TDSAT INTERNATIONAL SEMINAR ON DISPUTE RESOLUTION 29-30 October 2004 New Delhi, India
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DESCRIPTIONThe Evolving Scenario in the Telecommunications Sector Impact on Nature of Disputes and Response Mechanisms. TDSAT INTERNATIONAL SEMINAR ON DISPUTE RESOLUTION 29-30 October 2004 New Delhi, India Susan Schorr, Regulatory Officer Telecommunication Development Bureau (BDT). - PowerPoint PPT Presentation
TDSAT INTERNATIONAL SEMINAR ON DISPUTE RESOLUTION29-30 October 2004New Delhi, India
Susan Schorr, Regulatory OfficerTelecommunication Development Bureau (BDT)The Evolving Scenario in the Telecommunications Sector Impact on Nature of Disputes and Response Mechanisms
The Telecommunications Sector has become the ICT SectorPlain old telecom services being replaced by bouquet of voice, data, broadband Internet and multimedia servicesCopper networks refitted as ADSL broadband networksCATV compete head-to-head with copperVoice traffic shifting to VoIPWireless broadband key to developing countries
Revenues from public switched telephone, cellular mobile and other telecommunication networks worldwide, 1993-2003 and 2003, in current USD billions
Source: ITU World Telecommunication Indicators Database
Ownership Status of the Incumbent OperatorSource: ITU World Telecommunication Regulatory Databasefrom 1991 to 2004Privatization by region, percentage, mid 2004
102 million broadband subscribers by end 2003
Broadband networksPhone linesCoaxial cablesFibre optic cablesPower linesWirelessWhile most current broadband networks are based on copper lines, fibre optic and wireless technologies are the broadband of the futureSource: ITU World Telecommunication Indicators DatabaseOther broadband includes fibre to the home, WiFi, Metro Ethernet,Fixed Wireless Access, Satellite, etc.
Broadbands fast growthBroadband access has quietly grown faster than mobile phones in their early stagesSource: ITU World Telecommunication Indicators Database
ICT Sector Increasingly Dominated by Wireless TechnologiesICT sector dominated by mobile cellularAdvent of 3G servicesNew fixed wireless broadband technologies like Wi-Fi and Wi-MAX on the riseAll these changes require a new regulatory framework
ICT Users Worldwide 1991mid 2004 Source: ITU World Telecommunication Indicators Database
Cellular mobile users mid-2004 and mobile users added 2000-mid 2004; number of Internet users 2003, and new Internet users added, 2000-2003
Source: ITU World Telecommunication Indicators Database
Level of competition in selected services world, 2004
Source: ITU World Telecommunication Regulatory Database
Other Regulatory TrendsFreeing spectrum for use by ever growing numbers of wireless devicesAuthorizing greater use of VoIPConsidering regulation of VoIPCombating Spam
Impact of Technological, Market and Regulatory Developments on DisputesEmbracing technology and service neutral licenses should reduce disputes about market entry into specific marketsTechnology neutral regulation = greater liberalizationFurther liberalization creates new market players and grants rights to these new players that did not exist before.Granting of new rights inevitably leads to new disputes as new interests clash with traditional ones
Trends: National Regulatory Authorities Worldwide and Percentage per RegionSource: ITU World Telecommunication Regulatory Database.
Mechanisms to resolve interconnection disputes, sanctions power
Overturning decision of national regulatory authority
Percentage of Regulators worldwide responsible for consumer issues
Thank You!Susan SchorrRegulatory OfficerITU/BDT/Regulatory Reform Unit+41 22 730 firstname.lastname@example.org
Good morning ladies and gentlemen,It is with great pleasure that I am here with you today at the TDSAT International Seminar on Dispute Resolution. I am delighted to speak to you today about the evolving scenario in the telecommunications sector and its impact on the nature of disputes and the efficacy of response mecanisms.
The telecommunications sector has evolved to the point that we now refer to it as the information and communication technology (ICT) sector. This ICT sector is undergoing a radical transformation from an industry based on plain old telecommunication services to one that includes voice, data, Internet access and multimedia services and applications. Convergence is increasingly becoming a reality, at least in industrialized countries. Old copper networks are being upgraded and re-fitted as DSL broadband networks, enabling high-speed Internet access for multimedia applications such as video clips and music downloads. Voice traffic is increasingly shifting to Voice over IP (VoIP) and Voice over Broadband (VOB). Cable TV (CATV) networks can now offer not only one-way broadcast, but also broadband Internet and voice telephony services that compete head-to-head with telecommunication operators. Network operators have also begun selling value added services to their broadband subscribers, such as video and music downloads, to increase their revenue streams. This is dramatically changing the way former telecom companies do business. AT&T, once synonymous with residential telephone service in the United States, announced in July 2004 that it would no longer seek new residential fixed line customers. Shortly after making this announcement, AT&T launched a monthly bundled VoIP and broadband price plan. The value of the ICT sector that includes the provision of voice, data, video and text services to the public, from both fixed and wireless platforms amounted to an estimated USD 1.1 trillion in 2003 up from USD 0.5 billion in 1993. To put that into context, it is equivalent to the national GDP of a nation such as Italy, or more than double the national GDP of India. Furthermore, it accounts for 3.1 per cent of GDP globally, or USD 31 for every USD 1000 of the worlds wealth. Those numbers are impressive enough, but to the USD 1.1 trillion it would be reasonable to add the USD 300 billion or so generated in sales of telecommunication equipment. And if one wanted to take an expansive view of the information and communication technologies (ICT) sector, why not add also the computer industry (hardware and software) and the broadcasting sector? This would quickly bring the total value to over USD 2.5 trillion. Looking even further a field, to the broader information sector, which would include the media, cinema, video games, music, consumer electronics, online entertainment etc, one could easily double that figure and arrive at an economic activity, based around the collection, processing, storage and display of information, which amounts to between 10-15 per cent of global wealth, depending on how narrowly or widely the industry is defined.Definitional issues aside, it is clear that telecommunication services lie at the heart of the information economy, both as a direct creator of wealth, and as an enabler of wealth creation in related service sectors. Virtually all of the global growth in the telecommunications service sector over the last decade has come from the mobile sector, the Internet, broadband and other data services. The mobile sector, accounted for USD 414 billion in revenue in 2003, an increase of over ten times since 1993. Growth in the fixed-line telephone business has been sluggish since the mid-1990s and even declining since 2001, especially for international telephone traffic, which has been the segment of the market most affected by rising competition and least-cost routing of calls over IP-based networks. Indeed, taken together, the value of mobile and other non-voice services is now greater than that of the traditional fixedline telephone services, which have been the mainstay of public telecommunication operators since the late nineteenth century. Furthermore, during 2004, it is likely that global revenues from mobile networks will exceed those from global fixed-line networks for the first time .
By 2001 the majority of ITU member states had at least partially privatized their incumbent fixed line operators. Since then, there has not been much increase in privatizations, because of the downturn of the ICT capital markets following the bursting of the dot.com bubble in 2000. Initial privatizations in the period during 2002 and 2003 were limited to China in 2002, Mozambique in 2003 and Saudi Arabia in 2003. Bosnia and Herzegovina, which has three fixed line operators, also privatized two of these in 2003. Only one country, Bulgaria, succeeded in launching an initial privatization in 2004, when the government sold a 65 per cent share of BTC to a strategic partner. Although initial privatizations were limited, a number of governments did succeed in further privatizing state-owned incumbents in 2003 and 2004. The French government, for example, sold off enough shares of France Telecom in September 2004 to bring its share holding to under fifty percent. France had been one of the few remaining Western European governments that continued to hold a majority stake in its incumbent fixed line operator. Likewise, Jordan completed the privatization of Jordan Telecom in October 2003.Despite the slow activity in recent years, there appears to be a renewed optimism in the sector as a handful of countries have announced plans either to launch initial or further privatizations in the next year. Nigeria is offering a 51% stake in Nigeria Telecommunications Ltd (NITEL) and Rwanda extended the deadline for the submission of bids for the privatization of up to a 99% stake in fixed-line operator Rwanda Telecommunications Ltd (RwandaTel) until 30 September 2004. Albania, Bosnia, Comoros, Germany, the Former Yugoslav Republic of Macedonia, Malawi and Russia are among the other countries that have announced either further or initial privatization plans.Although privatization of incumbent fixed line operators has slowed, new market entrants, such as competitive mobile operators, are largely privately held and private participation in ICT service providers remains a major force in the sector today. Many of these privately held mobile operators were created through licensing, not privatization. Private participation often improves the performance of operators, brings new business models, new technologies and greater efficiency.
At the end of 2003, there were 102 million broadband subscribers, compared with 65 million a year earlier, which represents a growth rate of 57 per cent. The vast majority of todays broadband users are in the developed world. But even among member countries of the Organisation for Economic Co-operation and Development (OECD), there are large disparities, not only in service availability but also in terms of quality of access and price per Mbit/s Speeds can vary from 0.256 Mbit/s to 100 Mbit/s.
Worldwide, DSL accounts for 57% of the broadband user base, followed by cable modems with 37%. While DSL and cable modem technologies have largely been built on top of existing networks, some new transmission technologies, such as fibre optic cables, have been gaining in popularity and account for a significant percentage of broadband network growth. How long will DSL technology remain the top dog? In Korea, a new variant, called Very high data rate Digital Subscriber Line (VDSL) has attracted more than 2 millions subscribers and may soon eliminate the market for ADSL, in much the same way as ADSL eliminated the market for dial-up Internet access. The other category showed on this slide includes metro Ethernet/apartment LANS (used in Hong Kong, China and Sweden) or Fibre-to-the-Home (growing in importance in Iceland and Japan).Although not currently in widespread use, there are a number of promising wireless Broadband technologies now being developed. WiMAX (Worldwide Interoperability for Microwave Access, IEEE 802.16) and WiBro (Wireless Broadband: IEEE 802.16e) may revolutionize the way the developing and developed world access information. WiMAX, for example, is expected to be able to transmit a full 70Mbit/s over a range of 50 Km. Such wireless broadband technologies could be a boon to developing countries that have limited fixed line infrastructure. These two technologies could be converted into a network, based around, for instance, existing cellular base stations and towers.
Globally, the number of broadband subscribers continues to grow rapidly. Taken over a four year period, broadband has enjoyed a much higher rate of growth than that of mobile subscribers over a similar stage of its market development.
Five of the 15 top broadband economies worldwide are in Asia. Korea (Rep) leads the way with 23.3 broadband subscribers for every 100 inhabitants. The other Asia broadband leaders are Hong Kong, China, Taiwan, China, Japan and Singapore. The U.S. is the largest single broadband economy, with over 25 million users at the start of 2004. But China added 11 million new broadband users in 2003, to reach 13.5 million, and is predicted to overtake the U.S. by the end of this year.
While broadband currently remains a wireline-based business, the ICT sector as a whole is increasingly dominated by wireless technologies. The last few years has witnessed an unprecedented rise in mobile cellular voice services. Today, we are seeing the advent of third generation mobile services and, as just mentioned, the emergence of new fixed wireless broadband technologies such as WiFi, WiMax and WiBro. All of these changes hold great promise to developing countries seeking to bridge the digital divide, provided that policy makers and regulators can create an effective regulatory environment.
By mid 2004 the world counted a total of 2.7 billion fixed line and mobile subscribers worldwide, including 1.185 billion fixed line subscribers and 1.484 billion mobile pre and post-paid customers. Added to this are 699 million Internet users worldwide. In the first part of this decade, growth in the number of mobile customers has surged, while growth in the number of Internet users has slowed. Fixed line growth, although slowly building, continues to be eclipsed by mobile growth rates. Three nations led the surge in mobile subscribers, China, India and Russia. In July 2004, Chinas Ministry of Information Industry reported 310 million mobile phone usersmore than the entire population of the United States. Although lagging behind China in terms of total number of mobile subscribers, India is now starting to experience exponential growth. In September 2004, TRAI reported that it had added 9.37 million mobile subscribers during the first half of the year to reach a total of 43 million mobile users. TRAI further predicted that the number of mobile subscribers would outpace the number of fixed lines at any moment and that the number of wireless subscribers would reach 100 million by the end of 2005. Russia jumped from 36.5 million in 2003 to just shy of 60 million by September 2004. Although the developed world still accounts for the largest segment of the global telecommunication sector by value, it is the developing world where much of the new growth is occurring, and where most of the potential for future growth resides. By mid-2004, developing countries accounted for the overwhelming majority of the worlds mobile cellular subscribers, an amazing 56 per cent. In the period between 2000 and mid-2004, moreover, the developing world accounted for almost 79 per cent of the new growth in the market (new mobile users added). Similarly, although developing economies accounted for just less than 40 per cent of Internet users worldwide (in 2003), they made up 66 per cent of the new users added in the period 2000-2003. This bodes well for the new portable Internet market, where new users are likely to be found predominantly in the developing world.  For this presentation, the term developed economies includes Andorra, Australia, Austria, Belgium, Bermuda, Canada, Croatia, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, Netherlands, New Zealand, Norway, Poland, Portugal, San Marino, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom, and the United States. All other countries are included in the developing classification.
Competition has grown worldwide in the past ten years, and with it the number of subscribers. Over the past decade, many countries have taken a gradual approach to opening their ICT markets to competition. For many countries, their initial phase of market reform involved first opening mobile services to competition, along with certain value added services. This often was implemented by issuing service-specific and sometimes technology-specific licences for each category of service as it became liberalized. Gradually, as new services were opened to competition, new service-specific licences were issued.Indeed, a number of countries have developed scores of different license categories. Now that different technologies can be used to provide identical services (e.g., copper and CATV networks can both offer voice, broadband and TV broadcast, or GSM and CDMA to provide mobile voice services), service-specific licensing frameworks have inevitably led to regulatory disputes regarding the respective rights of market players to provide services and compete for customers.This is starting to change, however. Until this year, many countries were reluctant to open their basic telecom services to competition. The year 2004 marks a major milestone in this respect. Basic services are now provided under competitive conditions in 54 percent of countries worldwide. The term basic services is defined as local, long distance and international services. A number of countries have achieved greater competition through the adoption of technology and service neutral licenses or by moving to a system of general authorizations or mere notifications. Here, for example, we see the migration of licensing in Malaysia, from a system of at least 31 different licence service categories, to four.Why are countries changing their licensing practices? Continuous technological advancement and constant market evolution have necessitated a simultaneous development of the licensing process to ensure that it remains relevant and beneficial. Left unchanged, the licensing process can act as an obstacle to the development of the ICT market. The preservation of unnecessary, onerous and complicated licensing requirements can act as a barrier to market entry and increased competition in the telecom sector. Outdated and irrelevant licensing classifications can also hinder technological advancement and telecommunications service development. For example, licensing classifications based on specific types of technologies can act as an artificial barrier to the introduction of alternative new technologies that can provide similar services.Other regulatory and policy changes are occurring at the same time. A number of countries are developing policies to free spectrum for use by the ever-growing numbers of wireless Internet devices and technologies. Countries that had once banned VoIP services are now allowing it. Countries that exercised regulatory forbearance with regard to VoIP are now reviewing this policy to consider whether VoIP service providers should, for example, contribute to universal service funds, or whether VoIP services should be subject to quality of service standards. A growing number of regulators are also stepping up to combat spam, which has become the scourge of the Internet.
Technology neutral and service neutral licenses should act to reduce disputes regarding which players may or may not enter specific market segments. Greater market liberalization, however, a natural by-product of open licensing practices, will continue to give rise to disputes as new interests clash with traditional ones. Why is this so? Technology and service neutral licensing is usually achieved by passing new legislation which bestows new rights on market players, rights that did not exist before. Legislation that bestows new rights is never passed with the expectation that by simply passing the law, everyone will comply with it. Criminal laws are passed, yet crimes continue to be committed. Legislation may be passed that gives added protection to certain classes of people, perhaps those discriminated against on the basis of race, caste, religion or gender. New market access opportunities were created under the framework of the World Trade Organization. Would anyone expect that any of these laws or international agreements would not give rise to disputes? Hardly. Market access agreements in the WTO, for example, were accompanied by the creation of a dispute settlement mechanism. And this, of course is put to great use. Expanding rights to operate in the ICT sector can be expected to follow the same trend. While disputes and liberalization seem to go hand-in-hand, there are also steps that policy makers and regulators are taking to reduce the level of disputes and the strain this puts on limited regulatory resources. My colleague, Rory Macmillan will be discussing more about alternative dispute resolution later today.
Disputes may relate to infrastructure, interconnection, investment, trade, consumer-related issues, spam and universal access/service. As technology develops, new issues will inevitably arise that may lead to new areas of disputes that cannot even be imagined today. Spam is a case in point. Spam was not a problem just a few years ago, but now threatens to raise havoc with the Internet. This has given rise to new anti-spam legislation and legal actions.
Faster growth of the ICT sector will also provide greater policy maneuverability. In other words, growth in the total number of ICT subscribers coupled with increased operator revenues will help to build support for policy changes from consumers, service providers and investors.
Moreover, as technology and the ICT market develops, new issues will inevitably arise that may lead to new areas of disputes that cannot even be imagined today. Spam is a case in point. Spam was not a problem just a few years ago, but is now raising havoc with the Internet. This has given rise to new anti-spam legislation and legal actions.
So who is handling all of these disputes? While practices vary, country to country, dispute resolution often falls to the national regulatory authority. According to the responses to the annual ITU regulatory survey, there are 132 countries in the world today that have established a national regulatory authority up from 14 a decade earlier.To ensure positive effects of sector reform, effective regulation and rulings are essential. The role of the regulator is crucial and is gaining even more importance with the convergence of networks and services and increased competition in ICTs. Policymakers and regulators recognize that effective dispute resolution is an increasingly important objective of telecommunications policy and regulation. Failure to resolve disputes quickly and effectively can otherwise delay the introduction of new services and infrastructure; block or reduce the flow of capital from investors; limit competition, leading to higher pricing and lower service quality; and retard liberalization and with it, general economic, social and technical development.
Effective and efficient dispute resolution requires capacity building on the part of regulators. The regulator needs to have the power to regulate disputes and to have procedures established to adjudicate them as well as to monitor compliance and enforce sanctions in a fair and transparent fashion. Policymakers, regulators and courts, therefore, are adopting a range of alternative approaches to dispute resolution. These include traditional litigation, regulatory adjudication, mediation and conciliation, arbitration and expert determinations. The top slide shows that countries are using multiple forms of dispute resolution mechanisms to handle regulatory disputes, such as interconnection. The bottom slide shows some of the sanctions and penalties regulators can use in enforcement against licensees. In addition, some countries have established mechanisms that seek to build consensus among market players rather than wait until issues boil to a head in the form of protracted litigation. For example, some countries like Canada and Malaysia have established interconnection committees or industry forums to agree on a range of interconnection issues (prices, points of interconnection, access rights and technical issues) in the spirit of industry self-regulation As mentioned in the ITU 2002 Trends in Telecommunication Reform report, experience seems to show that excessive division of regulatory responsibility among different government agencies can result in delayed and inconsistent responses to market and regulatory developments. Court adjudication, for example, may present a number of disadvantages: high costs and delays in some jurisdictions and a perceived lack of telecom-specific expertise to deal with many complex industry disputes. Efficiency is key to dispute resolution. Otherwise lengthy dispute resolution processes will encourage gaming behaviour. Of course, the bottom line in all of these changes in the ICT sector and efforts to promote more efficient dispute resolution is to better meet consumer needs so that universal access to ICTs may be achieved. According to the responses to the ITU World Telecommunication Regulation Survey, regulators are increasingly involved in consumer issues. 76% of the worlds regulatory authorities noted that they are responsible for promoting consumer participation in the regulators activities. 59% are responsible for representing or defending consumer rights; 82% are responsible for informing consumers of their rights (or consumer education); 59% are responsible for providing comparative tariff information and 87% handle consumer complaints. Thank you for your attention. I would just like to make you aware of our website where you can find out more informationabout the full range of tools that ITU BDT makes availabe for regulators and policy makers. I would like to point out that in late August we hosted a workshop on Dispute Resolution for the Europe/CIS Region. You can link to all the workshop presentations and papers from TREG Events/Past Events. In addition, we were very honoured this year to have Justice R.U.S. Prasad join us for several months in Geneva this year. Justice Prasad has developed a set of training materials on dispute resolution that will be delivered in on-line courses next year in both the Arab region and the Europe region to ITU members.