When a fixed licence goes mobile

Mention telecoms convergence, and most people will think of a seamless set of media services: TV over your telephone line, telephone calls over the airwaves and data on demand. Regulators tend to view convergence both as a trend to be monitored (paying particular attention to dominant operators trying to move into new markets) and, potentially, as an opportunity to streamline their own regulations.

However, while offering operators such simplified, converged licences can contribute to the transparency of regulation, they can also introduce complications when ensuring that consumers' interests are safeguarded.

There are potentially as many definitions of "˜"converged'" licences as there are regulators to grant them. In Europe, for example, operators are required to do little more than notify the regulator before launching.

Even so, in most cases there is still in most cases a firm distinction between fixed and mobile operators, and mobile licences are usually closely tied to specific technologies and spectrum - this is despite reference in the European Directive to "˜an authorisation system covering all comparable services in a similar way regardless of the technologies used'.

Similarly, countries that offer a "˜"second national licence'" to end a fixed incumbent's monopoly (for example, in Senegal), while often describing the licence as converged, are actually offering a set of fixed and mobile licences bundled together.

Pioneered by Mauritius in 2003, and subsequently adopted in several countries including Tanzania, Nigeria and India, a more comprehensive type of converged licensing framework (CLF) typically aims to:

"¢ separate the licensing process from the allocation of scarce resources (such as spectrum, rights of way and numbering ranges)

"¢ be technology neutral (in particular, fixed and mobile operators are not distinguished)

"¢ be service neutral (voice, data or broadcast services are all permitted).

Tanzania is an example that demonstrates the dramatic effects that a CLF can have on the market. A 2005 review of interconnection regulation conducted by Analysys for the Tanzanian Communications Regulatory Authority (TCRA) involved four operators, all using GSM. The latest review, conducted at the end of 2007 and the first to be carried out under the CLF, werefound seven operators licensed and with access to spectrum, including two CDMA operators and two operators that were formerly "fixed-only'. Aside from any transparency arguments behind the introduction of the CLF, it has revealed a healthy appetite for telecoms investment in this developing country.

Legislators and regulators support converged licensing because it can simplify some of the issues they face; for example, the Indian regulator, TRAI, has found that restricting the scope of licences (such as limiting mobility) has led to an artificial segregation of markets and consequently to disputes and litigation when operators stretch the mandate of their licences.

The flip side of a CLF is that to achieve the three aims listed above, the regulator may have limited power to influence how the allocated resources are used - for example, which numbering ranges are associated with which access technologies, or how spectrum is allocated between end users.

Yet, at the same time, obligations remain on the regulator to ensure that the correct investment incentives are preserved.

 

In this context, moving to a CLF requires the regulator to carefully consider how to adapt its economic regulation. In interconnection markets, for instance, where long-run incremental costs have been used to impose price caps on termination rates, fundamental questions must be asked anew:

"¢ what is the efficient technology to deliver voice services: copper, GSM, fibre or WiMAX‾ Standalone or combined‾

"¢ in a market with an unpredictable number of telecoms operators, what is the scale of an efficient, competitive operator‾

These questions are particularly relevant in countries where the traditional fixed operator does not (and possibly cannot) make a profit out of fixed-line telephony services, and where low cellular penetration presents opportunities for new entrants. Hence, it is unsurprising that the future of converged licensing is being explored in Africa.

In Tanzania, one of the conclusions of the interconnection review was that the differentiation between termination rates to fixed and mobile lines should be eliminated. Although this conclusion was supported by market conditions that are specific to Tanzania, convergence (and substitution) of access technologies, and the trend towards market-based allocation of scarce resources like spectrum, may mean that regulators in all continents will be increasingly less able to distinguish fixed from mobile operators. So, while consumers are enjoying TV over the telephone and telephone over the airwaves, regulators will be faced with the challenge of working out when a telephone is just a telephone.

 

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