Inside telecommunications Issue 9

Regulation

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New EU data protection laws prove contentious

In January, the European Union (EU) announced a review of its data protection laws to help end users maintain control over their personal data.

A key proposal is “the right to be forgotten,” which forces companies to delete the user data of those who request it, together with an obligation on businesses to report data breaches as soon as possible.

Penalties for infringement include fines of up to €1m, or up to 2% of the global annual turnover of the company.

The reforms are designed to:

  • Strengthen online privacy rights, giving consumers more control over their data
  • Boost Europe’s digital economy as corporate responsibilities become clearer and end users become more trusting of online personal data.

As highlighted in our Mobile Maze study, many end users would try new mobile data services sooner if they were more confident of privacy and security credentials.

Figure 5: Potential mobile data service users stating more information on privacy/security would accelerate service take-up

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Source: The Mobile Maze, EY, October 2012 (online survey of 6,000 global mobile phone users)

The European Telecommunications Network Operators’ Association (ETNO) has welcomed the move, highlighting that the proposals strike an effective balance between data protection and innovation.

However, concerns remain that:

  • Some amendments are too prescriptive
  • Requiring explicit consent from individuals would add to costs and complexities
  • The rules lack proportionality, as the treatment of infringers is the same for all entities

The UK Government believes the regulation should instead be positioned as a directive, which would give member states greater flexibility in updating national laws. Many operators and US-based web giants remain skeptical as well.

A plenary meeting of the European Commission in June is likely to cement the status of new rules.

Mexico plans reform of telecoms sector

The Mexican Government has announced plans to reform the country’s telecommunications and television sectors.

In March, it presented a bill designed to boost competition by creating an independent regulator that could force dominant players to shed assets while encouraging foreign investment.

The prospective reform would also aim to lower prices for end users by enabling a greater range of competing offers in the market. Specific measures include:

  • Exploiting the fiber assets currently held by the Federal Electricity Commission to create shared public networks
  • New digital inclusion policies that target broadband availability for 70% of households and 85% of SMEs

The bill has been approved by Mexico’s lower house of Congress and the Mexican Senate.

Figure 6: Estimated loss in consumer surplus resulting from excessive pricing of telecommunications services in Mexico, 2000–09

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Source: “OECD Review of Telecommunication Policy and Regulation in Mexico,” OECD, January 2012

Going forward, existing operators will be able to branch out into new services such as pay-TV or broadband.

However, overhaul of legislation brings new challenges:

  • Imposing local loop unbundling (LLU) at a time when migration to fiber broadband infrastructure is critical could hamper infrastructure investment
  • LLU is a complex process that requires organizational change and high levels of regulatory oversight to ensure compliance

Looking ahead, reform is likely to introduce a number of new market dynamics:

  • Socioeconomic benefits of greater digital inclusion through more competitively priced services
  • Consolidation between different players in the pay-TV market
  • New entrants in the mobile market as virtual operators, with the prospect of converged triple- and quad-play services