Business environment

Business environment

Mobile operators provide 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 the emergence of internet platforms and services.

In most countries, however, mobile operators are still subject to rules and obligations that 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 at regulations and revisions that better reflect today’s technologies and markets.

Resetting policy and regulation to drive the digital economy

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 social and economic outcomes. 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. By updating the regulatory framework, policymakers can ensure that government and industry are aligned and working to foster an inclusive digital society for all.

Figure 1 identifies four areas of policy action related to network investment, regulation, promoting the digital economy and demonstrating digital leadership.3

3 GSMA (2017), Embracing the Digital Revolution: Policies for Building the Digital Economy

Community networks

Background

Community networks are a ‘do-it- yourself’ approach to connectivity: local, community-owned (or community- managed) networks that address specific local connectivity needs. They are usually established in areas that are not commercially viable for mobile operators to cover and typically operate on a small scale, addressing discrete market failures. They can therefore be effective complements to connectivity efforts led by mobile operators.

These networks have been made possible by technological advances that have reduced barriers to network deployment and management and that have enabled non-operators to build and deploy mobile and internet connectivity solutions. Largely technology-neutral, these solutions are tailored to the needs of the community or local setting and can include the use of modular and simplified infrastructure, renewable energy, a variety of backhaul methods (including an ISP or Wi-Fi backbone, VSAT and WiMAX) and open connectivity standards. Community networks often use Wi-Fi technology in unlicensed spectra, 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. Since they offer a specific solution to geographical, commercial and logistical connectivity challenges that can often be unique, they are often context-specific and difficult to scale. Only a few community networks have established a lasting and financially sustainable business model.

Debate

What role can community networks play in a national connectivity approach?

How can mobile 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 operators?

Industry position

Community networks can complement the efforts of mobile operators to expand coverage because they are an opportunity to deliver the transformative benefitsof connectivity to locations that are not commercially viable. By doing so, they can drive the use of information and communication technology (ICT), increase digital skills, support local business development and increase uptake of digitally delivered public services within the communities they serve.

Community networks have limitations, however. They typically do not have the resources or expertise to sustain investment in new innovations or address risks as effectively as scaled commercial networks. Regulatory uncertainty or constraints can also limit the potential of community networks and hamper the roll-out of larger-scale commercial connectivity networks.

A level playing field is essential, and regulation should empower both community networks and mobile operators to drive connectivity and accelerate digital inclusion. The regulation and policies applied to community networks should not impair or discourage the deployment of larger-scale commercial network operations and put mobile operators at a disadvantage.

Where Wi-Fi cannot provide a suitable solution, voluntary spectrum sharing can be an interesting opportunity to open access to new spectra for community networks. However, careful planning is required, and it is essential that the chosen approach protects the needs of incumbents, supports the needs of new users and does not limit the evolution of the spectrum band.

Voluntary spectrum trading through secondary market transactions should be considered to enable spectrum access for community networks.Countries should have a regulatory framework that allows  mobile 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 through reduced coverage, slower rollouts and worse performance.

Resources

Wireless Networking in the Developing World, The WNDW Project, February 2013

Competition

Background

Mobile phones are the most widely adopted consumer technology in history. In large part, this success is due to competition in the mobile industrythat has driven innovation.

The digital economy and explosive growth in smartphone adoption have brought innovation and disruption to traditional  mobile communications services. These changes have also had an impact on existing policy frameworks and challenged competition policy.

Despite the influence of new market dynamics on the mobile sector, the industry is still subject to the contradictions of a legacy regulatory system. This has put services in competition with each other, such as voice services offered by mobile operators and internet players that are, so far, regulated differently.

These differences can be seen in how economic regulation and competition law 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. Combined with powerful network effects and the tendency for markets to tip in favour of dominant platforms, this can harm consumers, hinder competition and stifle innovation.

The ability of competition policy and enforcement to deal with issues arising in digital markets is, therefore, key to the competitive development of the entire digital economy.

Debate

How should markets be defined in the digital age?

How can traditional competition tools be applied in the digital age?

Are significant market power (SMP) access remedies still appropriate?

Industry Position

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-related ones.

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 obligations. This should be achieved through a combination of deregulation and increased use of horizontal legislation to replace industry-, technology- or service-specific rules.

Regulators and competition authorities must recognise the dynamic nature of competition in the digital age. Internet players adopt new and different business models to offer services to customers, such as advertising-supported services that rely on sophisticated web 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, those that adopt traditional business models that are better understood may find themselves subject to greater scrutiny.

Including these new types of competitors in market assessment reviews could reveal there is much more competition in communications services than regulatory and competition authorities currently recognise. It could also demonstrate the potential for regulatory policy goals to be achieved through competition law.

A basic principle of economic regulation is that regulation should not be imposed if competition law is sufficient to deal with the issues identified. Therefore, regulation of licensed providers could be lessened or may no longer be needed. Competition law itself can also  be improved and updated to tackle the issues arising in digital markets more effectively, as some authorities around the world are demonstrating.

Resources

GSMA Competition Policy website

The Data Value Chain, GSMA, June 2018

Competition Policy in the Digital Age, GSMA, October 2015

Efficient mobile market structures

Background

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, regular investments in network infrastructure and services to provide consumers and businesses with improved offerings. For example, while many operators continue to invest in their 4G networks, they are also investing in 5G network deployments.

The high level of competition in the mobile services market has caused the tariffs charged to mobile users to fall steadily and significantly over the past few years. At the same time, consumption of mobile services – and mobile data in particular – has grown steadily, with most users getting far more for their money.

To preserve competition, foster innovation and support the wider societal benefits of mobile connectivity, policymakers must ensure 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 have unintended consequences, including inefficient allocations of the spectrum and/or reduced incentives to invest. Since this ultimately produces poor outcomes for consumers, 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 societal benefits) arising from mobile mergers.

Debate

Can mergers between mobile operators bring significant consumer benefits in mobile markets and wider society?

Industry position

When assessing mobile mergers, policymakers should consider the full range of benefits of mergers, including price effects, innovation, investments and the use of spectrum over the short and long term.

Investment and quality of service

Competition authorities should consider placing greater emphasis on how mergers may affect an operator’s ability to invest. Growing demand for data services requiring ever-increasing bandwidth necessitates continuous investment in new capacity and technology.

Positive spill-over effects to the wider economy

Improvements to digital infrastructure support economic growth by increasing productivity across the economy.

Greater benefits than network sharing

Competition authorities have often argued that network sharing is a better alternative to mergers. While the pro-competitive nature of network-sharing agreements can only be assessed on a case-by-case basis, these agreements are not always feasible between merging parties because of an asymmetry of assets (such as spectrum holding) or different deployment strategies.

Unit Prices

There is no robust evidence to suggest that four-player markets have produced lower prices than three-player markets in the past decade, whether in Europe or elsewhere. Mergers can accelerate the transition between technology cycles in the mobile industry (which are responsible for significant reductions in unit prices), leading to improvements in quality and innovation in services. As the market moves from voice to data, the global volume growth rate of mobile networks is accelerating. This requires more concentrated market structures to meet the investment challenge, drive mobile data unit prices down and fuel demand for mobile data services.

Effects of remedies on investments and use of spectrum

Mergers that compel mobile operators to provide third parties with access to their networks could reduce incentives to invest and significantly diminish benefits for consumers. In three cases where the European Commission’s Directorate- General for Competition made a network entry option available (Ireland, Germany and Austria), nobody took the option even though it was arguably offered on favourable terms. Remedies that involve reallocating network assets or reserving spectrum for other mobile operators could, in some cases, deter investment and lead to the underuse or misuse of resources.

Resources

Competition Dynamics in Mobile Markets in Europe, GSMA, November 2022

Assessing the Impact of Market Structure on Innovation and Quality in Central America, GSMA, May 2018

Assessing the Impact of Mobile Consolidation on Innovation and Quality: An Evaluation of the Hutchison/Orange Merger in Austria, GSMA, July 2017

Assessing the Case for In-country Mobile Consolidation in Emerging Markets, GSMA, February 2015

Global title leasing

Background

A global title (GT) is an address used for routing signalling messages on telecommunications networks. National authorities allocate numbering resources to communications providers, which reserve and use part of those numbers for use as GTs. In mobile networks GTs enable information to be exchanged within and between networks so that mobile services work regardless of whether users are in their home network or roaming.

The practice of leasing GTs (by a ‘GT lessor’ to a ‘GT lessee’) has enabled additional entities (GT lessees) to gain access to the global SS7 network and to exchange signalling messages using GTs associated with the GT lessor. This reduces routing transparency and accountability, disguising the activities of GT lessees and making it difficult for mobile operators to know who sent the signalling traffic entering their networks. The lack of transparency and absence of controls and oversight associated with GT leasing is of concern to mobile operators and their customers due to the risks it introduces, which can include traffic interception, location tracking and fraud.

Debate

How can regulators ensure that recipients of national numbering resources use them in ways that do not introduce security or fraud risks to other networks or their customers?

How can legitimate and innovative mobile services be supported without continued use of GT leasing?

Industry position

GT leasing has evolved through the emergence of commercial relationships built up over time without any industry standardisation, specifications or recommendations. As a result, there is no agreed framework governing the relationships between GT lessors and the networks to which they are interconnected. Not all parties engaged in GT leasing have considered the impact of GT leasing on the networks receiving the traffic or the subscribers of those networks.

In response to these shortcomings, GSMA members have developed a GT leasing reference document (FS.52) that describes GT leasing motivations, benefits, issues and concerns. The document also contains a code of conduct containing requirements and guidelines intended to minimise the risks associated with GT leasing.

GT lessors and transit carriers involved in GT leasing arrangements are being invited to voluntarily declare to their partners that they adhere to the GT Leasing Code of Conduct as evidence of their commitment to routing transparency and to reduce the risks for mobile operators and their customers. Operators and carriers that do not lease GTs are also being encouraged to publicly declare their support for the Code of Conduct and request compliance from their suppliers and partners.

Resources

GSMA Global Title Leasing Code of Conduct, GSMA, 2023

Mobile Privacy Principles, GSMA, February 2016

Infrastructure sharing

Background

Common in many countries, infrastructure sharing can provide additional capacity in congested areas where space for sites and towers is limited and help to expand coverage in underserved geographical areas.

Infrastructure-sharing arrangements allow mobile operators to jointly use masts, buildings and even antennae, avoiding unnecessary duplication. It has the potential to strengthen competition and reduce the carbon footprint of mobile networks while also reducing costs for operators.

As with spectrum-trading arrangements, mobile infrastructure sharing has traditionally involved voluntary cooperation between licensed mobile operators based on their commercial needs.

Debate

Should regulators oversee, approve or manage infrastructure-sharing arrangements?

What role should governments play in the development and management

of core infrastructure?

Industry position

Governments should have a regulatory framework that allows voluntary infrastructure sharing among mobile operators.

While it may, at times, be advantageous for mobile operators to share infrastructure, network deployment remains an important 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.

National regulatory frameworks should facilitate all types of infrastructure-sharing arrangements. This can include sharing various components of mobile networks, including so-called passive and active sharing. In some cases, site sharing (a type of passive sharing) increases competition by giving operators access to sites that are necessary to allow them to compete on quality of service and coverage.

Infrastructure-sharing agreements should be governed by commercial law and, as such, be 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.

Resources

Unlocking Rural Coverage: Enablers for Commercially Sustainable Mobile Network Expansion, GSMA, July 2016

Intellectual property rights — patents

Background

The mobile ecosystem has been a major driver of economic progress and welfare. Countries around the world continue to benefit from improvements in productivity and efficiency brought about by the uptake of mobile products and services.5

Without the immense efforts of the mobile industry, many of the adopted technologies in 2G, 3G, 4G and beyond 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 people’s lives. The public has become heavily reliant on mobile telecommunications technology and the ability of mobile operators to deliver such services.

However, in the past few years, there have been radical changes in the licensing of telecommunications technology (the prime use of patent portfolios in telecommunications). Initially, patents were used to preserve a company’s ‘freedom to operate’ (the ability to bring products to market by seeking large portfolio cross-licences). Increasingly, patents have become tradeable, income- generating assets (via the secondary patent market) capable of being asserted against start-ups, small and large companies and, in certain cases, used to stifle competition.

Debate

Now that patents have become tradeable and an income-generating asset, can they still be considered a tool to support and promote innovation?

Are patent assertion entities (PAEs) having a negative effect on competition?

Industry position

The secondary patent market has greatly encouraged the rise of non-innovating, non-practicing patent monetisation and licensing or enforcement entities, known as PAEs. Usually, PAEs purchase patents (rather than developing and licensing technology) to be asserted against manufacturers and mobile operators already using the technology.

There are several reasons mobile operator networks have become a premium target for so-called ‘patent trolls’ in Europe, the USA and Asia. These include:
•  The complexity of mobile operator networks
•  The scale of investments needed to build them
•  The level of revenues they generate
•  The reliance of these networks on standards-based technology

The multiple costs associated with PAE litigation and threats of injunction (as leverage in demands for disproportionately high licensing fees) have a detrimental effect, not only on a mobile operator’s business but also on innovation and standardisation in mobile telecommunications.

Increasing PAE litigations and adversarial/ litigious licensing negotiations highlight the need for greater clarity on the licensing of standard essential technology. These efforts should focus on:

  • The reliance of the public on mobile telecommunications technology and the ability of mobile operators to deliver such services.
  • The fact that disruption to these services, even minor, will have a severe negative effect on people’s lives.
  • The importance of maintaining the integrity of mobile telecommunications services and ensuring continuous investment and adoption of new technologies in the telecommunications market.
  • The need to incorporate appropriate rules and regulations in frameworks governing the seeking and granting

5 GSMA (2023), The Mobile Economy 2023

Mobile termination rates

Background

Mobile termination rates (MTRs) are the fees charged by mobile operators to connect a phone call originating from a different network. Setting regulated MTRs continues to be a focus of regulators in both high- and low-income countries, and many different approaches have been developed to calculate 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 mobile operator enjoying significant market power, regulators have developed various regulations and the most notable is the requirement to set cost-oriented prices for call termination.

Debate

How should an appropriate regulated rate for call termination be calculated?

Is the drive towards ever-lower mobile termination rates 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?


Industry position

Regulated mobile termination rates should accurately reflect the costs of providing termination services.

Evidence suggests that reductions in MTRs are not beneficial after a certain point. The setting of regulated MTRs is complex and requires a detailed cost analysis, as well as 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 operators’ business models. Unsignalled, 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.

Resources

The Impact of Recent Cuts in Mobile Termination Rates Across Europe, Frontier Economics forVodafone Group, May 2012

The Setting of Mobile Termination Rates: Best Practice in Cost Modelling, GSMA, October 2008

Net neutrality

Background

While there is no single definition of net neutrality, it often refers to issues concerning the optimisation of traffic over networks. Advocates assert that all traffic carried over a network should be treated equally, but others contend that offering different service levels for different applications enhances the user experience.

Where this flexibility exists, mobile operators can offer a bespoke, managed service to providers of new connected products, such as autonomous cars. This could not exist without constant, high- integrity connectivity. Operators can also enter 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 data usage. These kinds of arrangements support product and service innovation, deliver added value to consumers and generate new revenue for mobile 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 limited available spectrum. Unlike fixed broadband networks, where a known number of subscribers share capacity, the capacity demand at any given cell site is much more variable and the number and mix of subscribers is constantly changing, 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 puts equal demand on a network. For example, voice traffic is time- sensitive and video streaming typically requires large amounts of bandwidth. Networks need to be managed in a way that accommodates all types of traffic and supports innovations with 5G and IoT. The principle of the open internet and allowing operators to offer their customers a variety of service options 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.

Debate

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?

Industry position

Mobile operators need to be able to actively manage network traffic to meet the different needs of consumers.

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 how operators handle mobile traffic is not required. Any regulation that limits their flexibility to manage quality of service from end to end and provide consumers with a satisfactory experience is inherently counterproductive.

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 by comparing performance differences in a transparent way.

Mobile operators compete in many areas, including 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.

Resources

GSMA Net Neutrality website

Passive infrastructure providers

Background

Many mobile operators share infrastructure on commercial terms to reduce costs, avoid unnecessary duplication and 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 signal transmission and reception.

Infrastructure-sharing is arranged through bilateral agreements between mobile operators to share specific towers, through strategic sharing alliances, through 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 mobile operators. Several countries have established regulatory frameworks based on registration that encourage passive infrastructure-sharing arrangements and provide regulatory clarity for mobile operators and independent passive infrastructure providers. While regulatory authorities in almost all countries support passive infrastructure-sharing arrangements, there is a lack of regulatory clarity in some countries and particularly so in relation to independent tower companies.

Debate

What benefits do independent tower companies offer to mobile operators?

Should passive infrastructure sharing ever be mandated by a regulatory authority?

What steps should regulators take to provide clarity for tower companies and mobile operators?

Industry position

Licensed mobile operators should be able to share passive infrastructure with other licensed mobile 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 the mobile industry to expand coverage cost-effectively and rapidly while retaining competitive incentives. Regulation of passive infrastructure- sharing should be permissive but 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 that applies to electronic communications network and service providers.

Registered providers should be permitted to construct and acquire passive infrastructure that is open to sharing with mobile operators, provide (for example, sell or lease) passive infrastructure elements to licensed operators and supply ancillary services and facilities essential to the provision of passive infrastructure.

Mobile operators should be permitted to use infrastructure from passive infrastructure companies through commercial agreements without explicit regulatory approval. Infrastructure-sharing agreements should be governed by commercial law and, as such, be subject to assessment under general competition law.

Public authorities should provide licensed mobile 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 the construction of 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 development of this industry, which makes more efficient, lower-cost forms of infrastructure supply possible.

Resources

Infrastructure Sharing: An Overview, GSMA, June 2019

Public-private partnerships (PPPs)

Background

A public-private partnership (PPP) is a legal arrangement between two or more private- sector and public-sector parties to deliver a service via mutual 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 investment from different stakeholders and support the extension of network coverage in areas that would otherwise be risky investments with limited commercial potential. Governments view PPPs as a way to drive investment in areas without coverage and leverage the expertise of the private sector. In turn, private companies benefit from the 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 multilateral organisations, which recognise the potential economy-wide benefits of such projects and are willing to support private companies and governments that lack the financial means to get these projects off the ground on their own.6

In 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

Debate

Are PPPs an effective way to accelerate the deployment of infrastructure and drive digital inclusion?

What alternatives do governments have to use their resources to catalyse investment?

What are the characteristics of a PPP that maximises positive impacts while minimising negative consequences?

Industry position

PPPs can be an effective way to deploy and operate network infrastructure in areas that do not have the economic potential to attract private investment. Public and private resources may support network deployment to deliver communications services directly to customers7or provide the infrastructure to deploy commercially viable networks.8

Governments should only consider PPPs in the most remote areas. Engaging with mobile operators and considering their roll-out plans is an essential part of the scoping phase9because it prevents public investment from being wasted in areas where operators could have deployed networks on their own. Service delivery and customer engagement should be left to the private sector, which can provide the full suite of products and services to support digital inclusion.

Governments should only consider PPPs after exhausting all other policy and regulatory measures to maximise coverage through market-driven mechanisms. Creating an investment- friendly policy framework should be the first step in a coverage expansion strategy10 GSMA (2016), Unlocking Rural Coverage: Enablers for Commercially Sustainable Mobile Network Expansion. As second step, governments should consider giving mobile operators the same preferential conditions that PPPs often enjoy, such as subsidies, no- cost access to public infrastructure or less stringent quality-of-service obligations. This may be sufficient to create a favourable business case in remote areas.

When implementing a PPP, governments should avoid the single wholesale network (SWN) approach. SWNs are PPPs that do not observe the best practices outlined above. SWNs have a geographic scope that overlaps with commercial networks and monopolises important resources, such as spectrum. They create an uneven playing field, use valuable public resources inefficiently and have multiple implementation challenges (see the ‘Single Wholesale Networks’ section for more details).

Resources

Guidelines on State Aid for Broadband Networks, European Commission, 2023 6 An 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 began operating in 2012 and now connects 24 countries to international fibre infrastructure, some for the first time. It is enabling faster speeds and lower prices for internet access. The World Bank financed part of the ACE submarine cable. Sources: World Bank (2018), Private Participation in Infrastructure Database; World Bank (2018), Implementation Completion and Results Report. 7 ‘Todo Chile Communicado’ is a typical example of the first case, where a PPP was created to bring mobile connectivity to 1,474 rural communities in Chile. Source: GSMA (2016), Closing the Coverage Gap. 8 The ACE submarine cable is a good example of infrastructure that has enabled faster and cheaper internet connectivity across 24 countries in Africa. 9 European Commission (2023), Guidelines on State Aid for Broadband Networks 10 GSMA (2016), Unlocking Rural Coverage: Enablers for Commercially Sustainable Mobile Network Expansion

Quality of service

Background

The quality of a mobile data service is characterised by a few important parameters: speed, packet loss, delay and jitter. It is also affected by factors such as mobile signal strength, network load and user device and application design.

Mobile operators must manage changing traffic patterns and congestion because these normal fluctuations result in customers experiencing different levels of service quality.

Connection throughput is viewed by some regulatory authorities as an important attribute of service quality. However, it is also the most difficult to define and communicate to users. Mobile throughput can vary dramatically over time, and throughput is not the only product attribute that influences consumer choice.

Debate

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 depending on 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?

Industry position

Competitive markets with minimal regulatory intervention are best able to deliver the quality of mobile service that customers expect. Regulation that sets a minimum quality of service is disproportionate and unnecessary.

The quality of service that mobile consumers experience depends on many factors and some of these are beyond the control of mobile operators, such as the type of device, application and propagation environment. Defining specific quality targets is neither proportionate nor practical. Mobile networks are technically different from fixed networks because 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 a 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 that rigidly defines a particular service quality level is unnecessary and likely to affect the development of these services.

Competitive markets with different commercial offerings and information that allows consumers to make informed choices deliver the best outcomes. If regulatory authorities are concerned about service quality, they should engage in dialogue with the industry to find solutions that strike the right balance of transparency and quality of service.

Resources

The Quality of Mobile Services in Latin America, GSMA, February 2015

Single wholesale networks

Background

Single wholesale networks (SWNs), also known as single-distributor, government- initiated monopolies or wholesale open access networks (WOANs), were implemented by some countries in the mid- to late-2010s. Considered by policymakers as an alternative to competitive mobile networks for the delivery of mobile broadband services in 4G or 5G, SWNs have become less popular.

Supporters of SWNs argued that they addressed certain concerns better than traditional network competition. These concerns generally included lack of coverage or inadequate competition in rural areas, inefficient use of radio spectrum or fears that the private sector lacked incentives to maximise coverage or investment. However, SWNs have proven to be unsuccessful in solving any of these problems and have largely been abandoned for competition-based approaches.

Government-initiated network monopolies require mobile operators and others to rely on wholesale services from the SWN as they serve and compete for retail customers. While there are variations in the SWN proposals discussed and implemented by different governments, mobile operators are limited to providing broadband in one technology (4G or 5G) solely via the SWN in most cases.

Debate

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?

Industry position

SWNs and WOANs are likely to lead to worse outcomes for consumers than network competition.

Although some supporters claim they provide greater network coverage than network competition, this is often because there are public subsidies and other forms of favourable support for SWNs that are not available to competing mobile operators, making it an unfair comparison. Commercial networks can deliver coverage even in areas where duplicate networks are not economical. This can be achieved in many ways, including through voluntary network sharing among mobile 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, 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 embrace new technologies.

Rather than use public funds to create a separate network to deliver coverage in areas commercial networks have not 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 these areas.

Resources

Policy Trends in the Aftermath of Single Wholesale Networks, GSMA, 2023

Assessing the Case for Single Wholesale Networks in Mobile Communications, Frontier Economics for the GSMA, September 2014

Taxation

Background

Mobile telecommunications have a positive impact on economic and social development, creating jobs, increasing productivity and improving the lives of citizens. Despite these beneficial outcomes, many countries impose mobile-specific taxes on consumers and operators. These include special communication taxes, such as excise duties on mobile handsets and airtime usage, and revenue-share levies on mobile operators. Some countries have applied a surcharge on international inbound call termination (SIIT), which can increase international call prices and effectively act as a tax on citizens of other countries. These taxes have placed a disproportionate tax burden on the mobile sector, which can prevent countries from reaping the full benefits of mobile technology.

Debate

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?

Industry position

Governments should reduce or remove mobile-specific taxes because the social impact and long-term positive impact on GDP (and, hence, tax revenues) will outweigh any short-term reduction in contributions to government 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 taxes 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 operators should not be affected – taxation should not disincentivise efficient investment or competition in the ICT sector.
  • Taxes should be equitable and the burden of taxation should not fall disproportionately on lower-income members of society.

Discriminatory, sector-specific taxes deter uptake of mobile services and can slow 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 discourage private spending and prevent the positive spillovers of mobile throughout the economy, ultimately diminishing social and economic welfare.

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 to consumer adoption and use of mobile broadband. Lowering the tax burden on the sector increases mobile uptake and use, creating a multiplier effect across the wider economy.

Taxing international calls has a negative impact on consumers, businesses and citizens abroad, damaging a country’s competitiveness.

Resources

GSMA Mobile Taxation Research and Resources

Mobile Tax Policy and Digital Development: A Study of Markets in Sub-Saharan Africa, GSMA, October 2023

Rethinking Mobile Taxation to Improve Connectivity, GSMA, February 2019

Universal service funds

Background

A policy goal of many governments, universal service refers to telecommunications service that is available, accessible and affordable for everyone.

Several countries have established universal service funds (USFs) to extend coverage to areas that are not commercially viable for the private sector. USFs are typically funded by levies on telecommunications sector revenues and the funds are disbursed either through direct subsidies or competitive bidding. USFs can also provide non-financial support to connectivity initiatives.

Despite these goals, USFs often perform poorly and countries with USFs have typically not experienced stronger internet growth.11 Studies by the GSMA and the International Telecommunication Union (ITU) show that disbursement rates remain very low around the world and many funds have been unable to distribute any of the levies collected.

When not administered effectively, USFs can be counterproductive. By effectively taxing telecommunications customers, services become less affordable.

Debate

What policies and processes need to be in place to ensure USF financial resources are transparent and used efficiently?

What alternative strategies can governments employ to enable the private sector to expand connectivity?

How relevant are USFs in mature markets?

Industry position

USFs should only be considered once all policy and regulatory measures to maximise coverage through market-driven mechanisms have been exhausted and after careful assessment of alternative mechanisms, such as coverage obligations and reverse spectrum auctions.

Reducing costs and regulatory barriers is critical to expanding mobile connectivity. Importantly, governments can help by removing sector-specific taxes, stimulating demand and developing infrastructure.

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, not just mobile operators. The allocation of funds, in consultation with the mobile industry, should be competitive and technology- neutral, and should target projects with the greatest possible impact. USFs should have:

  • Clear targets that ensure effective and timely disbursement of funds.
  • Continuous evaluations, annual reporting and regular independent audits of government administration to ensure transparency in fund financing, disbursements and operations.
  • Solid, clear and transparent underlying legal frameworks that support flexible services and technology neutrality.
  • An independent fund structure to avoid political interference.
  • Effective administration that avoids excessively bureaucratic structures or insufficient oversight.A thorough analysis of investment gaps and the impact of introducing levies on affordability and adoption to set appropriate USF levies.
  • Consideration of a pay-or-play model by which mobile operators can choose to make a financial contribution to the USF or implement projects that meet the fund’s goals.
  • Regular consultation with mobile operators to ensure investments in coverage are targeted efficiently, include operational expenditure subsidies where necessary and avoid duplication of infrastructure.

If USFs cannot be managed efficiently within a reasonable time frame, a plan should be implemented to phase them out.

Resources

Survey of Universal Service Funds, Key Findings, Ladcomm Corporation for the GSMA, April 2013

The Impact of Universal Service Funds on Fixed-Broadband Deployment and Internet Adoption in Asia and the Pacific, UN ESCAP, 2016

11 UN ESCAP (2017), The Impact of Universal Service Funds on Fixed-Broadband Deployment and Internet Adoption in Asia and the Pacific