Conference of Mr. Georges Mokhbat at 14th Diada de les Telecomunicacions de Catalunya The new role of Governments in deregulated telecom markets. Who is responsible for “Digital Highways”

1. The new role of Governments in deregulated
telecom markets
Who is responsible for “Digital Highways”
aligning Technology with business requirements
September 2015
Georges MOKHBAT

2. 2
Macom expertise
Independent Communications Technology consulting firm
Experienced consulting team
Strong value proposition
 Corporate customers
 Government policy in Telecoms/ICT
 Member of the Society of Communications Technology Consultants International
 +25 years of experience in customer advocacy in Communications Technology services sourcing and contract negotiations
 Solid and recurring customer base across France, UK, UAE, Lebanon
 International project management expertise: Europe, Middle East, US
 Technical and financial expertise in technology services selection
 External opinion on where the technology or market is heading preventing short term decisions from hindering the future
 In-depth Market knowledge of international Telecom markets enabling now-how transfer
Paris, France
Beirut, Lebanon
Dubai, UAE
offices

3. 3
Time for a change
 Governments have looked so far at Telecommunications Infrastructure from the perspective of:
̶ Availability (access lines)
̶ Affordability (Prices) for the consumer
HOWEVER
 Telecommunications Networks are also today at the heart of business development from
different perspectives
̶ Operational efficiency
̶ Revenue Generation (e-commerce, Banking, Retail,…)
 Regional Telecommunications infrastructure (and primarily BROADBAND availability) has
become a Key selection criteria for investors
AND
 Current European Telecommunications Market landscape is showing its weaknesses:
̶ Too many players leading to inefficiency in addressing global markets
̶ New unregulated players are disturbing the market (Facebook, Google, Skype,…)
̶ Two regulatory environments (National and European) hindering market development

4. 4
How markets were developed
History
 Except in the US, Governments were initially the only Telecom stake owner
 Competition has been the key driver for Telecom markets development
 though with different approaches
̶ In the US, progressively after a legal suit from DoJ against ATT (a private monopoly) that was
settled in 1984 by its divestiture (break-up)
̶ In the UK, Mercury was formed in 1982 prior to BT privatisation in 1984  full liberalization in
1991 but BT still retains 85% of market share
̶ In Europe, progressive privatization and use of facilities based companies to create
competition
 What triggered this development ?
̶ In the US, the opportunity of Microwave technology triggered the break-up of ATT private
monopoly on Long distance
̶ In France, X25 created the opportunity to establish a customer centric government owned
company
̶ Mobile technology (terminals) created the opportunity to develop private

5. 5
How markets were developed
History
 Lessons:
̶ Deployment of new services require marketing innovation  need for competitive markets
̶ Incumbent operators are still market leaders (after 20 years)
̶ Access charges are key to the operator business
• 50% of the cost for a new entrant
• 30% of the incumbent revenues
 The Situation Today:
̶ Infrastructure services are considered to be granted
̶ Users tend to select on services: terminals, applications, etc.
̶ Operators have moved away from major infrastructure investments
 Disruptive technology triggered new business model
̶ Microwave Links  US Long distance operators
̶ Endpoint technology  Competitive Telecom markets
̶ GSM  Privatization
̶ High Speed, Applications  New business models
̶ Broadband  ??????

6. 6
Technology evolution
Funct Network Components 1960's 1970's 1980's 1990's 2000's 2010's 2015's
Endpoints (Terminals)
dedicated (Telex,
Telephone, etc.)
Separate endpoints
(voice, data)
Separate endpoints
(voice, data)
Separate endpoints
(voice, data, fix, mobile)
SETUP box
(voice/data/video/conve
rgence)
SETUP box
(voice/data/video
convergence)
SETUP box
(voice/data/video/mobil
e convergence)
OTP
Switching Technology
message switching ,
circuit switching, manual
message, circuit, data
switching (IP, X25)
Evolution for Data
switching
IP switching IP switching
IP switching, label
switching
Label switching
Transmission Analogue (Modem) Analogue/Digital Digital Digital Digital + Optical switching Digital+optical switching Optical switching
Physical Layer Copper Copper/fiber/Microwave Copper/fiber/ Microwave
Copper/fiber/
Microwave (primarily for
mobile)
Copper/fiber/
Microwave (primarily for
Mobile)
Fiber/Microwave for
mobile Access
BROADBAND ACCESS
(FIBRE, 4G)
T
R
A
N
S
M
I
S
I
O
N
S
W
I
T
C
H
I
N
G

7. 7
Time for Change: Why?
 In a Networked business, competitors are partners: can we afford in the Telecom what happened
to the airline industry ?
 Competitive markets is still an objective but having a viable telecom services industry has become
a national imperative
 Current National Operators are facing new compelling and competing challenges:
̶ Capital intensive broadband investments
̶ Direct competition from more global OTT providers: SKYPE capital expenditure per subscriber
to provide voice services is US 2cts in comparison to USD 1500-2500 per subscriber to
provide NGBN service
 Telecommunications markets evolution were driven by technology
̶ Enhanced endpoint capabilities triggering services competition
̶ Deployment of alternative transmission technologies: Microwave, GSM, etc…
̶ New Broadband services  need for an alternative approach while still facilitating
development of competitive markets
 What is the role of Broadband networks in the Economy?
 Telecom Industry perspective
 Usage Perspective

8. 8
Industry perspective: time for a change ?
 Basic Telecom Services (voice, data) have reached the bottom in most markets. Telco’s are incited
to develop other services (cloud services, IPBX, etc.) in order to compensate, thus destroying value
in adjacent markets
 Broadband Networks will only be cost efficient if new services are deployed (hence triggering
savings in other domains):
̶ Enabling teleworkers will generate savings in transport, housing costs,….
̶ Introducing new public services: why not national UberPop? AirBnb? Or others
 Market organisation needs to be reviewed should we want to free resources to address such major
challenges
 Broadband Networks eliminate national boundaries
̶ Data can be located in other countries
̶ Traffic (main Telco business) can be diverted
 If nothing is done, European Telco’s may disappear... CAN WE AFFORD IT?

9. 9
Industry perspective: time for a change ?
 BROADBAND: High Speed/Converged technologies
̶ Fibre optic: no private company can afford such a long term investment
̶ Mobile 4G (LTE technology) >100Mb/s --- spectrum limitations
̶ Fix and mobile: these services are and will converge  no need to distinguish
̶ Data and voice (VOIP services)
 Increased network usage and higher bandwidth capacity implies
̶ Increased bandwidth requirements  Optical transmission, spectrum allocation
̶ Increased cellular coverage  more antenna sites, spectrum usage
̶ Increased costs
̶ New applications and services
̶ New marketing strategy
 What others tell us ??
̶ Multiple infrastructure operators is incompatible with Fiber optic deployment
̶ Big debate on network neutrality…
̶ Complex negotiations for bandwidth sharing between mobile operators
 Need for Government involvement

10. 10
Usage perspective: time for a change ?
 New customer expectations, usage based pricing  New business models
̶ Price reduction/Per use pricing for various services
• Advertising or indirect financing models
• Aren’t we going to a world where Telecom infrastructure is free?
 New players: important changes
̶ Move from infrastructure to Content providers
̶ Competition in Telecoms is International
 Digital Hub Strategy
̶ Broadband is a new disruptive technology  opportunity to develop competitive markets in
other industries
̶ Content and services will drive customer adoption: TV, Fashion, Education, Medicine, Banking,
News etc…
̶ Broadband is a “service industries” enabler
 IT IS NOT ANYMORE ABOUT TELECOMS ONLY
̶ Need for a global vision and strategy
̶ Regulation will need to address primarily content providers
̶ Move from the debate on Infrastructure ownership and look beyond it

11. 11
Broadband deployment must be global
Impact of broadband on output over diffusion process
Source: OECD broadband statistics, adapted from Katz (2008a).
 Only High level of Broadband penetration can achieve important level of economic impact
-
-
+
+
Broadband penetration
Increase
employment
Critical mass
threshold
Saturation point

12. 12
Usage perspective: time for a change ?
• 42%: forecasted yearly growth of Fixed internet traffic in Western Europe
(source: Analysys Mason)
• CAGR of Mobile Data traffic (source : CISCO VNI index)
̶ 46% In Spain (7-fold from 2014 to 2019)
̶ 51% In France (8-fold from 2014 to 2019)
̶ 47% In USA (7-fold from 2014 to 2019)
̶ 54% In UK (9-fold from 2014 to 2019)
̶ 62% In Saudi Arabia (11-fold from 2014 to 2019)
̶ 67% In China, India (13-fold from 2014 to 2019)
̶ 72% In Russia (15-fold from 2014 to 2019)
• CAGR of global IP traffic (2014-2019)
• Consumer segment: 24%
• Business Segment: 20%
• Western Europe, North America: 21%
• Middle East and Africa: 44%
 When Annual Operators Growth in Europe range in the 5-10%

13. 13
Time for Change: Why NOW?
 Governments must elevate broadband from merely another regulatory concern to a top issue on
the national strategic agenda. (Booz & Co)
 France lawmakers have initiated an initiative authorizing direct regional authorities involvement in
Telecom Infrastructure Projects
 Australia, Korea, Japan governments have embarked in the build-up of National Broadband networks
Wave Enabler Economical impact Government role Period
Agriculture Land Small Community, Local markets
Regulate land
ownership
PRE 1800
Industry Machine tools
Large Cities, National/Regional
markets
Highways 1800-1970
Information
Telecommunications
infrastructure
No boundaries, Global markets Digital Highways ?? NOW

14. 14
Korea: A digital highway champion
Sources: Akamai, 2010; Booz & Company analysis

15. 15
0
2
4
6
8
10
12
Broadband penetration rates
Fixed broadband penetration percentage increase Dec. 2013 - Dec. 2014, by country
Source: OECD broadband statistics
(per 100 inhabitants)

16. 16
Broadband impact on GDP growth
Percentage of impact of broadband on GDP growth
Source: OECD broadband statistics, adapted from Koutrompis (2009)
Medium penetration
 Germany, France, Japan, Belgium,
UK, Australia, US, Canada,
Luxembourg
 Average contribution to GDP growth:
0.014
Low penetration
 Greece, Portugal, Italy,
New Zealand, Austria,
Hungary, Spain, Ireland
 Average contribution to
GDP growth: 0.008
High penetration
 Denmark,
Norway,
Netherlands,
Sweden,
Switzerland
 Average
contribution to
GDP growth:
0.023

17. 17
Broadband impact on GDP growth
Fixed (wired) broadband penetration and GDP per capita
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
0
10
20
30
40
50
60
Fixed broadband penetration (subscribers per 100 inhabitants,
Dec. 2014) (left-hand scale)
GDP per capita (USD PPP, current prices, 2014) (right-hand
scale)
Source: OECD broadband statistics

18. 18
Broadband and business
Business use of broadband, 2011 or latest available year
0
25
50
75
100
Finland
Korea
(2010)
Switzerland
(2008)(*)
Spain
Iceland
(2010)
Sweden
Slovenia
Denmark
New
Zealand
(*)
Australia
(*)(2010)
Canada
(2007)
France
United
Kingdom
Luxembourg
Netherlands
Estonia
Ireland
Germany
Norway
Austria
EU27
Turkey
(2010)
Czech
Republic
Italy
Hungary
Belgium
Portugal
Japan
(*)
Greece
Slovak
Republic
Poland
Mexico
(2008)(*)
Source: OECD, ICT database and Eurostat, Community Survey on ICT usage in enterprises, June 2012.
% of businesses with
10 or more employees

19. 19
Conclusion
 Telecom market developments are Global and services oriented: Customers (will) consider
infrastructure as granted
 Telecom Infrastructure is an enabling technology for the other industries and the Country
 We have to admit that Competition is not yet there in the Infrastructure
 In order to be cost-efficient, BROADBAND has to be deployed globally and simultaneously
 Who has Global needs in a Country ??
 Who is responsible for meeting this challenge ????

20. 20
How?
 Basically, broadband must be Government responsibility
̶ Being businesses enabler, its deployment cannot depend only on private investors
̶ It is key for its own services, processes deployment and operational efficiency
 Standards methods are today available to Governments :
̶ Reduce Digital Divide through Direct broadband investment in “specific” areas (France,..)
̶ Launch its own Broadband Highway Network (Japan, Australia,.)
̶ Set a policy target and control its progress with industry (UK government strategy)
̶ Collect funds, through taxes, to create a “shared” broadband infrastructure
̶ De-layering existing incumbent operators (Australia, Italy, Singapore,…)
 Deploying community services or building on content solution providers should finance such
national/regional deployments

21. 21
A New business Model

22. 22
In Short….
 Telecom Market Deregulation has achieved its goal: Quick technology penetration and
adoption
 Today it is about “SERVICES” and each country should assume its own “Digital
Transformation”, if it does not want its processes (and culture) being imposed from abroad
 BROADBAND is STRATEGIC  Country future cannot depend on private interests
 It is about building a country processes around technology

23. 23
Gràcies
Thank you
Gracias
Merci
‫شكرا‬