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Inside Telecommunications: Regulatory trends and their potential impacts - EY - Global

Inside Telecommunications: 2Q 2012 trends

Regulatory trends and their potential impacts

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Figure 7: US spectrum surplus/deficit projection

Spectrum and taxes are the two assureds in the regulatory world as operators and governments alike look for new ways to capitalize on the surge in mobile connectivity.

US spectrum policy in the spotlight

The US mobile industry’s need for additional spectrum has been recognized by The Middle Class Tax Relief and Job Creation Act of 2012. The act authorizes the FCC to hold incentive auctions for TV broadcast spectrum and identifies several bands for release.

Figure 7: US spectrum surplus/deficit projection

Source: Federal Communications Commission, February 2012

During the second quarter, additional FCC initiatives surfaced. In May, a proposal was tabled to remove rules that prevent the use of LTE in the 800 MHz band. Currently, channels can only be 25 KHz wide, thereby precluding their use for high-speed mobile technology. The FCC also approved plans to allocate spectrum in the 2.3 GHz band for connecting wireless medical devices.

Meanwhile, S-band spectrum used for mobile satellite services has been under increasing scrutiny. In March, the FCC provided draft rules for its terrestrial use, which would enable DISH network to roll out an LTE Advanced network.

In March, the FCC also announced it was investigating technical factors that would allow interoperability within the lower 700 MHz band.

Operators continue to seek shorter-term solutions to alleviate the spectrum crunch, including purchasing spectrum in the open market. Looking ahead, the regulatory challenge is twofold:

  • Ensure enough spectrum is available to sustain demand for mobile data
  • Preserve an equitable distribution of spectrum holdings within the industry

Shifting sands in approaches to sector taxation

Taxation policies towards the telecom sector remain in flux in many markets worldwide, particularly in Europe.

In May, the Hungarian parliament approved a two-forint (0.7 eurocents) tax on mobile operators, which will be applied on texts and call minutes. The move, which aims to help reduce the country’s deficit, has been strongly protested by operators.

In Ukraine, national internet industry group InAU has protested a draft legal amendment proposing a tax on telecom companies. The draft proposes a 3.5% tax on income from telecoms services to create a new national telecommunications fund.

Mobile operators in Croatia had better news, as the parliament decided to abolish a 6% tax on mobile service revenues from 9 July 2012. Previously, the tax — applicable to mobile call and messaging revenues — was removed at the beginning of the year only to be reinstated at the end of January.

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