An operators perspective of the European regulatory debate Advancing in Telecommunications Regulatio

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An operators perspective of the European
regulatory debateAdvancing in
Telecommunications Regulation 1st Black Sea and
Caspian Regulatory ConferenceMay 26,
2006Wolfgang Kopf, LL.M.Executive VP Public
Regulatory AffairsT-Mobile International
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Agenda

• About T-Mobile
• European Mobile Markets
• The European Regulatory Debate
• Spectrum Liberalization

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About T-Mobile

• T-Mobile International AG Co. KG was
  established in December 1999 and is one of the
  largest mobile communications operators worldwide
  (3rd place in terms of Revenues, 4th place in
  terms of subscribers)
• T-Mobile International was the first seamless
  transatlantic mobile network operator and is
  still the only one
• DT Group holds direct or indirect investments in
  mobile communications companies in 15 countries
  with more than 86 million subscribers 2005
  (eoy)
• Net revenue of T-Mobile International was 28,5
  billion Euros in 2005 (eoy)

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Our Footprint
T-Mobile D (100 ) No. 1 Player
PTC (Poland, 49 .0) No. 1 Player
T-Mobile NL (100) No. 3 player
Mobimak (Macedonia, 30.2) No. 1 Player
T-Mobile UK (100) No. 1 Player (w/ Virgin
Mobile)
Monet (Montenegro, 45.5) No. 2 Player
T-Mobile Croatia (51.0 ) No. 1 Player
Eronet (Bosnia, 25.0) No. 3 Player
T-Mobile Slovakia (51.0 ) No. 2 Player
Notes Ranking based on subscribers number
(status as of Q2/2005). Percentage of stakes in
brackets. No. 4 player after closing of Sprint
/ Nextel merger Pro rata as (local) fixed line
is holding the shares in the local mobile
operation
T-Mobile branded
Not T-Mobile branded
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Agenda

• About T-Mobile
• European Mobile Markets
• The European Regulatory Debate
• Spectrum Liberalization

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EU25 Communications Market VolumesEU25
communications markets growing faster than GDP.
Mobile and fixed data services main growth
drivers. Fixed voice service revenues steadily
declining.
EU25 Communications Market Volumes( bn)
1.7
1.1
0.9
2.4
EU25 GDP growth
5.3
6.7
3.9
4.9
Yearly growth
CAGR
277
264
5.3
254
14
238
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Cable TV Services
18.3
12.3
13
51
12
45
15.1
42
Fixed Data Services
36
32.5
--0.7
90
38.6
91
Fixed Voice Services
92
92
44.1
7.6
122
41.4
114
Mobile Services
107
98
2003
2001
2002
2004E
...
share at total market volume
Source EU Commission (10th Communications report)
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EU15/EU25 Mobile Subscriber DevelopmentEuropean
mobile markets approaching saturation.
Addressable market penetration already higher
than 100. Prepaid main growth driver.
Mobile Subscribers (SIM cards) and Penetration in
EU 15 EU 25(in m)
Subscriber EU 15
Subscriber EU 25
Prepaid penetration
62
63
CAGR 00-0411 (EU15)
2000
2001
2002
2003
2004
2Q 2005
63
75
79
86
94
96
EU15
Populationpenetration
91
94
EU25
Sources Mobile Communications/Baskerville,
Merrill Lynch (April/September 2005), Eurostat,
own calculations Note Total EU25 population of
458m by end of 2004, EU15 with 384m population.
End of year penetration rate. CAGR Compound
Annual Growth rate EU Europe
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Business challenges and opportunities on mobile
markets
Competitive moves by market players

• Price-aggressive competitors and (additional) low
  cost /no frills operators entering
• Increasing competition around existing customers
• Increasing relevance of data and internet
  services
• Market consolidation and increased MA activities

Future mobile market development uncertain
Regulation ???
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Agenda

• About T-Mobile
• European Mobile Markets
• The European Regulatory Debate
• Spectrum Liberalization

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Review 2006 of the European Telecommunications
Framework (i2010)

• European Commission aims with i 2010 at
• Foster growth and jobs in the information society
  and media industries.
• i 2010 is a comprehensive strategy for
  modernizing and deploying all EU policy
  instruments to encourage the development of the
  digital economy regulatory instruments, research
  and partnerships with industry.
• The Commission will in particular promote
  high-speed and secure broadband networks offering
  rich and diverse content in Europe.
• Furthermore i 2010 covers the review of the new
  regulatory framework and the recommendation of
  relevant markets.

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Review 2006 of the Regulatory Framework - General
Principles T-Mobiles View

• Current Regulatory Framework did not reach goal
  of deregulation
• Optimise the burdensome Art. 7 FD procedure
• Introduce sunset-clauses, i.e. if NRA imposes
  remedies it has to analyse and renew the market
  analysis within 2 years. Otherwise the remedies
  cease to exist.
• Market analysis generally needs to be forward
  instead of backwards looking (esp. in fast moving
  dynamic markets)
• Ensuring proportionate imposition of remedies by
  including a mandatory proportionate test for
  remedies in the NRF.
• Ensuring strict application of common principles
  by NRAs e.g. proportionality by including
  stricter tests within the framework.

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The relevant MarketsT-Mobiles View

• Market for access and call origination it is
  highly competitive throughout Europe (Retail
  competition, Service Providers, MVNOs) ? no
  further inclusion in recommendation on relevant
  markets necessary
• Market for international roaming is competitive
  due to traffic steering capabilities and
  extensive rebate schemes ? no further inclusion
  in recommendation on relevant markets necessary
• Market for voice call termination due to
  artificial market definition one network one
  market each MNO has significant market power and
  has to be price regulated ? Necessary to analyse
  market definitions since there is per
  definitionem no possibility for an effective
  market to evolve if each MNO has 100 market
  share. ? No extension of market for voice call
  termination in mobile networks to data
  communication services.

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No extension of regulation on newly emerging
markets

• Mobile industry is a fast moving industry with
  short product cycles.
• High risks for undertakings investing in new
  technologies / services (will the service be
  accepted by costumers ?)
• Undertakings need to receive an acceptable return
  on invest.
• Time to market for new products.
• New emerging markets need time to develop early
  regulation would reduce incentives for innovation
  and investment
• New emerging markets need no regulation as higher
  margins in an early market phase induce new
  market entry and lead to lower prices
  (Schumpetrian competition)

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Agenda

• About T-Mobile
• European Mobile Markets
• The European Regulatory Debate
• Spectrum Liberalization

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European spectrum policy the New Framework
Objective More competition less regulation

• European experience and the 3G approach
• European Commission tried to combine the
  successful
• 2G industrial policy approach with new
  principles
• Common European UMTS standard W-CDMA
• Spectrum using rights (instead of licenses)
• Efficient use of spectrum
• Enforcement of competition

Reasoning

• New spectrum policy principles
• ? liberalisation measures
• Spectrum trading ? allowing transfer of spectrum
  using rights between entities
• Change of use (Refarming) ? allowing entities to
  be free to use spectrum for any application
• Technology neutrality ? allowing entities to use
  whichever technology (standard)

• 3G auctions perceived as failure
• Regulators know that they need to act, but are
  very hesitant or uncoordinated
• No harmonized European approach to transform
  principles yet

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Spectrum policy and standardisation players and
drivers

• Vendors
• Scale effects on markets
• Secure return of investments through elaborate
  licence conditions
• Establish own technologies as standards

Spectrum policy

• EU Commission
• Competition
• Efficient use of spectrum
• European technology development
• Common technology platform
• Minimise interference problems
• Harmonization

WRC
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Liberalisation Benefit or threat for mobile
markets ?

• Increased flexibility of spectrum use
• Spectrum usable for alternative technologies
• Flexible network structures
• Short time to market for technologies
• Innovation
• Flexible reaction on market demands
• Increased access to spectrum resources of other
  market segments (e.g. broadcast, satellite, etc.)

• Increased distortion of competition in UMTS
  auction countries 3G at risk?
• Spectrum efficiency/ Interference coordination
  more difficult
• Less economies of scale and network effects
• Lack of standardisation and interoperability
• Spectrum hoarding

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Todays environment impacts a successful
liberalisation

• Relevance for transition
• Liberalisation measures should take into
  account
• the development and the needs of the existing 2G
  market
• the just awakening and developing 3G market
• the need for resources for the next generation 3G
  (3.9G) systems
• the safeguarding of future mobile systems (4G,
  NGN) and markets in Europe

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International spectrum coordination and
usageMobile technologies in the 169 MHz - 6700
MHz band
European extension band for terrestrial and
satellite UMTS
Private Mobile Radio (PMR), Public Access
Mobile Radio(PAMR), NMT, and other services,
Different bands for radar, radionavigation,
GPS, mobile satellite,radio relay
Includes core bands for terrestrial and
satellite UMTS Services,
Includes 455 MHz for different indoor /outdoor
WLAN applications
862-960 MHz
380470 MHz
960 1710 MHz
1710 1880 MHz
1900 2200 MHz
2400 2500 MHz
2500 2690 MHz
2700 5000 MHz
5150 5875 MHz
169.4169.8 MHz
5875 6700 MHz
EU-wide harmoni-zed for ERMES paging
Land mobile radio, such as GSM 900, E-GSM,
GSM-R, PAMR (TETRA), NMT, tactical radio relay
GSM 1800 band, Tactical radio relay
ISM-Band, different technologies, e.g. WLAN,
Bluetooth
Different bands forradar, radionavgai-tion,
fixed links, fixed satellite, WLL, ISM, ...
FSS C-band (fixed satellite service)
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From narrowband to broadband access mobile
bandwidth evolution compared to fixed
ADSL Asymmetric Digital Subscriber
Line ATM Asynchronous Transfer Modus GSM Global
System for Mobile Communications GPRS General
Packet Radio System HSPA HSxPA High Speed
Packet Access ISDN Integrated Services Digital
network UMTS Universal Mobile Tele-
communications System DECT Digital
Enhanced Cordless Telecomm. WLAN Wireless Local
Area Network HIPERLAN High Performance Radio
LAN DAB Digital Audio Broadcasting DVB
Digital Video Broadcasting Further glossary
see in the backup
2G
3G
Evolution of 3G
Customer mobility
3G developments
DAB
Highmobility
HSxPA
UMTS
GSM/GPRS
Lowmobility
WLAN(IEEE 802.11)
DVB
DECT
HIPERLAN/2
Portable
Bluetooth
Fixed
ADSL
ATM
ISDN
Data rate
9,6
2
34
155
32
64
Kbit/s
Mbit/s
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Why lower frequencies are better
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Use of digital dividend possible WIN-WIN
situation

• Digital switchover broadens capacity of channels
  by factor 4
• Demand for mobile services will rise (at the
  latest in about 10 years, see EC FMS study)
• If spectrum allocation would foresee flexible
  usage, demand could make the decision between
  broadcast or mobile use
• The US-spectrum allocation is an example
• Possible outcome Broadcasters gain more
  channels and mobile operators get more
  spectrum

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