Göran Marby is the Director-General of the Swedish Post and Telecom Agency (PTS) since January 1, 2010. He has held several executive positions within the IT sector: CEO Cygate, Country Manager Cisco Sweden, CEO Unisource Sweden.
New social media services and behavioural patterns are creating challenges for both operators and regulators. Operators are facing an uncertain investment case in the move to next generation access. What is the role of regulators in these circumstances? How can they ensure basic access to broadband for everyone?
The electronic communications market is right now in the middle of a major paradigm shift. Looking at recent developments in Sweden it is possible to identify three driving forces underlying this: we are constantly finding new ways to communicate; we demand mobile and wireless services; and the inevitable transition from traditional technology to IP is happening now.
Electronic communication is no longer just calling, mailing and texting. Social media is actually influencing our way of communication. Chat and voice communication through Skype, MSN or Facebook, i.e. Internet services, is gaining ground. These new services and behavioural patterns create challenges. Networks of yesterday are not dimensioned for these services and services are not optimised for the networks.
We also want constant access to these services, in our homes as well as on the move. In a short period of time the smartphone has for many people become the primary terminal for Internet connection. Mobility is a key driver. In 2009, the number of voice minutes from mobile networks for the first time exceeded the number of voice minutes from fixed networks. In 2010, the number of mobile broadband subscriptions (including data subscriptions to smartphones) exceeded the number of fixed broadband subscriptions. And in line with this trend, data traffic in mobile networks is booming.
Though these changes are to a large extent driven by the demands of endusers, they will of course affect both operators and regulators. Operators face a major shift in respect of both their business models and technology.
We have seen shifts in technology and business models before – when the Internet was introduced this was a great technology shift, but the way of charging consumers was initially the same (minute based). A few years later broadband, with fixed rates, was introduced. However, these two types of change are now occurring at the same time, which has never happened before.
In a few years the networks will be ‘all-IP-ready’ – opening the possibility to build cost-effective IP-based services. Operators will have to review their historical business models based on charging their consumers for ‘consumed minutes’ in their networks. Charging per minute will be obsolete in an all-IP-world. In the current situation operators are making money from voice and SMS due to low production costs, but now that broadband is driving investments this will change.
Uncertainty for operators
This is the basic reason why we today hear a lot of operators talking about uncertain investment cases. Both consumer demand and the willingness of consumers to pay for higher broadband speeds are being questioned. So operators face a major challenge. They need services and applications to stimulate the demand side and also need to find ways to secure at least parts of their revenues; otherwise there is little prospect of future services being developed by operators.
Is there a demand for broadband? We see a mixed picture across Europe, on the one hand in countries where the broadband explosion has not yet occurred and on the other hand in countries, such as my own, where both the demand for high speed broadband (i.e. above 100 Mbit/s) and the growth in demand is high. In Sweden, private subscriptions for high speed broadband as a share of access to high speed broadband increased by almost 20 per cent in 2011, to a total of 308 000 subscriptions.
However, pending the ‘killer application’, the operators are hardly idle. Both on the revenue side and on the cost side we see activities and development. On the revenue side we see more active branding, bundling of services, segmentation and, or at least the discussion of, prioritisation. On the cost side we see trends toward cheaper equipment, shared network investments and specialisation.
The net neutrality debate is also an important aspect and the recent legislation in the Netherlands shows that the battle is far from over. It is important to have an open internet where access is available to everyone, but it is also important to consider investments and development of new products and services.
There is also another problem. When everything is IP, what will happen to those who have no access to the new IP-networks – the next generation access (NGA) networks? There is a manifest risk, especially in a country such as Sweden with low population density and extensive rural areas, that we will face a new digital divide.
The role of the regulator
What is the regulator’s role? One of our missions, as I see it, is to provide transparency. We must not add to the uncertainty already facing the operators. Here I value the common EU platform as very important for discussion, learning from best practices from other Member States, and the Commission’s Guidelines and Recommendations. The Body of European Regulators for Electronic Communications (BEREC) is an important vehicle for this discussion and will be an important part of the solution to these problems.
Another mission is to make sure that regulation does not stand in the way of new business models. One example on the agenda in many EU states today is mobile termination rates – where there will be significant decreases throughout Europe. High dependency of revenues from mobile termination is a factor that cements old business models based on per minute charges.
The same applies concerning a rigid approach to net neutrality. The best approach again involves transparency and competition. Effective transparency will empower end users by enabling them to compare conditions and tariffs, and thereby enable them to make informed choices. This will exert pressure on the market players to provide competitive products, realising the full potential of the new regulatory framework. The BEREC Guidelines on Net Neutrality and Transparency, now under consultation, represent an important step.
And a third very important mission, in the light of the increasing demand for mobile services, is spectrum management. Given the increased demand for broadband access and mobility patterns, spectrum will continue to play an important, if not crucial, role. I am proud to say that Sweden is in the forefront of allocating and assigning spectrum suitable for broadband. But we need to continue the work of harmonising and allocating yet more spectrum to meet demand and promote the on-going development in the sector.
If the challenges of today are handled properly we can look forward to a development where innovation is embraced through a high rate of investment in networks and services bringing innovative products to the end users. Furthermore, there will be no future digital divide between privileged and less privileged areas. We should have at least basic access to broadband for everyone, so no-one is left behind when the development takes off. This constitutes a challenge for governments, regulators and operators, which must be jointly addressed.