Archive for August, 2013

Dutch network neutrality shows its benefits

Wednesday, August 28th, 2013

On a regulatory level, the Netherlands in mid-2012 became the first country in Europe (and the second globally, after Chile) to adopt laws protecting net neutrality. Legislation blocks ISPs from throttling or blocking traffic to specific websites or services, and from charging extra for access to certain websites or applications.

However, ISPs are permitted to manage traffic in cases of congestion and for network security, as long as those measures serve the interests of the internet user. Given the importance of internet access, ISPs can only disconnect users in a limited set of circumstances, such as for fraud or no payment of accounts.

The issue of net neutrality emerged in about 2000 when it became possible for ISPs to adjust traffic based on content or provider. Within a few years the proliferation of available services which competed with those offered by incumbents had led to rampant discrimination: it had become common, particularly among incumbent operators in the Nordics and Germany, for services such as VoIP to be blocked from mobile networks, or for customers to be charged extra for making use of them.

In the Netherlands the issue came to the fore in late 2011 after KPN reported another poor financial performance. The company sought to bolster its revenue by charging a premium for some mobile services (the WhatsApp messaging service was singled out in particular) which effectively replaced those services which KPN also offered. This was thwarted by the States General, which passed legislation guaranteeing network neutrality. The principal had first been elaborated in mid-2011.

A recent report from the research institute SEO Economic Research, commissioned by the Dutch Ministry of Economic Affairs, validates net neutrality as enshrined in the revised Dutch Telecommunications Law. The report has shown that net neutrality encourages ‘one-sided pricing’, by which all consumers pay the same charge for accessing the internet. This has obvious benefits over the non-net neutrality two-sided pricing, by which ISPs create different pricing structures between customers and content providers.

Net neutrality also fosters innovation at the core level: when IPSs charge content providers more for access to their priority traffic on their networks, the cost to the latter reduces the incentive to innovate. Thus net neutrality helps businesses develop products and services since ISPs are prevented from restricting or prioritising traffic to specific applications. The report also confirms that lower access costs encourage greater use of internet services: ISPs also benefit financially since customers (without the threat of having their broadband speed throttled or curtailed) are shown to be willing to pay for more data capacity.

The European Commission, which has longed debated the pros and cons of net neutrality, may take some positive soundings from the Dutch experience.

For more information see Netherlands – Broadband Market Insights, Statistics and Forecasts

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Cancellation of MTS mobile licence in Uzbekistan causes major dislocation in local market

Wednesday, August 28th, 2013

For many years Uzbekistan’s telecom infrastructure remained outmoded and inadequate. The country has been struggling to bring its telecommunications system up to the standard found in developed markets. Over the last decade or so, the situation has been steadily improving. This has in part been due to the government’s decision to give national priority to the telecom sector. The result has been a definite upward trend in the country’s telecom market, with increased investment in infrastructure, expanding subscriber bases and rising revenues. The government’s strategic policy was to privatise the incumbent operator Uzbektelecom and to open the market to competition.

The telecom market in Uzbekistan ran into a period of considerable difficulty in 2012 and the aftermath was being felt in 2013. In a dramatic turn of events the government took strong action against mobile operator MTS Uzbekistan after alleging a range of violations, including tax evasion, failure to meet regulatory standards, and the use of unlicensed infrastructure. The conflict escalated dramatically in August 2012 with the cancellation of MTS Uzbekistan’s operating licence. MTS held 40% of the mobile subscriber base at the time; the government’s action saw the 9.5 million subscribers to MTS suddenly without mobile service. These disconnected subscribers were forced to find service elsewhere. By mid-2013 MTS had been declared bankrupt and there had been no final resolution of the complicated dispute between the government and MTS. In the meantime, the mobile market had been severely damaged by the dispute and especially the way it had been managed. The disastrous process was certain to be viewed negatively by potential foreign investors.

Uzbekistan’s telecom sector has been regulated by the Uzbek Agency for Communications and Information (UzACI) since the creation of the agency in 2002/2003. In 2005 the UzACI approved a telecommunications investment program for the period 2005-2010. Among other things, the program aimed to increase the total number of fixed lines to 2.2 million and achieve 100% digitalisation of the network by 2010. The fixed line subscriber target was not achieved with subscriber numbers still sitting below 2 million by 2012. Only about two-thirds of the network was digital by 2007, but by 2009 this has been lifted sharply to 90% moving closer to achieving the target. The five year telecom investment program also aimed at accomplishing marked improvements in mobile telephone and internet penetration. By 2011 both these segments of the market had shown significantly gains, with the mobile market in particular having expanded rapidly over the previous five years. Subscriber numbers had jumped from around one million to 21 million over the plan period. Funding for the investment program was provided by loans and foreign investment, the internal resources of operators and providers, as well as from government funding. However, as already noted, the mobile market was badly hit by the MTS licence cancellation and after peaking at around 25 million subscribers the mobile market fell to around 20 million by end 2012. Some uncertainty was continuing to weigh on the market coming into 2013.

The state-owned national telecom operator, Uzbektelecom, has been responsible for the fixed-line network and services throughout the country. It was originally granted a monopoly on international voice services and VoIP until 2007. In the meantime, it controlled around 98% of local fixed-line telephony services and 96% of international fixed-line services. Little progress had been made in the government’s plans to privatise Uzbektelecom despite several attempts over the last decade to sell off a sizable stake to a foreign investor. The alternative fixed-line providers were Buzton and East Telecom, but they were servicing only a limited numbers of subscribers.

While the country’s internet market had enjoyed considerable growth since 2002, actual internet subscriptions have remained limited for the majority of the country’s population. Fixed broadband subscriptions in particular were small in number. By 2005 internet user penetration stood at just over 4%; by early 2013 it had reached a reported 37% user penetration. (It is noted that the various sources for statistics on internet subscribers in Uzbekistan provide limited or contradictory information.)

For detailed information, table of contents and pricing see:

Uzbekistan – Telecoms, Mobile, Broadband and Forecasts

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Resource and energy management are hot issues all around the world

Wednesday, August 28th, 2013

Governments and society are beginning to understand that energy savings and environment sustainability are important national issues that have an economic value as well. The focus on energy savings and sustainability linked to the rapid development of smart technologies is seeing the focus shift from smart meter rollouts – to the broader issues of smart grids.  These developments should be considered in the broader context of the modernisation of electricity networks through the introduction of sensing, communications and information technology into the grid – also known as machine-to-machine (M2M).

The energy sector is one of the last to face the transformation forced upon them by technical, social and political developments. While the writing has been on the wall for some time – initially driven by environmental and sustainability issues – it was not until consumer energy prices started to increase that the foundations of this industry were questioned, at which point the sector was thoroughly scrutinised by the consumers, media and the politicians. At that time it became clear that the industry had failed to keep up with social change and with changes in technology. It now faces significant challenges, both in relation to sustainability and to price increases.

Despite this increased understanding – in 2013 there seems to be a lull in smart grid developments after the early enthusiasm from 2007 to 2012. We now seem to have arrived at a period of regrouping and rethinking. Around the world some smart meter rollouts have been completed and some are still underway. However, the process has often been interrupted by consumer outcries and political intervention. The main reason for this has been the initial strategic mistake, made when electricity companies embarked on smart meter rollouts more or less as a stand-alone project. Most of these rollouts were based on facilitating time of use (ToU) pricing that would give the electricity companies the opportunity to increase prices at times of peak demand in order to better manage their network.

As long ago as 2006; BuddeComm argued for a much more holistic approach to the looming energy crisis, the climate change issues and energy efficiency in general. We said that the industry should look at the concept of smart grids as an overall approach to these issues. The smart grid concept can indeed facilitate smart meters and ToU, but they could also assist customers in more efficient management of energy use within their homes; and they can also facilitate management of renewable energy, electric vehicles and so on. It has as much to do with industry transformation as with smart technologies. Today there is a much better understanding of the concept of the smart grid and few energy companies would now embark on isolated smart meter rollouts – although some still continue to do so.

The telcos are looking at the broader market of M2M as a key revenue earner for the future and BuddeComm forecasts that sensors and other devices installed within the energy infrastructures will constitute 40%-50% of the overall M2M market. So obviously this is a key target market and it is most likely that the electricity industry will become the largest user of M2M networks.

With a better understanding of the complexity involved in the transformation of the electricity industry; the words ‘smart energy’ are becoming more prominent. BuddeComm believes that the term ‘smart grids’ is too narrow and that eventually ‘smart energy’ will become the accepted terminology, especially once the communications developments in national broadband networks and mobile broadband start to converge with smart grid developments.

BuddeComm’s new report, Global Smart Infrastructure – The Smart Grid and M2M Movement, provides important insights into the movement towards smart grid and smart energy practices. It identifies the key trends which will play an important role in the future, including insights in M2M which is closely related to smart infrastructure developments. The report provides global insights into the unfolding smart meter market and explores the consumer issues impacting upon uptake. In addition, this insightful document includes valuable and unique case studies on selected countries from North America, Asia-Pacific, Middle East, Latin America, Africa and Europe.

Examples of key insights:

  • In order to maximise its benefits, there is an urgent need for smart meter and smart grid standards.
  • Smart meters are going to play a key role in smart grids as the in-house energy management tools for the users.
  • With a better understanding of user requirements, apps-based developments rather than display-based customer interfaces are going to be the future.
  • Demonstration projects are currently being used to help understand the challenges and full benefits of Transactive Energy Systems.
  • Broadband Powerline (BPL) transmitting higher data rates (Mbps) on the energy distribution grid has emerged as one of the most promising solution for smart grids.
  • It is crucial for the electricity industry to become far more proactively involved in the development of the super grid, rather than leaving it to be developed by others.
  • The electricity grid is becoming the enabler in many key changes, and by making it an intelligent grid and adding telecoms to it, the power will shift away from the electricity companies to the customers – and the appliances that will be developed will assist this process; some of that on a M2M basis.
  • One of the most significant developments in smart grids in the use of cloud computing, big data and data analytics. These tools have a big role to play in any energy reform as it will enable significant higher levels of energy efficiency.
  • SCaDa is a core component of smart grid infrastructure based on M2M. China already holds a large market share of the SCaDa sector and this is expected to grow even further through to the 2020.
  • This exciting sector sees billions of dollars being invested worldwide in smart grid infrastructure, smart meters and distribution automation systems.
  • There are now several countries that are putting smart infrastructure central to their energy policies as they see this as the key to link the various policy and innovation developments together. Germany, the Netherlands and the Scandinavian countries are amongst the thought leaders in this field and Germany has invested heavily to make this happen.
  • European countries in general have become major proponents of smart grid infrastructure and smart metering. Countries in the region have developed smart meter policies, in part overseen by the European Commission requirements to meet goals set for 2020.
  • China and the US have some of the largest smart grid markets in terms of value – these two countries are also large investors in the technology.
  • Smart grid technology is only just beginning to be addressed on the African continent – less so from the environmental point of view at this stage but driven rather by the need to manage a chronic shortage.
  • Australia is in a key position to start developing all-encompassing strategies and business models to link resource products and energy products together, and start looking at using knowledge and investments to develop national-scale solutions.
  • Across the Middle East, smart grid trials or deployments have been conducted in Jordan, Lebanon, Syria, Iraq, Yemen, Oman, Bahrain, Saudi Arabia, Qatar and Dubai.
  • Latin American countries are interested in smart energy technology primarily as a way to reduce power theft, which is rife throughout the region.

For detailed information, table of contents and pricing see:

Global Smart Infrastructure – The Smart Grid and M2M Movement

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Digital economy will affect bank fees

Wednesday, August 28th, 2013

Looking at the recent results of Australian banks it is clear to see that they generate very healthy profits. These profits are largely derived from the large number of different bank fees that they charge their customers – and they are among the highest in the western world. Healthy profits have been the case for many years, and the underlying area of bank fees has been the subject of many enquiries from governments and regulators; but in general, while political promises and threats have been made, they have never really delivered any results for customers.

The banking sector has been one of the most protected in the economy, and to a certain extent for very good reasons. However the system has been developed to such an extent that, in reality, there is little or no competition between the banks. Furthermore, through their exceptional understanding of the regulatory processes and their sophisticated lobbying processes, the institutions have been able to influence regulations and policies in order to ensure that competition remains minimal – in fact, they are in general the major beneficiaries of the regulatory outcomes as it enables them to maintain the oligopoly system.

But the digital economy might spoil this party, and not because of anything that will take place within the cosy arrangement between banks and regulators. The potential threat will come from outside. The fat fees that exist in the market are attracting organisations with sizeable customer bases that require large numbers of transactions – retailers, telecoms companies and airlines. They are all involved in their own business and sector transformation processes made necessary by the digital economy, and these organisations are widening their level of services and exploring new markets in order to compensate for the resulting losses in their traditional operations. Financial services will increasingly become a target market for them, greatly enabled by the digital economy.

Interestingly, banks have rather suddenly embraced new developments such as m-banking and as a consequence have seen a massive uptake of these services. In order to be able to offer these services they needed to automate their systems, which they have done, and part of the large profits they now generate is based on this development – with significantly lower costs they still charge the same fees and all of that goes straight to the bottom line.

Interesting developments in the financial area are also coming from companies like Google, Apple, Amazon, Samsung and PayPal; they are companies that need to be carefully watched by the banking industry. These developments will further internationalise the financial retail market and that in turn might also lead to interesting new developments, with competition coming from overseas international organisations involved in financial transactions. This will also challenge the current national and international banking regulations.

So competition in a digital economy might actually finally deliver the outcome many have been fighting for, and which government policies and regulations failed to achieve – lower banking fees.

Under the pressure of these new developments banks will not sit still; but, while they will try and hold off for as long as possible eventually they will have to face these new developments and may have to lower their fees, it will be interesting to see if that also will stimulate further innovations in this sector when they are forced to start looking at new services to maintain their levels of profitability.

Paul Budde

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LTE and Mobile Number Portability to underpin competition in Kuwait

Tuesday, August 27th, 2013

Like the other countries in the Gulf Region, Kuwait is one of the wealthiest countries in the Middle East due to its abundance of natural resources such as oil. Kuwait’s government is heavily involved in the economy, largely due to its control of the oil industry. A similar situation exists in the telecom sector due to the lack of market liberalisation. Not only does Kuwait not have an independent regulator, the Ministry of Communications (MOC) is both the regulatory entity and also the operating entity for fixed-line services.

During June 2013 a draft law was passed to establish a telecoms regulator. Market competitors have long called for the establishment of separate regulatory authority to ensure fair competition.

Internet services are available throughout the country, with four major ISPs competing with each other. Underinvestment in infrastructure has hindered market development, with maximum speeds of 8Mb/s available on the government owned fixed line copper network. Alternative access network platforms such as FttH, WiMAX and mobile have been deployed, with the latter gaining much traction in the market given the market presence and abilities of the mobile network operators.

Recognising the potential of applying ICT to improve both social and economic development, Kuwait has taken steps to develop a digital economy; national level policies for e-health and e-government have been developed, with a number of services available online.

Kuwait possesses a competitive mobile market as evident by current penetration levels. Services are offered by Zain, Wataniya and Viva. Penetration levels rose significantly after Viva entered the market. The introduction of Mobile Number Portability in June 2013 will further improve competition.

LTE services have been launched and are being used to underpin mobile broadband offerings. Mobile operators are well positioned to profit from mobile broadband, given the superior advertised download speeds offered relative to fixed broadband ISPs, the sizeable potential broadband subscriber market, existing brand recognition, distribution channels and customer base.

For detailed information, table of contents and pricing see:

Kuwait – Telecoms, Mobile, Broadband and Forecasts

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