3G case studies
overview
Ben Petrazzini
Strategies and Policy Unit
ITU
Issues
z Licensing strategies
Ö Auction, beauty contest, mixed
z Licensing conditions
Ö Competition, ownership, coverage,
sharing, standards, timing, etc.
z Spectrum allocation
z Transition to 3G
z Market prospects
Licensing strategies
z Auction
Ö Venezuela, Chile?
z Beauty contest
Ö Japan, Sweden, China?
z Mixed
Ö Hong Kong SAR
Auction and mixed
z Hong Kong
Ö Pre-qualification process
Ö Royalty-based mechanism: licensee pays a
percentage of 3G revenues over time
Ö First 5 years they pay a fixed minimum
z Venezuela
Ö Demanded by legislation
Ö Auction revenues for Internet development
z Chile
Ö Undecided. Requires changes in law
Auction implications
z Governments: revenues
z Incumbents: no choice
z New entrants: an opportunity
z Other operators: high risk
z Users: might bring higher prices
z Society: efficient allocation of
resources
Beauty contest
z Sweden
Ö Telecom Bill – auction not to be used when
licensing spectrum
Ö Licensing to be based on “grounds of fact”
Ö Pre-qualification and beauty contest
Ö Pace of roll out and geographic coverage
Ö A leader in hardware and service development
z China
Ö Operators to pay for spectrumn [benchmarked]
Beauty contest implications
z Subjective, unreliable, non-measurable,
inefficient allocation of resources
Ö Sweden [paper]
z Transparent, measurable, fast, cheap,
quick net and service roll out, no damage
on operator’s investment capabilities,
auction or lottery considered nonobjective criteria
Ö Sweden [case study]
Licensing
conditions / requirements
z Competition
Ö A license for a new entrant (?)
z Ownership
Ö No cross ownership
z MVNOs
Ö Enforced or market driven
z
z
z
z
Market / geographic coverage
Cost sharing
Standards
Timing
Expanding competition
z 3G licensing seen as an opportunity to
expand effective competition
z Likelihood according to market structure
and current conditions
Ö
Ö
Ö
Ö
Ö
Venezuela = likely
Chile = unlikely
Japan = through open network access (?)
Sweden = likely
HK = through open network access (?)
Reserving for new entrants
z Sweden
Ö No reservation, yet entry of 2 new operators
z Japan
Ö No reservation, no new entrants. Three local
incumbents. No foreign carriers [vodaphone]
z Venezuela
Ö Four licenses, one reserved for a new entrant
z Chile
Ö Four licenses, reservation not decided
Controlling ownership
z Sweden
Ö Control of more than 20% of shares in
any of the other applying
operators/consortiums
z No such requirement on
Ö Japan
Ö Hong Kong
Ö Venezuela and Chile
Enforcing VMNOs?
z Hong Kong
Ö Up to 30% of network capacity should be
opened for VMNOs
Ö Operators asked for 20% to avoid
competitor’s access to more than 100%
capacity due to aggregation
Ö Wholesale prices for VMNOs by commercial
negotiations, but subjet to NRA intervention
z Sweden: allowed – 30 in Feb 2001
z Chile and Venezuela
Ö Left to commercial negotiations
Licensees
ÖJapan (3)
ÖSweden (4)
ÖHong Kong (4)
ÖVenezuela (4)
ÖChile (4)
ÖChina (?)
ÖGhana (?)
Coverage
z Japan
Ö 50% of population in the first five years
[DoCoMo to cover 97% of pop. by March 2004]
z Sweden
Ö 30% of population by each carrier – remaining
70% can be covered through roaming
agreements with other operators
z Hong Kong
Ö Set by regulator, linked to performance bonds
backed by bank guarranty
Cost sharing
z Sweden
Ö Yes to increase pace and reduce cost of
rollout
Ö Carriers will have to reach agreements
[infrastructure roaming]
Ö Alliances in the months following the
licensing
z Collusion: threat to effective competition
Ö An issue for the telecom regulator?
Standards
Ö China: an industrial 3G strategy and its
global integration dilemma
• Huawei – 97 patents – CDMA
• ZTE (cdma2000) and Datang (TD-SCDMA) – gov support
Ö Hong Kong: any standard if compatible
among each other and with backward
compatibility existing 2G systems
Ö Europe: ETSI’s 3G handset standards
recommendations
Ö Japan: WCDMA and cdma2000
Ö Chile, Venezuela and Ghana (?): a
commercial decision of the operators – but
affected by spectrum allocated to 3G
Market share evolution of Chinese
domestic vendors
14%
12%
12%
10% 10%
Base Station
10%
Handset
8%
Switching System
6%
4%
3%
4%
2%
2%
0%
0%
0%
0%
1998
1999
Source: Ministry of Information Industry, China
2000
Timing of licensing
ÖJapan (done)
ÖSweden (done)
ÖHong Kong (Q4 01)
ÖVenezuela (Q1 02)
ÖChile (Q2 02)
ÖChina (???)
ÖGhana (?)
Spectrum allocation
z Chile
Ö Core IMT 2000 bands occupied by PCS
Ö Then 1710-1850Mhz up & 2110-2170Mhz
Ö Waiting for regional trends and USA
z Venezuela
Ö Core IMT2000 bands vacant
Ö No contraints on timing due to spectrum allocation
z For small markets spectrum allocation is related
to economies of scale
Ö potential bidders
Ö availability and cost of hardware
Ö services, applications, and content
Transition to 3G
z China
Ö WAP 2% of mobile subscribers – per minute
charge
Ö Monternet great success – move to packet
switching – January 2001 GPRS
Ö SMS: 56 m/M in Q1 00 to 192 m/M in Q4 00
z Venezuela and Chile
Ö Gov. & operators
Ö Demand for mobile [voice vs. data] – different
in each country
z Japan
Ö I-mode then 3G
Business case for 3G
z High income economies
Ö Japan, Sweden, HK: a natural transition
demand driven
z Profitability
Ö Took 10 years for GSM in Sweden to
become profitable
z Developing countries
Ö Ghana, Chile, Venezuela, China: not so
clear [individual users of broadband
mobile services]. Supply playing an
important role
Charging for services
z Charging schemes
Ö Per minute, per packet, per service, flate rate,
per access time
z Emerging approaches
Ö Japan: per packet
Ö Sweden: range of pricing arrangements
z WAP
Ö Poor performance because it is charged by
time and it is expensive
z Always on – packet switched
Ö Lower rates, but charges by packet not
transparent, difficult to monitor by user
Cost of terminals
z Cost of terminals
Ö Sweden: US$ 400 sales price
Ö Availability? The vicious cycle.
Ö Equipment supplier financing
z Subsidizing terminals
Ö Some operators in Sweden have decided that
they will not subsidize 3G terminals
Ö The Chilean experience
Summary
z Chile
Ö Spectrum dilemma
z China
Ö Standards – industrial policy
z Ghana
Ö Market size and purchasing power
z Japan
Ö Services and prices
z Sweden
Ö Market structure and service strategies
z Venezuela
Ö Timing and design of license
THANK YOU!