Home Asia-Pacific III 2001 Licensing Principles for Wireless Network Investment and Buildout

Licensing Principles for Wireless Network Investment and Buildout

by david.nunes
Matthew J Flanigan Issue: Asia-Pacific III 2001
Article no.: 8
Topic: Licensing Principles for Wireless Network Investment and Buildout
Author: Matthew J Flanigan
Title: President
Organisation: Telecommunications Industry Association
PDF size: 24KB

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Article abstract

Matthew J. Flanigan, President of the Telecommunications Industry Association, outlines the regulatory principles that underlie the licensing of wireless network investment in Asia-Pacific. The emphasis is on market requirements and licensing policies that maximise the commercial potential and promote the widest deployment of wireless technology. Flexibility for licensed operators to determine services and technologies utilised should be a regulatory imperative. Policy principles should be directed towards full current and future support of the wireless sector.

Full Article

Economies recognise the growing importance of wireless telecommunications services to their overall economic development. These services provide another means of advancing universal access as well as leveraging the capabilities of the Internet. This is especially true for the Asia-Pacific region, as many of these economies have experienced tremendous growth in their wireless telephony and wireless Internet sectors. Given the different stages of development in most Asia-Pacific economies, increased collaboration with the business/private sector to expand their participation in infrastructure investment to upgrade access to networks is a necessity, especially in rural and under-served areas. Refinement of universal access policies should be explored and competition encouraged in the extension of networks. As economies address their telecommunications and information needs, the policy principles that support the growth and development of the wireless sector will be critical in ensuring that economies can take full advantage of current and future wireless applications. To assist economies in this process, they need to consider the regulatory and policy issues related to the licensing of wireless services in their region in order to best promote network buildout as well as the necessary investment for expansion. There is a growing recognition that licensing policies based on market requirements are key to maximising the commercial potential and wide deployment of wireless technology. Such policies also afford licensed operators greater flexibility in determining the services provided and technologies used in their network. This paper will identify a number of key principles for economies to consider in development relating to the licensing of wireless services, in order to provide a regulatory climate that most effectively allows for market-based development of advanced commercial wireless networks. Wireless in the Asia-Pacific Around one-third of the world’s telecommunications market-measured by subscribers and users of fixed telephone, mobile cellular and Internet networks-is located in the Asia-Pacific region. The region has considerable potential as it accounts for almost 60 per cent of the world’s population. In terms of subscribers in the mobile arena, China and Japan hold the second and third ranking in the world respectively. There is still much room for improvement among the region’s developing countries. Despite the new trends in telecommunications, some long-standing problems remain. Too many countries, including several in this region, still lack basic telecommunications infrastructure. Overall, the fixed-line density for developing countries in the region was just above five main lines per 100 inhabitants at year-end 1999, with four nations yet to reach one line per 100 people. Some six million people are on waiting lists for fixed-telephone service and many more have not signed up because they cannot afford the service now. Less than one-fifth of households in the region’s developing countries have their own telephone service. New technologies can help solve the problem. Countries like Cambodia, where mobile subscribers outnumber fixed, may look to wireless telephony as a quick means for building national networks. For many developing nations of the Asia-Pacific, mobile cellular is emerging as a substitute for shortages of fixed-lines. Wireless systems are relatively cheap to install, manage and maintain; they are quick to set up and they provide access in geographically difficult regions. Furthermore, the benefits wrought by mobility in communications are increasingly evident in terms of both economic and social development. The Asia-Pacific region has a distinct regional culture, and each of the nations that make up the region has its own cultural heritage. Though each country has its own unique background, it is commonly recognised that communications access is a major contributor to cultural, social and economic development. In addition to the struggle of providing basic communications, the Asia-Pacific region-like much of the world-is also faced with the digital divide and the inability to partake in the potential benefits associated with advanced information technology (IT) networks. The digital divide is a problem that results from differences in IT access, even among people living in the same country. The differences are linked to such factors as income, age, race, education, home environment and region. Considering the rapid growth of mobile cellular in the region, with mobile telephone connections often increasing at a much faster rate than fixed-line telephone connections, wireless technology could easily help to close the digital divide as well. The improvement of telecommunications networks will continue to be an important priority for the IT revolution and the development of the information society in the Asia-Pacific region-with wireless technologies playing a prominent role. The spread of mobile telephones in Asian countries was frequently referenced in the World Telecommunication Development Report. In its report, the International Telecommunication Union (ITU) states, “The success of mobile communications has been a triumph of technology married with marketing.” This quote appropriately highlights the importance of maintaining incentives for companies to seek an advantage by being the first to apply new ideas and initiative to the development of information infrastructure. According to the ITU, we must avoid situations in which inappropriate regulatory intervention stifles productive private sector initiatives relating to the development of infrastructure for the promotion of IT. Furthermore, the ITU finds it important to also consider the use of private sector financial resources. Another crucial perspective is the concept of a partner-ship between industry and government, in which private sector capital takes the initiative in developing networks while governments and regulators develop the environment. Wireless Licensing Principles Promoting Investment and Buildout Licences are particularly significant in the context of emerging and transitional economies. Licences provide certainty for investors and lenders, and with it the confidence that is required to invest the millions or billions of dollars required to install or upgrade telecommunications infrastructure in such economies. Licensing Objectives Governments and regulators normally have several different objectives for licensing telecommunications operators. This paper will focus primarily on licensing as a tool in meeting wireless network investment and buildout. In this respect, wireless licensing is often utilised to meet the following objectives: · Expansion of Networks and Services: Network rollout and service coverage obligations are often included in licenses. They are an important tool for expanding infrastructure investment and promoting universal service and universal access objectives in developing countries. · Regulatory Certainty: By defining the rights and obligations of the operator and the regulator, a licence can substantially increase confidence in the regulatory regime. Regulatory certainty is a critical element of the licensing processes where the aim is to attract investment. This is particularly true in cases where foreign investment is sought by riskier developing or transitional economies. Wireless Licensing Principles: Looking to WTO Respect for regional characteristics implies proper consideration for the circumstances and environment of each country in relation to liberalisation and deregulation. While telecommunications licensing approaches vary considerably from country to country, there are common features, particularly among better licensing practices. The General Agreement on Trade in Services (GATS) and the 1997 WTO Agreement on Basic Telecommunications (ABT) of the World Trade Organisation (WTO) include trade rules applicable to telecommunications regulation and licensing. Signatories to the ABT, as well as countries wishing to join the WTO, must bring their regulatory and licensing practices into compliance with WTO trade rules. The central theme of all of these rules is evolution towards open competitive markets and transparent licensing processes. The WTO ABT galvanised the global trend towards increased competition and deregulation in telecommunications services. The number and quality of the commitments that countries made clearly indicate a paradigm shift towards market-oriented solutions in telecommunications services. Sixteen countries in the Asia-Pacific have made commitments under the WTO ABT and this has led to an increase in foreign companies as investors or service providers. Though each country has its own unique background and differing levels of market liberalisation, the fundamental principles laid out by the WTO ABT provide a framework of “best practices” economies can refer to when confronted with issues related to the licensing of wireless. Principles important to consider when attempting to promote investment and network buildout include: Transparency – Procedural transparency is one of the fundamental requirements of a successful licensing process. The importance of transparency in the licensing process is evidenced by its inclusion in the WTO Regulation Reference Paper. Transparency requires that a licensing process is conducted openly and that licensing decisions are made based on criteria published in advance. Conducting a transparent licensing process is sometimes perceived to be more time consuming and difficult than less transparent alternatives. However, the absence of transparency undermines investor confidence in the fairness of the entire regulatory process and in the telecommunications market itself. Lack of transparency can significantly slow the process of liberalisation and reduce the benefits of privatisation. Licence Fees – It is generally accepted that fees should not impose unnecessary costs on the telecommunications sector. Fees should not hinder the development of innovative services and competition in the market. Balancing Certainty and Flexibility – Telecommunications licences should balance regulatory certainty with the flexibility necessary to address future changes in technology market structure and government policy. Licence conditions should be sufficiently flexible to allow their integration into the general regulatory framework for the sector as it develops. Licensing an operator should not preclude future regulatory reform. Technology Neutral – There should be no governmental mandate regarding which technology is deployed by any authorised network operator or which equipment supplier is chosen to supply the technology. The wireless network operator receiving the licence maintains the responsibility of determining which technology to deploy based on commercial considerations. Furthermore, the national regulator should forbear from mandating the exact network services to be provided by a wireless licence holder. Conclusion The principles for economies to consider in development relating to the licensing of wireless services are raised as part of the growing recognition that licensing policies based on market requirements are key to maximising the commercial potential and wide deployment of wireless technology. Such policies also afford licensed operators greater flexibility in determining the services provided and technologies used in their network. As economies address their telecommunications and information needs, the policy principles that support the growth and development of the wireless sector will be critical in ensuring that economies can take full advantage of current and future wireless applications.

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