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  1. 1. Dolphin Response to "Multimedia Communications on the Move" Ted Beddoes Chief Executive Officer Dolphin Telecom plc 4 June 1998
  2. 2. List of contents 1 Introduction 3 1.1 Dolphin’s response 3 1.2 Exciting opportunity 3 1.3 Potential exclusion of new entrants 3 1.4 Measures to reduce disadvantages to new entrants 3 2 The nature of UMTS 4 2.1 Meeting the needs of the users 4 2.2 Benefits to businesses and individuals 4 2.3 Variety of services and products 4 2.4 International harmonisation 5 3 Spectrum issues 6 3.1 Dependency between spectrum and licensing policy 6 3.2 Number of UMTS operators 6 3.3 National spectrum licences 6 3.4 Consistency with spectrum packaging solutions overseas 6 3.5 Relationship between paired and unpaired spectrum 6 3.6 Provision of asymmetric services 7 3.7 Sharing of spectrum 7 3.8 Removal of uncertainty regarding practicality of any sharing 7 4 Licensing policy 8 4.1 Advantageous position of incumbents 8 4.2 Reserving a licence for new entrants 8 4.3 Delayed launch of UMTS by incumbents 8 4.4 Pre-qualification criteria 8 4.5 Formation of consortia 9 4.6 Restrictions on bidders 9 4.7 Restrictions on suppliers 9 4.8 Coverage obligations 9 4.9 Site sharing 10 4.10 The need for roaming onto GSM networks 10 4.11 National roaming obligations on GSM operators 10 4.12 National roaming between UMTS operators 10 4.13 Licence duration 10 4.14 Payment terms 10 4.15 Availability of information to bidders 11 5 Conclusion 12 5.1 Dolphin support for the introduction of UMTS 12 Page 2
  3. 3. 1 Introduction 1.1 Dolphin’s response This document is the response of Dolphin Telecommunications to the DTI’s consultation paper “Multimedia Communications on the Move”1. The consultation paper invited views from industry on the Government’s plans for the introduction of Third Generation mobile communications in the UK. Given the time that has passed since the consultation paper was written, this response does not explicitly address all of the specific questions posed in the consultation paper, although it does address most of the issues raised. 1.2 Exciting opportunity Dolphin views UMTS as an exciting opportunity for the introduction of advanced mobile communication services and their use for a wide range of applications. We believe that there is great potential for UMTS to be used to provide significant benefits to businesses and consumers. These opportunities will only be realised if there is sufficient innovation and forward-thinking within the organisations that are awarded UMTS licences. The gaining of licences by strong consortia with an interest in the continuing development of a competitive market for mobile communication services beyond what is currently available has many potential benefits. 1.3 Potential exclusion of new entrants The four existing GSM operators in the UK (and similarly also BT) have many potential advantages in relation to UMTS. It would be easy to envisage a situation whereby some or all of these incumbent operators were able to extend their dominance of public mobile communications into the Third Generation age, to the exclusion of new entrants. We are sure that the Government shares our view that this would be undesirable. 1.4 Measures to reduce disadvantages to new entrants It is Dolphin’s view that, in order to encourage new entrants to operate UMTS networks with a realistic chance of being successful, measures will need to be included in the licensing regime to help redress the competitive advantages enjoyed by the incumbents. In the interests of an open, competitive, thriving UMTS market, Dolphin believes that these measures should preferably include: • the reservation of at least one UMTS licence for new entrants; • the right for new entrants to use the antenna masts of existing cellular operators; • the ability for UMTS subscribers to roam onto GSM networks; • the exclusion of any consortium arrangements that would act against the development of an open and competitive market. 1 “Multimedia Communications on the Move”, a consultation document on Third Generation mobile communications from the Department of Trade and Industry, which was issued by the UK Government in July 1997. Page 3
  4. 4. 2 The nature of UMTS 2.1 Meeting the needs of the users There is a great deal of uncertainty regarding the market for UMTS. The services to be provided should ideally be driven by the users’ requirements, such as the applications for which they wish to use mobile communications, the information to be communicated, and where it can best help them in their business. In reality, however, this may not necessarily be the case. At one extreme, UMTS networks might be “over- designed” in an attempt to cater for all of the different applications and requirements that may be envisaged, while at the other extreme, UMTS operators might end up providing little more than could be provided using current mobile networks. 2.2 Benefits to businesses and individuals Dolphin believes that the UMTS licensing process should seek to encourage potential licensees who would have the inclination and capabilities to develop their networks so as to best serve the users’ needs, and provide mobile communication services which are able to help realise genuine benefits to businesses and individuals. These may be in the form of economic benefits, operational improvements or social benefits, for example. 2.3 Variety of services and products Dolphin would hope that UMTS networks will be able to provide a flexible range of services and products to meet the needs of users for advanced mobile communications. The exact nature of the market, and the services/products that will be required to serve it, are difficult to predict at this stage. However, Dolphin would hope/expect that UMTS will be able to provide wireless access for applications such as: • high speed internet and intranet access; • electronic banking, point-of-sale transactions, and other applications associated with the cashless society; • on-line information services, for example transport and traffic information; • mobile access to home and office IT systems; • video applications, such as video conferencing, remote surveillance and internet television. In addition to advanced mobile data communications, users will continue to require voice communications and basic data services such as those provided on current mobile networks. These will ideally be available from the same terminals and as part of the same packages as the more advanced data services. Page 4
  5. 5. 2.4 International harmonisation Dolphin believes that it is important that the UMTS networks in the UK form an integral part of a harmonised pan-European UMTS network, and ultimately a world- wide IMT-2000 network. It is important that all possible steps are taken to try to ensure that any decisions taken in the UK do not jeopardise this position, for example by creating barriers to roaming or through technical decisions that may be inconsistent with those taken by other countries. Page 5
  6. 6. 3 Spectrum issues 3.1 Dependency between spectrum and licensing policy Spectrum issues and licensing are in practice inextricably linked. For example, decisions regarding the number of operators to be licensed and the amount of spectrum per operator are clearly highly interdependent. In this section we concentrate on issues specifically relating to spectrum, with other licensing and regulatory issues discussed in section 4. 3.2 Number of UMTS operators The number of UMTS operators licensed is clearly a key question that must be considered very carefully. It would be tempting for the regulator to try to maximise the number of operators, on competition grounds. There are dangers in going too far, however. The available spectrum would be spread too thinly, thus compromising the viability of UMTS and the services provided. There may also be questions regarding how many operators the UMTS market will be able to support. Current thinking within the UMTS community suggests that the viability of having any more than four operators within the current UMTS spectrum may be questionable. 3.3 National spectrum licences Dolphin supports the idea that UMTS spectrum should be licensed on a national (as opposed to regional/geographic) basis. 3.4 Consistency with spectrum packaging solutions overseas Dolphin believes that the international impact of any spectrum packaging solution adopted should be carefully considered. Any solution adopted in the UK that turned out to be inconsistent with solutions adopted in other countries may be potentially damaging to UK interests, for example in terms of availability and cost of equipment, or difficulties in international roaming. 3.5 Relationship between paired and unpaired spectrum Dolphin would ideally support the view that the paired and unpaired spectrum should be dealt with separately in the licensing/auction process. However, given the current discussions within the industry regarding spectrum packaging, and the possibility that even with as few as three operators there would be insufficient paired spectrum for each of them to construct a viable network without use of unpaired spectrum, Dolphin recognises that it may be unavoidable to package paired and unpaired spectrum together for licensing purposes. Page 6
  7. 7. 3.6 Provision of asymmetric services Dolphin believes that the paired and unpaired spectrum and the different proposed air interface technologies represent an opportunity to differentiate services with different inherent characteristics (for example time delays, and asymmetry between bandwidth required for uplink and downlink). Dolphin believes that it should be possible (at least in the unpaired spectrum) for an operator to provide such asymmetric services, ideally with the degree of asymmetry being dynamically determined, in order to provide for future services not currently envisaged. 3.7 Sharing of spectrum Dolphin’s view regarding the sharing of spectrum between operators is that it is generally inadvisable and would inevitably be problematic, with the quality of service provided by one operator dependent on the actions and co-operation of other (competing) operators. It is almost inevitable that disputes would arise. There may however be some potential for the sharing of spectrum for non-real time, store-and forward packet data services. 3.8 Removal of uncertainty regarding practicality of any sharing Dolphin recognises, however, that some degree of spectrum sharing (in combination with dedicated allocations) may be desirable, at least in the unpaired spectrum, in order to provide sufficient spectrum for each operator. Any decision to proceed on the basis that such sharing will be possible should only be taken if it is clear that such sharing will be feasible in practice. This will require confidence regarding the technical aspects of the sharing, but also the existence of a fair and practical process for co- ordination and co-operation between operators, which can allow operators to share spectrum effectively and without excessive dispute. Page 7
  8. 8. 4 Licensing policy 4.1 Advantageous position of incumbents Dolphin believes that the four existing GSM operators in the UK should be allowed to compete for UMTS licences, and would be expected to be amongst the pre-qualified bidders. We are sure that the Government would share our concern, however, that these existing cellular operators have a significant competitive advantage arising from their current networks and market positions. This may act as a significant barrier to new entrants wishing to operate UMTS networks. BT would also have a significant competitive advantage arising from their existing fixed network and market position. Dolphin believes that the potential dominance of these incumbents needs to be taken into account in developing licensing policy, otherwise it is likely that new entrants will be at a significant disadvantage in constructing a viable business case and bidding for UMTS licences. 4.2 Reserving a licence for new entrants In order to avoid the possibility of new entrants being effectively “squeezed out” and prevented from obtaining any of the UMTS licences, Dolphin recommends that one of the licences should be reserved for new entrants (with bids from any of the above five incumbent operators being effectively excluded). This could be achieved in an auction, for example, by awarding one licence to the highest bid from a new entrant, with the remaining licences awarded to the highest of the other bids (ie from incumbents and other new entrants). This would reduce the likelihood of the incumbents achieving complete dominance in the UMTS market, although they would still retain substantial advantages arising from their existing networks, ownership of sites, customer bases, etc. 4.3 Delayed launch of UMTS by incumbents Another possibility for reducing the competitive disadvantage of new entrants would be to give them a “head start” in launching their UMTS networks (of one year, say). In spite of our status as non-incumbents, Dolphin does not support such a measure, since for such a measure to be effective in assisting new entrants it would probably as a consequence delay the overall roll-out and development of UMTS as a whole in the UK. 4.4 Pre-qualification criteria Dolphin recommends that qualitative pre-qualification conditions should be applied to potential bidders, in order to provide some confidence in the overall competence of the bidding organisation/consortium to successfully implement and operate a UMTS network. This should aim to avoid some of the problems that have been experienced with auctions in other countries such as the US. Quantitative criteria that may place new entrants at a disadvantage compared to existing operators should be avoided. Page 8
  9. 9. 4.5 Formation of consortia It is Dolphin’s view that the formation of consortia to bid for UMTS licences could be beneficial for the development of UMTS in the UK (provided they are not able to act against the development of an open and competitive market). Such consortia could provide increased confidence that UMTS networks will be able to benefit UK businesses and consumers by providing advanced communication services to meet their needs. In addition to the “network operator” organisation(s), other organisations might be added to consortia to help provide competence and confidence in areas such as: • potential applications, eg IT systems, Internet, electronic commerce, information services, location systems; • system integration; • financing; • distribution and marketing; • innovation in the provision of services and products. 4.6 Restrictions on bidders Dolphin believes that restrictions on bidding for UMTS licences should be imposed in the event that the constitution of consortia would lend itself to anti-competitive practices or concentrations of market power that could act against an open and competitive market. For example, such restrictions might apply if a major company were to bid in more than one consortium, or in relation to the positions of BT and Cellnet. Restrictions may also be appropriate in relation to the media industry and content provision. 4.7 Restrictions on suppliers Dolphin suggests that suppliers of equipment and software should be excluded from bidding consortia, where the involvement of a supplier may be to the detriment of the UMTS market as a whole (eg for manufacturers of equipment used within the network infrastructure). In particular, exclusive agreements with such suppliers should be prohibited prior to auction. 4.8 Coverage obligations Dolphin considers that the proposal to oblige UMTS licensees to provide coverage to 80% of the population at 144 kbits/sec within 6 years of commencement of commercial operations is reasonable. Page 9
  10. 10. 4.9 Site sharing In order to reduce one of the disadvantages faced by new entrants, and to reduce unnecessary environmental damage arising from the numerous antenna masts being erected across the UK, Dolphin proposes that new entrants should have the right to access and use the antenna masts and infrastructure sites of incumbent cellular operators to a significantly greater extent than is currently achievable. In order to be effective, the obligation on incumbents should be to provide access at fair and reasonable commercial rates, and to do so in a way that does not unnecessarily hinder the legitimate roll-out of the new entrant’s network, nor result in avoidable damage to the environment. 4.10 The need for roaming onto GSM networks Any existing GSM 900/1800 operator who wins a UMTS licence is likely to have a significant potential advantage, at least in the early years of UMTS operations, arising from his likely ability to be able to offer his UMTS subscribers the ability to roam onto his GSM network, for example when no UMTS coverage is available or when speech communication is required. Without such an ability to roam, new entrants would be at a significant disadvantage in trying to market their services to potential customers, and conversely the customers themselves are likely to benefit from such an ability to roam. 4.11 National roaming obligations on GSM operators Dolphin recommends that there be a national roaming agreement within the UMTS licence that allows services to be provided to UMTS subscribers from GSM networks. Furthermore it should be mandated that, in the interests of subscribers and the development of UMTS in the UK, GSM operators should allow UMTS subscribers to roam onto their networks, with charges to the UMTS operator at discounted rates similar to those currently offered to independent service providers. 4.12 National roaming between UMTS operators It is Dolphin’s view that the introduction of national roaming between UMTS networks from the commencement of commercial services would remove an element of competition between the UMTS operators and act as a disincentive to roll-out their networks quickly, and would thus be against the interests of consumers. The option of introducing such national roaming at a later stage may be of greater merit. 4.13 Licence duration It is Dolphin’s view that the licence duration of 15 years suggested in the consultation document represents a minimum acceptable figure. 4.14 Payment terms Dolphin believes that, as part of the design of the licensing and auction process, the Government should consider the possibility that payments for spectrum and licences should be on preferential terms for new operators, for example with deferred payments or with increments over time (perhaps related to subscriber/revenue growth). Page 10
  11. 11. 4.15 Availability of information to bidders Dolphin requests that information regarding the licensing and bidding process, such as licence conditions, auction rules and bid success criteria, should be made available to potential bidders at the earliest opportunity. As a minimum, there should be a window of at least 90 days between the publication of a bid package containing comprehensive information on licensing, licence obligations, auction design, success criteria, payment conditions, etc and the commencement of the auction process. Page 11
  12. 12. 5 Conclusion 5.1 Dolphin support for the introduction of UMTS Dolphin Telecommunications welcomes the opportunity to contribute to the UK Government’s thinking regarding UMTS. Dolphin supports the early introduction of UMTS into this country in order to retain the UK’s position as a leader in mobile communications. Page 12