© Cullen International SA 2017 Peter Dunn – Cullen International The interaction between technology and regulation in the communications sector 16-18 May, 2017
Jan 21, 2018
© Cullen International SA 2017
Peter Dunn – Cullen International
The interaction between
technology and regulation
in the communications sector
16-18 May, 2017
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sectoral
regulation
influence of
technology
influence of
regulation
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Sector-specific regulation
Targeted at one sector
Typically former utilities and/or monopolies
Multiple possible aims, including:
• Liberalise market – introduce competition
• Ensure fair chance for competitors
• Protect consumers
Independent (hopefully!)
?
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Benefits of this approach
expertise
independence
• focus
• understanding
• open
• fair
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Before liberalisation
Samuelson:
Economies of scale are achieved when the per-unit
cost of production declines with greater production.
Sectors with huge economies of scale may be seen as
natural monopolies
Natural monopoly?
An industry in which multi-firm production
is more costly than production by a
monopoly.
A firm that is a natural monopoly produces
at lower long term average cost than
would be possible with multiple firms.
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Telecoms markets
• universal service
• national champions
• employment
high fixed costs and
large scale economies
believed to be
natural monopolies
Government ownership ? • investment?
• innovation?
• political interference?
• lack of choice?
• prices?
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but not in the UK …
1979: Margaret Thatcher becomes Prime Minister
1981: Mercury Communications is licensed (duopoly with BT)
1984: British Telecom is privatised
• 2.1m members of the public bought 2/5 of the shares
• privatisation and shareholder culture
1991: Duopoly Review – full competition
Duplication of networks – efficient or inefficient?
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Opening the market is not enough
Sustainable competition
Ensure fair competition
Based on access (ex ante)
Protect consumers
Transition to ex post competition law?
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Regulation is multi-faceted
Law
PoliticsEconomics
Technology
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sectoral
regulation
influence of
technology
influence of
regulation
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Regulation mainly follows technology
Consumer protection
Licensing
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Licensing used to be by service
www
IP
convergence on one platform
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Fixed network - connections
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Fixed network – not like this!
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Fixed network – uses exchanges
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Fixed network – not like this either!
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Fixed network – tiers of exchanges
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Fixed network – the numbers game
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Last mile bottleneck
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Last mile bottleneck
not efficient to duplicate
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Local loop unbundling
regulatory solution – physical unbundling
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Fibre to the home (FTTH) P2P
same topology = same regulatory solution
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Fibre to the home (FTTH) PON
different topology – unbundling not possible!
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Fibre to the cabinet (FTTC)
different topology – unbundling not economic!
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Regulating fibre access
but should we regulate fibre access at all?
same approach possible:
physical unbundling
regulators invent new
remedy: virtual unbundling
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Spectrum licensing
• Each mobile is assigned a separate frequency channel for the duration of the call
• Usually, mobile terminals will have one downlink frequency band and one uplink
frequency band
200 khz channels
5 MHz (25 channels)
5 MHz (1 carrier)
5 MHz carrier
uplink / downlink
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Spectrum licensing
200 khz channels
5 MHz (25 channels)
5 MHz (1 carrier)
5 MHz carrier
spectrum must be assigned
in 5 MHz blocks
spectrum must be assigned
as paired blocks
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sectoral
regulation
influence of
technology
influence of
regulation
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Regulation can have an effect also…
new opportunities new problems
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Tactical network deployment
allows physical unbundling
do not allow physical unbundling
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OTT services rely on access
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NN regulation can ensure access
regulation
Bahrain
USA
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Exploding demand
Q3 2011 Q3 2016
Source:
Ericsson mobility report (Nov. 2016)
Total monthly traffic
Data traffic grew 50%
between
Q3 2015 and Q3 2016
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Spectrum scarcity – technology helps
Carrier aggregation
Germany Ch.59 Germany Ch.53
Spectrum sharing
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• Sector–specific regulation: independent and multi-faceted
• In the communications sector, technological change is highly
significant, affecting behaviour, economics and competition
• Regulation mainly follows technology
• to address existing problems
• because regulators move less quickly than industry changes
• But regulation itself also affects technology:
• opening new opportunities
• creating new problems to be solved
• A well–functioning communications market is critical to future
economic success
• Regulation which is flexible and incentivises innovation is key
Summary
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