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Inside Telecommunications: July-September 2011 - Regulatory trends and their potential impacts - EY - Global

Inside Telecommunications: July-September 2011

Regulatory trends and their potential impacts

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Jonathan Dharmapalan
Global Telecommunications Leader
Adrian Baschnonga
Global Telecommunications Senior Analyst
Steve Lo
Global Telecommunications Center: Beijing
Holger Forst
Global Telecommunications Center: Cologne
Prashant Singhai
Global Telecommunications Center: Delhi
Serge Thiemele
Global Telecommunications Center: Johannesburg
Wasim Khan
Global Telecommunications Center: Riyadh
Mike Stoltz
Global Telecommunications Center: San Antonio

The explosive rise of smartphone-related services has done much to change the online privacy landscape.

Copper returns to boost fiber investment?

Amid continuing economic uncertainty, the European Commission has tabled new proposals to boost fiber investment in the region. Addressing the ETNO-Financial Times 2011 CEO Summit, Vice President of the European Commission (EC) responsible for the Digital Agenda, Neelie Kroes, announced two public consultations: the first on nondiscriminatory access for new entrants and the second on how best to calculate wholesale access prices.6

Both consultations are open to operators, consumer groups, national regulators and other interested parties until 28 November 2011. As part of the proposals, Kroes outlined that pricing for "largely depreciated" copper broadband networks could decrease posing a potential incentive for faster incumbent investment in – and migration to – fiber broadband infrastructure.

The European Commission's plans could see incumbents that choose to invest in fiber networks gaining exemption from additional regulations on their copper networks. For its part, the EU plans to pump EUR6.4b into the creation of new broadband infrastructure, in the form of equity, debt or guarantees.

News of revisions to copper access pricing has been met with dismay by many incumbents. Revenue cannibalization remains a very real fear for those players investing in fiber while also maintaining older infrastructure, and even Kroes recognizes that artificial reductions in copper access pricing could actually disincentivize consumers from upgrading to fiber if retail prices for basic broadband also begin to fall.

Nevertheless, the fact remains that growth in EU fixed broadband connections in 2010 was the lowest since 2002, and that 40% of households still have no broadband connection. Meanwhile, fiber broadband penetration rates in large European markets under perform those of developed economies in Asia.7

Although the proportion of broadband connections above 10 Mbps is growing, the number of connections that are 2 Mbps or below remained largely static in 2010 on the back of stable prices. Nevertheless, the EC remains committed to ensuring that half of European households are subscribing to 100 Mbps services by 2020.

EU fixed broadband lines by speeds, 2008-20118

EU fixed broadband lines by speeds, 2008-2011

While the transition from copper to fiber is seen as pivotal to boosting Europe's competitiveness, the EC's digital agenda goes well beyond upgrades to fixed line infrastructure. In September, Kroes announced plans for a Radio Spectrum Policy Programme (RSPP), a five-year project aimed at opening up valuable 800 MHz spectrum across member states to catalyze the spread of mobile broadband services.

This is seen as a vital step in improving broadband performance in rural areas, where fiber rollout is economically unviable. Thus far, only a handful of countries have repurposed broadcast spectrum in this way, so a consistent approach across member states remains challenging.

Privacy concerns top of mind for mobile users

Though mobile internet users benefit from a range of innovative app-based services, the explosive rise of smartphone-related services has also done much to change the online privacy landscape and presents a new set of challenges for end-users, application developers, operators and regulators alike.

A recent survey conducted by Futuresight Ltd on behalf of the GSMA shows that a large majority of mobile users in developed markets feel uncomfortable with personal data being collected and repurposed by applications or shared with third parties for promotional purposes. Four out of five end users believe safeguarding their personal information is very important, with areas such as targeted advertising, location-based services and third-party information-sharing all revealed to be areas of concern among customers.

Mobile users concerns over use of personal information9

Mobile users concerns over use of personal information

Nevertheless, location-based services such as maps and weather services are highly valued by 70% of mobile users. In this light, end users realize both the benefits and drawbacks of value-adding, location sensitive services. Issues regarding end user control and service transparency have to be tackled head-on if consumer trust in mobile applications is to be preserved.

Many different entities are attempting to pre-empt user concerns around privacy. However, the industry needs to move quickly to reassure customers, with clear regulatory jurisdictions in place. Although mobile applications are generating many of the headlines regarding privacy issues for mobile users; that is not to say that more basic services do not present headaches of their own.

In India, anxiety is growing around mobile marketing text messages. In order to curb a growing volume of unsolicited text messages, the Telecom Regulatory Authority of India (TRAI) introduced new rules in September, preventing mobile users from sending more than 100 SMS per day.10

This follows rules laid out in 2007 banning marketing cold calls — a move, which itself has prompted the sharp rise in marketing-related text messages. While there is much work to be done to reassure mobile users that there data is being safeguarded, certain scenarios allow for authorities to collect location and usage information without the end-user's consent. Such scenarios show how concepts of end-user privacy and national security demand very different responsibilities of operators.


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6 "Investing in digital networks: a bridge to Europe's future" ETNO-Financial Times CEO Summit, 3 October 2011, via
7 "Kroes's high-speed internet plan faces obstacles", 21 September 2011.
8 Digital Agenda Scoreboard 2011: Fast and ultra fast internet access, European Commission, 2011.
9“User perspectives on mobile privacy” GSM Association/Futuresight Ltd, September 2011; Survey data based on research conducted between April and June 2011, featuring 1,005 users in Singapore, 1,094 in Spain and 2,022 in the UK.
10"Indian regulator sets 100-text limit to curb mobile-marketing nuisance" The Guardian, 27 September 2011.

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