideration of its impact on consumer prices and, more broadly, on competition.
MTRs are wholesale rates, regulated in many countries, where a schedule of annual rate changes has been established and factored into mobile network operators’ business models. Unsignaled, unanticipated alterations to these rates have a negative impact on investor confidence.
The GSMA believes the setting of MTRs is best done at a national level, where local market differences can be properly reflected in the cost analysis, therefore extraterritorial intervention is not appropriate.
Vodafone Report: The Impact of Recent Cuts in Mobile Termination Rates Across Europe
GSMA Report: The Setting of Mobile Termination Rates
GSMA Report: Comparison of Fixed and Mobile Cost Structure
Vodafone Report: Regulating Mobile Call Termination
Intervening in a competitive market is far more complex and challenging than the traditional utility regulation of the kind normally applied to monopolies in gas, electricity and fixed-line telecommunications. With mobile, every action is more finely calibrated. The benefits of intervention are more ambiguous and the error costs larger.
— Stewart White, former Group Public Policy Director, Vodafone
While there is no single definition of net neutrality, it is often used to refer to issues concerning the optimisation of traffic over networks. Net neutrality advocates assert that it is necessary to legislate that all traffic carried over a network be treated in the same way. Others contend that flexibility to offer different service levels for different applications enhances the user experience.
Where this flexibility exists, mobile network operators are able to offer a bespoke, managed service to providers of new connected products, such as autonomous cars, which could not exist without constant, high-integrity connectivity. Operators can also enter into commercial arrangements with content and application providers that want to attract users by offering free access — for example, by zero-rating their content — so mobile subscribers are not ‘charged’ for the data usage. These kinds of arrangements enable product and service innovation, deliver added value to consumers and generate new revenue for network operators, which face constant pressure to enhance, extend and upgrade their networks.
Mobile operators face unique operational and technical challenges in providing fast, reliable internet access to their customers, due to the shared use of network resources and the limited availability of spectrum.
Unlike fixed broadband networks, where a known number of subscribers share capacity in a given area, the capacity demand at any given cell site is much more variable, as the number and mix of subscribers constantly changes, often unpredictably. The available bandwidth can also fluctuate due to variations in radio frequency signal strength and quality, which can be affected by weather, traffic, speed and the presence of interfering devices such as wireless microphones.
Not all traffic makes equal demands of a network; for example, voice traffic is time-sensitive while video streaming typically requires large amounts of bandwidth. Networks need to be able to apply network management techniques to ensure each traffic type is accommodated and to support innovations with 5G and the Internet of Things. The principle of the open internet and allowing network operators to offer a variety of service options to consumers are not mutually exclusive. As the net neutrality debate has evolved, policymakers have come to accept that network management plays an important role in service quality.
To meet the varying needs of consumers, mobile network operators need the ability to actively manage network traffic.
It is important to maintain an open internet. To ensure it remains open and functional, mobile operators need the flexibility to differentiate between different types of traffic.
Regulation that affects network operators’ handling of mobile traffic is not required. Any regulation that limits their flexibility to manage the end-to-end quality of service and provide consumers with a satisfactory experience is inherently counterproductive.
In considering the issue, regulators should recognise the differences between fixed and mobile networks, including technology differences and the impact of radio frequency characteristics.
Consumers should have the ability to choose between competing service providers on the basis of being able to compare performance differences in a transparent way.
Mobile operators compete along many dimensions, such as pricing of service packages and devices, different calling and data plans, innovative applications and features, and network quality and coverage. The high degree of competition in the mobile market provides ample incentives to ensure customers enjoy the benefits of an open internet.
Should networks be able to manage traffic and prioritise one traffic type or application over another?
For mobile networks, which have finite capacity, should fixed-line rules apply?
In some cases, net neutrality rules are being considered in anticipation of a problem that has yet to materialise. Is this an appropriate approach to regulation?
Just as content providers offer differentiated services such as standard and premium content for different prices, mobile network operators will offer different bandwidth products to meet different consumer needs. Customers are benefitting from these tailored solutions; only those who want to use premium services will have to pay the associated costs.
Traffic Management Is an Efficient and Necessary Tool
Traffic growth, the deployment of next-generation technologies and the emergence of new types of services are presenting mobile network operators with a huge challenge: how to manage different types of traffic over a shared network pipe, while providing subscribers with a satisfactory quality of service that takes into account different consumer needs and service attributes.
With finite capacity, mobile networks experience congestion. Mobile operators use traffic management techniques to efficiently manage network resources, including spectrum, and to support multiple users and services on their networks. Congestion management is essential to prevent the network from failing during traffic peaks, and to ensure access to essential services.
Traffic management techniques are applied at different layers of the network, including admission control, packet scheduling and load management. In addition, operators need to cater to different consumer preferences, so customers can access the services they demand. Traffic management is therefore an efficient and necessary tool for operators to manage the flow of traffic over their network and provide fair outcomes for all consumers.
Mobile operators need the flexibility to experiment and establish new business models that align investment incentives with technological and market developments, creating additional value for their customers. As the operational and business models of networks evolve, a whole host of innovative services and business opportunities will emerge.
The current competitive market is delivering end-user choice, innovation and value for money for consumers and no further regulatory intervention related to provision of IP-based services is necessary. The commercial, operational and technological environment in which these services are offered is continuing to develop, and any intervention is likely to impact the development of these services in a competitive context.
Traffic management techniques are necessary and appropriate in a variety of operational and commercial circumstances:
Protecting the network and customers from external threats, such as malware and denial-of-service attacks.
Applying content filters that limit access to age-inappropriate content.
Taking the appropriate action when a customer exceeds the contractual data-usage allowance, or offering charging models that allow customers to choose the service or application they want.
Routing emergency call services.
Prioritising real-time services, such as voice calls, as well as taking into account the time sensitivities of services such as remote alarm monitoring.
The combination of mobile broadband access, smartphones and internet technology has led to the emergence of a new breed of consumer mobile voice and messaging communication services provided by internet-based companies, often referred to as over-the-top service providers (OTTs). These services are providing consumers with additional choices in how they communicate with each other.
OTT communications services are typically offered in competition with, and as direct substitutes to, the circuit-switched voice and SMS services provided by mobile operators, but they are typically not properly considered in the market analysis carried out by regulators.
Due to the global nature of the internet, and because they have not been considered as equivalent to traditional communication services, many OTT communications services sit outside the scope of sector-specific national or regional regulatory and fiscal obligations (e.g., e-privacy, legal interception, emergency calls, universal service contribution, national specific taxes, consumer rights and quality of service) that have been put in place to protect consumers and ensure that all providers make a fair and proportionate contribution to local economic growth through investment, employment and tax.
As OTT communications services become more and more popular, they increasingly render a number of regulations designed to address alleged network bottlenecks, such as termination and roaming, unjustified.
Should OTT services be subject to the same regulatory obligations that apply to calls and messages carried over the PSTN?
Does the fact that OTT players currently sit outside the scope of sector-specific regulations provide them with a competitive advantage over traditional telecoms providers?
The mobile industry supports and promotes fair competition as the best way to stimulate innovation and investment for the benefit of consumers and to spur economic growth, and believes both objectives will be best served by the principle of ‘same rules for the same service’. The growth in competition between different types of service provider calls for a move towards shared rules that are lighter touch than those applicable in less competitive environments.
The principle of same rules for the same service maintains that where regulation is considered to be necessary, all equivalent consumer voice and messaging services should be subject to the same regulatory and fiscal obligations, regardless of the underlying technology, geographic origin or whether they are delivered by a mobile operator or OTT service provider. This will help to improve consumer confidence and trust in using internet-based services by ensuring a consistent approach to issues such as transparency, quality of service and data privacy. Consistent application of regulatory obligations will also support legitimate law enforcement and national security activities.
While the same rules should apply to the same services, these are not necessarily the rules that apply today to telecommunications services. There is a need for a forward-looking regulatory framework for communications services that is fit for purpose for a digital world. This framework must be driven by clear policy requirements around consumer protection, innovation, investment and competition.
By adopting a policy framework built around same rules for the same service, and properly recognising the competitive constraint imposed on mobile network operators by OTTs currently playing by different rules, national governments and regulators will be enabling an environment of fair and sustainable competition that promotes the best interests of consumers and fosters economic growth.
Everybody knows today that with telecom service providers and OTT [players], there are unbalanced relations and we have to find a better balance.
— Andrus Ansip, Vice-President for the Digital Single Market, European Commission, 2015
Many mobile network operators share infrastructure on commercial terms to reduce costs, avoid unnecessary duplication and to expand coverage cost-effectively in rural areas.
The most commonly shared infrastructure is passive infrastructure, which may include: land, rights of way, ducts, trenches, towers, masts, dark fibre and power supplies, all of which support the active network components required for the transmission and reception of signals.
Infrastructure sharing is arranged through bilateral agreements between mobile network operators to share the specific towers, strategic sharing alliances, the formation of joint infrastructure companies between mobile operators or via independent companies providing towers and other passive infrastructure.
Increasingly, independent tower companies provide tower-sharing facilities to network operators. Several countries have established regulatory frameworks based on registration that encourage passive infrastructure sharing arrangements and provide regulatory clarity for network operators and independent passive infrastructure providers. While regulatory authorities in almost all countries are supportive of passive infrastructure sharing arrangements, a lack of regulatory clarity exists in some countries, particularly in relation to independent tower companies.
What benefits do independent tower companies offer to mobile operators?
Should passive infrastructure sharing ever be mandated by the regulatory authority?
What steps should regulators take to provide clarity to tower companies and mobile operators?
Licensed network operators should be able to share passive infrastructure with other licensed network operators and outsource passive infrastructure supply to passive infrastructure providers without seeking regulatory approval.
Sharing passive infrastructure on commercial terms enables operators to reduce capital and operating expenditure without affecting investment incentives or their ability to differentiate and innovate.
Infrastructure sharing provides a basis for industry to expand coverage cost-effectively and rapidly, while retaining competitive incentives. Regulation of passive infrastructure sharing should be permissive, but should not mandate such arrangements.
In markets with licensing frameworks that do not already provide for the operation of independent tower companies, regulatory authorities (or the responsible government department) should either permit independent passive infrastructure companies to operate without sector-specific authorisation or establish a registration scheme for such companies. The scheme should be a simple authorisation that provides for oversight of planning-related matters, while making a clear distinction with the licensing framework applicable to electronic communications network and service providers.
Registered providers should be permitted to construct and acquire passive infrastructure that is open to sharing with network operators, provide (e.g., sell or lease) passive infrastructure elements to licensed operators, and supply ancillary services and facilities essential to the provision of passive infrastructure.
Mobile network operators should be permitted to make use of infrastructure from passive infrastructure companies through commercial agreements without explicit regulatory approval. Infrastructure sharing agreements should be governed under commercial law and, as such, be subject to assessment under general competition law.
Public authorities should provide licensed operators and passive infrastructure providers with access to public property and rights of way on reasonable terms and conditions. Governments, seeking to support national infrastructure development, should ensure swift approval for building passive infrastructure, and environmental restrictions should reflect globally accepted standards.
Taxation and fees imposed on independent tower or passive infrastructure companies should not act as a barrier to the evolution of this industry, which makes possible more efficient, lower-cost forms of infrastructure supply.
A public-private partnership (PPP) is a legal arrangement between two or more private and public sector parties with the aim of delivering a service via co-investment. PPPs are common in infrastructure sectors, such as telecoms, where upfront investments are high and payback periods long.
PPPs can be an interesting mechanism to facilitate co-investment from different stakeholders and support the extension of network coverage in areas that otherwise represent risky investments with limited commercial potential. Governments see PPPs as a way to drive investment in uncovered areas and leverage the expertise of the private sector. In turn, private companies benefit from greater certainty of a viable business model, thanks to the investment and guarantees provided by the public partner. Large scale PPPs often attract the interest of multilaterals organisation, which see the economy-wide potential benefits of such projects and are willing co-invest to support the private sector and governments that lack the financial means to get these projects of the ground on their own1.
Within the telecoms sector, PPPs are found across all network segments:
- First mile: submarine cables, satellite hubs, Internet Exchange Points (IXPs).
- Medium mile: fibre backbone and backhaul.
- Last mile: radio access networks and wired local loops.
1An illustrative example is the ACE submarine cable along the coast of West Africa, one of the largest PPP investments in the ICT sector. The ACE submarine cable initiated operations in 2012 and now connects 23 countries, some of them for the first time, to international fibre infrastructure. It is enabling increases in speeds and decreases in prices for internet access. The World Bank financed part of the ACE submarine cable. Sources: World Bank, Private Participation in Infrastructure Database, 2018; World Bank, Implementation completion and results report, 2018
Are PPPs an effective way of accelerating the deployment of infrastructure to drive digital inclusion?
What alternatives do governments have to use their resources to catalyse investment?
What are the characteristics of a PPP that maximizes the positive impacts while minimizing the negative unwanted consequences?
PPPs can be an effective mechanism to leverage public and private synergies to deploy and operate network infrastructure in areas that otherwise do not have sufficient economic potential to attract private investment. In these areas, leveraging public and private resources may allow for: 1) deploying networks that deliver communication services directly to customers2, or 2) providing the enabling infrastructure required to deploy commercially viable networks3.
Governments should only consider PPPs for the most remote areas. Engaging mobile network operators (MNOs) and taking into account their upcoming rollout plans should be part of the scoping phase of the PPP4 to avoid the crowding out of private investment. This is essential to prevent public investment being wasted in areas where MNOs could have deployed networks using private funds. Service delivery to the end user and customer engagement should be left to the private sector to allow it to provide the full suite of products and services that is essential to drive digital inclusion.
Governments should only consider PPPs after exhausting all other enabling policy and regulatory measures to maximise coverage through market-driven mechanisms. Creating an investment friendly policy framework should be the first step when pursuing a coverage expansion strategy5. As a second step, governments should consider giving MNOs the same preferential conditions that PPPs often enjoy, such as subsidies, no-cost access to public infrastructure, or alleviated quality of service obligations. Making these preferential conditions available to MNOs may suffice to create a favourable business case in remote areas. Only in areas where these measures have failed, should governments consider deploying a PPP.
Finally, when implementing a PPP, governments should avoid the Single Wholesale Network (SWN) approach. SWNs are PPPs that do not observe the best practices highlighted above. SWNs have wide geographic scope that overlaps with commercial networks and monopolises important resources such as spectrum. SWNs create an uneven playing field, make an inefficient use of valuable public resources, and face multiple implementation challenges (see section titled Single Wholesale Networks for more details on SWNs).
 “Todo Chile Communicado” is a typical example for the first case, where a PPP was created to bring mobile connectivity to 1474 rural communities in Chile.
Source: GSMA, Closing the coverage gap, 2016
 The ACE submarine cable is a good example of infrastructure that enabled faster and cheaper internet connectivity across 22 countries in Africa.
 European Commission, The broadband State aid rules explained, 2013
 See GSMA, Unlocking rural Coverage: Enablers for commercially sustainable mobile expansion, 2016
The quality of a mobile data service is characterised by a small number of important parameters, notably speed, packet loss, delay and jitter. It is affected by factors such as mobile signal strength, network load, and user device and application design.
Mobile network operators must manage changing traffic patterns and congestion, and these normal fluctuations result in customers experiencing a varying quality of service.
Connection throughput is seen by some regulatory authorities as an important attribute of service quality. However, it is also the most difficult to define and communicate to mobile service users. Mobile throughput can vary dramatically over time, and throughput is not the only product attribute that influences consumer choice.
Is it necessary for regulators to set specific targets for network quality of service in competitive markets?
Is it possible to guarantee minimum quality levels in mobile networks, which vary over time according to the volume of traffic being carried and the specific, local signal-propagation conditions?
Which regulatory approach will protect the interests of mobile service customers while not distorting the market?
Competitive markets with minimal regulatory intervention are best able to deliver the quality of mobile service customers expect. Regulation that sets a minimum quality of service is disproportionate and unnecessary.
The quality of service experienced by mobile consumers is affected by many factors, some of which are beyond the control of operators, such as the device type, application and propagation environment. Defining specific quality targets is neither proportionate nor practical.
Mobile networks are technically different from fixed networks; they make use of shared resources to a greater extent and are more traffic-sensitive.
Mobile operators need to deal with continually changing traffic patterns and congestion, within the limits imposed by finite network capacity, where one user’s traffic can have a significant effect on overall network performance.
The commercial, operational and technological environment in which mobile services are offered is continuing to develop. Mobile operators must have the freedom to manage and prioritise traffic on their networks.
Regulation which rigidly defines a particular service quality level is unnecessary and is likely to impact the development of these services.
Competitive markets with differentiated commercial offers and information that allows consumers to make an informed choice deliver the best outcomes. If regulatory authorities are concerned about quality of service, they should engage in dialogue with the industry to find solutions that strike the right balance on transparency of quality of service.
A Network of Interconnections
Offering a dependable quality of service is a priority for mobile network operators, as it allows them to differentiate the internet access service they provide from that of their competitors and meet customer expectations. However, mobile operators have little control over many of the parameters that can affect their subscribers’ experience.
- Factors beyond an operator's control include:
- The type of device and application being used.
- The changing usage patterns in a mobile network cell at different times of day.
- The movements and activities of mobile users, such as travel, events or accidents.
- Obstacles and distance between the terminal and antennae.
- The weather, especially rain.
In addition, the quality of internet access that users experience depends on the quality provided by each of the data paths followed. The internet service provider (ISP) only has control of the quality of service in its section of the network.
Factors affecting mobile quality of service
For these reasons, regulation concerning the quality of mobile internet service can be counterproductive. Regulation that does not consider the nature of mobile networks and the competitive workings of these services can be an obstacle to their development, widening the digital divide and promoting an inefficient use of the capital invested in networks.
Policymakers in some countries are considering establishing single wholesale networks (SWNs) or wholesale open-access networks (WOAN) instead of relying on competing mobile networks to deliver mobile broadband services in their country. Most of these proposals specify at least partial network ownership and financing by the government.
While there are variations in the SWN proposals discussed by different governments, SWNs can be generally defined as government-initiated network monopolies that compel mobile operators and others to rely on wholesale services provided by the SWN as they serve and compete for retail customers.
SWNs would represent a radical departure from the approach to mobile service provision that has been favoured by policymakers for the past 30 years — namely, to license a limited number of competing mobile network operators, which are usually under private ownership.
In 2000, there were almost as many countries served by a single mobile network as there were countries served by multiple competing networks. Today, however, only about 30 markets are served by a single mobile network.1 Many of them are small islands with populations in the thousands, and, in total, they represent less than two per cent of the world’s population. During the same period, network competition has produced unprecedented growth and innovation in mobile services, particularly in developing countries. The number of unique mobile subscribers has now surpassed five billion.2 This success has fuelled innovation and helped increase speeds, improved network coverage and cut costs.
Supporters of SWNs argue they can address some concerns better than the traditional model of network competition in some markets. These concerns generally include inadequate or lack of coverage in rural areas, inefficient use of radio spectrum and fears that the private sector may lack incentives to maximise coverage or investment.
SWNs and WOANs are likely to lead to worse outcomes for consumers than network competition.
Some supporters claim they will deliver greater network coverage than network competition can. However, this claim often reflects the existence of public subsidies and other forms of favourable support for the SWN, which are not available to competing network operators, making it an unfair comparison. Commercial networks can deliver coverage even in areas where duplicate networks are uneconomic. This can be achieved in many ways, including through the implementation of voluntary network sharing among operators.
The benefits of network competition go beyond coverage. Innovation is a key driver of consumer value at the national level, and this occurs in networks as well as services and devices. While mobile technologies are typically developed at the international level, the speed at which they become available to consumers depends on national policies and market structures. In practice, government-mandated wholesale networks have been much slower to expand coverage, perform upgrades and to embrace new technologies.
Rather than use public funds to create a separate network to deliver coverage in areas into which commercial networks have not yet found it viable to cover, an alternative approach is to consider how public funds might be used to subsidise a commercial network provider to expand coverage to reach these areas.
Are SWNs likely to increase the quality and reach of next-generation mobile broadband, compared with the existing approach of network competition?
What alternative policies should be considered before adopting a monopoly wholesale network model?
Risks Associated with Single Wholesale Networks
Governments often have ambitious goals when they mandate the creation of a single wholesale network (SWN) or a wholesale open-access network (WOAN) instead of relying upon the market, especially competing mobile networks, to deliver mobile broadband services in their country. In seeking support for their regulatory decisions, they promise citizens better coverage, more competition, and as a result, more affordable prices.
However, research shows that of the five countries seriously considering this option, only Rwanda has actually rolled out a network (as of 2017). It also appears that Rwanda’s network hasn’t lived up to expectations. The lessons from these countries highlight the real challenges of SWNs and WOANs and show that these difficulties must be taken very seriously by other countries contemplating this route.
Building good mobile networks is hard and maintaining and upgrading them is also very difficult. However, these are all things the mobile industry has proven to be very good at — assuming the right conditions are in place. Governments would better serve their citizens by enabling and supporting commercial network deployments rather than focusing their energies on building and promoting networks.
The challenges many governments have faced in recent years bear this out. For example, the public-private partnership project in Rwanda set ambitious goals but has faced a number of difficulties in meeting them. The current progress suggests the original coverage target of 95 per cent won’t be achieved by the end of 2017. The take-up also appears to be limited so far, an important contributor being the cost of the services.
In the other four countries, efforts to roll out networks have either been severely delayed or abandoned altogether. For example, Mexico’s roll-out was intended to begin in 2014 and be operational by 2018, but delays and court challenges have pushed that timeline back by several years. In May 2015, the government announced the investment target had been reduced from $10 billion to $7 billion. It also estimated that the number of cell towers built for the network will be closer to 12,000 instead of 20,000. As the last bidder standing, in 2016 the Altán consortium was granted access to 90 MHz of very valuable contiguous spectrum in the 700 MHz band to build an LTE-based wholesale network.
The push in Kenya stalled due to a complicated negotiation process with several stakeholders, and the Russian initiative failed as carriers were unable to reach a satisfactory agreement. As of late-2017, South Africa is still mulling its next step. A white paper published in October 2016 proposed the creation of a WOAN in South Africa, including significant changes to access policies and spectrum licensing.
Improving rural coverage is something the mobile industry works on tirelessly. Instead of going down the wholesale monopoly route, the GSMA recommends governments conduct a comprehensive consultation with all stakeholders to address coverage gaps.
While it is often a fiercely competitive industry, mobile operators are not shying away from co-operation as a means of expanding coverage by signing infrastructure sharing agreements on a voluntary basis. They are also exploring new business models with third parties to share the cost and investment risks associated with building and operating networks in rural and remote locations. In the end, the connectivity gap can only be overcome through close collaboration between the telecoms industry and governments. The basic building blocks that can help make this happen are:
- Cost-effective access to low-frequency spectrum.
- Support for flexible use in spectrum (e.g., refarming and technology neutral licenses).
- Support for all forms of voluntary infrastructure sharing.
- Elimination of sector-specific taxation on operators, vendors and consumers.
- Non-discriminatory access to public infrastructure.
- Support for streamlined planning and administrative processes.
- Relaxation of quality of service requirements.
- Context appropriate competition policy, especially concerning market structure.
- Support for multi-sided business models such as zero rating and sponsored data.
The mobile telecommunications sector has a positive impact on economic and social development, creating jobs, increasing productivity and improving the lives of citizens.
Sector-specific taxes are levied on mobile consumers and operators in many countries. These include special communication taxes, such as excise duties on mobile handsets and airtime usage, and revenue-share levies on mobile operators. These taxes contribute to a high tax burden on the mobile sector that exceeds the burden on other sectors.
Some countries have applied a surcharge on international inbound call termination (SIIT), which can have the effect of increasing international call prices and acting as a tax on other countries’ citizens.
There is an increasingly broad consensus around the world that for tax systems to be effective they should follow internationally recognised best practice principles.
Do sector-specific taxes deliver short-term government income at the expense of longer-term additional revenues that could be accrued through increased economic growth?
Governments should reduce or remove mobile-specific taxes because the resulting social impact and long-term positive impact on gross domestic product, and hence tax revenues, will outweigh any short-term reduction in contributions to governments’ budgets.
- Taxes should align with internationally recognised principles of effective tax systems. In particular:
- Taxes should be broad-based — different taxes have different economic properties and, in general, broad-based consumption taxes are less distortionary than taxation on income or profits.
- Taxes should account for sector and product externalities.
- The tax and regulatory system should be simple, easily understandable and enforceable.
- Dynamic incentives for the operators should be unaffected — taxation should not disincentivise efficient investment or competition in the information and communication technology (ICT) sector.
- Taxes should be equitable and the burden of taxation should not fall disproportionately on the lower-income members of society.
Discriminatory, sector-specific taxes deter the take-up of mobile services and can slow the adoption of ICT. Lowering such taxes benefits consumers and businesses and boosts socio-economic development.
Governments often levy special taxes to finance spending in sectors where private investment is lacking, however this approach is inefficient. Fiscal policy that applies a special tax to the telecommunications sector causes distortions that deter private spending and, in the end, diminish welfare by preventing the realisation of the positive spill-overs that mobile provides throughout the economy.
Emerging economies need to align their approach to taxing mobile broadband with national ICT objectives. If broadband connectivity is a key social and economic objective, taxes must not create an obstacle to investment in broadband networks or adoption and usage of mobile broadband by consumers. Lowering the taxation burden on the sector increases mobile take-up and use, creating a multiplier effect in the wider economy.
Taxing international calls negatively impacts consumers, businesses and citizens abroad, damaging a country’s competitiveness.
Taxes and Fees on Mobile Consumers and Operators
Mobile operators have repeatedly raised concerns that their customers are facing an undue burden from taxation, compared to other goods and services. The taxation and fees burden on the mobile sector consists of a wide range of charges. On the consumer side, this includes taxes on handset purchases and connection activation, as well as calls, messages and data access. High taxation has a negative impact on the affordability of mobile services and can also have wider negative effects on productivity and economic growth.
In addition to these consumer-facing charges, mobile operators also face a range of other charges including licensing fees, corporation tax, revenue charges and many more. Taxes and fees that specifically target the mobile sector affect an operator's incentive to invest in network roll-out. The extent to which these charges fall on operators or consumers depends on individual market conditions. Some taxes may be absorbed by operators in the form of lower profits, while others may be passed through to consumers as higher prices, or a combination of the two.
Research by Deloitte for the GSMA revealed that:
- Mobile operators paid some $32 billion in 2015 across 27 nations surveyed. Sector-specific taxes were around $8 billion of this. Sector-specific excise duties were present in 81 per cent of surveyed nations, as were spectrum fees.
- Mobile-only tax payments were 30.5 per cent of operators’ revenues, excluding non-recurring payments such as spectrum auction fees.
In nine countries, including Brazil, Chad and DRC, taxes account for 40 per cent or more of sector revenue.
Among the countries surveyed, it is only in South Africa and Italy that the sector’s tax contribution as a proportion of the whole tax take closely match its proportion of the whole economy. In four nations, the sector pays more than double, in three others more than triple and in three others more than four times.
Taxes and fees on mobile services affect the affordability of access and usage. These taxes and fees may have a disproportionate impact on lower-income consumers, as they result in mobile services accounting for a larger share of the annual income of poorer households. For the Democratic Republic of Congo, the most extreme case, these fees represent 26 per cent of the gross national income of the bottom 20 per cent of income earners.
Eight Steps Governments Can Take to Rebalance Taxation and Promote Digital Inclusion
1. Phased reductions of sector-specific taxes and fees can represent an effective way for governments to signal their support for boosting the connectivity agenda.
2. To enable more users to gain access to mobile services, governments should choose to lower the affordability barrier caused in part by so-called ‘luxury’ taxes on devices and connections.
3. Uncertainty over future taxation reduces investment because the risk of future tax rises is priced into investment decisions. Governments should seek to limit unpredictable tax and fee changes and streamline how tax and fees are levied.
4. The spectrum award approach needs to balance the relationship between ex-ante and ex-post fees in a transparent way, to ensure operators do not pay twice for access to the same resource.
5. Eliminating import duties for mobile network equipment and other local taxes levied directly on mobile sites has the potential to increase network investment.
6. Governments should avoid disproportionate taxation of services such as mobile money, as it puts a wide range of positive externalities at risk.
7. Removal of surtaxes on international incoming calls can ease barriers to regional and international trade by lowering the cost of international communication. It can also improve affordability, enabling more consumers to realise the benefits of mobile services.
8. Governments should apply fees on profits rather than revenues, so as not to discourage investment and innovation. These fees require the same payment from an operator regardless of whether it retains its profit or uses it to invest in new infrastructure and services.
Universal service – characterised by a telecommunications service that is available, accessible and affordable – is a policy goal of many governments. This goal is well aligned with the mobile industry’s purpose to ‘connect everyone and everything to a better future’.
A number of countries have established universal service funds (USFs) to extend coverage in areas that are not commercially viable for the private sector. USFs are typically funded by levies on telecommunication sector revenues and the funds are disbursed through direct subsidies or via competitive bidding. USFs can also provide non-financial support to connectivity initiatives and enable operators to directly play a part (see ‘pay or play’ approach).
Despite these goals, USFs often perform poorly and countries with USFs typically have not experienced better results in internet growth than countries without such funds1. Studies by the A4AI, GSMA and the ITU show that disbursement rates remain very low across the world and that many funds have been unable to distribute any of the levies collected.
When administered ineffectively, USFs can be counterproductive in that, by effectively taxing communications customers, they actually serve to raise the affordability barrier. In other cases, the lack of transparency and the inability of USFs to disburse funds in a timely manner has created distrust between governments and the private sector.
What policies and processes need to be in place to guarantee the transparent and efficient use of USF financial resources?
What alternative strategies can governments put in place to enable the private sector to drive greater connectivity?
How relevant are USFs in mature markets?
Should the contribution base for USFs be broadened beyond mobile network operators?
How can unspent USF financial resources be unlocked to drive digital inclusion?
Liberalised markets and private-sector investment have delivered telecommunication services to the majority of the world’s population, a trend that is expected to continue2.
Reducing regulatory and cost barriers is critical to increase the reach of mobile networks and achieve greater connectivity. For example, governments can help by removing sector-specific taxes, stimulating demand and developing the supporting infrastructure.
USFs should only be considered once all policy and regulatory measures to maximise coverage through market-driven mechanisms have been exhausted and after a careful assessment of alternative mechanisms, such as coverage obligations and reverse spectrum auctions.
In markets where they already exist, USFs should be targeted, time-bound and managed transparently. Alternative funding mechanisms should be considered to ensure a broad base of stakeholders contribute to USFs, beyond mobile network operators. The funds should be allocated in a competitive and technically neutral way, in consultation with the industry, with a view to target projects with the highest possible impact. Where appropriate, this could include projects to drive usage of telecommunications services, for example, through digital literacy campaigns and demand-stimulation measures focusing on women, people with disabilities and other underserved segments of the population.
In order to function correctly, USFs may refer to the following best practices:
- Establish clear targets to ensure effective and timely disbursement of funds;
- Undergo continuous evaluation, publish annual reporting and run regular independent audits of government administration of these programmes to increase transparency of fund financing, disbursements and operations;
- Be set up with solid, clear and transparently defined underlying legal frameworks that allow for service-flexibility and technology neutrality;
- Be based on an independent fund structure to avoid political interference;
- Be administered effectively to avoid excessively bureaucratic structures or insufficient oversight;
- Conduct a thorough analysis on the investment gaps as well as the impact of introducing levies on affordability and adoption to set USF levies at appropriate levels;
- Consider a ‘pay or play’ model where mobile operators can choose to either pay their financial contribution to the USF or to implement projects aligned with the fund’s goals;
- Consult mobile operators to ensure investments in greater coverage are targeted efficiently, include operational expenditure subsidies where necessary and avoid duplication of infrastructure;
- If efficient management of USFs cannot be achieved within a reasonable timeframe, a roadmap should be adopted to phase out USFs.
2According to GSMAi forecasts, mobile operators will invest around $480 billion worldwide between 2018 and 2020 in mobile capex. GSMA, Mobile Economy 2019