Archive for May, 2013

NBN and the competition issues

Friday, May 31st, 2013

Competition continues to be a hot topic in every NBN debate about developments of the NBN, in relation to both the current government’s position and to Coalition policies.

The current debate very much revolves around the Special Access Undertakings (SAUs). We analysed this situation a few months ago, at which time we said that the underlying problems with the SAU is the flawed longer-term NBN Co business model. This model depends entirely on old-fashioned telecoms income and does not take into account the wider economic and financial benefits that will be delivered by the NBN. Because of its national importance to, for example, healthcare, education and government services, over time cost of access to the NBN will go down and not up – but that reality is not yet reflected in the NBN Co business plan.

On the Coalition’s side there is still that lingering promise of infrastructure-based competition, which of course involves another rather flawed assumption. This assumption is all the more remarkable as it was under a previous Coalition government that infrastructure competition – between HFC and ADSL networks – failed completely. How on earth they plan to revive a national level of competition remains a mystery. It would, however, be very dangerous to develop policies on the premise that infrastructure-based competition can work. The window of opportunity for such a level of competition has clearly passed and there is no way that this can be revived; duplicated infrastructure will simply end up on the scrapheap of stranded infrastructure.

Instead BuddeComm suggests that what we need to keep a much closer eye on is the dominance of Telstra in this new environment.

The unfortunate selection of 121 POIs instead of the 14 initially proposed by NBN Co severely limits the opportunities of large-scale retail-based competition. Only two or three wholesale/retail operators can afford to build out national services on top of the NBN, which would require them to install their own equipment in all of those 121 POIs.

Narrowing that down even further, among these two or three Telstra is by far the most dominant player.

Add to this the lucrative deal it already has with NBN Co and it is evident that a cash-rich company can easily outcompete others in, for example, the mobile spectrum auctions that recently took place. Give the build-out of services on this new spectrum a couple of years and we will see that Telstra will also be totally dominant in the mobile market.

So far very little debate is taking place on what this will mean for the overall level of competition in the market.

The next concern is that if the Coalition indeed wants to make some serious changes to the foundations of the NBN they will need the cooperation of Telstra, and that telco has already very clearly indicated that it will only make changes that would be in the interest of its shareholders. In other words, Telstra needs to be better off under any deal that the Coalition needs from them.

So if the Coalition does want to make any significant changes it will have to make Telstra a very attractive offer. With or without an NBN Telstra has little or no interest in investing in copper- and HFC-based infrastructure, so if the Coalition wants it to invest in those old technologies they would need to take the risks of such investments. Furthermore, Telstra would be the only one who would be able to deliver on the Coalition policy to prolong the life of copper and HFC; and so, beside the money issue the regulatory issue will need to be addressed – and, again, without any associated incentives Telstra would be very reluctant to move in this direction. So, whatever way you look at it, changes to the fundamentals of the NBN would undermine competition in Australia even further.

So far the Coalition has mainly spoken about competition in relation to the position of NBN Co, and there certainly is a need to keep an eye on that. Nevertheless at this point in time the dominant position of Telstra continues to be the greatest threat to competition.

While Telstra has changed considerably, for the better, it remains very dominant, and tough regulatory policies will be needed to ensure good and viable ongoing competition in Australia. Any government that places itself in a vulnerable position vis-à-vis Telstra will find it hard to negotiate those very essential tough deals.

Paul Budde

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Cuban subsea cable improves connectivity but access restrictions remain

Friday, May 31st, 2013

Two important recent developments in Cuba’s internet market have provided some encouragement that the country will join the international internet community. But not yet.

The opening of the subsea cable link to Jamaica was the first of these. Forming part of the Cuba-Venezuela cable ALBA-1, it had been opened to traffic from Venezuela earlier this year. The cable link ends the major restriction by which all international traffic was channelled through a network of three satellites. Although the cable provides considerable potential for connectivity to the Web, the poor condition of domestic wiring, systems and infrastructure mean that considerable upgrades and investment are still needed to eliminate bottlenecks. In addition, the availability of equipment is dire: the first legally and publically available PCs only went on sale in 2008 after the government (following the retirement of Castro) lifted its ban on ownership of a range of consumer electronics. Even now, the imminent trial of DTT services in Havana, using the Chinese standard DTMB will rely on STBs donated by the Chinese government.

Apart from the physical limitations, users must still tackle a government suspicious of the internet as a tool of subversion. The government does not permit the general public full access to the internet. Internet access is only available at select state institutions (generally restricted to academics and government officials), while tourists have limited access at a number of hotels around the island. Despite the scarcity of internet cafés, a number of municipal culture centres and post office Net Halls (a service which started during 2004) also allow limited access, though users are limited to sending email messages over a closed network on the island with no full links to the Web proper.

The second major development is the opening of 118 internet outlets around the island, complementing the existing (limited) number of outlets. Yet these provide relatively expensive and only partial internet access: costing around CUC4.50 (US$4.50) per hour the service can only have a limited reach within the population, where the average wage is about US$20 per month. There are a number of bureaucratic restrictions as well: internet users must register and be vetted to gain an ID permitting access. No VoIP services are permitted, and nor is any provision being made for WiFi access.

The government’s enthusiasm to control the flow of information within and into the country was plainly exhibited by its introduction of the ‘NOVA’ operating system (intended as a substitute for Microsoft Windows). The NOVA software was specifically designed so that its levels of security and protection adhered to the government’s requirements for control over internet access. This determination to control remains as strong as ever: the broadening of the number of access points may make it easier for a limited number of Cubans to access such internet services as they are currently familiar with, but the country is far from being part of the internet community.

For more information see Cuba – Telecoms Mobile and Broadband – Analyses and Statistics

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Hopes for more stability put Somalia on investors radar

Friday, May 31st, 2013

Somalia’s telecommunications market is unique in the world. There has been no central government since 1991 when a dictatorial regime was overthrown, but despite the anarchy that followed, the telecoms sector has flourished. It is highly competitive with at least seven mobile networks, which also offer fixed-line and Internet services. There are no regulations or taxes and no service obligations, tariffs are among the lowest in Africa. However, the absence of regulation has also led to problems with frequency spectrum coordination and interconnection between networks.

In addition, the threat of piracy in Somalia’s waters has so far prevented the country from gaining access to international submarine fibre optic cables, which means that it has to rely on satellites for its international connections. As a consequence, the broadband capabilities of Somalia’s Internet service providers are limited. Plans are now underway to land an international cable in the country for the first time.

Recent progress in the fight against islamist militias and the formation of a new government are giving rise to hopes that the country may finally stabilise and become more attractive to foreign investment, which is needed to take the telecoms and broadband sector to the next level. The new government is beginning to regulate the sector and is planning to issue new spectrum licences that will allow the operation of high-speed mobile broadband technologies.

Market highlights:

  • A completely unregulated market;
  • New telecom licences to be issued;
  • An underdeveloped broadband market;
  • New government may bring more stability for foreign investment.

Estimated market penetration rates in Somalia’s telecoms sector – end 2013

Market

Penetration rate

Mobile 52%
Fixed 1%
Internet 1.4%

(Source: BuddeComm based on various sources)

For detailed information, table of contents and pricing see: Somalia – Telecoms, Mobile and Broadband

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Beltelecom upgrades international bandwidth to meet traffic demand

Thursday, May 30th, 2013

Economic challenges

Belarus’s economic growth was halted by the 2008 financial crisis. Although inflation has been brought down to more manageable levels since the hyper-inflationary years to 2011, the country will face difficult challenges into 2014 at least. The economic crisis has also affected the telecom sector, with reduced customer spend leading to lower telco revenue and investment.

Telecom sector overview

There remain many opportunities for growth in coming years given the relatively low penetration in fixed-telephony and broadband services. Although the sector has been reformed in recent years, restructuring has not resulted in the privatisation of the incumbent Beltelecom, which has invested substantially in infrastructure and technologies, assets which the government is keen to control despite having considered auctioning off the enterprise. Growth is expected to be particularly strong in the FttH sector, where much of the company’s capex is directed.

Mobile developments

The mobile sector has experienced the strongest growth in telecoms, with a rapid rise in mobile penetration attributed to effective competition. LTE services, launched in 2012, suggest that further revenue growth will come from mobile data services. Recent spectrum auctions will facilitate the development of mobile broadband access, particularly in rural areas.

Belarus – Key telecom parameters – 2010; 2013

Sector

2010

2013 (e)

Subscribers to telecom services(million)

Fixed broadband 1.8

3.12

Mobile telephony 10.1

11.57

Fixed-line telephony 4.04 4.24

Penetration of telecoms services

Fixed broadband

14%

21%

Mobile telephony

108%

124%

Fixed-line telephony

42%

45%

(Source: BuddeComm based on industry data)

Market highlights:

  • FttH deployment is guided by the Ministry of Communications within the state programme by which Beltelecom has made GPON-based FttH available to about 90,000 subscribers. Some 3,520km of cabling has been built thus far.
  • Analogue switch off by 2015 may be brought forward though DTTV development has been stymied by the high cost of reception equipment. To help push ASO, the sale of TV sets without DTT tuners are banned.
  • Future internet society development is guided by a development strategy for 2011-2015. Priorities include development to infrastructure, e-government, e-health, e-learning and human capital development
  • A commercial LTE launch in early 2012 in Minsk and Grodno has been the forerunner of considerable investment in LTE infrastructure.
  • Scartel has indicated its readiness to sell Yota Bel, potentially bringing in an international investor into the LTE market.
  • In March 2012 the UN ranked Belarus 48th on its e-government development index (in terms of telecoms infrastructure), compared to 84th in 2008.
  • International transmission capacity has grown in line with rising internet usage. By March 2012 capacity had reached 220Gb/s. of which the gateway to Russia accounted for 140Gb/s, with the remaining 80Gb/s transiting through its western link.
  • MTS Belarus launched DSL services in mid-2012, complementing its limited Ethernet offerings.
  • Beltelecom during 2013 contracted to increase international internet capacity from 350Gb/s to 450Gb/s, with new channels for both the western and eastern directions.

BuddeComm’s annual publication, Belarus – Telecoms, IP Networks and Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecoms sector in one of Eastern Europe’s lager emerging markets. It incorporates the latest Ministry of Communication’s market data, telcos’ operational and financial data to Q1 2013, and market developments to May 2013. The report provides an overview of the telecoms market including the mobile voice and data, broadband and digital media sectors.

For detailed information, table of contents and pricing see: Belarus – Telecoms, IP Networks, Digital Media and Forecasts

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Mobile ARPU rises as 3G broadband services gain traction in Madagascar

Tuesday, May 28th, 2013

Madagascar’s exposure to the global economic crisis was amplified by political instability following a controversial change of government in 2009. The economy has remained weak since then which has led to weaker subscriber growth in the telecoms sector, reduced consumer spending and, as a consequence, intensified price competition between the three GSM mobile network operators – Orange, Bharti Airtel (formerly Zain) and Telma, the incumbent telco. A fourth mobile operator, Madamobil, launched a CDMA-based network in 2010 but its licence was revoked in 2012. GDP growth is currently expected to steadily rise back to levels of around 5% by 2016/17, but this will in part depend on the outcome of controversial elections in 2013. However, plans to exploit and export crude oil, gas and other natural resources may deliver a boost to the economy.

Positive developments in the internet and broadband sector have begun following the arrival of the first international submarine fibre optic cables, LION and EASSy on the island in 2009 and 2010. This ended the country’s dependency on satellites for international connections, bringing down the cost of international bandwidth and making internet access more affordable to a wider part of the population.

A national fibre backbone is being implemented connecting the major cities. Wireless broadband access networks are being rolled out, enabling converged voice, data and entertainment services. The launch of third generation (3G) mobile broadband services has enabled the mobile operators to reverse their rapidly declining average revenue per user (ARPU).

The fixed-line sector has been undergoing a revolution following the privatisation of Telma. Major investments have been made, the number of fixed lines has multiplied, albeit from a very low base. ADSL2+ broadband services have been introduced and the decline in fixed-line revenue has been successfully reversed. Despite these positive developments, the national telco is considering various divestiture options.

Penetration rates in all market sectors are still below African averages, promising excellent growth potential.

Market highlights:

  • 2013 elections crucial for political stability and economic growth;
  • Mobile ARPU rises as 3G broadband services gain traction;
  • Fourth mobile licence revoked;
  • Lower international bandwidth costs lead to retail broadband price cuts;
  • National fibre rollout continues;
  • National telco considers divestiture options.

Estimated market penetration rates in Madagascar’s telecoms sector – end 2013

Market

Penetration rate

Mobile 48%
Fixed 1.5%
Internet 2.5%

(Source: BuddeComm based on various sources)

For detailed information, table of contents and pricing see: Madagascar – Telecoms, Mobile, Broadband and Forecasts

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