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Closed September 6, 2007

Posted by Jasper in Uncategorized.
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Dear Readers
This blog is closed untill further notice.
However, should you wish to contact me, I can be reached on jasper.mikkelsen@gmail.com.

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Looking to the future May 3, 2007

Posted by Jasper in broadband, NGN, Technology.
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CA-net news has some interesting references to the future of the internet and broadband technologies.

FTTH Council Video: A FTTH Council provides a very high level perspective of the Internet and its current challenges and provides evidence of the tsunami of data that will fill networks with the distribution of video. Their point is of course that the surge in data requires update of the last mile (amoung other things).

Jon Crowcroft Interview, Article on the challenges of P2P running on today’s networks, Article on why IPTV is doomed to fail: Jon Crowcroft claims that heat loading at data centers will make distribution of video through traditional client server models impossible, and that P2P will be the only practical way of distributing such content. This is why many argue that the traditional telco NGN architecture with IPTV is doomed to failure.

New Zealand: Separation April 16, 2007

Posted by Jasper in Regulation.
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Telecom New Zealand announced Friday last week an outline of its response to an operational separation consultation document released by the Ministry of Economic Development last week. The interesting thing about the outline is that Telecom proposes ownership separation of its access network. This is more far reaching than the consultation document which envisages a complex form of operational separation. According to Telecom:

The complicated separation requirements add unnecessary cost, and propose governance arrangements that are unworkable within a single entity.

Watch out for the Telecom submission due on the 27 April.
You can view the media release here.
You can view the Telecom high level proposal here.
You can view the Initial Impact Assessment here.
The consultation document on the proposed operational separation of Telecom can be accessed here.
Access assorted background documents here.

UPDATE: Access the Telecom Submission here. The Minister of Communications has invited comment on the proposal.

Sweden: PTS on broadband February 21, 2007

Posted by Jasper in Uncategorized.
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[Based on T-Regs] On 15 Feb 2007, the Swedish regulatory authority PTS issued a 164-page document (available only in Swedish) containing extensive proposals for a new national broadband strategy. 

The stated aim of PTS is to achieve an increase in the accessibility of broadband infrastructure with the short-term objective of broadband for all households (permanent housing), businesses and public entities no later than 2010 and to promote and protect sustainable retail market competition for broadband services. Broadband is defined in the context of this 2010 target as connections that can be upgraded to a downstream transmission speed of at least 2 Mbit/s.

Several simultaneous ‘policy trajectories’ are put forward by PTS to achieve the stated 2010 goals. The first trajectory involves financial and regulatory requirements for government funded infrastructures; the second trajectory addresses regulation of the fixed incumbent operator TeliaSonera’s network infrastructure and wholesale activities (including proposals for functional as well as legal separation). The third trajectory focuses on openness and neutrality of (often government-owned or funded) fibre infrastructures. 

In terms of government funded infrastructures PTS suggests the following: 

  1. Continued government support of initiatives representing a global investment of SEK 1135m (€864m) for the rollout of broadband infrastructure (of which SEK 567.5m (€432m) financed by EU structural funds). 
  2. Imposition of minimum requirements on infrastructure established with public funds (e.g. minimum transmission rate). 
  3. Any broadband networks financed with ‘central government support’ should be open to service providers other than the network owner during the (entire) lifetime of the networks.

In order to be able to fulfil point 3, PTS is requesting (from the legislator) powers to impose access requirements through regulation and wishes to be given a mandate to monitor compliance and to take the measures available under the Swedish Electronic Communications Act with regard to these networks. 

Municipal authorities are bequeathed with a monitoring and structuring role (data collection of existing infrastructure and rollout plans). PTS also asks for legislation allowing municipalities (as broadband providers) more freedom to allow for cross-municipal collaboration. PTS is also advocating the inclusion of access to broadband in the scope of universal service (in the context of the review of the EU Universal Service Directive 2002/22/EC). This, according to PTS, also brings along the need to re-evaluate and change the financing model for universal service based on the allocation of net service costs between the providers of electronic communications networks and providers of communications services. 

PTS also suggests that the Swedish Government should encourage coordination of construction of telecommunications infrastructure with other infrastructure, e.g. electricity infrastructure.

In terms of TeliaSonera’s wholesale activities (especially the local access network) PTS indicates that equal access to TeliaSonera’s local access network is neccessary in order to achieve long-term and sustainable competition in the broadband market. PTS considers that this will reduce inertia in the market and improve predictability. 

PTS is of the view that the most suitable model to do away with potential favouritism of the incumbent network for its retail division is to adopt a model of ‘functional separation’ and/or ‘a stronger legal separation’. Although TeliaSonera Network Sales AB (operating under the trade name ‘Skanova’) already has been separated out as a legal entity, wholesaling fixed network infrastructure, PTS notes discrepancies of treatment with regard to information flows and differences of procedures for installation and maintenance between the affiliated retail organisation and alternative wholesale customers (alternative operators).  

PTS also envisages a complete separation of the workforce and suggests separating all wholesale human resources from the rest of the company. In addition, PTS wants to eliminate any exchange of information between the wholesale organisation and other parts of TeliaSonera that could benefit TeliaSonera’s retail operations at the expense of other market players. 

PTS indicates it would set up a compliance board (including PTS officials) whose task it would be to continuously monitor the outcome of the proposed functional and/or legal separation model. The compliance board would be the forum to which TeliaSonera would report, but it would also be the place for alternative market players to have their voice heard in the discussions regarding the new separation model. 

PTS encourages TeliaSonera to reinforce such separation voluntarily, as it considers that there is limited scope under the current Swedish Electronic Communications Act to impose separation as a sector specific remedy. PTS is however convinced that the new model will bring advantages to TeliaSonera and that this should be sufficient motivation for the company to proceed voluntarily to separation. 

Australia: shareholder letter February 21, 2007

Posted by Jasper in Uncategorized.
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Telstra has sent a letter to its shareholders describing it competitors as leeches:

Like leeches, foreign companies are encouraged by lopsided regulations to act like parasites on Telstra’s infrastructure

Can you believe it…this has got to be a new low in Telstra’s attempt to turn the tides of regulation in their favour. And by the way Tealstra are also trying to convince the broad comunity that they are are the only hope for regional broadband. Of course Telstra is entitled to campaign to get the best deal for its shareholders, but as noted by Crickey to dress itself up as some kind of philanthropist consumer advocate fighting an unreasonable government is more than a bit rich.

Seinfeld January 28, 2007

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Some Sunday fun, Jerry Seinfeld on cell phones. Click here. Enjoy.

Netherlands: sub-loop unbundling January 25, 2007

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The Dutch regulatory authority OPTA published a letter yesterday where it essentially dennounces it previous intention to abandon to publish policy rules for the phasing out of local loop unbundling from Main Distribution Frames. Specifically, OPTA states that permitting KPN to withdraw MDF access would only be conceivable if market entry possibilities and the continuity of service provision by alternative operators would be sufficiently guaranteed. According to OPTA, the studies conducted, and input received from alternative operators, indicate that it is not sufficiently clear that a fully fledged alternative would be sufficiently guaranteed.

A study by Analysys is quoted that concludes that the business case for an alternative operator using sub-loop unbundling from street cabinets is slim, i.e. is likely to be economically viable under very few circumstances. A summary of the report is available here (last two pages in English).

[From T-Regs]

Update: OPTA has now released a public version of the study entitled ‘The Business Case for Sub-Loop Unbundling in The Netherlands‘. The report can be accessed here.

UK: International roaming with 3 January 17, 2007

Posted by Jasper in Mobile.
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Yesterday 3 in the UK announced what may mark a new round of cuts to international roaming rates or changes to charging structures (excerpt from press release):

3 today throws down the gauntlet to the other mobile operators to put an end the ‘international roaming rip-off’ with the launch of ‘3 Like Home’. ‘3 Like Home’ marks an end to extra charges for all 3 customers by allowing them to use their existing bundles when using any 3 network abroad.

All 3 customers visiting Ireland, Italy, Austria, Australia, Hong Kong, Sweden and Denmark will now be able to take advantage of being on one of 3’s sister networks to use their existing minutes, text and data bundles to make voice and video calls, send texts, picture and video messages, and even surf the internet or watch TV from their handsets while abroad without accruing any additional charges.

3 Like Home also marks an end to customers being charged to receive calls when abroad – a practice that has led to many people opting to keep their mobiles switched off while abroad to avoid expensive charges. With ‘3 Like Home’, customers on any of their sister networks will be able to receive their calls and texts free of charge – just like they do at home.

Unlike other mobile operators who charge consumers a one-off fee or monthly subscription to access better calling rates to and avoid ‘roaming charges’ – the extra cost for making and receiving calls and data abroad – 3 Like Home will automatically apply when customers are on any of 3’s sister networks.

Great news if you’re a 3 subscriber in the UK travelling to Ireland, Australia, Italy, Austria, Hong Kong, Sweden or Denmark. Not so great if you’re anything else. Judging from other 3 websites a similar initiative has not been taken in other jurisdictions (at least not yet). 

Ireland: Mobile termination H3GI January 12, 2007

Posted by Jasper in Mobile, Regulation.
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The Irish regulator ComReg is consulting on wholesale voice call termination on Hutchison 3G Ireland’s mobile network, releasing a consultation paper yesterday.

The interesting thing about this consultation is that reference is made to a bargaining model by Binmore and Harbord (BH).  This model emphasises the bargaining dynamic when operators set termination rates. While considerations of countervailing buying power and the like have been considered in mobile termination consultations before this would appear to be the first time that bargaining has been considered more formally by a regualtor.

ComReg has a number of reservations about the model, their principal being that its predicted outcomes do not fit the empirical evidence. The BH model predicts that H3GI would achieve termination rates equal to the average of the lowest termination rates in the market, this has not happened, as H3GI’s rates are above the levels in the overall mobile market. The BH model also predicts that in a situation of regulatory intervention stemming from the interconnectivity obligation and dispute resolution that H3GI’s bargaining power would be increased but that termination rates would remain around the average of the 2G operator rates. Again, this has not happened, H3GI’s rates are above the level in the overall mobile market.

I haven’t read the whole consultation document yet, but it certainly has a very different flavour than many other model termination consultations that nowadays more or less revolve around the same issues.

The consultation paper is available here.

Sweden: Government report on broadband January 5, 2007

Posted by Jasper in broadband, Strategy.
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Before Christmas I had a closer look at the broadband strategy in Sweden. At that time I wasn’t aware of a report published in December last year by the Government’s working group on IT infrastructure and broadband (under the IT Policy Strategy Group).

The working group produced the following vision for the area:

Sweden must be the country where an efficient and secure IT infrastructure provides the best conditions for enterprise, innovation and eServices, both public and private. IT must enable Swedish people to access the services they need, no matter where they are.

To achieve the vision they set up the following general objectives for IT infrastructure:

The whole of Sweden should have an efficient and future-proof infrastructure for electronic communications with high transfer capacity in both directions, so as to enable good technical quality of transfer for multimedia services, in a functional, cost-effective and competitive market.

They mention a number of measures that need to be adopted to achieve this oal including:

  • developing an IT policy agenda within general industrial policy;
  • broadband subsidies;
  • investment in fibre-cabling;
  • built-out and coordination of passive infrastructure (ducts, poles etc.); and
  • a predictable spectrum policy.

The most important aspect is that the measures adopted should be characterised by their long-term and foreseeable nature – all with a view to creating a market, where there is sound competition, in which the end-user is in focus and where there are incentives for investments and innovation.

The report contains a separate section that dwells on why governments (municipal, state and national) should focus on the build out of “passive” infrastructure to enable broadband for all.

The report is available here (in English).

Boxing day December 27, 2006

Posted by Jasper in broadband.
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An opinion piece in The Australian came out on Boxing Day which is based on short report I wrote for the Competitive Carriers Coalition. I had hoped it would have hit the streets a few weeks earlier, but such is the workings of the newspaper business. Full (original) text below.

Thinking outside (Telstra’s) box on broadband

In recent weeks, key industry leaders have openly criticised the status of broadband in Australia. Rupert Murdoch chairman of News Corporation (publisher of The Australian) labelled broadband services in Australia “a disgrace” and said that the federal government and Telstra should invest up to $12 billion in a new network – comments later echoed by James Packer. Telstra claims that its incentive to invest is restricted by the regulatory regime for access to its network.

However, turning to Telstra to solve our broadband problems is antiquated and inappropriate. It is a far cry from the approach adopted in other jurisdictions to assume that the response to low broadband availability must be assisting the incumbent to undertake core investment. Options are available that can promote bringing fibre closer to end-users without providing more assistance to Telstra.

Australia can learn from approaches undertaken overseas to improve our broadband access. Evidence suggests that Australia is far from the forefront in broadband penetration and inadequate in broadband speed – a fact acknowledged by Telstra Chief Executive Sol Trujillo. In terms of access speed, around 35% of plans in Australia have speeds of 256Kbps or less. This contrasts most starkly with Sweden where some 25% of plans have speeds of 20Mbps or up to 80 times faster those on 256Kbps plans. Further, it is important to remember that the world does not stand still. To improve our standing we have to improve faster than the current trendsetters, not just catch up to where they are now.

Turning to the incumbent for help would have been appropriate in pre-liberalisation days before the introduction of competition. Today we move in a different era, where answers are needed to a different set of questions. Indeed in no jurisdiction have politicians or regulators looked blindly to the historical incumbent for help to ensure the broadband future. On the contrary, in countries like Sweden, which has an extremely successful broadband strategy, the government has stimulated the building of new networks as a competitive alternative to the national champion TeliaSonera.

That said, a range of policies have been put in place to stimulate investment overseas, suggesting that one solution does not fit all. It would be a mistake simply to import experiences from other countries with blind faith in their workings. The solution must be tailored to Australia’s economic, geographical, cultural and educational situation.

To encourage further investment, we must also recognise that broadband poses many uncertainties for investors. The most significant is demand. Some believe demand for broadband will be driven by video services while others focus on options for social interaction. Each of these has implications for the roll-out of infrastructure. Regardless of beliefs, the only thing that is certain is that demand for broadband services is uncertain and unknown. However, demand‑side uncertainty can be reduced. South Korea is a good example of a country that has pursued a successful demand‑side strategy. This policy has focused on education and targeting of those that are less technically adept. Broadband is available to almost 100% of the South Koreans and some 26% of the population are subscribers.

An alternative is to create a better environment for investment in broadband by stimulating the supply side of the market. International experience here is broad and varied. There is, however, a clear tendency to delegate locally – moving away from a focus on national solutions to allow greater flexibility in responding to local need and conditions.

The most effective broadband strategies are those that touch upon a wide variety of factors and engage a broad set of players – an approach that Senator Helen Coonan’s recent blueprint for Australian would appear to endorse. Of particular importance is the focus on competition and its crucial role in the creation of a viable and sustainable broadband market.

Indeed it is exactly the focus on competition that has spurred much of the debate in regulatory circles of how best to encourage investment in broadband, including both vertical and horizontal separation. The importance of competition is acknowledged even in the United States where there is no requirement for a regulated access regime. The fundamental underpinning of US regulatory regime is that the future number of end-to-end broadband providers will be sufficient to ensure adequate levels of competition in the market. Under these circumstances, there is no need for regulated access to new fibre networks.

A sustainable broadband market requires sustainable competition. Turning to Telstra is the wrong response and not what has been done in other jurisdictions. It is a wrong response because it is an answer to the wrong question. It is backward-looking and stifles competition in an environment that needs to be forward-looking and pro-competitive. Creating a competitive environment is the only way to improve Australia’s broadband situation.

Australia: Mobilising shareholders December 20, 2006

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Incumbent Telstra has announced that is devoting AUD 1 million to a campaign to recruit its shareholders as foot soldiers in its battle with the Federal Government over telecommunications regulation.

Most of the 100,000 people who became new Telstra shareholders in the recent T3 share sale will this week receive flyers in the mail from Telstra, urging them to pressure the Government to soften laws that allow its rivals to use its phone and broadband networks.

“We can lead the world: but you must have your say,” the flyer states, referring shareholders to its nowwearetalking website for more information – a website that in my opinion has zero credibility.

Personally, I doubt that they will accomplish much for their million dollars.

Australia: Broadband in WA December 4, 2006

Posted by Jasper in broadband, Uncategorized.
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The Western Australian (WA) government has unveiled a plan designed to connect homes, businesses, schools and all state government departments to a high-speed state-wide broadband network (see media release here). The StateWide Broadband Network (SBN) strategy will provide broadband speeds of 10 M-bits in the early stages. The government will pool the $A100 million it currently spends on telecom services each year to offer a 10-year, $A1 billion contract to facilitate the installation of the network. The WA government says that the scheme, which is based on a model implemented in Alberta, Canada, will be put out to tender in early 2007. For more information on the SBN, click here.

UK: Spectrum costs November 29, 2006

Posted by Jasper in Costing, Mobile, Regulation.
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In a letter sent to Ofcom the European Commission expresses concerns as to how wholesale tariffs, charged by the five UK mobile operators for terminating calls to their customers, have been assessed. In the Commission’s view, Ofcom’s proposed tariffs keep termination values higher than necessary due to 3G spectrum cost valuations which risk overestimating the costs. The Commission therefore asks the UK watchdog to reconsider the valuations. OFCOM’s approach would be detrimental to fair competition in the UK’s mobile market and lead to higher consumer prices for consumers. Commissioner Viviane Reding said:

I am concerned that Ofcom’s approach to calculate 3G spectrum costs could hinder the movement towards lower mobile interconnection prices.

The Commission believes that such costs should not be calculated on the basis of prices paid during the spectrum auctions, which are in today’s context inflated. Otherwise, distortions of competition and higher prices for mobile customers could be the result. I therefore ask OFCOM to reassess their method of calculating mobile termination rates in the UK.

I am generally of the belief that mobile termination prices in most jurisdictions are excessive, but I am surprised that the Commission has decided to attack Ofcom on this issue – Ofcom who were the first to create a mobile LRIC model and have been very aggressive on excessive termination rates. There are many assumptions in the UK mobile LRIC model that could be questioned. To pick one, as the Commission has done, tastes of regulatory cherry picking.

The target mobile termination prices are € 0.078 (5.3 pence) per minute for 2G/3G and € 0.089 (6 pence) per minute for 3G operators. According to the Commission, Ofcom has indicated the inclusion of 3G spectrum costs adds, on average, € 0.016 (1.2 pence) per minute to the mobile termination rates for the 2G/3G operators and € 0.028 (1.9 pence) per minute for the 3G-only operator. Even a small reduction in spectrum costs could therefore have an effect on prices.

However, valuation of spectrum on a current cost basis is no easy task. While a re-valuation of spectrum costs is likely to lead to a reduction, it is far from clear that any reduction in cost will be significant. Europe Economics considered how spectrum could valued in a report to the Commission in 2001. In it they noted:

One interesting case of particular importance in mobile telephony is the appropriate valuation of spectrum. Since the spectrum for 2G licenses cannot be traded, the NRV [Net Realisable Value] is zero. It could also be argued that the replacement cost is infinite (since it is impossible to purchase a similar asset), except on the rare occasion when further spectrum licences are offered for sale (e.g. 3G auctions). Even in these instances, spectrum is typically sold in large blocks that may be inappropriate for the replacement of 2G spectrum alone (MEA adjustments would be necessary). Furthermore, such sales are infrequent and therefore not helpful for calculating current costs on an ongoing basis.

The basis for Europe Economics analysis is the value to the owner convention. This defines current cost as the lower of replacement cost (RC) or deprival value (the greater of either selling the asset or using the asset). This can be written as Min [ RC, max [ NRV, NPV] ]. The replacement cost measures the cost of replacing the existing asset with another asset of similar performance characteristics; NRV is the net realisable value, the amount that would be obtained by selling an asset; and NPV is the net present value, the sum of discounted cash flows that an asset is expected to generate during its lifetime.

According to Europe Economics the substantial barriers to replacing 2G spectrum mean that it is not appropriate to use replacement cost for defining the current cost of spectrum. Hence, using the formula above, the current cost of spectrum is the greater of either zero (which is the NRV) or the NPV of the spectrum.

Basing the cost of spectrum on NPV requires the evaluation of the the expected future profits available to the mobile operator in question (after allowing for return on capital), over the life of the spectrum rights. If the future expected profit stream is greater than zero, the current cost of spectrum is the expected future profit stream (allowing for return on capital).

An easier methodology (but also subject to critique) may simply be benchmarking of spectrum value across Europe. This is likely to give the lower value desired by the Commission.

The Commission’s letter is available here.

Australia: Overview November 27, 2006

Posted by Jasper in Uncategorized.
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For those interested in a comprehensive overview of the Australian communications market, I suggest you read the  Australian Communications and Media Authority’s (ACMA) recently released report on the communications industry (for 2005-06).

According to the report reform of the Australian telecommunications sector has resulted in significant economic benefits. Australia now has more than 19.7 million mobile phones – 1.3 million added in 2005-06 – and more than 5.9 million Internet subscribers. 3G mobiles are now used by 8% of Australian consumers, and a third of all households now connect to fast Internet access services. Access the Report here.