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TELECOMMUNICATIONS, MEDIA & TECHNOLOGY




                                         Telecoms
                                         regulatory
                                         developments
                                         in the region



                                         Dr Martyn Taylor
                                         Partner
                                         martyn.taylor@nortonrose.com

                                         June 2012
                                                               1
Overview



1.   Analyst predictions


2.   Regulatory developments in Asia


3.   Regulatory developments in Australasia   Dr Martyn Taylor
                                              Partner
                                              +61 2 9330 8056
4.   Regulatory developments in Middle East   martyn.taylor@nortonrose.com


5.   Regulatory risk profiles




                                                                 2
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY




                                         Analyst
                                         predictions




                                                   3
Mobile telecom networks in 2012 and 2013

1. 3G now has >50% global penetration. 4G LTE is the growth focus
   for advanced economies. 2G network closures will be considered.

2. 4G mobile spectrum will dominate most regulatory agendas,
   including ‘digital dividend’ spectrum. MVNOs will be recognised
   as a more politically expedient way to liberalise telecom markets.

3. Tower sale and leaseback deals may unlock value from passive
   infrastructure in order to fund CAPEX for 4G spectrum and LTE.

4. Smart phones and tablets will continue to accelerate mobile data
   usage. Mobile internet traffic is becoming an increasing
   proportion of all global Internet traffic, currently at 10%.

5. Mobile payment systems, machine to machine (M2M), and near
   field communications (NFC) are key areas of potential innovation.

6. Mobile advertising is in need of innovation. Mobiles account for
   10% of media consumption, but only 1% of advertising spend.
                                                                        4
Fixed telecom networks in 2012 and 2013

1. One third of the world’s population are now on the Internet.
   Developing economies have >100% growth in Internet access.

2. NGN rollouts will dominate national policy agendas as nations
   seek to achieve ubiquitous broadband Internet access.

3. NGN rollouts will provide an opportunity to revisit many
   regulatory policy settings, including to recognise convergence.

4. TDM traffic will continue to be substituted for VoIP as
   broadband penetration increases and OTT applications such as
   Skype increase in popularity in the mass market.

5. Traditional distinctions between platforms will continue to be
   removed via a shift to generic Internet access and ‘IP
   everywhere’. Mobile and fixed are becoming substitutable.

6. Smartphones and tablets will drive fixed data traffic growth via
   the use of home WiFi as a cheaper alternative to cellular data.
                                                                      5
Importance of broadband deployments

•   ‘Digital divide’ once measured as differences in communications access
    is now measured in terms of differences in the quality of access.

•   Slow download speeds result in lost opportunities. A 10% increase in
    broadband penetration in developing nations increases GDP by 1.4%.

•   Broadband is an enabling ICT platform that can influence entire economy:

    •   Improves variety, utility, value of services/applications offered by
        providers, to benefit users, society, multiple sectors of economy.

    •   Positive externalities of that can spillover into economic growth.

•   Human Rights Council of the UN General Assembly has declared access
    to the Internet a basic human right which enables individuals to exercise
    their right to freedom of opinion and expression.

•   The Internet is a cross-border resource for aggregate human knowledge
    that far surpasses any individual library. Broadband Internet access is the
    key that unlocks this knowledge in today’s information society.
                                                                                  6
Government policy objectives

•    A common policy objective is universal broadband Internet access

     •   Advanced nations: ‘superfast broadband’ speeds > 24 Mbit/s.

     •   Developing world: ‘basic broadband’ speeds up to 2 Mbit/s.

•    Best illustrated by United Nations “Call to Action” for the Rio+20
     sustainable development summit later this month:

     •   UN has called on all Governments to promote universal
         broadband access, including policies to expand access to health
         and education through broadband.

     •   UN has stated that its aim is to ensure that at least 50% of the
         developing world’s population and 40% of households have
         access to broadband Internet by 2015.

     •   UN has called for the private sector to contribute to this goal by
         developing innovative business models that increase broadband
         penetration, particularly in developing countries.
                                                                              7
Speeds required for different applications

BASIC BROADBAND                                          HIGH SPEED BROADBAND                                 SUPERFAST BROADBAND



500kbit/s to 1Mbit/s            1 to 5 Mbit/s               5 to 10 Mbit/s              10 to 100Mbit/s       100Mbit/s to 1 Gbit/s            1 to 10 Gbit/s


 VoIP                       Complex web browsing         Complex telecommuting        Telemedicine             Telemedicine HD             Research applications

 SMS                        Email with attachments       Large file-sharing           Educational services     Multiple educational        HD telepresence

 Basic e-mail               Remote surveillance          IPTV SD (many channels)      Broadcast video SD/HD    Broadcast video full HD     Digital cinema streaming

 Simple web browsing        IPTV SD (1-3 channels)       Switched digital video       IPTV HD                  Full IPTV channel support   Complex telemedicine

 Low-quality video          Simple telecommuting         Video on demand SD           Complex gaming           Video on demand HD          Scientific remote control

 Basic social networking    Digital broadcast (1 ch)     Broadcast video SD           Complex telecommuting    Gaming (immersion)          Virtual reality

 Small file sharing         Streaming music              Video streaming (2-3 ch)     Complex telepresence     Full telecommuting          Terabyte file sharing

 Music downloads            Advanced social networking   Video download HD            Surveillance HD          Video download (Blu-Ray)    Remote supercomputing

 Basic smartphone content   Medium file-sharing          Low-quality telepresence     Intelligent buildings                                3D HDTV channels

                            Video download SD            Gaming

                            Low quality gaming           Basic medical file sharing

                            Simultaneous devices         Basic remote diagnosis

                                                         Remote education

                                                                                                                                                8
                                                         Building management
A future world defined by IP addresses…




                                          9
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY




                                         Regulatory
                                         developments
                                         in Asia




                                                  10
0
                      200
                                       400
                                                           600
                                                                             800
                                                                                              1000
                                                                                                                       1200
                                                                                                                                           1400
        China
         India
   Indonesia
    Pakistan
 Bangladesh
       Japan
  Philippines
     Vietnam
                                                                                                                                                     Population (millions)




                                                           0
                                                                             200
                                                                                               400
    Thailand
South Korea
                                           China
    Myanmar
                                            India
    Malaysia
                                        Pakistan
 North Korea
      Taiwan                         Bangladesh
    Australia                          Myanmar
                                                                                                         mobiles


   Sri Lanka                            Vietnam
   Cambodia                           Cambodia
  Hong Kong                                 Laos
                                                                                                     Population without




         Laos                          Sri Lanka
   Singapore
New Zealand




                 $0
                                                                                                                  $10,000
                                                                                                                                           $12,000




                            $2,000
                                             $4,000
                                                                 $6,000
                                                                                     $8,000




        China
         India
       Japan
South Korea
   Indonesia
    Australia
      Taiwan
                                                                                                                                                                                       What are the key Asian jurisdictions ?




    Thailand
    Pakistan
                                                      $0
                                                                   $20,000
                                                                                   $40,000
                                                                                                        $60,000




    Malaysia
  Philippines                  Singapore
  Hong Kong                   Hong Kong
   Singapore                    Australia
                                                                                                                                                     Aggregate income (USD billions)




     Vietnam                      Taiwan
 Bangladesh                        Japan
   Sri Lanka                 South Korea
New Zealand                  New Zealand
                                Malaysia
                                                                                                                        (GDP per capita)




    Myanmar
                                                                                                                       Individual income




11




 North Korea                    Thailand
   Cambodia                        China
         Laos                  Indonesia
Many jurisdictions rely heavily on wireless networks

140%                                      Jurisdictions that do not
                                          yet have 100% fixed
                                          network penetration by
120%
                                          household…

100%



 80%
                                           Very heavy reliance on
                                           wireless telecoms
 60%



  40%



  20%

                                               Mobile penetration
   0%                                          (by population)


                                               Fixed penetration
                                               (by household)


                                                         12
Low regulatory
             Singapore                                                   risk




1. Singapore has a population of just over 5 million, which is a small market        Mobile market
                                                                                     shares 2012
   by Asian standards. However, it has the greatest income per capita.
                                                                                       46%

2. The World Economic Forum has described Singapore as ‘Asia’s most
                                                                                                28%
   connected country’, noting it leads the Asian region in ICT development.                               26%

3. The Government actively promotes the ICT sector and has a 10 year ICT
   Master Plan, labelled the ‘Intelligent Nation 2015’ (iN2015) which is
   administered by the Infocommunications Development Authority (iDA).




                                                                                                STARHUB
                                                                                      SINGTEL
4. To give effect to iN2015, the Government allocated SGD 1 billion funding




                                                                                                           M1
   for the deployment of the Singapore Next Generation Network (NGN).
   The NGN is unique in the world in promoting four layers of structural
   separation: ducts/exchanges, dark fibre, operation, retail.                       150% MOBILE
                                                                                     PENETRATION
                                                                                     (POPULATION)
5. Singapore’s mobile phone penetration is 150% by population. Around
   75% of subscribers receive 3G services. 100% of Singapore households              100% FIXED
                                                                                     PENETRATION
   have access to fixed broadband access of some kind.                               (HOUSEHOLD)
                                                                                                13
Singapore – recent developments

1. NGN: iDA intervened in the Singapore Next Generation Network (NGN) regulatory framework to
   address concerns regarding operational delays in connecting customers and resolving faults:
     •   iDA conducted a review of OpenNet’s Interconnection Offer and directed a number of operational
         refinements. The acceptability of those changes is currently awaiting final iDA approval.
     •   Further regulatory instruments to give effect to the NGN have also been approved, including CityNet’s
         reference access offer for access to lead-in ducts.

2. Spectrum: iDA is undertaking consultation on the refarming of spectrum for 4G mobile,
   including the potential closure of 2G networks, the reservation of some 2.5GHz spectrum for a
   fourth mobile operator, and the auction of 1800MHz, 2.3GHz and 2.5GHz spectrum.

3. Competition: iDA issued a 2012 version of the Telecoms Competition Code, now including an
   amended version of Chapter 10 which regulates M&A in the Singapore telecoms sector.

4. Data protection: The Government undertook a third round of public consultation on the
   proposed new data protection regime in April 2012. The Personal Data Protection Bill is planned
   to be tabled to Parliament in the third quarter of 2012 and will regulate the collection, security
   and privacy of personal data as well as introducing a ‘Do Not Call’ register.
                                                                                                     14
Moderate to high
             Indonesia                                                    regulatory risk




1. At 240 million people, Indonesia is the third largest market in Asia behind         Mobile market
                                                                                       shares 2012
   China and India. It also ranks fifth in aggregate income but 11th in
                                                                                        51%
   individual income per capita.

2. Indonesia faces difficult challenges in building telecoms infrastructure                        23%
                                                                                                             21%
   over a complex geography. Around 80% of fixed network customers are
   served by fixed wireless.                                                                                              6%


3. Indonesia’s mobile market passed 260 million subscribers in early 2012




                                                                                       TELKOMSEL



                                                                                                              XL AXIATA
   with penetration at 107%.




                                                                                                   INDOSAT



                                                                                                                          OTHER
4. Internet access has been historically restricted by the limited availability
   of copper wireline infrastructure for DSL. While mobile and wireless
   broadband is overcoming this access bottleneck, Internet penetration still         127% MOBILE
   remains low at only 10% of the population                                          PENETRATION
                                                                                      (POPULATION)


5. Telekomsel dominates the mobiles market with a 51% market share.                   66% FIXED
                                                                                      PENETRATION
                                                                                      (HOUSEHOLD)
                                                                                                   15
Indonesia – recent developments

1. SMS interconnection: Indonesia announced in May 2012 that its existing ‘sender keeps all’
   regime for SMS messages would be replaced by an SMS terminating access payment model.

2. Convergence: The Ministry of Communications and IT (MCI) is drafting legislation to achieve
   convergence of telecommunications, broadcasting and the Internet.

3. New spectrum: MCI is considering releasing a further 10MHz of 2.1GHz spectrum and some
   2.3GHz spectrum to support 3G services and broadband wireless. There are also proposals to
   accelerate the switchover to digital television in order to re-farm the 700MHz spectrum.

4. Content: Indonesia is considering reforms to its laws relating to the regulation and censorship
   of content and reforms to its cross-ownership rules in relation to broadcasting assets.

5. NGN: The Government has continued to promote major telecoms infrastructure development:
     •   The ‘Palapa Ring’ project will connect Eastern Indonesia regions with the remainder of Indonesia.
     •   Telekomunikasi Indonesia will invest $233 million to build a national broadband network, known as
         “True Broadband” that will cover 497 cities and 13 million homes by the end of 2015.

6. VoIP and IPTV: Indonesia has commenced formally licensing VoIP and IPTV services.
                                                                                                   16
Moderate regulatory
              Malaysia                                                    risk




1. Malaysia has a population of 28 million and some of the most advanced            Mobile market
                                                                                    shares 2012
   telecommunications infrastructure in the developing world.
                                                                                    40%
2. Malaysia is mobiles-focussed but is focussed on deploying fixed network
                                                                                             33%
   infrastructure. Around 43% of households in Malaysia are currently                                  25%
   connected to fixed network infrastructure.
                                                                                                               2%
3. Malaysia’s ‘Vision 2020” aims to see it described as a developed nation
   by 2020. Telecommunications is an important part of Malaysia’s plan.




                                                                                              CELCOM



                                                                                                               OTHER
                                                                                     MAXIS



                                                                                                        DIGI
4. Mobile penetration is one of the highest in Asia at 134% of the population
   with 37 million subscribers in a competitive market. Malaysia is a heavy
   user of SMS by world standards.
                                                                                     134% MOBILE
                                                                                     PENETRATION
5. Growth in mobile broadband is currently rapid. Around one third of                (POPULATION)
   mobile subscribers in Malaysia are currently on 3G, resulting in Malaysia         43% FIXED
   achieving its target of 55% household broadband penetration in 2011.              PENETRATION
                                                                                     (HOUSEHOLD)

                                                                                                 17
Malaysia – recent developments

1. New spectrum: The Malaysian Communications and Multimedia Commission (MCMC)
   intends to award 2.6GHz spectrum to nine companies to assist 4G rollout and the deployment
   of wireless data technologies. The MCMC is also considering refarming 850/900/1800MHz
   spectrum and 700MHz ‘digital dividend’ spectrum once switchover from analogue to digital
   television occurs.

2. HSBB Network: Under the National Broadband Initiative, Telekom Malaysia has a public-
   private partnership agreement with the Government to deploy a High-Speed Broadband
   (HSBB) network. Deployment is well underway with the first subscribers connected from
   2010. A regulatory holiday will be provided until 15 September 2015.

3. 4G sharing arrangements: The MCMC has commented that it expects to see further
   rationalisation and co-operation in the Malaysian industry in order to reduce the costs of
   deployment of 4G mobile infrastructure. Maxis and U Mobile entered into a 3G RAN sharing
   deal in 2011. Celcom and Digi had also entered into an infrastructure sharing deal in 2010.

4. Competition law: The new Competition Act took effect from 1 January 2012, but does not
   apply to any commercial activity regulated under the Communications and Multimedia Act.
                                                                                        18
High regulatory
              India                                                        risk




1. India is currently the fastest growing telecoms market in the world,            Mobile market
                                                                                   shares 2012
   achieving a growth rate of 26% in 2011.
                                                                                   20%
                                                                                     17% 11%
2. India is the world’s second largest telecoms market behind China. There             17% 11% 13%
   are around 903 million mobile users and 123 million Internet users.                       11%



3. Fixed line penetration remains at only 18% of the population. The state-




                                                                                             VODAFONE
                                                                                                        RELIANCE
   owned enterprises MTNL (serving Delhi, Mumbai) and BSNL (serving the




                                                                                    BHARTI




                                                                                                                                         OTHER
                                                                                                                                  TATA
                                                                                                                    BNSL
                                                                                                                           IDEA
   remainder of India) are the key fixed providers. Bureaucracy has
   impeded fixed rollout initiatives.

4. Most of the growth rates and intense competition are occurring in mobiles.
   The Indian mobiles market is divided into 23 geographic ‘circles’ along
   state boundaries. Separate licences have been awarded for each circle.                    87% MOBILE
                                                                                             PENETRATION
5. At one point, some ‘circles’ had up to 13 licensed mobile operators.                      (POPULATION)

   However, intense price competition has resulted in industry consolidation.                18% FIXED
                                                                                             PENETRATION
                                                                                             (HOUSEHOLD)
                                                                                                                   19
India – recent developments

1. Licensing: The 2G spectrum scandal involved allegations of favouritism in the awarding of 2G
   licences. The Supreme Court of India revoked all 122 licences in February 2012 covering a third
   of India’s 2G spectrum. A number of foreign companies that had entered into joint ventures with
   local Indian companies were adversely affected. The spectrum is currently being re-auctioned.
   Around USD 10 billion in existing 2G investment is at stake.

2. National Telecoms Policy 2012: India has adopted a new telecoms policy, partly to increase
   transparency and provide a more predictable regulatory regime:
     •   A single licence will be available that covers all India, rather than for a specific geographic circle.
     •   Spectrum licences will be unbundled from telecom licences and refarming of spectrum will be permitted.
     •   The use of a single licence will permit the removal of roaming charges between mobile circles and will
         enable number portability for users moving between mobile circles.
     •   Use of spectrum will be liberalised, permitting any kind of services over any kind of technology platform.
     •   Rules restricting Internet telephony have been relaxed
     •   M&A restrictions will be liberalised.

3. Enforcement action: The TRA is currently taking significant enforcement action:
     •   against various licence holders for not meeting rollout obligations.
     •   against 3G roaming agreements which are alleged to be depriving the Government of tax revenue
                                                                                                        20
Low regulatory
              Hong Kong SAR                                                  risk




                                                                                       Mobile market
1. Hong Kong has a population of 7 million and the second highest per                  shares 2012
   capita incomes in Asia, behind Singapore.                                           27%
                                                                                         26%
                                                                                           21%
2. Hong Kong is one of the world’s most competitive mobiles markets and                      13%
   has the worlds highest mobile penetration at 200% of the population.                        13%

   Tariffs are among the lowest worldwide for some of the highest speeds




                                                                                             HUTCHIISON
                                                                                                           CHINA MOB
                                                                                                                       SMARTONE
3. Broadband networks reach 85% of Hong Kong households, assisted by




                                                                                                                                  PCCW
                                                                                       CSL
   Hong Kong’s high population density. Fixed network penetration is at
   100% of households.

4. While the mobile market is saturated, new technologies and innovation
   are continuing to drive growth. Mobile data has ben achieving
   exponential growth rates. 4G LTE networks are currently being deployed.             200% MOBILE
                                                                                       PENETRATION
                                                                                       (POPULATION)
5. Operators are launching triple and quad-play service offerings to drive
   average revenue per user (ARPU).                                                    100% FIXED
                                                                                       PENETRATION
                                                                                       (HOUSEHOLD)
                                                                                                          21
Hong Kong SAR – recent developments

1. New regulator: A new ‘Communications Authority’ was established on 1 April 2012 which
   merged the Office of the Telecommunications Authority (OFTA) with the Broadcasting Division
   of the Television and Entertainment Licensing Authority.

2. New competition law: A new Competition Ordinance was enacted on 15 June 2012. The
   competition law applies to the telecommunications sector and will give the new competition
   regulator concurrent jurisdiction with the Communications Authority in relation to
   telecommunications matters. However, various transitional provisions currently apply.

3. Next Generation Networks: OFTA is currently investigating whether further regulatory
   measures and reforms are required to address the deployment of Next Generation Networks:
     •   PCCW is at least halfway through migrating its voice network to a Next Generation Network.

4. New spectrum: New spectrum is being released to meet market demand for new spectrum in
   order to supply mobile data services:
     •   20MHz of spectrum in the 850MHz band was auctioned in March 2011.
     •   90MHz of spectrum in the 2.3GHz band was auctioned in Feb 2012. Very high prices were paid.
     •   Further spectrum will be made available in the first quarter of 2013.
                                                                                                 22
High regulatory
             China                                                         risk



                                                                                      Mobile market
                                                                                      shares 2012
1. China has the largest population in Asia at 1.35 billion and also has the           66%
   greatest aggregate wealth by a very substantial margin. The individual
   wealth of Chinese consumers is comparable with Malaysia and Thailand.

2. Telecoms in China is dominated by the Government which owns more
   than 50% of each of the three key telecoms operators. Each of these
                                                                                                      21%
   operators are joint fixed and mobile operators
                                                                                                                       13%

3. While mobile penetration has not yet reached the levels of other




                                                                                                       CHINA TELECOM
   economies at 73% of the population, growth rates are significant. China




                                                                                                                       CHINA UNICOM
                                                                                       CHINA MOBILE
   is the first economy to have over a billion mobile subscribers.

4. 3G networks have been deployed and are winning substantial
   subscribers, but 4G deployment has been delayed by developments in                73% MOBILE
   the Chinese TD-SDMA standard.                                                     PENETRATION
                                                                                     (POPULATION)

5. Fixed network penetration is relatively high and is being accelerated by a        70% FIXED
                                                                                     PENETRATION
   variety of Government infrastructure rollout programmes.                          (HOUSEHOLD)
                                                                                                      23
China – recent developments


1. Next Generation Network rollout: ‘Three Networks Integration Project’ is underway with the
   objective of a consumer connecting to only one communications network for their television,
   Internet and telephone needs:
     •   one aspect of the Project is the deployment of Next Generation Network capabilities to reach 300
         million users and 200 million households within the next ten years
     •   the project is one of several measures recently undertaken to achieve greater convergence

2. Internet service providers: The Ministry of Industry and Information Technology (MIIT) has
   recently promulgated several codes of conduct for Internet information service providers:
     •   Codes are directed at types of conduct that may harm end users, such as deception and interference
     •   MIIT has also been more proactive in taking enforcement action against inappropriate content

3. Deregulation of tariffs: MIIT is seeking to reduce the price of fixed broadband services in the
   same manner as has occurred in relation to mobile services. Further deregulation of retail
   tariffs is likely to occur.

4. Broadband speed improvements: MIIT is also intending to implement a broadband
   connection speed improvement project.
                                                                                                   24
China’s licensing grey areas

•   Chinese regime has many ‘grey areas’: activities of indeterminate legality.

•   Activities may be tolerated by MIIT until such time as they are the subject of
    complaint, typically when the boundaries are pushed too far by foreign firms.
    At that point, public action is taken to regulate the conduct.

•   Recent example – voice over IP services in China (VoIP):

     •   Technically – all VoIP offered by entities other than the Chinese
         operators is illegal. However, all VoIP has been tolerated to date.

     •   December 2010 – MIIT announces it will take enforcement action
         against foreign VoIP operators in China, presumably following concerns
         by Chinese telcos that Skype was depriving them of revenue.

     •   January 2011 – MIIT is less absolute and announces it is supportive of
         VoIP, but not illegal VoIP. What is illegal VoIP is not clearly identified.
                                                                                       25
Moderate to high
            Thailand                                                     regulatory risk




1. Thailand has a population of some 70 million and hence is ranked 9th in          Mobile market
   market size in Asia. It is also ranked 11th by individual income.                shares 2012



2. Thailand is heavily mobiles-focussed. Fixed network penetration remains          44%

   low at only 35% of households. Further fixed deployment has stalled.                    30%
                                                                                                   24%
3. By contrast, Thailand’s mobile market has around 72 million subscribers with
   penetration at around 105% by population.                                                               2%


4. Thailand has not yet deployed 3G mobile services due to delays to 3G




                                                                                                           OTHER
                                                                                                    TRUE
                                                                                            DTAC
   spectrum auctions. In turn, this has lead to poor network quality and an




                                                                                     AIS
   absence of mobile broadband.

5. In 2010, the National Telecommunications Commission’s ability to hold 3G
   spectrum auctions was successfully challenged. As a result, the National          117% MOBILE
                                                                                     PENETRATION
   Broadcasting and Telecommunications Commission (NBTC) was formed as               (POPULATION)

   a combined broadcasting and telecoms regulator with the relevant powers.          35% FIXED
                                                                                     PENETRATION
                                                                                     (HOUSEHOLD)
6. The pace of reform of telecommunications in Thailand has been slow.
                                                                                              26
Thailand – recent developments

1. 3G spectrum auctions: Thailand’s National Broadcasting & Telecommunications
   Commission (NBTC) has released draft rules for new 3G spectrum auctions:
    • The rules are less stringent and permit bidding by telcos with less reserve capital.
    • NBTC will impose a maximum 3G tariffs.
    • NBTC will divide the 2.1-GHz spectrum into nine slots, each containing 5 MHz.
    • A 3G licence auction will be scheduled for the fourth quarter. The event will feature
       simultaneous ascending-bid auctions.
    • Each bidder will be permitted to obtain a maximum bandwidth of 20 MHz under a
       bandwidth cap restriction.

2. CAT-True 3G marketing investigation: The NBTC has determined that a 3G marketing
   partnership between state-owned CAT Telecom and private sector operator True Corp
   violates the Frequency Allocation Act. CAT is the only current holder of 3G spectrum in
   Thailand and has put its 3G expansion plans on hold.

3. Delays to 3G number portability: NBTC’s mobile number portability regulation will allow
   mobile subscribers to retain their mobile numbers while switching networks. However, CAT is
   raising concerns of subscriber overflow.
                                                                                         27
High regulatory
             Philippines                                                      risk



                                                                                        Mobile market
                                                                                        shares 2012
1. At 96 million people, the Philippines is the 7th largest market in Asia.
   However, the population is poor by global standards.                                  68%


2. The Philippines is heavily mobiles-focussed. Notwithstanding policies to
   promote fixed network rollout, only around 17% of households are
   currently served by fixed telephony services.                                                32%


3. A historic problem preventing fixed network rollout was under-utilisation
   of existing fixed network assets with only 50% utilisation rates.                                    >1%


4. Mobile penetration is around 107% of the population with 98 million




                                                                                                GLOBE
                                                                                                        OTHER
                                                                                         PLDT
   subscribers, but Internet access remains lower at around 20% of the
   population. The Philippines is a heavy user of SMS and is a global
   leader in SMS volumes.                                                                107% MOBILE
                                                                                         PENETRATION
5. Growth in mobile broadband is occurring, driven by smartphones and                    (POPULATION)

   social networking. The Philippines has 3G networks and is progressively               17% FIXED
                                                                                         PENETRATION
   rolling out 4G (both mobile and broadband wireless).                                  (HOUSEHOLD)
                                                                                                   28
Philippines – recent developments

1. PLDT-Digitel: The National Telecommunications Commission (NTC) approved the merger
   of PLDT and Digitel with the merger subsequently implemented in October 2011:
     •   The merger has left PLDT with a 68% market share in Philippine mobiles.
     •   The Philippines does not have merger rules, but Government approval was required.

2. 3G spectrum: A condition of the merger between PLDT and Digitel, was that PLDT would
   return of 10MHz of 2.1GHz 3G spectrum to allow further market entry:
     •   The spectrum is due to be auctioned following its return in July 2012.
     •   Four 3G licences were awarded in 2005, but significant consolidation has
         subsequently occurred, including the PLDT-Digitel merger.

3. New wireless entrants: NTC has approved licence applications by Multi-Lane and BellTel
   to supply wireless broadband and local loop services in various locations. The NTC is
   intending to introduce further competition following the PLDT and Digitel merger.

4. 4G rollout: Globe has deployed 4G LTE in Manilla City and is undertaking a broader
   rollout. Previously, 4G services had been limited to broadband wireless.
                                                                                        29
Moderate to high
             Bangladesh                                                     regulatory risk




1. At 142 million people, Bangladesh is the fifth largest market in Asia.              Mobile market
                                                                                       shares 2012
   However, it is also one of the poorest, most densely populated, least
   developed countries in the world.                                                 42%


2. Bangladesh has some of the most underdeveloped fixed telecoms                                27%
   infrastructure in the world. Fixed line penetration remains at less than                               20%

   4% of households and halved in 2010 when the regulator took action to                                          7%
                                                                                                                           4%
   shut down 5 illegal VoIP operators.




                                                                                                ORASCOM
                                                                                      GRAMEEN
3. However, Bangladesh does have a competitive mobiles market and is




                                                                                                                  AIRTEL

                                                                                                                           OTHER
                                                                                                           ROBI
   heavily reliant on mobiles. Bangladesh’s mobile market has over 90
   million subscribers with a penetration over 63% of the population.

4. Broadband internet remains almost non-existent in Bangladesh.                            63% MOBILE
   Broadband Internet penetration is in the order of 0.5% of the population.                PENETRATION
                                                                                            (POPULATION)

5. The mobiles market in Bangladesh has 6 operators and is dominated by                     4% FIXED
                                                                                            PENETRATION
   Grameenphone with a 44% market share. Only 2G is supplied.                               (HOUSEHOLD)
                                                                                                          30
Bangladesh – recent developments

1. 3G spectrum licences: The BRTC is proposing to award four 2100MHz licences (10MHz
   each) for 3G/4G services:
     •   One will go to state-owned operator Teletalk, two will go to other existing mobile
         operators, and the last one will be reserved for a new entrant.
     •   Spectrum auctions are due to occur in September this year.
     •   3G licence holders would be able to upgrade their licences to 4G at no extra charge.
     •   The BTRC is proposing a fee USD 18 million for every megahertz of bandwidth, with an
         auction floor price of USD 180 million.
     •   The BRTC has permitted Teletalk to trial 3G services for a 6 month period from July.

2. VoIP licences and issues: BTRC sent a draft guideline to the telecom ministry for issuing
   licences to VoIP service providers, but a dispute within Government is delaying any licensing.

3. VoIP enforcement: BRTC has threatened to impose fines on any mobile operators supplying
   VoIP services over mobile phones. A key concern has been the use of VoIP services by
   foreign carriers to avoid payment of termination fees for inbound calls, an important source of
   revenue. An estimated 20% of traffic terminated illegally using VoIP.
                                                                                              31
Summary of developments in Asia

1.   Most Asian jurisdictions are heavily focussed on mobiles-based competition, particularly
     many of the developing economies with low fixed network penetration.

2.   Many mobile markets have reached saturation with mobile penetration greater than the
     number of users. In such circumstances, growth is still being achieved by the rapid
     growth in mobile data, handset innovation and new technologies such as 4G.

3.   Mobile spectrum is increasingly viewed as a scare resource, driving up auction prices and
     leading to novel solutions (such as industry consolidation and spectrum sharing). Many
     nations are seeking to release more spectrum, including by refarming existing spectrum.

4.   A number of Asian jurisdictions are deploying Next Generation Networks (NGN) or have
     programmes and incentives in place to encourage greater fixed network deployment.

5.   A number of Asian jurisdictions are recognising the need for regulatory convergence,
     particularly in relation to broadcasting and Internet technologies. As part of this trend,
     difficult issues of Internet content regulation and VoIP technologies are being considered.

                                                                                          32
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY




                                         Regulatory
                                         developments
                                         in Australasia




                                                   33
Low regulatory
              Australia                                                    risk




1. At 24 million, Australia has a modest population by Asian standards but            Mobile market
   has the 6th highest aggregate income in Asia and the third highest                 shares 2012

   individual income, assisted by Australia’s substantial mineral resources.          45%


2. Telecoms has traditionally been dominated by Telstra with a roughly 42%                       32%
   share of all telecoms services, but current reforms will see a form of                                 23%
   structural separation occur. Telstra will close its fixed network and migrate
   its fixed customers to the National Broadband Network.




                                                                                                           VODAFONE
3. Mobiles currently accounts for more than 50% of revenue in Australian




                                                                                       TELSTRA

                                                                                                  OPTUS
   telecoms. Recent consolidation saw the merger of Vodafone and
   Hutchison, leaving three key network operators.

4. Telstra currently has the only 4G LTE network. Optus and Hutchison are
                                                                                      126% MOBILE
   currently in a joint venture to share mobile sites and improve coverage.           PENETRATION
                                                                                      (POPULATION)

5. The National Broadband Network will result in broadband access being               98% FIXED
   deployed throughout Australia. 92% of the population will receive                  PENETRATION
                                                                                      (HOUSEHOLD)
   broadband fibre. The remaining 8% will receive fixed wireless or satellite.                    34
Australia – recent developments


1. Next Generation Network: The National Broadband Network (NBN) is dominating issues:
     •   NBN Co will be a wholesale-only, open-access, state-owned, FTTH local access monopoly
     •   principal benefit is delivering superfast broadband to rural Australia, but at a high cost (USD 38 billion)
     •   network will cross-subsidise from metro to rural to achieve a uniform national price for basic access

2. Structural separation of Telstra: Telstra will migrate its fixed customers to the NBN over a
   period of 8 years in return for migration payments: a form of structural separation:
     •   migration will ultimately be forced, but end users have around 18 months to voluntarily migrate
     •   regulatory impediments will exist to deter superfast fixed network build by NBN competitors
     •   regulation is heavily reliant on regulatory undertakings to the ACCC: a new regulatory paradigm

3. Content regulation: The Government is currently considering plans to reform the regulation of
   broadcasting and content in Australia under a streamlined regulatory framework.

4. Mobile spectrum: The digital dividend 700MHz spectrum is due for auction next year.
   Spectrum renewal fees for existing spectrum licences have been higher than expected, hence
   Australia is considering implementing different models for spectrum licensing fees.
                                                                                                        35
Low regulatory
              New Zealand                                                     risk




                                                                                         Mobile market
1. At 4 million, New Zealand has one of the smallest populations in Asia, but            shares 2012
   has the seventh highest individual income.                                             48%


2. The telecoms market one of the first in the world to be liberalised, but                           38%

   historically suffered from an absence of Government intervention to
   restrain the market power of the Telecom New Zealand.
                                                                                                              14%

3. Telecoms reforms from 2001 created a new framework formarket access
   and competition. In 2011, Telecom New Zealand voluntarily demerged to




                                                                                                               2 DEGREES
                                                                                           VODAFONE
   create Chorus as the structurally separated network business.




                                                                                                       TCNZ
4. The New Zealand mobiles market was historically a duopoly. A new
   mobile operator, 2degrees, was launched in 2010 and has been rapidly
   gaining market share while creating significant price-based competition.              132% MOBILE
                                                                                         PENETRATION
5. Mobile penetration rates are among the highest in Asia at 132% of the                 (POPULATION)

   population. Fixed network penetration is at 100%. A rollout by Chorus of              100% FIXED
                                                                                         PENETRATION
   ultra-fast broadband will further increase broadband penetration.                     (HOUSEHOLD)
                                                                                                      36
New Zealand – recent developments


1. Next Generation Network: The Ultra-Fast Broadband Network (UFB) and Rural
   Broadband Initiative (RBI) have been dominating recent developments:
     •   UFB involves Government subsidy for deployment of FTTH to urban areas in New Zealand
     •   RBI involves Government subsidy for broadband deployment to rural areas in New Zealand
     •   Telecom NZ is rolling out most of the FTTH infrastructure, but some local fibre companies involved
     •   reforms are currently occurring to streamline USO levies

2. Structural separation: Telecom NZ structurally separated (via a voluntary demerger) in
   order to win the UFB rights:
     •   Chorus is the network access entity and will deploy FTTH. It will also own legacy copper access.
     •   Telecom NZ will continue to own mobile networks but will be a fixed network retailer.

3. Content regulation: New Zealand Commerce Commission is currently undertaking
   extensive public consultation to identify issues that may impede the uptake of broadband.

4. Spectrum: Digital dividend 700MHz spectrum is due for auction and will provide the basis
   for LTE 4G deployments and wireless broadband deployments.
                                                                                                   37
Summary of developments in Australasia


1.   Both Australia and New Zealand are rolling out fibre-to-the-home network infrastructure in
     urban areas and mobile wireless in rural areas. However, significant differences exist in
     relation to the extent of fibre rollout and the level of Government funding.

2.   Structural separation of the incumbent fixed network owner is occurring in both
     jurisdictions on a voluntary basis. While New Zealand has achieved this immediately via a
     demerger of Telecom NZ, Australia will take 8 years to achieve this via a network
     migration of end users from Telstra to NBN Co.

3.   Further regulatory reforms are likely to occur in both jurisdictions to promote broadband
     uptake. New Zealand is currently identifying impediments to uptake. Australia is seeking
     to remove regulatory impediments by converging the regulation of digital media.

4.   The NGN rollouts are providing an opportunity for both jurisdictions to refine and reform
     some of the key historic regulatory settings applied to the telecommunications industry.

5.   Digital dividend 700MHz spectrum will shortly become available and provide a basis for
     further mobile competition in both jurisdictions. Mobile networks are being upgraded.
                                                                                          38
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY




                                         Regulatory
                                         developments
                                         in the Middle
                                         East




                                                   39
Moderate to low
                 Bahrain                                                      regulatory risk




1. Bahrain is ranked as the 12th most liberalised economy in the world,
   reflecting its desire to attract international investment to achieve its
   Economic Vision 2030.

2. Pursuant to its National Economic Strategy, Bahrain was one of the first
   Gulf States to liberalise its telecoms market. While Bahrain has the
   smallest telecoms market in the Middle East by population, its market is
   now one of the most competitive.

3. Batelco is the incumbent operator in Bahrain and is subject to substantial
   regulation based principally on dominance designations.

4.    The Telecommunications Regulatory Authority of Bahrain takes a proactive
     and strict approach to enforcement of that regulation, informed by
     competition policy concerns.

5. The TRA often leads regulatory trends in the Gulf and recently won an
   award as the most progressive regulator in South Asia, the Middle East,
   and North Africa                                                                             40
Bahrain – recent developments


1. Bahrain is currently finalising its third Telecommunications (five year) Plan.
     •   The Plan has been prepared and is currently awaiting Ministerial sign-off.

2. The Bahrain Electricity & Water Authority is deploying a fibre network, but deployment is not as
   advanced as other Gulf States. Bahrain has instead favoured local loop unbundling of
   Batelco’s legacy copper access network as an immediate means to promote competition.

3. Bahrain recently implemented both fixed and mobile number portability, being the first country in
   the Middle East and North African to achieve this.

4. Bahrain has recently implemented detailed Consumer Protection Guidelines which are
   unprecedented in the Gulf.

5. The TRA has recently undertaken one of the first complex competition investigations in the Gulf
   in the context of an alleged vertical price squeeze…



                                                                                           41
Moderate to low
                 Qatar                                                          regulatory risk




1. Qatar has the world's highest per capita GDP and is one of the world’s
   fastest growing economies. During 2011, Qatar’s telecoms markets
   experienced significant growth, driven by expansion of access to
   broadband services and by increasing mobile subscriber penetration.

2. Around two thirds of telecoms services in Qatar are now mobile-based.

3. Qatar’s telecoms sector is not yet fully liberalised, but is still heavily
   regulated. ictQATAR is the independent industry regulator in Qatar.

4. Qtel is the incumbent fixed and mobile network operator. The second
   licensee, Vodafone Qatar, operates competing mobile infrastructure with
   a fixed network deployment underway.

5. ictQatar has indicated it will consider licensing a third fixed operator
   during 2012 and may also consider whether a third mobile operator is
   required.

                                                                                                  42
Qatar – recent developments


1. The Qatar National Broadband Network (QNBN) is currently being deployed using FTTH on a
   fibre infill basis to supplement fibre rollouts by Qtel as incumbent. QNBN is state-owned.
     •   QNBN will operate under a wholesale-only, open access model.
     •   QNBN will supply wholesale bitstream to the other fixed network licensees, Qtel and Vodafone Qatar.

2. Mobile number portability will shortly be launched in Qatar. ictQATAR as industry regulator will
   then investigate fixed number portability.

3. As with Bahrain, Qatar has focussed on enhancing consumer protection:
     •   A new consumer affairs department has been created within ictQATAR with call centre.

4. Qatar recently reviewed is historic market definition and dominance designations, but made no
   material changes. This is not surprising given Qatar’s markets are not yet fully liberalised.

5. During 2011, Qtel was required to cease using the ‘Virgin Mobile’ brand as Vodafone Qatar
   alleged that this mislead consumers into believing there was a third mobile operator.


                                                                                                   43
Moderate to low
                 United Arab Emirates                                      regulatory risk




1. The UAE is currently ranked as the 14th best nation in the world for doing
   business, based on its economy and regulatory environment. The UAE has
   relatively mature telecommunications markets serving business centres in
   Abu Dhabi and Dubai that act as a hub for the Middle East region and
   surrounding nations.

2. The UAE telecoms sector is not yet fully liberalised, but is heavily
   regulated. The Telecommunications Regulatory Authority of the UAE is the
   independent industry regulator.

3. Etisalat is the incumbent fixed and mobile operator. Etisalat provides fixed
   access in most areas of the UAE and operates a 4G LTE mobile network.

4. The second licensee, Du, operates a rival 3.75G HSPA+ mobile network
   and owns significant fixed infrastructure in the ‘free zones’ and new housing
   estates of Dubai.

5. A number of satellite providers have also been licensed to provide services.
                                                                                             44
UAE – recent developments

1. The UAE will shortly become one of the first countries in the world to achieve full fibre coverage:
     •   Du deployed fibre in new estates in Dubai.

     •   Etisalat will shortly complete its upgrade from copper to fibre for the remainder of the UAE.
     •   As there is no need for a National Broadband Network in the UAE, the TRA has instead required
         Etisalat and Du to provide each other with wholesale bitstream access.

2. Delays have occurred in implementing mobile number portability (MNP) in the UAE.
     •   Once MNP is implemented, the UAE will move to implement fixed number portability.

3. The Telecommunications Regulatory Authority (TRA) of the UAE is currently implementing
   enhanced economic regulation and is in the process of issuing regulatory adjustments.

4. The TRA is currently undertaking public consultation on draft consumer protection regulations.

5. In 2010, the TRA threatened to suspend Blackberry services in the UAE until Research in
   Motion complied with interception requirements.
                                                                                                         45
Summary of developments in the Middle East


1.   Bahrain, Qatar and the UAE are each deploying fibre, but under different rollout models.
     The UAE should achieve ubiquitous fibre deployment by early 2012. Bahrain and Qatar
     will reach an advanced state of deployment by the end of 2012.

2.   Fixed market competition will occur in each jurisdiction via wholesale bitstream access.
     Given Bahrain’s more advanced state of market deregulation, it has also sought to achieve
     immediate broadband competition via copper local loop unbundling.

3.   Each of the Gulf States are implementing fixed and mobile number portability.

4.   Economic regulation remains at different stages of evolution in the different markets. The
     UAE will continue to implement regulation. Qatar and Bahrain will continue to refine its
     application. Bahrain will also continue to assess whether selective rollback is required.

5.   Each jurisdiction is focussing on consumer protection to a higher degree.

                                                                                         46
TELECOMMUNICATIONS, MEDIA & TECHNOLOGY




                                         Regulatory
                                         risk profiles




                                                     47
Level of regulatory risk


               LOW REGULATORY RISK          HIGH REGULATORY RISK



    All of the following:                               Any of the following:
    • Rules are clearly defined                         • Rules are not clearly defined
    • Well resourced regulatory agencies                • Less resourced regulatory agencies
    • Low risk of policy reversals                      • High risk of policy reversals
    • Decisions are predictable                         • Decisions can be unpredictable


   Hong Kong



   New Zealand                                                                        Philippines



   Australia               Qatar                              Bangladesh              China



   Singapore               UAE                                Indonesia               India



   Japan                   Bahrain         Malaysia           Thailand           48
                                                                                      Vietnam
Regulatory risk is factored into commercial risk

SEC filing by ChinaCache - the leading CDN operator in China…
“As of the date of this prospectus, there is no legal definition as to what constitutes a "content
and application delivery business," nor are there laws or regulations in China specifically
governing the content and application delivery business.

We cannot assure you that PRC governmental authorities will continue to deem our content
and application delivery business and any of our newly developed technologies, network and
services used in our business as a type of value-added telecommunications business
covered under the VAT license of Beijing Blue I.T.

As we expand our networks across China, it is also possible that the MIIT, in the future, may
deem our operations to have exceeded the terms of our existing license. Further, we cannot
assure you that Beijing Blue I.T. will be able to successfully renew its VAT license upon its
expiration, or that its VAT license will continue to cover all aspects of our content and
application delivery business and operations upon its renewal.

In addition, new laws, regulations or government interpretations may also be promulgated
from time to time to regulate the content and application delivery business or any of our
related technology or services, which may require us to obtain additional, or expand existing,
operating licenses or permits.

Any of these factors could result in Beijing Blue I.T. being disqualified from carrying out its
current business, causing significant disruption to our business operations which may
materially and adversely affect our business, financial condition and results of operation.”
                                                                                                     49
Disclaimer
The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Norton Rose LLP, Norton
Rose Australia or Norton Rose OR LLP on the points of law discussed. No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any constituent part of
Norton Rose Group (whether or not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to
                                                                                                                                                                                    50
a partner or director is to a member, employee or consultant with equivalent standing and qualifications of, as the case may be, Norton Rose LLP or Norton Rose Australia or Norton Rose OR LLP
or Norton Rose South Africa (incorporated as Deneys Reitz Inc) or of one of their respective affiliates.

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Telecoms Regulatory Developments in Asia, Australasia and the Middle East

  • 1. TELECOMMUNICATIONS, MEDIA & TECHNOLOGY Telecoms regulatory developments in the region Dr Martyn Taylor Partner martyn.taylor@nortonrose.com June 2012 1
  • 2. Overview 1. Analyst predictions 2. Regulatory developments in Asia 3. Regulatory developments in Australasia Dr Martyn Taylor Partner +61 2 9330 8056 4. Regulatory developments in Middle East martyn.taylor@nortonrose.com 5. Regulatory risk profiles 2
  • 3. TELECOMMUNICATIONS, MEDIA & TECHNOLOGY Analyst predictions 3
  • 4. Mobile telecom networks in 2012 and 2013 1. 3G now has >50% global penetration. 4G LTE is the growth focus for advanced economies. 2G network closures will be considered. 2. 4G mobile spectrum will dominate most regulatory agendas, including ‘digital dividend’ spectrum. MVNOs will be recognised as a more politically expedient way to liberalise telecom markets. 3. Tower sale and leaseback deals may unlock value from passive infrastructure in order to fund CAPEX for 4G spectrum and LTE. 4. Smart phones and tablets will continue to accelerate mobile data usage. Mobile internet traffic is becoming an increasing proportion of all global Internet traffic, currently at 10%. 5. Mobile payment systems, machine to machine (M2M), and near field communications (NFC) are key areas of potential innovation. 6. Mobile advertising is in need of innovation. Mobiles account for 10% of media consumption, but only 1% of advertising spend. 4
  • 5. Fixed telecom networks in 2012 and 2013 1. One third of the world’s population are now on the Internet. Developing economies have >100% growth in Internet access. 2. NGN rollouts will dominate national policy agendas as nations seek to achieve ubiquitous broadband Internet access. 3. NGN rollouts will provide an opportunity to revisit many regulatory policy settings, including to recognise convergence. 4. TDM traffic will continue to be substituted for VoIP as broadband penetration increases and OTT applications such as Skype increase in popularity in the mass market. 5. Traditional distinctions between platforms will continue to be removed via a shift to generic Internet access and ‘IP everywhere’. Mobile and fixed are becoming substitutable. 6. Smartphones and tablets will drive fixed data traffic growth via the use of home WiFi as a cheaper alternative to cellular data. 5
  • 6. Importance of broadband deployments • ‘Digital divide’ once measured as differences in communications access is now measured in terms of differences in the quality of access. • Slow download speeds result in lost opportunities. A 10% increase in broadband penetration in developing nations increases GDP by 1.4%. • Broadband is an enabling ICT platform that can influence entire economy: • Improves variety, utility, value of services/applications offered by providers, to benefit users, society, multiple sectors of economy. • Positive externalities of that can spillover into economic growth. • Human Rights Council of the UN General Assembly has declared access to the Internet a basic human right which enables individuals to exercise their right to freedom of opinion and expression. • The Internet is a cross-border resource for aggregate human knowledge that far surpasses any individual library. Broadband Internet access is the key that unlocks this knowledge in today’s information society. 6
  • 7. Government policy objectives • A common policy objective is universal broadband Internet access • Advanced nations: ‘superfast broadband’ speeds > 24 Mbit/s. • Developing world: ‘basic broadband’ speeds up to 2 Mbit/s. • Best illustrated by United Nations “Call to Action” for the Rio+20 sustainable development summit later this month: • UN has called on all Governments to promote universal broadband access, including policies to expand access to health and education through broadband. • UN has stated that its aim is to ensure that at least 50% of the developing world’s population and 40% of households have access to broadband Internet by 2015. • UN has called for the private sector to contribute to this goal by developing innovative business models that increase broadband penetration, particularly in developing countries. 7
  • 8. Speeds required for different applications BASIC BROADBAND HIGH SPEED BROADBAND SUPERFAST BROADBAND 500kbit/s to 1Mbit/s 1 to 5 Mbit/s 5 to 10 Mbit/s 10 to 100Mbit/s 100Mbit/s to 1 Gbit/s 1 to 10 Gbit/s VoIP Complex web browsing Complex telecommuting Telemedicine Telemedicine HD Research applications SMS Email with attachments Large file-sharing Educational services Multiple educational HD telepresence Basic e-mail Remote surveillance IPTV SD (many channels) Broadcast video SD/HD Broadcast video full HD Digital cinema streaming Simple web browsing IPTV SD (1-3 channels) Switched digital video IPTV HD Full IPTV channel support Complex telemedicine Low-quality video Simple telecommuting Video on demand SD Complex gaming Video on demand HD Scientific remote control Basic social networking Digital broadcast (1 ch) Broadcast video SD Complex telecommuting Gaming (immersion) Virtual reality Small file sharing Streaming music Video streaming (2-3 ch) Complex telepresence Full telecommuting Terabyte file sharing Music downloads Advanced social networking Video download HD Surveillance HD Video download (Blu-Ray) Remote supercomputing Basic smartphone content Medium file-sharing Low-quality telepresence Intelligent buildings 3D HDTV channels Video download SD Gaming Low quality gaming Basic medical file sharing Simultaneous devices Basic remote diagnosis Remote education 8 Building management
  • 9. A future world defined by IP addresses… 9
  • 10. TELECOMMUNICATIONS, MEDIA & TECHNOLOGY Regulatory developments in Asia 10
  • 11. 0 200 400 600 800 1000 1200 1400 China India Indonesia Pakistan Bangladesh Japan Philippines Vietnam Population (millions) 0 200 400 Thailand South Korea China Myanmar India Malaysia Pakistan North Korea Taiwan Bangladesh Australia Myanmar mobiles Sri Lanka Vietnam Cambodia Cambodia Hong Kong Laos Population without Laos Sri Lanka Singapore New Zealand $0 $10,000 $12,000 $2,000 $4,000 $6,000 $8,000 China India Japan South Korea Indonesia Australia Taiwan What are the key Asian jurisdictions ? Thailand Pakistan $0 $20,000 $40,000 $60,000 Malaysia Philippines Singapore Hong Kong Hong Kong Singapore Australia Aggregate income (USD billions) Vietnam Taiwan Bangladesh Japan Sri Lanka South Korea New Zealand New Zealand Malaysia (GDP per capita) Myanmar Individual income 11 North Korea Thailand Cambodia China Laos Indonesia
  • 12. Many jurisdictions rely heavily on wireless networks 140% Jurisdictions that do not yet have 100% fixed network penetration by 120% household… 100% 80% Very heavy reliance on wireless telecoms 60% 40% 20% Mobile penetration 0% (by population) Fixed penetration (by household) 12
  • 13. Low regulatory Singapore risk 1. Singapore has a population of just over 5 million, which is a small market Mobile market shares 2012 by Asian standards. However, it has the greatest income per capita. 46% 2. The World Economic Forum has described Singapore as ‘Asia’s most 28% connected country’, noting it leads the Asian region in ICT development. 26% 3. The Government actively promotes the ICT sector and has a 10 year ICT Master Plan, labelled the ‘Intelligent Nation 2015’ (iN2015) which is administered by the Infocommunications Development Authority (iDA). STARHUB SINGTEL 4. To give effect to iN2015, the Government allocated SGD 1 billion funding M1 for the deployment of the Singapore Next Generation Network (NGN). The NGN is unique in the world in promoting four layers of structural separation: ducts/exchanges, dark fibre, operation, retail. 150% MOBILE PENETRATION (POPULATION) 5. Singapore’s mobile phone penetration is 150% by population. Around 75% of subscribers receive 3G services. 100% of Singapore households 100% FIXED PENETRATION have access to fixed broadband access of some kind. (HOUSEHOLD) 13
  • 14. Singapore – recent developments 1. NGN: iDA intervened in the Singapore Next Generation Network (NGN) regulatory framework to address concerns regarding operational delays in connecting customers and resolving faults: • iDA conducted a review of OpenNet’s Interconnection Offer and directed a number of operational refinements. The acceptability of those changes is currently awaiting final iDA approval. • Further regulatory instruments to give effect to the NGN have also been approved, including CityNet’s reference access offer for access to lead-in ducts. 2. Spectrum: iDA is undertaking consultation on the refarming of spectrum for 4G mobile, including the potential closure of 2G networks, the reservation of some 2.5GHz spectrum for a fourth mobile operator, and the auction of 1800MHz, 2.3GHz and 2.5GHz spectrum. 3. Competition: iDA issued a 2012 version of the Telecoms Competition Code, now including an amended version of Chapter 10 which regulates M&A in the Singapore telecoms sector. 4. Data protection: The Government undertook a third round of public consultation on the proposed new data protection regime in April 2012. The Personal Data Protection Bill is planned to be tabled to Parliament in the third quarter of 2012 and will regulate the collection, security and privacy of personal data as well as introducing a ‘Do Not Call’ register. 14
  • 15. Moderate to high Indonesia regulatory risk 1. At 240 million people, Indonesia is the third largest market in Asia behind Mobile market shares 2012 China and India. It also ranks fifth in aggregate income but 11th in 51% individual income per capita. 2. Indonesia faces difficult challenges in building telecoms infrastructure 23% 21% over a complex geography. Around 80% of fixed network customers are served by fixed wireless. 6% 3. Indonesia’s mobile market passed 260 million subscribers in early 2012 TELKOMSEL XL AXIATA with penetration at 107%. INDOSAT OTHER 4. Internet access has been historically restricted by the limited availability of copper wireline infrastructure for DSL. While mobile and wireless broadband is overcoming this access bottleneck, Internet penetration still 127% MOBILE remains low at only 10% of the population PENETRATION (POPULATION) 5. Telekomsel dominates the mobiles market with a 51% market share. 66% FIXED PENETRATION (HOUSEHOLD) 15
  • 16. Indonesia – recent developments 1. SMS interconnection: Indonesia announced in May 2012 that its existing ‘sender keeps all’ regime for SMS messages would be replaced by an SMS terminating access payment model. 2. Convergence: The Ministry of Communications and IT (MCI) is drafting legislation to achieve convergence of telecommunications, broadcasting and the Internet. 3. New spectrum: MCI is considering releasing a further 10MHz of 2.1GHz spectrum and some 2.3GHz spectrum to support 3G services and broadband wireless. There are also proposals to accelerate the switchover to digital television in order to re-farm the 700MHz spectrum. 4. Content: Indonesia is considering reforms to its laws relating to the regulation and censorship of content and reforms to its cross-ownership rules in relation to broadcasting assets. 5. NGN: The Government has continued to promote major telecoms infrastructure development: • The ‘Palapa Ring’ project will connect Eastern Indonesia regions with the remainder of Indonesia. • Telekomunikasi Indonesia will invest $233 million to build a national broadband network, known as “True Broadband” that will cover 497 cities and 13 million homes by the end of 2015. 6. VoIP and IPTV: Indonesia has commenced formally licensing VoIP and IPTV services. 16
  • 17. Moderate regulatory Malaysia risk 1. Malaysia has a population of 28 million and some of the most advanced Mobile market shares 2012 telecommunications infrastructure in the developing world. 40% 2. Malaysia is mobiles-focussed but is focussed on deploying fixed network 33% infrastructure. Around 43% of households in Malaysia are currently 25% connected to fixed network infrastructure. 2% 3. Malaysia’s ‘Vision 2020” aims to see it described as a developed nation by 2020. Telecommunications is an important part of Malaysia’s plan. CELCOM OTHER MAXIS DIGI 4. Mobile penetration is one of the highest in Asia at 134% of the population with 37 million subscribers in a competitive market. Malaysia is a heavy user of SMS by world standards. 134% MOBILE PENETRATION 5. Growth in mobile broadband is currently rapid. Around one third of (POPULATION) mobile subscribers in Malaysia are currently on 3G, resulting in Malaysia 43% FIXED achieving its target of 55% household broadband penetration in 2011. PENETRATION (HOUSEHOLD) 17
  • 18. Malaysia – recent developments 1. New spectrum: The Malaysian Communications and Multimedia Commission (MCMC) intends to award 2.6GHz spectrum to nine companies to assist 4G rollout and the deployment of wireless data technologies. The MCMC is also considering refarming 850/900/1800MHz spectrum and 700MHz ‘digital dividend’ spectrum once switchover from analogue to digital television occurs. 2. HSBB Network: Under the National Broadband Initiative, Telekom Malaysia has a public- private partnership agreement with the Government to deploy a High-Speed Broadband (HSBB) network. Deployment is well underway with the first subscribers connected from 2010. A regulatory holiday will be provided until 15 September 2015. 3. 4G sharing arrangements: The MCMC has commented that it expects to see further rationalisation and co-operation in the Malaysian industry in order to reduce the costs of deployment of 4G mobile infrastructure. Maxis and U Mobile entered into a 3G RAN sharing deal in 2011. Celcom and Digi had also entered into an infrastructure sharing deal in 2010. 4. Competition law: The new Competition Act took effect from 1 January 2012, but does not apply to any commercial activity regulated under the Communications and Multimedia Act. 18
  • 19. High regulatory India risk 1. India is currently the fastest growing telecoms market in the world, Mobile market shares 2012 achieving a growth rate of 26% in 2011. 20% 17% 11% 2. India is the world’s second largest telecoms market behind China. There 17% 11% 13% are around 903 million mobile users and 123 million Internet users. 11% 3. Fixed line penetration remains at only 18% of the population. The state- VODAFONE RELIANCE owned enterprises MTNL (serving Delhi, Mumbai) and BSNL (serving the BHARTI OTHER TATA BNSL IDEA remainder of India) are the key fixed providers. Bureaucracy has impeded fixed rollout initiatives. 4. Most of the growth rates and intense competition are occurring in mobiles. The Indian mobiles market is divided into 23 geographic ‘circles’ along state boundaries. Separate licences have been awarded for each circle. 87% MOBILE PENETRATION 5. At one point, some ‘circles’ had up to 13 licensed mobile operators. (POPULATION) However, intense price competition has resulted in industry consolidation. 18% FIXED PENETRATION (HOUSEHOLD) 19
  • 20. India – recent developments 1. Licensing: The 2G spectrum scandal involved allegations of favouritism in the awarding of 2G licences. The Supreme Court of India revoked all 122 licences in February 2012 covering a third of India’s 2G spectrum. A number of foreign companies that had entered into joint ventures with local Indian companies were adversely affected. The spectrum is currently being re-auctioned. Around USD 10 billion in existing 2G investment is at stake. 2. National Telecoms Policy 2012: India has adopted a new telecoms policy, partly to increase transparency and provide a more predictable regulatory regime: • A single licence will be available that covers all India, rather than for a specific geographic circle. • Spectrum licences will be unbundled from telecom licences and refarming of spectrum will be permitted. • The use of a single licence will permit the removal of roaming charges between mobile circles and will enable number portability for users moving between mobile circles. • Use of spectrum will be liberalised, permitting any kind of services over any kind of technology platform. • Rules restricting Internet telephony have been relaxed • M&A restrictions will be liberalised. 3. Enforcement action: The TRA is currently taking significant enforcement action: • against various licence holders for not meeting rollout obligations. • against 3G roaming agreements which are alleged to be depriving the Government of tax revenue 20
  • 21. Low regulatory Hong Kong SAR risk Mobile market 1. Hong Kong has a population of 7 million and the second highest per shares 2012 capita incomes in Asia, behind Singapore. 27% 26% 21% 2. Hong Kong is one of the world’s most competitive mobiles markets and 13% has the worlds highest mobile penetration at 200% of the population. 13% Tariffs are among the lowest worldwide for some of the highest speeds HUTCHIISON CHINA MOB SMARTONE 3. Broadband networks reach 85% of Hong Kong households, assisted by PCCW CSL Hong Kong’s high population density. Fixed network penetration is at 100% of households. 4. While the mobile market is saturated, new technologies and innovation are continuing to drive growth. Mobile data has ben achieving exponential growth rates. 4G LTE networks are currently being deployed. 200% MOBILE PENETRATION (POPULATION) 5. Operators are launching triple and quad-play service offerings to drive average revenue per user (ARPU). 100% FIXED PENETRATION (HOUSEHOLD) 21
  • 22. Hong Kong SAR – recent developments 1. New regulator: A new ‘Communications Authority’ was established on 1 April 2012 which merged the Office of the Telecommunications Authority (OFTA) with the Broadcasting Division of the Television and Entertainment Licensing Authority. 2. New competition law: A new Competition Ordinance was enacted on 15 June 2012. The competition law applies to the telecommunications sector and will give the new competition regulator concurrent jurisdiction with the Communications Authority in relation to telecommunications matters. However, various transitional provisions currently apply. 3. Next Generation Networks: OFTA is currently investigating whether further regulatory measures and reforms are required to address the deployment of Next Generation Networks: • PCCW is at least halfway through migrating its voice network to a Next Generation Network. 4. New spectrum: New spectrum is being released to meet market demand for new spectrum in order to supply mobile data services: • 20MHz of spectrum in the 850MHz band was auctioned in March 2011. • 90MHz of spectrum in the 2.3GHz band was auctioned in Feb 2012. Very high prices were paid. • Further spectrum will be made available in the first quarter of 2013. 22
  • 23. High regulatory China risk Mobile market shares 2012 1. China has the largest population in Asia at 1.35 billion and also has the 66% greatest aggregate wealth by a very substantial margin. The individual wealth of Chinese consumers is comparable with Malaysia and Thailand. 2. Telecoms in China is dominated by the Government which owns more than 50% of each of the three key telecoms operators. Each of these 21% operators are joint fixed and mobile operators 13% 3. While mobile penetration has not yet reached the levels of other CHINA TELECOM economies at 73% of the population, growth rates are significant. China CHINA UNICOM CHINA MOBILE is the first economy to have over a billion mobile subscribers. 4. 3G networks have been deployed and are winning substantial subscribers, but 4G deployment has been delayed by developments in 73% MOBILE the Chinese TD-SDMA standard. PENETRATION (POPULATION) 5. Fixed network penetration is relatively high and is being accelerated by a 70% FIXED PENETRATION variety of Government infrastructure rollout programmes. (HOUSEHOLD) 23
  • 24. China – recent developments 1. Next Generation Network rollout: ‘Three Networks Integration Project’ is underway with the objective of a consumer connecting to only one communications network for their television, Internet and telephone needs: • one aspect of the Project is the deployment of Next Generation Network capabilities to reach 300 million users and 200 million households within the next ten years • the project is one of several measures recently undertaken to achieve greater convergence 2. Internet service providers: The Ministry of Industry and Information Technology (MIIT) has recently promulgated several codes of conduct for Internet information service providers: • Codes are directed at types of conduct that may harm end users, such as deception and interference • MIIT has also been more proactive in taking enforcement action against inappropriate content 3. Deregulation of tariffs: MIIT is seeking to reduce the price of fixed broadband services in the same manner as has occurred in relation to mobile services. Further deregulation of retail tariffs is likely to occur. 4. Broadband speed improvements: MIIT is also intending to implement a broadband connection speed improvement project. 24
  • 25. China’s licensing grey areas • Chinese regime has many ‘grey areas’: activities of indeterminate legality. • Activities may be tolerated by MIIT until such time as they are the subject of complaint, typically when the boundaries are pushed too far by foreign firms. At that point, public action is taken to regulate the conduct. • Recent example – voice over IP services in China (VoIP): • Technically – all VoIP offered by entities other than the Chinese operators is illegal. However, all VoIP has been tolerated to date. • December 2010 – MIIT announces it will take enforcement action against foreign VoIP operators in China, presumably following concerns by Chinese telcos that Skype was depriving them of revenue. • January 2011 – MIIT is less absolute and announces it is supportive of VoIP, but not illegal VoIP. What is illegal VoIP is not clearly identified. 25
  • 26. Moderate to high Thailand regulatory risk 1. Thailand has a population of some 70 million and hence is ranked 9th in Mobile market market size in Asia. It is also ranked 11th by individual income. shares 2012 2. Thailand is heavily mobiles-focussed. Fixed network penetration remains 44% low at only 35% of households. Further fixed deployment has stalled. 30% 24% 3. By contrast, Thailand’s mobile market has around 72 million subscribers with penetration at around 105% by population. 2% 4. Thailand has not yet deployed 3G mobile services due to delays to 3G OTHER TRUE DTAC spectrum auctions. In turn, this has lead to poor network quality and an AIS absence of mobile broadband. 5. In 2010, the National Telecommunications Commission’s ability to hold 3G spectrum auctions was successfully challenged. As a result, the National 117% MOBILE PENETRATION Broadcasting and Telecommunications Commission (NBTC) was formed as (POPULATION) a combined broadcasting and telecoms regulator with the relevant powers. 35% FIXED PENETRATION (HOUSEHOLD) 6. The pace of reform of telecommunications in Thailand has been slow. 26
  • 27. Thailand – recent developments 1. 3G spectrum auctions: Thailand’s National Broadcasting & Telecommunications Commission (NBTC) has released draft rules for new 3G spectrum auctions: • The rules are less stringent and permit bidding by telcos with less reserve capital. • NBTC will impose a maximum 3G tariffs. • NBTC will divide the 2.1-GHz spectrum into nine slots, each containing 5 MHz. • A 3G licence auction will be scheduled for the fourth quarter. The event will feature simultaneous ascending-bid auctions. • Each bidder will be permitted to obtain a maximum bandwidth of 20 MHz under a bandwidth cap restriction. 2. CAT-True 3G marketing investigation: The NBTC has determined that a 3G marketing partnership between state-owned CAT Telecom and private sector operator True Corp violates the Frequency Allocation Act. CAT is the only current holder of 3G spectrum in Thailand and has put its 3G expansion plans on hold. 3. Delays to 3G number portability: NBTC’s mobile number portability regulation will allow mobile subscribers to retain their mobile numbers while switching networks. However, CAT is raising concerns of subscriber overflow. 27
  • 28. High regulatory Philippines risk Mobile market shares 2012 1. At 96 million people, the Philippines is the 7th largest market in Asia. However, the population is poor by global standards. 68% 2. The Philippines is heavily mobiles-focussed. Notwithstanding policies to promote fixed network rollout, only around 17% of households are currently served by fixed telephony services. 32% 3. A historic problem preventing fixed network rollout was under-utilisation of existing fixed network assets with only 50% utilisation rates. >1% 4. Mobile penetration is around 107% of the population with 98 million GLOBE OTHER PLDT subscribers, but Internet access remains lower at around 20% of the population. The Philippines is a heavy user of SMS and is a global leader in SMS volumes. 107% MOBILE PENETRATION 5. Growth in mobile broadband is occurring, driven by smartphones and (POPULATION) social networking. The Philippines has 3G networks and is progressively 17% FIXED PENETRATION rolling out 4G (both mobile and broadband wireless). (HOUSEHOLD) 28
  • 29. Philippines – recent developments 1. PLDT-Digitel: The National Telecommunications Commission (NTC) approved the merger of PLDT and Digitel with the merger subsequently implemented in October 2011: • The merger has left PLDT with a 68% market share in Philippine mobiles. • The Philippines does not have merger rules, but Government approval was required. 2. 3G spectrum: A condition of the merger between PLDT and Digitel, was that PLDT would return of 10MHz of 2.1GHz 3G spectrum to allow further market entry: • The spectrum is due to be auctioned following its return in July 2012. • Four 3G licences were awarded in 2005, but significant consolidation has subsequently occurred, including the PLDT-Digitel merger. 3. New wireless entrants: NTC has approved licence applications by Multi-Lane and BellTel to supply wireless broadband and local loop services in various locations. The NTC is intending to introduce further competition following the PLDT and Digitel merger. 4. 4G rollout: Globe has deployed 4G LTE in Manilla City and is undertaking a broader rollout. Previously, 4G services had been limited to broadband wireless. 29
  • 30. Moderate to high Bangladesh regulatory risk 1. At 142 million people, Bangladesh is the fifth largest market in Asia. Mobile market shares 2012 However, it is also one of the poorest, most densely populated, least developed countries in the world. 42% 2. Bangladesh has some of the most underdeveloped fixed telecoms 27% infrastructure in the world. Fixed line penetration remains at less than 20% 4% of households and halved in 2010 when the regulator took action to 7% 4% shut down 5 illegal VoIP operators. ORASCOM GRAMEEN 3. However, Bangladesh does have a competitive mobiles market and is AIRTEL OTHER ROBI heavily reliant on mobiles. Bangladesh’s mobile market has over 90 million subscribers with a penetration over 63% of the population. 4. Broadband internet remains almost non-existent in Bangladesh. 63% MOBILE Broadband Internet penetration is in the order of 0.5% of the population. PENETRATION (POPULATION) 5. The mobiles market in Bangladesh has 6 operators and is dominated by 4% FIXED PENETRATION Grameenphone with a 44% market share. Only 2G is supplied. (HOUSEHOLD) 30
  • 31. Bangladesh – recent developments 1. 3G spectrum licences: The BRTC is proposing to award four 2100MHz licences (10MHz each) for 3G/4G services: • One will go to state-owned operator Teletalk, two will go to other existing mobile operators, and the last one will be reserved for a new entrant. • Spectrum auctions are due to occur in September this year. • 3G licence holders would be able to upgrade their licences to 4G at no extra charge. • The BTRC is proposing a fee USD 18 million for every megahertz of bandwidth, with an auction floor price of USD 180 million. • The BRTC has permitted Teletalk to trial 3G services for a 6 month period from July. 2. VoIP licences and issues: BTRC sent a draft guideline to the telecom ministry for issuing licences to VoIP service providers, but a dispute within Government is delaying any licensing. 3. VoIP enforcement: BRTC has threatened to impose fines on any mobile operators supplying VoIP services over mobile phones. A key concern has been the use of VoIP services by foreign carriers to avoid payment of termination fees for inbound calls, an important source of revenue. An estimated 20% of traffic terminated illegally using VoIP. 31
  • 32. Summary of developments in Asia 1. Most Asian jurisdictions are heavily focussed on mobiles-based competition, particularly many of the developing economies with low fixed network penetration. 2. Many mobile markets have reached saturation with mobile penetration greater than the number of users. In such circumstances, growth is still being achieved by the rapid growth in mobile data, handset innovation and new technologies such as 4G. 3. Mobile spectrum is increasingly viewed as a scare resource, driving up auction prices and leading to novel solutions (such as industry consolidation and spectrum sharing). Many nations are seeking to release more spectrum, including by refarming existing spectrum. 4. A number of Asian jurisdictions are deploying Next Generation Networks (NGN) or have programmes and incentives in place to encourage greater fixed network deployment. 5. A number of Asian jurisdictions are recognising the need for regulatory convergence, particularly in relation to broadcasting and Internet technologies. As part of this trend, difficult issues of Internet content regulation and VoIP technologies are being considered. 32
  • 33. TELECOMMUNICATIONS, MEDIA & TECHNOLOGY Regulatory developments in Australasia 33
  • 34. Low regulatory Australia risk 1. At 24 million, Australia has a modest population by Asian standards but Mobile market has the 6th highest aggregate income in Asia and the third highest shares 2012 individual income, assisted by Australia’s substantial mineral resources. 45% 2. Telecoms has traditionally been dominated by Telstra with a roughly 42% 32% share of all telecoms services, but current reforms will see a form of 23% structural separation occur. Telstra will close its fixed network and migrate its fixed customers to the National Broadband Network. VODAFONE 3. Mobiles currently accounts for more than 50% of revenue in Australian TELSTRA OPTUS telecoms. Recent consolidation saw the merger of Vodafone and Hutchison, leaving three key network operators. 4. Telstra currently has the only 4G LTE network. Optus and Hutchison are 126% MOBILE currently in a joint venture to share mobile sites and improve coverage. PENETRATION (POPULATION) 5. The National Broadband Network will result in broadband access being 98% FIXED deployed throughout Australia. 92% of the population will receive PENETRATION (HOUSEHOLD) broadband fibre. The remaining 8% will receive fixed wireless or satellite. 34
  • 35. Australia – recent developments 1. Next Generation Network: The National Broadband Network (NBN) is dominating issues: • NBN Co will be a wholesale-only, open-access, state-owned, FTTH local access monopoly • principal benefit is delivering superfast broadband to rural Australia, but at a high cost (USD 38 billion) • network will cross-subsidise from metro to rural to achieve a uniform national price for basic access 2. Structural separation of Telstra: Telstra will migrate its fixed customers to the NBN over a period of 8 years in return for migration payments: a form of structural separation: • migration will ultimately be forced, but end users have around 18 months to voluntarily migrate • regulatory impediments will exist to deter superfast fixed network build by NBN competitors • regulation is heavily reliant on regulatory undertakings to the ACCC: a new regulatory paradigm 3. Content regulation: The Government is currently considering plans to reform the regulation of broadcasting and content in Australia under a streamlined regulatory framework. 4. Mobile spectrum: The digital dividend 700MHz spectrum is due for auction next year. Spectrum renewal fees for existing spectrum licences have been higher than expected, hence Australia is considering implementing different models for spectrum licensing fees. 35
  • 36. Low regulatory New Zealand risk Mobile market 1. At 4 million, New Zealand has one of the smallest populations in Asia, but shares 2012 has the seventh highest individual income. 48% 2. The telecoms market one of the first in the world to be liberalised, but 38% historically suffered from an absence of Government intervention to restrain the market power of the Telecom New Zealand. 14% 3. Telecoms reforms from 2001 created a new framework formarket access and competition. In 2011, Telecom New Zealand voluntarily demerged to 2 DEGREES VODAFONE create Chorus as the structurally separated network business. TCNZ 4. The New Zealand mobiles market was historically a duopoly. A new mobile operator, 2degrees, was launched in 2010 and has been rapidly gaining market share while creating significant price-based competition. 132% MOBILE PENETRATION 5. Mobile penetration rates are among the highest in Asia at 132% of the (POPULATION) population. Fixed network penetration is at 100%. A rollout by Chorus of 100% FIXED PENETRATION ultra-fast broadband will further increase broadband penetration. (HOUSEHOLD) 36
  • 37. New Zealand – recent developments 1. Next Generation Network: The Ultra-Fast Broadband Network (UFB) and Rural Broadband Initiative (RBI) have been dominating recent developments: • UFB involves Government subsidy for deployment of FTTH to urban areas in New Zealand • RBI involves Government subsidy for broadband deployment to rural areas in New Zealand • Telecom NZ is rolling out most of the FTTH infrastructure, but some local fibre companies involved • reforms are currently occurring to streamline USO levies 2. Structural separation: Telecom NZ structurally separated (via a voluntary demerger) in order to win the UFB rights: • Chorus is the network access entity and will deploy FTTH. It will also own legacy copper access. • Telecom NZ will continue to own mobile networks but will be a fixed network retailer. 3. Content regulation: New Zealand Commerce Commission is currently undertaking extensive public consultation to identify issues that may impede the uptake of broadband. 4. Spectrum: Digital dividend 700MHz spectrum is due for auction and will provide the basis for LTE 4G deployments and wireless broadband deployments. 37
  • 38. Summary of developments in Australasia 1. Both Australia and New Zealand are rolling out fibre-to-the-home network infrastructure in urban areas and mobile wireless in rural areas. However, significant differences exist in relation to the extent of fibre rollout and the level of Government funding. 2. Structural separation of the incumbent fixed network owner is occurring in both jurisdictions on a voluntary basis. While New Zealand has achieved this immediately via a demerger of Telecom NZ, Australia will take 8 years to achieve this via a network migration of end users from Telstra to NBN Co. 3. Further regulatory reforms are likely to occur in both jurisdictions to promote broadband uptake. New Zealand is currently identifying impediments to uptake. Australia is seeking to remove regulatory impediments by converging the regulation of digital media. 4. The NGN rollouts are providing an opportunity for both jurisdictions to refine and reform some of the key historic regulatory settings applied to the telecommunications industry. 5. Digital dividend 700MHz spectrum will shortly become available and provide a basis for further mobile competition in both jurisdictions. Mobile networks are being upgraded. 38
  • 39. TELECOMMUNICATIONS, MEDIA & TECHNOLOGY Regulatory developments in the Middle East 39
  • 40. Moderate to low Bahrain regulatory risk 1. Bahrain is ranked as the 12th most liberalised economy in the world, reflecting its desire to attract international investment to achieve its Economic Vision 2030. 2. Pursuant to its National Economic Strategy, Bahrain was one of the first Gulf States to liberalise its telecoms market. While Bahrain has the smallest telecoms market in the Middle East by population, its market is now one of the most competitive. 3. Batelco is the incumbent operator in Bahrain and is subject to substantial regulation based principally on dominance designations. 4. The Telecommunications Regulatory Authority of Bahrain takes a proactive and strict approach to enforcement of that regulation, informed by competition policy concerns. 5. The TRA often leads regulatory trends in the Gulf and recently won an award as the most progressive regulator in South Asia, the Middle East, and North Africa 40
  • 41. Bahrain – recent developments 1. Bahrain is currently finalising its third Telecommunications (five year) Plan. • The Plan has been prepared and is currently awaiting Ministerial sign-off. 2. The Bahrain Electricity & Water Authority is deploying a fibre network, but deployment is not as advanced as other Gulf States. Bahrain has instead favoured local loop unbundling of Batelco’s legacy copper access network as an immediate means to promote competition. 3. Bahrain recently implemented both fixed and mobile number portability, being the first country in the Middle East and North African to achieve this. 4. Bahrain has recently implemented detailed Consumer Protection Guidelines which are unprecedented in the Gulf. 5. The TRA has recently undertaken one of the first complex competition investigations in the Gulf in the context of an alleged vertical price squeeze… 41
  • 42. Moderate to low Qatar regulatory risk 1. Qatar has the world's highest per capita GDP and is one of the world’s fastest growing economies. During 2011, Qatar’s telecoms markets experienced significant growth, driven by expansion of access to broadband services and by increasing mobile subscriber penetration. 2. Around two thirds of telecoms services in Qatar are now mobile-based. 3. Qatar’s telecoms sector is not yet fully liberalised, but is still heavily regulated. ictQATAR is the independent industry regulator in Qatar. 4. Qtel is the incumbent fixed and mobile network operator. The second licensee, Vodafone Qatar, operates competing mobile infrastructure with a fixed network deployment underway. 5. ictQatar has indicated it will consider licensing a third fixed operator during 2012 and may also consider whether a third mobile operator is required. 42
  • 43. Qatar – recent developments 1. The Qatar National Broadband Network (QNBN) is currently being deployed using FTTH on a fibre infill basis to supplement fibre rollouts by Qtel as incumbent. QNBN is state-owned. • QNBN will operate under a wholesale-only, open access model. • QNBN will supply wholesale bitstream to the other fixed network licensees, Qtel and Vodafone Qatar. 2. Mobile number portability will shortly be launched in Qatar. ictQATAR as industry regulator will then investigate fixed number portability. 3. As with Bahrain, Qatar has focussed on enhancing consumer protection: • A new consumer affairs department has been created within ictQATAR with call centre. 4. Qatar recently reviewed is historic market definition and dominance designations, but made no material changes. This is not surprising given Qatar’s markets are not yet fully liberalised. 5. During 2011, Qtel was required to cease using the ‘Virgin Mobile’ brand as Vodafone Qatar alleged that this mislead consumers into believing there was a third mobile operator. 43
  • 44. Moderate to low United Arab Emirates regulatory risk 1. The UAE is currently ranked as the 14th best nation in the world for doing business, based on its economy and regulatory environment. The UAE has relatively mature telecommunications markets serving business centres in Abu Dhabi and Dubai that act as a hub for the Middle East region and surrounding nations. 2. The UAE telecoms sector is not yet fully liberalised, but is heavily regulated. The Telecommunications Regulatory Authority of the UAE is the independent industry regulator. 3. Etisalat is the incumbent fixed and mobile operator. Etisalat provides fixed access in most areas of the UAE and operates a 4G LTE mobile network. 4. The second licensee, Du, operates a rival 3.75G HSPA+ mobile network and owns significant fixed infrastructure in the ‘free zones’ and new housing estates of Dubai. 5. A number of satellite providers have also been licensed to provide services. 44
  • 45. UAE – recent developments 1. The UAE will shortly become one of the first countries in the world to achieve full fibre coverage: • Du deployed fibre in new estates in Dubai. • Etisalat will shortly complete its upgrade from copper to fibre for the remainder of the UAE. • As there is no need for a National Broadband Network in the UAE, the TRA has instead required Etisalat and Du to provide each other with wholesale bitstream access. 2. Delays have occurred in implementing mobile number portability (MNP) in the UAE. • Once MNP is implemented, the UAE will move to implement fixed number portability. 3. The Telecommunications Regulatory Authority (TRA) of the UAE is currently implementing enhanced economic regulation and is in the process of issuing regulatory adjustments. 4. The TRA is currently undertaking public consultation on draft consumer protection regulations. 5. In 2010, the TRA threatened to suspend Blackberry services in the UAE until Research in Motion complied with interception requirements. 45
  • 46. Summary of developments in the Middle East 1. Bahrain, Qatar and the UAE are each deploying fibre, but under different rollout models. The UAE should achieve ubiquitous fibre deployment by early 2012. Bahrain and Qatar will reach an advanced state of deployment by the end of 2012. 2. Fixed market competition will occur in each jurisdiction via wholesale bitstream access. Given Bahrain’s more advanced state of market deregulation, it has also sought to achieve immediate broadband competition via copper local loop unbundling. 3. Each of the Gulf States are implementing fixed and mobile number portability. 4. Economic regulation remains at different stages of evolution in the different markets. The UAE will continue to implement regulation. Qatar and Bahrain will continue to refine its application. Bahrain will also continue to assess whether selective rollback is required. 5. Each jurisdiction is focussing on consumer protection to a higher degree. 46
  • 47. TELECOMMUNICATIONS, MEDIA & TECHNOLOGY Regulatory risk profiles 47
  • 48. Level of regulatory risk LOW REGULATORY RISK HIGH REGULATORY RISK All of the following: Any of the following: • Rules are clearly defined • Rules are not clearly defined • Well resourced regulatory agencies • Less resourced regulatory agencies • Low risk of policy reversals • High risk of policy reversals • Decisions are predictable • Decisions can be unpredictable Hong Kong New Zealand Philippines Australia Qatar Bangladesh China Singapore UAE Indonesia India Japan Bahrain Malaysia Thailand 48 Vietnam
  • 49. Regulatory risk is factored into commercial risk SEC filing by ChinaCache - the leading CDN operator in China… “As of the date of this prospectus, there is no legal definition as to what constitutes a "content and application delivery business," nor are there laws or regulations in China specifically governing the content and application delivery business. We cannot assure you that PRC governmental authorities will continue to deem our content and application delivery business and any of our newly developed technologies, network and services used in our business as a type of value-added telecommunications business covered under the VAT license of Beijing Blue I.T. As we expand our networks across China, it is also possible that the MIIT, in the future, may deem our operations to have exceeded the terms of our existing license. Further, we cannot assure you that Beijing Blue I.T. will be able to successfully renew its VAT license upon its expiration, or that its VAT license will continue to cover all aspects of our content and application delivery business and operations upon its renewal. In addition, new laws, regulations or government interpretations may also be promulgated from time to time to regulate the content and application delivery business or any of our related technology or services, which may require us to obtain additional, or expand existing, operating licenses or permits. Any of these factors could result in Beijing Blue I.T. being disqualified from carrying out its current business, causing significant disruption to our business operations which may materially and adversely affect our business, financial condition and results of operation.” 49
  • 50. Disclaimer The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Norton Rose LLP, Norton Rose Australia or Norton Rose OR LLP on the points of law discussed. No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any constituent part of Norton Rose Group (whether or not such individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to 50 a partner or director is to a member, employee or consultant with equivalent standing and qualifications of, as the case may be, Norton Rose LLP or Norton Rose Australia or Norton Rose OR LLP or Norton Rose South Africa (incorporated as Deneys Reitz Inc) or of one of their respective affiliates.