Emerging Trends in Telecom/ ICT Licensing Dr. V. Sridhar IIIT-B vsridhar@iiitb.ac.in www.vsridhar.info 18 Nov 2019 TRAI ASEAN Capacity Building Workshop 1
What are the basic Principles of Telecom Regulation and Licensing What is the emerging role of Regulator? What are the futuristic Licensing and Regulatory Models? TRAI ASEAN Capacity Building Workshop 18 Nov 2019 2
Why Regulate ICT Sector? 3
Regulatory needs under different market types Public Monopoly • Limited regulation as Government or State Owned Operators provide service, as well as in most cases as a regulator. The erstwhile PTTs in Europe and DoT in India are examples Private Monopoly • Notable example being erstwhile AT&T and the Bell Operating Companies in the U.S. The private operators needs to be regulated especially for Quality and Price of services Partial Competition • Most telecom markets wherein there are oligopolies that necessitate regulation on tariffs, universal service obligation, and prevent anti- competitive practices Full Competition • Most Internet and digital market places wherein there is little barrier to entry and exit that does not necessitate regulation; only applicable in case of violation as ex-poste 18 Nov 2019 TRAI ASEAN Capacity 4 Building Workshop
Need for Regulation To protect Consumer Interests • In the areas of pricing, quality of service and non-discriminated service offerings To foster effective competition • Reduce barriers to entry and exit; prevent anti-competitive behavior including predatory pricing and collusion; to reduce market failures To provide universal service • To provide equitable services across geographies, gender, demographics, and societies To promote technologies and innovation • To encourage innovation and promotion of new technologies and their adoption in the industry and society 18 Nov 2019 TRAI ASEAN Capacity 5 Building Workshop
Why Regulate Telecommunications? ● More liberalized telecom market Need to attract private sector: competition management ○ ■ When the government or PSUs fail Growth of alternative communication services ○ ■ And promote innovation ● Internet (VoIP, IPTV), mobile (VAS) Development of International trade in telecommunication services ● Bring in foreign investment ○ ■ Foreign telcos, global service providers TRAI ASEAN Capacity Building 18 Nov 2019 6 Workshop
When to Regulate.. TRAI ASEAN Capacity Building Workshop 18 Nov 2019 7
Types of Markets Landline Service One Firm Monopoly Cable TV Service Number of Firms? Mobile Service Few Firms Oligopoly DTH Service WhatsApp Differentiated Over The Top Products Services Many Firms Facebook Identical ?? Products TRAI ASEAN Capacity Building Workshop 18 Nov 2019 8
Externalities and Market Efficiencies ● An externality refers to the uncompensated impact of one person’s actions on the well-being of a bystander. Externalities cause markets to be inefficient, and thus fail to maximize total ○ surplus. ● An externality arises... . . . when a person engages in an activity that influences the well-being of a bystander and yet neither pays nor receives any compensation for that effect. ○ When the impact on the bystander is adverse, the externality is called a negative externality. ○ When the impact on the bystander is beneficial, the externality is called a positive externality. 9 Negative or positive externalities need regulatory intervention
Excludability and Rivalrousness When thinking about the various goods in the economy, it ● is useful to group them according to two characteristics: Is the good excludable?: Mobile Service ○ Is the good rival? FM Radio, Public Wi-Fi ○ Excludability ● Excludability refers to the property of a good whereby a person ○ can be prevented from using it. Rivalry ● Rivalry refers to the property of a good whereby one person’s ○ 10 use diminishes other people’s use.
“ The best things in life are free. . . ” However, there is no Free lunch ● Free goods provide a special challenge for economic analysis. Most goods in our economy are allocated in markets … ● When goods are available free of charge, the market forces that ● normally allocate resources in our economy are absent When a good does not have a price attached to it, private markets ○ cannot ensure that the good is produced and consumed in the proper amounts In such cases, government policy can potentially remedy the market ○ failure that results, and raise economic well-being. 11
What to Regulate? 12
Taxonomy of what to regulate Many Competition Level Few Ceiling Price Floor What to Regulate? Universal Access Subsidize Rural Services Local Interconnection National International Mobile Service Scare Resource Radio Spectrum Satellite Service Privacy 18 Nov 2019 TRAI ASEAN Capacity 13 Building Workshop
Type of Regulation: Ex Ante Regulation ● Ex ante regulation is anticipatory intervention ● Ex ante regulation uses government-specified controls ● to: Prevent socially undesirable actions or outcomes in markets, or ○ Direct market activity towards socially desirable ends. ○ ● Ex ante regulation is mainly concerned with market structure, i.e. the number of firms and level of market concentration, entry ○ conditions, and the degree of product differentiation. ○ ● Ex ante regulation often takes the form of sector specific regulation. TRAI ASEAN Capacity Building 18 Nov 2019 14 Workshop
Type of Regulation: Ex post Regulation ● Ex post regulation addresses specific allegations of anti- competitive behavior or market abuse. Ex post regulation aims to redress proven misconduct through a ● range of enforcement options including fines, injunctions, or bans. ● Ex pos t regulation is mainly concerned with market conduct — the behavior of a firm with respect to both its competitors and its customers. ○ Ex post regulation often takes the form of competition laws. ● TRAI ASEAN Capacity Building 18 Nov 2019 15 Workshop
Regulatory Organization and Processes TRAI ASEAN Capacity Building Workshop 18 Nov 2019 16
Telecom Regulatory Organization: India 18 Nov 2019 TRAI ASEAN Capacity 17 Building Workshop
Org Structure of FCC 18 Nov 2019 TRAI ASEAN Capacity 18 Building Workshop https://www.fcc.gov/sites/default/files/fccorg-08112017.pdf
EU Telecom Regulation 18 Nov 2019 TRAI ASEAN Capacity 19 Body of European Regulators for Electronic Communications (BEREC) Building Workshop
The Regulatory Process Either suo moto or Stakeholders Response on request from DoT TRAI Posts Pre-Consultation Posts Consultation Paper Conducts Open-house Submits Recommendations to Sessions DoT Telecom Commission Telecom Commission of DoT Submits Policy Proposals to Examines the the Ministry of Recommendations Communications and IT Ministry of Communications and IT finalizes the Policy and gets Cabinet approval, if required 18 Nov 2019 TRAI ASEAN Capacity 20 Building Workshop
Licensing Telecommunication Services: A way to regulate TRAI ASEAN Capacity Building Workshop 18 Nov 2019 21
Methodology of License Assignment License Assignment Single Stage Lottery Sealed Bid Multi-stage Beauty Parade Auction Sealed Bid Fee Based Incentive First Come Fixed Fee First Serve 18 Nov 2019 TRAI ASEAN Capacity 22 Building Workshop
Licensing Objective Regulating Provisioning of an essential public service ● Emergency service (911, E-911 service in the US) ○ Expansion of networks and services ● Rural area coverage ○ Regulating market structure ● Determining network operators allowing for efficient supply of ○ telecom services Allocation of scarce resources ○ Establishing a competition framework ○ TRAI ASEAN Capacity Building 18 Nov 2019 23 Workshop
Different types of licenses in the ICT sector Fixed Landline Telecom Access License Cellular Mobile Landline Virtual Network License Mobile National ICT License Long Distance International Internet Internet Service Telephony Very Small Aperture Terminal Satellite Satellite Over The Top Telephony Communicatio n Public Mobile Radio Trunking Cable TV Broadcasting Direct to Home Over The Top Broadcasting FM Radio 18 Nov 2019 TRAI ASEAN Capacity 24 Building Workshop
Balancing Certainty and Flexibility ● License conditions should be flexible to allow sector growth, and future regulatory reform License period in India – 20 years ○ ○ Amendable/ non-amendable clauses ○ Clause 5.1 of UL: The Licensor reserves the right to modify at any time the ■ terms and conditions of the License, if in the opinion of the Licensor it is necessary or expedient to do so in public interest or in the interest of the security of the State or for proper conduct of the Telegraphs. The decision of the Licensor shall be final and binding in this regard TRAI ASEAN Capacity Building 18 Nov 2019 25 Workshop
Roll-out Obligations For 3G For Broadband Wireless Access TRAI ASEAN Capacity Building 26 18 Nov 2019 Workshop
Future of Licensing and Regulation 27
OTT Services 28
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