Archive for December, 2010

Examination of 2G licensing extended by India’s Supreme Court

Wednesday, December 29th, 2010

Amid continued claims of alleged corruption relating to the sale of 2G spectrum, India’s Supreme Court has called for the Central Bureau of Investigation (CBI) to examine all mobile spectrum allocations since 2001. The court has directed it to expand its probe into the matter with a view to determining how much revenue the government may have lost as a result of alleged irregularities in the awarding of concessions. A two-judge bench asked the CBI to submit its final report by February 2011. The CBI has also been asked to consider allegations in a report filed in November by the Comptroller and Auditor General of India that many companies that received licences and bandwidth in 2008 were actually ineligible, and to examine why the regulator took no action. Meanwhile, the Enforcement Directorate, which is investigating any illegal fund transfers linked to the matter, has been called on to put forward its own findings by that same time as the CBI reports.

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Innovative 3UK providing unlimited data usage

Wednesday, December 29th, 2010

As the UK’s fourth player in the mobile phone market, 3UK (H3) has for several years developed a reputation for introducing innovative business models in a bid to attract subscribers from other providers. These have rocked the boat in ways which the other MNOs would doubtless prefer not to.

3UK’s parent company, Hutchison Whampoa, launched services in early 2003 having spent some €6 billion on its 3G licence and an additional €3 billion on network construction. The operator thus had every incentive to secure customers where it could, and save money where it could. As for innovation, 3UK was the first to allow mobile VoIP (through a deal with Skype): in 2008, it launched the Skypephone, featuring Skype calling and integrated instant messaging, and since mid-2009 it has allowed its subscribers free Skype to Skype calls without having to pay data charges. By early 2010, the operator reported having managed one billion minutes on its Skype service, estimating that the service had saved customers £120 million in calling costs.

3UK has also introduced an unlimited usage service, branded as the ‘One Plan’, which previously charged per 10 pence per MB for usage above 1GB per month. The plan provides sufficient minutes and SMS texts as can be realistically consumed in a month, as well as unlimited data. By contrast, the other MNOs have scaled back their data packages, imposing download restrictions (commonly 500MB per month) and throttling measures to curb consumer use of mobile data and so relieve the strain on their networks. O2 has notorious experience in this: it was the exclusive carrier of Apple’s iPhone in the UK market from late 2007 to late 2009, during which time the iPhone (considered an important customer acquisition tool) helped boost O2’s revenues by 10%. However, O2 soon earned the wrath of its customers after they found that their host network was incapable of delivering the data they called up or sent: in essence, the network was not up to scratch.

3UK’s confidence in its own network stems from its seven-year services agreement with Ericsson (to run to 2012) to manage its network and IT infrastructure. The agreement followed similar deals in place between the companies in Australia and Italy. By late 2010 3UK had completed the first phase of its £400 million 3G network upgrade as part of a project to expand its network to13,000 base stations nationwide year. The operator’s 3G coverage now reaches about 98% of the population. In addition, 3UK recently completed its network consolidation with that of T-Mobile (and, by extension, Orange through their new identity as Everything Everywhere). The network operating organisation Mobile Broadband Network (MBN) was set up to operate the joint network on behalf of both companies. The completed programme saw more than 3,000 redundant sites switched off, boosted HSPA coverage and provided 3UK with a stronger network on which to sell its new data plan. Although 3UK, with about 6.3 million subscribers, remains a small player compared to the three market leaders Vodafone (16.8 million), O2 (23 million) and Everything Everywhere (30.4 million) it is precisely this innovative business model which will enable it to survive and grow, at the expense of the big three. For consumers, churning to 3UK will soon become easier: porting mobile numbers is ‘donor-led’, in that consumers must ask operators to take their phone number to a new provider, and then pass on the Porting Authorisation Code (PAC). In 2011 portings must be completed in one day and the PAC must be issued by the provider within two hours by text message.

The promotion of the ‘One Plan’ focuses on its removing the possibility of bill shock when consumers use their smartphones (though the plan excludes iPhones and Blackberries). This will be particularly acute for those consumers who, often unwittingly, sometimes naively, racked up huge bills in their initial enthusiasm having bought a smartphone and plan from an MNO keen to make a sale in the first place. Bill shock for one month alone can instantly curb mobile data use, and cause resentment among consumers.

Bill shock of course also affects mobile roaming. At the EU level, the European Regulators Group (ERG) noted that the cost of sending an SMS message internationally was on average almost four times higher than if sent domestically, but with very low associated marginal cost. Data prices per MB are especially high and pose a significant price hurdle to the use of mobile Internet while abroad. Although margins on data roaming are high, mobile operators generally claim that data roaming represents only about 2-4 % of revenue. The EC has incrementally reduced excessive roaming charges through a number of regulatory measures, setting a wholesale cap for text messages at €0.04. In addition, since mid-2010 consumers have been able to set a limit to their data roaming bill: by default, MNOs must offer a monthly cut-off limit of €50 minimum and send users a warning when they reach 80% of their chosen limit. The EC also established a €1 per MB safeguard limit for wholesale data roaming fees, to make them more predictable for operators and so enable more transparent retail prices. The wholesale cap will be lowered to €0.50 by mid-2011.

See also:

United Kingdom – Mobile Market – 3G, Mobile Data and Forecasts;

United Kingdom – Mobile Market – Statistics and Forecasts.

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Thai panel says TOT could seek compensation from AIS

Tuesday, December 28th, 2010

A government panel in Thailand has suggested that the state-owned telecom operator TOT could seek compensation of THB75 billion from mobile operator Advanced Info Service (AIS) for paying less than originally agreed for a mobile phone concession. The panel also said that TOT could ask AIS to return to paying 30% of its pre-paid revenue to TOT as set out in the original concession deal, rather than the 20% being paid after unlawful amendments to the arrangement. The panel, which was set up to review amendments made to the original concession deals, has completed its work and was preparing to submit its findings to the Minister for Information and Communication Technology. Its recommendations also include a suggestion that Cabinet should decide whether to allow AIS to continue paying 20% of revenue to TOT following a five-year extension to the concession which had been due to expire in September.

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UK government’s latest broadband scheme demands review on fibre tax

Tuesday, December 28th, 2010

The UK government has steadily refined its national broadband plan, guided as it is by the 2010 Digital Economy Act which aims to provide all households with a broadband service of at least 2Mb/s by 2015. The government appears to be coming around to the popular view that this level of service is far from adequate. The initial 2012 timetable has already suffered a three-year setback, but at least the revised speed target is shifting towards 50Mb/s.

Currently, only Virgin Media, with a network covering about half of all homes, offers significant data speeds. Its 100Mb/s service has been rolled out steadily during the year, with plans to extend it across its network by mid-2011. The company has also trialled a 200Mb/s service in Ashford since mid-2009 (extended to Coventry in early 2010), and in mid-2010 began preparing for modems to handle 400Mb/s. BT’s fibre offers are geographically limited as yet: its £2.5 billion programme aims to provide up to 40% million homes with fibre by 2012 and 66% by 2015. In June 2010 BT announced plans to connect 87% of homes and businesses in London to FttC-enabled exchanges by about April 2011. Since most of the national infrastructure is hybrid VDSL / FttC, it is restricted by its reliance on copper for the last mile. Furthermore, last month BT, having achieved speeds of 70Mb/s using FttC in laboratory conditions, announced that it would not upgrade to FttH those areas where FttC has already been deployed, considering FttC sufficiently ‘future-proof’ for consumers, even though in practice the majority of FttC homes cannot expect more than about 35Mb/s.

To address the problematic rural areas, the government has allocated £830 million to fund fibre-based hubs to every community in the country by 2015. The hubs will be linked to exchanges by fibre, allowing ISPs to deliver faster IP services. There is an additional £50 million (derived from BBC licence fee revenue originally intended for digital switchover) allocated to funs pilot projects to test how these hubs can be extended to rural areas.

So good, so fine. Yet there is disquiet among ISPs that the scheme fails to address the current fibre tax regime which favours BT and Virgin Media against smaller ISPs. BT is assessed for tax in a different way from small companies. The Valuations Office (VOA) in mid-2010 considered that the taxable rate per home should be £20 (compared to £7.50 per home connected with cable). In addition, BT pays tax based on the rent generated by a cable as also on its entire physical non-domestic infrastructure. All other players pay per fibre pair – with networks up to 50kms they pay for cables used at between £2,000 (outside London, or £3,000 for business rates) and £3,000 (within London) for the first kilometre. There is then a phased scale, increasing the rent per kilometre as the length of the network falls below 2,000kms – in other words, for tax purposes smaller networks pay proportionately more in tax. BT does not pay higher rates with the greater number of fibres used, whereas alternative operators pay more proportional to each kilometre lit up. For alternative operators, the higher cost to access each home becomes evident since each is connected with a separate cable (almost all of which are shorter than a kilometre). Although the tax rate falls rapidly the more cables an operator has the overall tax bill to deliver fibre to a community can be burdensome, and would dissuade a proportion of those people so served from signing up.

So the existing taxable rating system stifles fibre-based broadband services by making it economically unviable for operators other than BT and Virgin Media from undertaking the work. A meeting was held earlier in December 2010 between the government and a numbers of ISPs and stakeholders to discuss the fibre tax, yet this was essentially a letting-off steam exercise for ISPs, rather than one aimed at revising the tax. Some of the key smaller fibre operators, such as FibreCity, which recently restarted its stalled deployment in Bournemouth, were not invited to attend.

For more information, see:

United Kingdom – Broadband – Fixed Network Statistics and Forecasts;
United Kingdom – Key Statistics, Telecom Market and Regulatory Overviews.

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India considers law on monitoring by security agencies

Tuesday, December 28th, 2010

India is considering introducing a law that would force operators and vendors to ensure that their networks supported real-time monitoring by security agencies. The proposed law, based on the US Communications Assistance for Law Enforcement Act (CALEA), would require operators to allow lawful interception of voice, emails, Internet data and VoIP communications. Indian telcos are already required to enable state surveillance by licence agreement, but there is nothing that forces them to modify their networks to allow it. The Indian government hopes to be able to pass the law as early as 2011. The legislative changes may be accompanied by the establishment of a new telecom security commission which would be responsible for making security decisions based on input from both intelligence agencies and the industry.

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