Towards 4G environment: Future regulatory challenges for content provision on mobile markets Aachen...

Towards 4G environment:

Future regulatory challenges for

content provision on mobile markets

Aachen University of Applied Sciences

Presentation for the 15th European Regional ITS Conference

Berlin, 4th – 7th September 2004

Prof. Dr. Markus Fredebeul-Krein

Content

Characteristics of future 4G markets

2.

3.

1.

Regulatory challenges in a 4G market environment

Regulating content provision on 4G markets?

4. Conclusion

Characteristics of future 4G markets 1.

Standard set by ITU in 2010 ?

WLANs + GPRS ?

Everything not 3G ?

Some new radio interface (e.g. UWB) ?

The next winning de facto standard ?

tech focus

market strategy focus

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1. Characteristics of future 4G markets 1.1 What is 4G?

Seamless mobility ? user focus6

telco & regulator focus

datacom & tech focus

3G bashing focus

A number of possible definitions have been suggested:

4G

3G

2,5

1. Characteristics of future 4G markets1.2 From 2G to 4G

2000 today 2005 2010

Cu

sto

mer

val

ue

Mobile voice communication worldwide

SMS

First multimedia services (MMS)

Mobile Internet-access

Digital ckt. Switched + packet switched voice+data+video Multimedia

broadband multimedia applications

Interoperability and integration

Technology independent platform

Digital all IP Voice+data + video

Mobile multimedia

2G

Public W-LAN

1. Characteristics of future 4G markets1.3 Developments worldwide

WWRF (Wireless World Research Forum): interest group founded by Alcatel, Ericsson, Nokia, Siemens and leading research centres

ITU-T/-R Working Group: follow-up technologies of IMT-2000

Other working groups, i.e. 4GMF (4G Mobile Forum), 3GPP, IETF and MWIF/OMA

USA 4G developments

4G4G

In North America 4G development is driven by W-LAN.

Worldwide 4G Developments

4G-notion as an evolutionary system of integrative technologies

EU 4G developments

Japan focuses on a new mobile 4G standard and not on integration of existing technologies

Japan & Asia 4G developments

Depending on the technological / historical background the term 4G has different meanings in different regions

TD-SCDMA

MC-CDMAMulti-Carrier CDMA

Bluetooth

WAP

A number of technologies (apart from 3G) will have an impact on wireless development this decade. Market winners will become part of a 4G architecture

Optical Wireless

BLAST (Bell Lab Layered

Space-Time)

Software radio

OFDM WLANSmart

antennas

DVB-T(digital terrestrial TV)

SatellitesUWB

(Ultra Wide Band)

Micro-fuel cells

all-IP

Ad-hoc networks

Turbo-code

LAS-CDMA Large Area Synchronized

CDMA

MDMA Multi-dimensional

multiple access

1. Characteristics of future 4G markets 1.4 Technologies

Convergence of fixed, mobile satellite and broadcast

Support of terminal and personal mobility

Global seamless support of wide range of services

User data rates from 2Mb/s to 20Mb/s or more

support of broadband mobile multimedia support of high definition moving pictures

Support of broadcast and distribution services

Reconfigurability of networks and terminals

Coverage : Pico, micro, macro and broadcast

Software Defined Radio Technology

IP Technology

Dynamic Spectrum Allocation

Efficient Energy Use

Optimum Routing

Global Roaming

More Services than 3G

Guaranteed QOS

Support of Variety of Terminals

Heterogeneous standards

Users Information Rates >2 Mb/s may be 20 Mb/s

Key Features

1. Characteristics of future 4G markets1.5 Key features

Networks:

Several competing infrastructures (GPRS, WLANs, 3G + dark-horses)

Terminals: Adaptive instead of single mode A continuous suite of terminals from voice-

only ear-phones, wearables, handsets, handhelds, goggles with screens, lap-tops to wireless cars etc.

Applications: High Speed Multimedia instead of voice, data

1. Characteristics of future 4G markets1.6 Summery: the wireless landscape in 2010

Seamless Services and Intersystem Roaming

Emerging new technologies with potential for breakthrough after 2010

Regulatory challenges in a 4G market environment2.

Regulating Mobile Communications will undergo a transition in a 4G environment

less regulations and regulatory intervention for mobile operators compared with fixed-network providers

limited competition/closed market

mobile-specific licences issued (typically less than 5)

No content regulation on mobile telecom markets

More regulation for mobile providers

Distinctions between fixed and mobile sectors will diminish as a greater separation between „services“ and „networks“ is made:

network provision will increasingly become technology-neutral (subject to resource-availability, e.g. spectrum)

2 regimes will in the future regulate operators and providers.

Sector Regulation & Competition Law

Content regulation is likely to become an issue in the future

Traditional Future Changes

Restructuring of regulator to adopt to new tasks

2. Regulatory challenges in a 4G market environment 2.1 Key changes of a future regulatory framework

regulatory concerns will shift upwards to the higher layers of the network hierarchy

integration of communicationsand content markets

traditional regulatory requirements may become less relevant with 4G

other requirements will remain but change character

technologies In the long run legacy networks will continue to exist, but over time they will be transformed and upgraded to enable additional types of services

focus on the category of service to be interconnected, rather than on the origin of the network

interconnection With 4G, market dominance may also be derived from controlling more limited sets of functions and capabilities that are necessary for the provision of services to end users

implications of regulatory action in cases where some form of dominance over control points occurs

understand sources of market power and its abuse in the 4G environment

2. Regulatory challenges in a 4G market environment 2.2 Regulatory challenges in a 4G environment

New technologies and the integration of communications and content markets set the framework for regulation in a 4G environment. Both of them are likely to change market power of undertakings in the market.

In the Future Circuit Switched technology will be substituted by IP technology. This will have impacts on competition and regulatory intervention:

More opportunities for open interfaces: potential for wider participation and

more competition in advanced communications

services

Interoperability and open interfaces will

become important issues as there will be many more forms of interconnection

and access

More potential for more geographic independence as a s

erver can be located anywhere

Declining importance of

national Numbering

2. Regulatory challenges in a 4G market environment 2.3 Regulatory Implications of IP-based Service Provision (1)

Move from SS7 Signalling to IP Addressing leads to….

Regulators will have to assess whether open interfaces to service components are necessary or if there will be sufficient interoperability being implemented through gateways that perform conversion between interfaces

International competition increases as IP networks make service creation independent from user location. This will in turn change market definitions

As terminal equipment becomes increasingly intelligent new criteria for determining whether a given function belongs to a network and is covered by its regulations are necessary

Time based tariffs will become more and more inappropriate where cost orientation is a regulatory requirement as no clear start and end signal is transmitted

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As a consequence….

2. Regulatory challenges in a 4G market environment 2.4 Regulatory Implications of IP-based Service Provision (2)

2. Regulatory challenges in a 4G market environment 2.5 More Control Points on 4G Markets

Control Points on 4G markets will to a large extend determine if an operator or Service Provider has Significant Market Power. Example today: Local Loop

Possible Control Points in the future:

Network

Control of Inter-connect and QoS Determines

whether/at which quality service are offered

Control of Routing Tables

Control of network related functions via standards

Services Content User Information

These potential bottlenecks may enable operators / providers to exercise market dominance by imposing unfavourable access conditions upon other market players

Control of service related functions via standards

Interoperability of Transport and Service

Walled Gardens Enable operator

to restrict access to content

Control of Content provided exclusively to selected network/service providers

Customer Billing Information

Access to customer Information Systems

Control of location based services

2. Regulatory challenges in a 4G market environment 2.6 Increased complexity of regulatory interventions

Existence of Control Points might lead to serious barriers to market entry which in turn might call for regulatory intervention. A careful review of the situation is however necessary:

Assess whether potential control points create market power sufficient to justify regulatory intervention

Increased Complexity and analytical challenges

Inappropriate regulatory requirements would in affect mean that the regulator would pick winners and losers

The importance of Control Points might diminish as new technologies other service alternatives

If network access and content platforms are unrestrictedly opened, operators will no longer be able to ensure end user quality and security

Regulatory Task

Inappropriate intervention could freeze commercial arrangements and market structures that are not efficient or viable in the long term

Regulatory rules for the provision of content on 4G mobile markets 3.

“Walled garden” is a term applied to a service package that provides customers access to certain pre-determined functions and content

It is a branded service and is actively promoted by the service provider and its partners, and contains high quality content that is intended to enrich the users experience and thereby increase their service loyalty and reduce churn

Entry is normally open only to those users who have subscribed to the service

Describes a business strategy designed to attract and retain customers

Network operators or service providers choose to control the content and services that can be accessed by a customer

Could become an important bottleneck in differentiating the availability of services and contents

Examples have already emerged, where mobile operators are seeking to create a walled garden for a selection of services

Characteristics Consequences

3. Regulatory rules for the provision of content on 4G mobile markets 3.1 Walled gardens as potential bottlenecks

Under semi-walled garden” (open garden) portals owned by network operators or service providers enable access to the public Internet, but only through a number of menu choices

Insufficient supply in the garden

The vast majority of access providers will be unable to provide the breadth and depth of quality services/content needed to fulfil subscribers’ demand

Competition btw. portal providers

There are strong incentives for especially smaller operators/service providers to move beyond the walled garden approach, if that is what end-users want

Promoting destination sites

Increased promotion of destination sites from traditional media, portals, and start-ups will drive experienced users beyond the walled garden

Access portals to widen target group

With insufficient growth in access subscribers, access portals have an incentive to expand their target group for future 4G services beyond their own access subscribers

For several reasons (semi-)walled gardens may not be a successful business strategy of mobile network operators in the long run

3. Regulatory rules for the provision of content on 4G mobile markets 3.2 (Semi-)Walled gardens gardens as a business model

Regulatory intervention may be detrimental

(Semi-)walled gardens could provide a good starting point for many users first entering a new service space

Network operators / service providers can make sure that walled gardens services are easy to use, offer predictable prices and minimise the risk of fraud

Functions for managing / protecting digital rights are crucial for successful distribution of content

The lack of Digital Rights Management is a barrier to many applications involving copyright media.

As long as no standard approach for digital rights management has been identified, (semi-)walled gardens may provide the best channel for content delivery and payment

Choosing a less interventionist approach by reducing market entry barriers for 4G providers

adopting a light-handed licensing regime which allows new companies to avoid burdensome application procedures.

stimulating the market entry of service providers

If (semi-)walled gardens constitute a significant bottleneck on future 4G markets, there are other arguments against regulating them

3. Regulatory rules for the provision of content on 4G mobile markets 3.3 Arguments against regulating (semi-)walled gardens

Absence of regulatory intervention Service concept being important

than technical standards

Micro-payment system profitable for both DoCoMo and content providers

Success factors of mobile

Internet in Japan

Despite dominance DoCoMo was able to exercise influence over standards for the services, thus being able to able to control the development and delivery of fully functional solutions

Competitors have been almost as successful as i-mode, although they are built on different networks

have chosen similar solutions for providing service, billing customers, sharing revenues, setting content prices and signing up for services

DoCoMo allows content providers to charge btw. 1 and 3 € for contentsOnly 9% of this charge is kept by DoCoMo as a handling chargeOfficial content providers had an incentive to develop content

3. Regulatory rules for the provision of content on 4G mobile markets 3.4 The mobile service i-mode by NTT DoCoMo

Business strategy chosen by mobile operators in Korea has been to achieve high volume of data traffic and to differentiate from other mobile operators

Walled Garden Apporach

control quality and number of mobile services/contents

control over prices of services/contents

distinguished offerings via exclusive agreements with content providers

Success: Just one year after the launch of 2.5G more than 9 million out of 36 million mobile customers have been using the service

But: Korean Regulator has obliged mobile operators to keep only 10% of the revenue from premium priced content - giving 90% to the content owners

Operators offered contents at very low cost, generating revenues mainly from the data traffic, meaning that content providers were getting 90% of very little

3. Regulatory rules for the provision of content on 4G mobile markets 3.5 Korean mobile Internet services

Conclusion 4.

Abstain from requiring non-dominant operators/providers to provide open and non-discriminatory access at any level of 4G markets

Be cautious when putting in place ex-ante measures, and apply instead ex-post tools which are sufficient for large parts of the 4G market

Distinguishing between potential bottlenecks that promote normal competitive activity, and those that may harm competitive activity

Be careful of not regulating too early and take into account “long-term risks and reward aspect

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Guidelines for regulatory action on 4G markets

4. Conclusion 4.1 Recommendations on regulating content provision on future 4G markets

Network operators

The principles of open and non-discriminatory access (as well as other remedies if necessary) should only apply to 4G networks of dominant operators and not to all network operators

Service Providers

Mandated open access to services where a “dominant service provider” exists. Only when he can prove that he cannot provide unlimited access due to capacity constraints, he may be allowed to restrict accessExclusive agreements between service- and content providers should be monitored closely by regulators in view of their competitive effects

User access

Subject to competition provisions, access to content should be a matter for commercial agreementregulatory provisions shall prevent the abuse of market power of dominant content suppliersOpen network access for users should always be mandatory

4. Conclusion 4.2 Recommendations on regulating access on future 4G markets

Regulatory action against operators and providers on future 4G markets may be guided by the following principles:

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