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Telcos Cannot Wind Back the Clock

The proposals by the European and Arab telcos that are being considered at the World Conference on International Telecommunications (WCIT) conference in Dubai later this year are most certainly facing defeat.

This is not because the USA believes that the international telecommunications regulations (ITR) cannot be discussed by the ITU. America has a rather strange set of national regulations in which they have combined internet infrastructure and content—and as such they claim that this no longer has anything to do with telecommunications. Nowhere else in the world has such a bizarre interpretation been adopted.

Far more relevant opposition comes from the ASEAN countries, who say simply that any regulation that increases the international cost of telecommunication is unacceptable. Interestingly, many of these countries have, or are looking at, open networks and/or regulatory structures whereby the infrastructure can be treated separately from the services, and so they do not have the same problems as the European and Arab operators.

At the same time, like many other countries—119 in total—the ASEAN countries see broadband infrastructure in terms of the national interest and are looking at innovative ways of sharing the burden of investments needed for upgrading the infrastructure.

Obviously this is a much more structural solution than that being advocated by the European and Arab telcos. They are trying to wind back the clock. As vertically-integrated companies they were unable to transform themselves to face the rapidly changing digital environment. Despite having a head-start in both the fixed broadband internet and mobile broadband they have failed to change their business models so as to position themselves as front-runners for the opportunities that the digital economy has to offer. Ironically it was the OTT (over the top) organisations of that time who asked for a fairer share, when telcos charged 60%-80% of OTT revenues for the privilege of hosting these services in their portals.

With the OTT battle more or less lost, the telcos now simply want to retreat to their monopolistic ivory towers and go back to increasing prices. This is simply not acceptable for the ASEAN countries. The European/Arab proposals will not be accepted by the rest of the world.

If those telcos are serious about their future they should stop coming up with band-aid solutions and start looking at far more structural solutions.

The cost of upgrading telecoms infrastructure could be 30%-50% cheaper if treated as a utility investment; and, as is already happening in Europe, investors are ready to invest in such open network projects. Why would the end-users need to be taxed for those upgrades if they are carried out by rather inefficient, vertically-integrated telcos at significantly higher and unnecessary costs?

Apart from the fact that the ETNO (The European Telecommunications Network Operators’ Association) and Arab States proposals are the wrong way of addressing the problems, how do they imagine they could be implemented? You would have to create an entirely new bureaucracy trying to figure out what is national and what is international traffic, and who is the originator of that traffic—and, increasingly, what is the telecoms element of the new digital economy services that are delivered over these networks. A key element of the digital economy is a high level of individual participation, and the amount of red tape needed to separate all of this, in accordance with these proposals, would severely undermine the national benefits of the digital economy. But even if they would be able to come up with clever ideas here, the proposals remain wrong.

The issues that are going to be put on the table in Dubai are not new. At previous international telecoms conferences, including ITU meetings—some dating back to the late 1990s following the ‘settlement reforms’—solutions were put on the table based on voluntary steps and national telecoms policies. But when it came to implementation they were not followed up—as with so many industry issues the telcos did not act in a timely fashion and they are continuing to pay the price for this. No ETNO proposal will not change that situation. It is just moving the inevitable further into the future. Unless the industry transforms itself there will be no solution to the telecommunications infrastructure investment problems of these vertically-integrated telcos.

By Paul Budde, Managing Director of Paul Budde Communication

Paul is also a contributor of the Paul Budde Communication blog located here.

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