OECD Experts Meeting on Telecommunications Services
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1 Barriers to Trade in Telecommunications Services OECD Experts Meeting on Telecommunications Services Anastacio Ramos Director, International Regulatory Affairs and Public Policy Verizon 10 December 2008
2 The World has Changed and So have We The Internet Generally 1.5 billion global users ** (growing by 10 million a month) Daily traffic (102 billion s by 2009) U.S. Internet connections (handled 700mil. gb per month by 2006) Verizon Wireless* U.S. wireless customers States w/wireless presence 70.8 million 49 with D.C. 2 Verizon Telecom* U.S. wireline access lines Wireline broadband connections FiOS triple-play 38.3 million 8.3 million 2.2 million Internet 1.6 million Video * Statistics as of 10/08 ** 6.7 billion current population
3 Verizon s International Presence * 32,000 employees serving 100,000+ customers (98% of the Fortune 500) International IP Network 2,700 cities 150 countries 100,000+ miles of fibre Over 6 continents 4,500 global PoPs *Statistics as of 10/08 Verizon Business in Europe: Offering services in 23 of the 27 Member States, with approximately 4,700 employees Including: Voice, GDL, PIP, Frame/ATM, IP, Dial VzB-International Headquarters located in Reading, U.K. (approximately 1,800 employees) 3
4 Verizon s International Presence * 32,000 employees serving 100,000+ customers (98% of the Fortune 500) International IP Network 2,700 cities 150 countries 100,000+ miles of fibre Over 6 continents 4,500 global PoPs *Statistics as of 10/08 Verizon Business in Asia: Offering services in 13 countries within the region, with approximately 650 employees Including: Voice, GDL, PIP, Frame/ATM, IP, Dial Partners in Trans-Pacific Express undersea cable 4
5 The Importance of Liberalization Attracting new investment Upgrading economy Infrastructures Improving efficiencies in an increasingly global market place Delivering macro-economic benefits such as creating jobs Contributing to improving universal service Improving services, pricing and choices for the end-user communities Encouraging innovation and differentiation of services 5
6 Regulatory Framework 6 Clear Policies and Procedures. Laws and regulations should be clearly defined, implemented and enforced in order to attract investment. Regulatory Independence and Transparency. Regulatory independence is a critical aspect of regulatory effectiveness. A lack of transparent rule-making process can signal a high degree of uncertainty which often results in delayed investments. Successful Licensing. Licensing criteria and conditions should be applied in accordance with regulations that are developed in a transparent and open manner. Flexibility for Innovative Services. A regulatory framework should be tailored to encourage introduction of innovative services, to rely of commercial agreements to the maximum extent possible, and to have effective competitive safeguards when needed. Adherence to WTO Reference Paper Principles. Adherence to the WTO Reference Paper is critical to fostering competition in the telecom sector.
7 Foreign Direct Investment (FDI) The telecommunications sector is a capital intensive industry Access to capital is key to ensuring the deployment and expansion of a robust networks Economies that have eliminated barriers to FDI have benefited - Greater commitment and longer term engagement by foreign investors - New management approaches - Technology and skills available to host country 7
8 Foreign Direct Investment (FDI) Cont d Over the last two decades, most economies have taken significant steps to allow the flow of FDI into their telecom sectors, but some still limit foreign ownership. Many countries limit FDI to 49% or lower. Some countries also place other types of restrictions which inhibit FDI, e.g., JV with existing companies only. Multinational corporations (MNCs) require seamless telecommunications services around the globe. Global telecom service providers need flexibility in selecting the appropriate business model to provision cross-border services: - Own and Operate - Local Service Provider Agreements - Equity Joint Ventures 8
9 Access to Submarine Cable Landing Stations The rapid growth of Internet traffic requires enormous amounts of bandwidth capacity. There is wide recognition among developing and emerging countries of the importance of access to low-cost, high speed international bandwidth in driving: - Information and communications technology - Economic growth - Education - Social welfare - National security The lack of reasonable access to submarine cable landing stations and backhaul can impose high costs on international bandwidth. 9
10 Access to Submarine Cable Landing Stations 10
11 Undersea Cable Landing Rules Undersea cable landing and in-country network access regulations in many countries make it difficult for global telecom providers to serve their corporate customers efficiently. Cable Landing Licenses/FDI Limits - Some countries require new entrants to obtain a facilities-based national basic service license as prerequisite to landing a cable. - FDI restrictions also limit the flexibility international carriers have to determine whether an equity joint venture is necessary. Access to Backhaul Capacity and Leased Lines - In some countries access to backhaul networks is limited to a single provider, generally the incumbent carrier. - In these instances, the cost of leasing backhaul and leased lines tends to be significantly higher than in markets where competition exists. Undersea Cable Repairs - Cable repairs outside the territorial sea should not be subject to preapproval by governmental agencies. - Bureaucratic delays prevent efficient restoration of critical services. 11
12 Licensing Framework Barriers to Trade in Telecom Services Extended time frames for obtaining licenses - Unnecessary evaluation of business plans - Inefficient review processes Excessive licensing requirements - Burdensome network coverage - High capitalization requirements - High fees Narrow scope of licenses - Definition of Value Added Services limited in scope - Difficult to offer converged services e.g., IPTV - Option to obtain General or Class licenses needs to be an option 12 Option to resell retail services should be made available to carriers authorized to offer telecom services
13 Efficient Interconnection Cost oriented Non discriminatory At technically feasible points Wholesale products that allow reasonable margins for retail competition Asymmetric regulation 13 - Ex Ante regulation of interconnection in the absence of competition - Ex Post regulation where competitive facilities and services exists - Transition to ex post regulation when proven existence of effective competition
14 Light-Touch Regulatory Framework for VoIP and Other IP-Based Services With the right legal and regulatory framework, VoIP-led innovation has tremendous potential to extend the power of Internet communications to regions of the world in which the service has not been widely deployed. Interconnected VoIP is increasingly becoming a very important service for consumers and enterprise customers. Most developing countries place restrictions on the provision of VoIP services - Some prohibit VoIP entirely - VoIP classified as a basic service, subject to licensing and economic regulation - Numbering resources restricted to basic service operators An evolutionary regulatory approach to the provision of access to emergency services, universal service contributions, and quality of service fosters the deployment of innovative services. 14
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