Transcript 2. Regulatory challenges in a 4G market environment

Towards 4G environment:
Future regulatory challenges for
content provision on mobile markets
Prof. Dr. Markus Fredebeul-Krein
Aachen University of Applied Sciences
Presentation for the 15th European
Regional ITS Conference
Berlin, 4th – 7th September 2004
Content
1.
Characteristics of future 4G markets
2.
Regulatory challenges in a 4G market environment
3.
Regulating content provision on 4G markets?
4.
Conclusion
Page 2
1.
Characteristics of future 4G markets
Page 3
1.
Characteristics of future 4G markets
1.1
What is 4G?
A number of possible definitions have been suggested:
1
Standard set by ITU in 2010 ?
telco & regulator focus
2
WLANs + GPRS ?
datacom & tech focus
3
Everything not 3G ?
3G bashing focus
4
Some new radio interface (e.g. UWB) ?
tech focus
5
The next winning de facto standard ?
market strategy focus
6
Seamless mobility ?
user focus
Page 4
1.
Characteristics of future 4G markets
1.2
From 2G to 4G
4G
3G
Customer value
2,5
2G
 Mobile voice
communication
worldwide
 SMS
 First multimedia
services (MMS)
 Mobile Internetaccess
 Digital ckt.
Switched +
packet switched
voice+data+video
Multimedia
 broadband
multimedia
applications
 Interoperability and
integration
 Technology
independent
platform
 Digital all IP
Voice+data + video
 Mobile multimedia
Public W-LAN
2000
Page 5
today
2005
2010
1.
Characteristics of future 4G markets
1.3
Developments worldwide
Depending on the technological / historical background the term 4G has
different meanings in different regions
Worldwide 4G Developments
 WWRF (Wireless World Research Forum): interest group founded by Alcatel, Ericsson,
Nokia, Siemens and leading research centres

ITU-T/-R Working Group: follow-up technologies of IMT-2000

Other working groups, i.e. 4GMF (4G Mobile Forum), 3GPP, IETF and MWIF/OMA
EU 4G
developments
4G-notion as an
evolutionary system
of integrative
technologies
Page 6
4G
USA 4G developments
In North America 4G
development is driven
by W-LAN.
Japan & Asia 4G
developments
Japan focuses on a
new mobile 4G
standard and not on
integration of existing
technologies
1.
Characteristics of future 4G markets
1.4
Technologies
A number of technologies (apart from 3G) will have an impact on wireless
development this decade. Market winners will become part of a 4G
architecture
OFDM WLAN
Smart
antennas
DVB-T
(digital terrestrial TV)
Software
radio
WAP
all-IP
Bluetooth
Ad-hoc
networks
Turbo-code
MDMA
LAS-CDMA
Large Area Synchronized
CDMA
Page 7
Optical Wireless
Satellites
UWB
(Ultra Wide Band)
TD-SCDMA
Micro-fuel
cells
BLAST
(Bell Lab Layered
Space-Time)
Multi-dimensional
multiple access
MC-CDMA
Multi-Carrier CDMA
1.
Characteristics of future 4G markets
1.5
Key features
Key Features
 Convergence of fixed, mobile satellite
and broadcast
 Support of terminal and personal mobility
 Global seamless support of wide range of
services
 User data rates from 2Mb/s to 20Mb/s or
more


support of broadband mobile multimedia
support of high definition moving pictures
 Software Defined Radio Technology
 IP Technology
 Dynamic Spectrum Allocation
 Efficient Energy Use
 Optimum Routing
 Global Roaming
 More Services than 3G
 Support of broadcast and distribution
services
 Guaranteed QOS
 Reconfigurability of networks and
terminals
 Heterogeneous standards
 Coverage : Pico, micro, macro and
broadcast
Page 8
 Support of Variety of Terminals
 Users Information Rates >2 Mb/s may be
20 Mb/s
1.
Characteristics of future 4G markets
1.6
Summery: the wireless landscape in 2010
Emerging new technologies with potential for breakthrough after 2010
Networks:

Several competing infrastructures (GPRS, WLANs, 3G + dark-horses)
Terminals:

Adaptive instead of single mode A continuous suite of terminals from voice-
only ear-phones, wearables, handsets, handhelds, goggles with screens,
lap-tops to wireless cars etc.
Applications:

High Speed Multimedia instead of voice, data
Seamless Services and Intersystem Roaming
Page 9
2.
Regulatory challenges in a 4G market environment
Page 10
2.
Regulatory challenges in a 4G market environment
2.1
Key changes of a future regulatory framework
Regulating Mobile Communications will undergo a transition in a 4G environment
Traditional
 less regulations and
regulatory intervention for
mobile operators
compared with fixednetwork providers
 limited
competition/closed
market
 mobile-specific licences
issued (typically less
than 5)
 No content regulation
on mobile telecom
markets
Future Changes
 More regulation for mobile providers
 Distinctions between fixed and mobile
sectors will diminish as a greater
separation between „services“ and
„networks“ is made:
 network provision will increasingly
become technology-neutral (subject to
resource-availability, e.g. spectrum)
 2 regimes will in the future regulate
operators and providers.
 Sector Regulation &
Competition Law
 Content regulation is likely to become
an issue in the future
Restructuring of regulator to adopt to new tasks
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2.
Regulatory challenges in a 4G market environment
2.2
Regulatory challenges in a 4G environment
New technologies and the integration of communications and content markets
set the framework for regulation in a 4G environment. Both of them are likely to
change market power of undertakings in the market.
understand sources
of market power
and its abuse in
the 4G environment
interconnection
 With 4G, market
dominance may also
be derived from
controlling more limited 
sets of functions and
capabilities that are
necessary for the
provision of services to
end users
 implications of
regulatory action in
cases where some
form of dominance over
control points occurs
Page 12
In the long run legacy
networks will continue
to exist, but over time
they will be transformed
and upgraded to enable
additional types of
services
technologies
traditional regulatory
requirements may
become less relevant
with 4G
 focus on the category  other requirements will
of service to be
interconnected, rather
than on the origin of the
network
remain but change
character
integration of
communications
and content
markets
 regulatory concerns will
shift upwards to the
higher layers of the
network hierarchy
2.
Regulatory challenges in a 4G market environment
2.3
Regulatory Implications of IP-based Service Provision (1)
In the Future Circuit Switched technology will be substituted by IP technology.
This will have impacts on competition and regulatory intervention:
Move from SS7 Signalling to
IP Addressing leads to….
More
opportunities for open
interfaces: potential for
wider participation and
more competition in
advanced communications
services
Interoperability and
open interfaces will
become important issues
as there will be many more
forms of interconnection
and access
Page 13
Declining
importance of
national Numbering
More potential
for more geographic
independence as a s
erver can be
located anywhere
2.
Regulatory challenges in a 4G market environment
2.4
Regulatory Implications of IP-based Service Provision (2)
As a consequence….
1
2
Regulators will have to assess whether open interfaces to service
components are necessary or if there will be sufficient interoperability being
implemented through gateways that perform conversion between interfaces
International competition increases as IP networks make service creation
independent from user location. This will in turn change market definitions
3
As terminal equipment becomes increasingly intelligent new criteria for
determining whether a given function belongs to a network and is covered
by its regulations are necessary
4
Time based tariffs will become more and more inappropriate where cost
orientation is a regulatory requirement as no clear start and end signal is
transmitted
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2.
Regulatory challenges in a 4G market environment
2.5
More Control Points on 4G Markets
Control Points on 4G markets will to a large extend determine if an operator or
Service Provider has Significant Market Power. Example today: Local Loop
Possible Control Points in the future:
Network
 Control of Inter-
Services
 Control of service
connect and QoS
 Determines
whether/at which
quality service
are offered
 Control of Routing

Tables
Control of network
related functions
via standards


related functions
via standards
Interoperability of
Transport and
Service
Walled Gardens
 Enable operator
Content

Control of Content
provided
exclusively to
selected
network/service
providers
User Information
 Customer Billing


Information
Access to
customer
Information
Systems
Control of location
based services
to restrict access
to content
These potential bottlenecks may enable operators / providers to exercise market
dominance by imposing unfavourable access conditions upon other market players
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2.
Regulatory challenges in a 4G market environment
2.6
Increased complexity of regulatory interventions
Existence of Control Points might lead to serious barriers to market entry
which in turn might call for regulatory intervention. A careful review of the
situation is however necessary:
Regulatory Task
Assess whether
potential control
points create
market power
sufficient to
justify
regulatory
intervention
Inappropriate
intervention could
freeze commercial
arrangements and
market structures
that are not efficient
or viable in the long
term
Inappropriate
regulatory
requirements would
in affect mean that
the regulator would
pick winners and
losers
The importance of
Control Points
might diminish as
new technologies
other service
alternatives
If network access
and content
platforms are
unrestrictedly
opened, operators
will no longer be
able to ensure end
user quality and
security
Increased Complexity and
analytical challenges
Page 16
3.
Regulatory rules for the provision of content on 4G mobile markets
Page 17
3.
Regulatory rules for the provision of content on 4G mobile markets
3.1
Walled gardens as potential bottlenecks
Characteristics
 “Walled garden” is a term applied
to a service package that provides
customers access to certain predetermined functions and content
 It is a branded service and is
actively promoted by the service
provider and its partners, and
contains high quality content that
is intended to enrich the users
experience and thereby increase
their service loyalty and reduce
churn
 Entry is normally open only to
those users who have subscribed
to the service
Consequences
 Describes a business strategy
designed to attract and retain
customers
 Network operators or service
providers choose to control the
content and services that can be
accessed by a customer
 Could become an important
bottleneck in differentiating the
availability of services and contents
 Examples have already emerged,
where mobile operators are
seeking to create a walled garden
for a selection of services
Under semi-walled garden” (open garden) portals owned by network operators or service
providers enable access to the public Internet, but only through a number of menu choices
Page 18
3.
Regulatory rules for the provision of content on 4G mobile markets
3.2
(Semi-)Walled gardens gardens as a business model
For several reasons (semi-)walled gardens may not be a successful business
strategy of mobile network operators in the long run
Insufficient
supply in the
garden
The vast majority of access providers will be unable to provide the
breadth and depth of quality services/content needed to fulfil
subscribers’ demand
Competition
btw. portal
providers
There are strong incentives for especially smaller operators/service
providers to move beyond the walled garden approach, if that is what
end-users want
Promoting
destination
sites
Increased promotion of destination sites from traditional media,
portals, and start-ups will drive experienced users beyond the walled
garden
Access portals
to widen target
group
Page 19
With insufficient growth in access subscribers, access portals have an
incentive to expand their target group for future 4G services beyond
their own access subscribers
3.
Regulatory rules for the provision of content on 4G mobile markets
3.3
Arguments against regulating (semi-)walled gardens
If (semi-)walled gardens constitute a significant bottleneck on future 4G markets,
there are other arguments against regulating them
Regulatory intervention
may be detrimental

(Semi-)walled gardens
could provide a good
starting point for many
users first entering a
new service space
 Network operators /
service providers can
make sure that walled
gardens services are
easy to use, offer
predictable prices and
minimise the risk of
fraud
Page 20
Functions for managing /
protecting digital rights
are crucial for successful
distribution of content

The lack of Digital
Rights Management is
a barrier to many
applications involving
copyright media.
 As long as no standard
approach for digital
rights management has
been identified, (semi)walled gardens may
provide the best
channel for content
delivery and payment
Choosing a less
interventionist approach
by reducing market entry
barriers for 4G providers

adopting a light-handed
licensing regime which
allows new companies
to avoid burdensome
application procedures.
 stimulating the market
entry of service
providers
3.
Regulatory rules for the provision of content on 4G mobile markets
3.4
The mobile service i-mode by NTT DoCoMo
Absence of regulatory intervention

Despite dominance DoCoMo was
able to exercise influence over
standards for the services, thus
being able to able to control the
development and delivery of fully
functional solutions
Service concept being important
than technical standards
Competitors have been almost as
successful as i-mode, although
they are built on different networks
 have chosen similar solutions for
providing service, billing customers,
sharing revenues, setting content
prices and signing up for services

Success
factors of
mobile
Internet in
Japan
allows content providers to charge btw. 1 and 3 € for contents
Only 9% of this charge is kept by DoCoMo as a handling charge
Official content providers had an incentive to develop content
DoCoMo
Micro-payment system profitable for both DoCoMo and content providers
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3.
Regulatory rules for the provision of content on 4G mobile markets
3.5
Korean mobile Internet services
Success: Just one year after the launch of 2.5G more than 9 million out of 36 million
mobile customers have been using the service
Business strategy chosen by mobile operators in Korea has been to achieve
high volume of data traffic and to differentiate from other mobile operators
 control
quality and
number of mobile
services/contents
 control
over prices of
services/contents
 distinguished
offerings
via exclusive
agreements with
content providers
Walled Garden Apporach
But: Korean Regulator has obliged mobile operators to keep only 10% of the
revenue from premium priced content - giving 90% to the content owners
Operators offered contents at very low cost, generating revenues mainly from
the data traffic, meaning that content providers were getting 90% of very little
Page 22
4.
Conclusion
Page 23
4.
Conclusion
4.1
Recommendations on regulating content provision on future 4G markets
Guidelines for regulatory action on 4G markets
1
Abstain from requiring non-dominant operators/providers to provide
open and non-discriminatory access at any level of 4G markets
2
Be cautious when putting in place ex-ante measures, and apply instead
ex-post tools which are sufficient for large parts of the 4G market
3
Distinguishing between potential bottlenecks that promote normal
competitive activity, and those that may harm competitive activity
4
Be careful of not regulating too early and take into account “longterm risks and reward aspect
Page 24
4.
Conclusion
4.2
Recommendations on regulating access on future 4G markets
Regulatory action against operators and providers on future 4G
markets may be guided by the following principles:
Network
operators
The principles of open and non-discriminatory access (as well as
other remedies if necessary) should only apply to 4G networks of
dominant operators and not to all network operators
Service
Providers
Mandated open access to services where a “dominant service provider”
exists. Only when he can prove that he cannot provide unlimited access
due to capacity constraints, he may be allowed to restrict access
Exclusive agreements between service- and content providers should be
monitored closely by regulators in view of their competitive effects
User
access
Subject to competition provisions, access to content should be a matter for
commercial agreement
regulatory provisions shall prevent the abuse of market power of dominant
content suppliers
Open network access for users should always be mandatory
Page 25