GSM Asia Pacific

Universal Service

My perspectives will be broad. I’ll cover the broad issues here. Primarily on connecting the unconnected for the first two issues and roamin applies to all of us. Today 80% of the world has mobile coverage. One could question whether universal service has already been reached. Interesting when we look at developing countries, about 1/3 have a universal service fund. The trend is for governments to introduce more universal service funds and to stretch the definition. The people that contribute to this fund are you the mobile operators and it is in effect taxation. It becomes a taxation to subsidize monopoly fixed line operators something that they had hundreds of years to do.

Ironically, by taking money away, universal service funds can inhibit mobile service providers ability to reach unconnected. Our question has always been, is it appropriate to have a universal service fund, and if it is necessary can we ensure that the distribution of those funds is fair and equitable.

There’s an estimated 6 billion dollars tied up in universal service funds that can’t be accessed. What we’ve realized is that they’re not going away, so we’ve focused on good governance of those funds.

Taxation

Like cigarettes, we’re a very easy target. The impact is that it takes money and redistributes it into other years. The difference is that it doesn’t go back into telecom. We believe that we are tax neutral if you remove punitive taxation. By punitive we mean above and beyond value added tax. In half of the countries in the world 25% of the cost of handset is punitive taxes. This is a tax above and beyond other taxation. We see this across many markets.

The contribution that mobile makes to markets is absolutely astronomical. Our call to government is don’t tax mobile, let us do our job and we’ll provide the services and the value to your society that you’re looking for.

Roaming Regulation

It’s now very active on the political agenda. Everyone knows about European Roaming Regulation. Within your region in Asia we’ve seen the Austratian Parliament and Indian Parliament be quite active. The genesis started in 2004 with the EU complaining about roaming prices in the UK. The result was a wholesale cap of 30 Euro cents and a retail cap 49 cents for outgoing and 42 cents for incoming. And this retail cap was unheard of. The question really is, is it a regulatory question in Europe or is it something else? My answer is that it has nothing to do with regulation.

Prices were falling at about 20% a year, there was no sign of competitive failure, and surveys in Europe showed that users were happy with their mobile services, including roaming.

The EU is now surprised that innovation has stopped in roaming. It doesn’t make sense to do anything different. The reason the European Commission wanted to implement caps was that you would see an explosion in roaming traffic. The mobile operators have seen 30% of revenue wiped out and nothing near the promised elasticity.

The European Commission is unpopular in member states and they needed a win. They picked a pan-European service and they’ve been very successful politically.

As an industry we managed it badly. Being responsible, being transparent and being clear remail a priority for mobile operators. And make sure you communicate to your politicians what you’re doing.  It cost the operators 150 million euros to implement the regulations.