Telecommunications: regulation and industrial development
The Barcelona Declaration aimed to encourage “Mediterranean countries’ access to the new information society”. The regional EUMEDIS programme, part of MEDA, aims to modernize the regulatory telecommunications framework by devising a Euro-Mediterranean government strategy for the information society. The NAPT programme aims to encourage the transfer of European experience and regulations towards the South.
Europe has adopted a relatively precise regulatory framework, which can bring the problem of excessively rigid rules. The United States has relaxed its own regulations, with the potential for distorting competition.
These questions need to be raised around two major themes:
1. The future of wired networks in the face of the inevitable rise of fibre optics in networks to ensure broader access to multimedia: In what ways can we encourage investment in these networks?
2. The neutrality of networks regarding content or services available on the final market: How can a single connection be used to convey a broad range of content and services and thus foster their development?
These two themes are covered in the report, “Régulation et développement industriel des télécommunications autour de la Méditerranée,” produced by Pierre Musso and Laurent Gille, with a focus on the situation in countries north of the Mediterranean (France, Italy, Spain, Greece and Portugal) and those in the south and east (Algeria, Tunisia, Morocco, Egypt and Turkey).
The European Commission has identified ICT’s crucial role in achieving the Lisbon Strategy’s objectives on growth and jobs. These objectives are supported by a European regulatory framework for electronic communications, devised to stimulate market competition, investment and innovation. This framework has largely inspired regulations in Mediterranean countries, although measures sometimes differ significantly from one country to another.
Several trends have considerably modified the telecommunications sphere. For example, the definition of content, services and applications is increasingly complicated, while landline and mobile access is constantly rising. At the same time, some traditional markets have reached maturity and competition is pushing stakeholders to invest in new technologies so as to offer innovative services based on convergence between high-speed networks, audiovisual media, and electronic measures.
On the other hand, the opening-up of the sector to new stakeholders has considerably altered the way it operates. In some countries, traditional operators have lost their dominant position in the space of a few years, whereas in other countries they maintain a strong influence on the market. Regulations have sometimes struggled to adapt to these changes in market dominance, while technological innovation has increasingly allowed networks to make a topological and functional break by allowing them to share increasingly advanced infrastructures that go way beyond the interconnection mechanisms required to terminate a call: whether this involves unbundling the local loop (along the whole length, or partially, for passive functions only, or active ones as well, etc.), domestic roaming, or the emergence of operators whose main function is distribution or grouping services. The “virtualization” of networks is thus becoming a core regulatory issue: Up to what point should it be obligatory to share networks, open up services and not discriminate between operators?
In other words, the value chain is breaking up just as markets are becoming global. Stakeholders are aiming at closer involvement, either directly or through industrial alliances, so as to offer so-called “multiple play” services to markets. Regulators attempt to maintain a degree of competitive pressure by obliging some resources to open up, and a degree of fragmentation in the value chain to limit the competitive advantage of integration, without weakening the sector. Where should we set the bar between fragmentation and integration – that is the question that everyone is asking, bearing in mind that national contexts can give very different answers: the “ills” are not necessarily the same from one country to another, and the “cures” should not be either.
This gives rise to the question of the most suitable type of regulation for boosting the industrial development of high-speed networks and new multimedia services in the southern Mediterranean.
Several trends have considerably modified the telecommunications sphere. For example, the definition of content, services and applications is increasingly complicated, while landline and mobile access is constantly rising. At the same time, some traditional markets have reached maturity and competition is pushing stakeholders to invest in new technologies so as to offer innovative services based on convergence between high-speed networks, audiovisual media, and electronic measures.
On the other hand, the opening-up of the sector to new stakeholders has considerably altered the way it operates. In some countries, traditional operators have lost their dominant position in the space of a few years, whereas in other countries they maintain a strong influence on the market. Regulations have sometimes struggled to adapt to these changes in market dominance, while technological innovation has increasingly allowed networks to make a topological and functional break by allowing them to share increasingly advanced infrastructures that go way beyond the interconnection mechanisms required to terminate a call: whether this involves unbundling the local loop (along the whole length, or partially, for passive functions only, or active ones as well, etc.), domestic roaming, or the emergence of operators whose main function is distribution or grouping services. The “virtualization” of networks is thus becoming a core regulatory issue: Up to what point should it be obligatory to share networks, open up services and not discriminate between operators?
In other words, the value chain is breaking up just as markets are becoming global. Stakeholders are aiming at closer involvement, either directly or through industrial alliances, so as to offer so-called “multiple play” services to markets. Regulators attempt to maintain a degree of competitive pressure by obliging some resources to open up, and a degree of fragmentation in the value chain to limit the competitive advantage of integration, without weakening the sector. Where should we set the bar between fragmentation and integration – that is the question that everyone is asking, bearing in mind that national contexts can give very different answers: the “ills” are not necessarily the same from one country to another, and the “cures” should not be either.
This gives rise to the question of the most suitable type of regulation for boosting the industrial development of high-speed networks and new multimedia services in the southern Mediterranean.
The most suitable regulation for boosting the industrial development of high-speed networks and new multimedia services in the southern Mediterranean should:
1) Not curb investments, especially those linked to converging televisions, telephones and computers, but also foster innovation in a sector where technological progress will remain very strong;
2) Encourage investment from local industry, partly through the creation of technological clusters, and industry group champions;
3) Urge unification of the Maghreb. This regulation must lead to a common Euro-Mediterranean policy;
4) Remain autonomous and have a voice in the evolution of traditional operators.
The authors and the group of experts identified twelve concrete proposals leading to better regulation.
1. Create a permanent Euro-Mediterranean conference involving different stakeholders (operators, industrials, regulators, research centres, public authorities, consumer associations, etc.), based on the two existing telecom regulator networks.
Two regulator networks already exist. One is Arabic – the Arab Regulators’ Network (AREGNET), and the other is Francophone – Fratel, created in Bamako in 2003. These different regulator networks could coordinate the Euro-Mediterranean conference, which would boost their cooperation and inter-organization. The major themes of the conference could also be the two questions raised in this report:
- What should the mid- to long-term (7-12 year) industrial policy be regarding these infrastructures, particularly the future of wired networks? And what is the prospective vision for the telecommunications and ICT sector?
- What should the industrial policy be regarding service and content for ICT and multimedia? What is the long-term vision for developing uses?
2. Help build the expertise capacities of independent regulation authorities.
The objective is to exchange “good practices” and define concerns common to all operators in North and South. A common ICT policy would start with cooperation from all regulators. One of the challenges would be to ease European regulation and adapt it to the realities of southern countries.
3. Envisage new industrial partnerships between operators from North and South of the Mediterranean, apart from capital participation, in particular at the time of privatization.
Industrial partnerships are the most likely source of future national and North African champions. What forms of company “sponsorship” could be promoted that would more or less systematically encourage the mid-term emergence of national champions? How can a kind of strategic convergence be created in the sector with an objective of bringing out national champions? This could be supplemented by a territorial development policy.
This should involve encouraging industrial partnerships between North and South with long-term investments. The result would be a move away from short-term projects based on traditional sales contracts, and would foster the emergence of national and North African champions. This implies:
- that infrastructure operators would focus on a narrow industrial network, possibly with suitable regulation enabling them to offer the best tariffs;
- that in their calls for tender, partners would emphasize what they have to offer in a precise set of technical specifications established for the mid term.
4. Create a network of existing technology parks in Arab countries, connecting them to each other and to countries in the northern Mediterranean.
This networking should involve encouraging technology transfer and especially developing partnerships in Research & Development and service innovation. The latter is increasingly important in the developing network economy to ensure that the services proposed on future networks in Africa and the Middle East will be as appropriate as possible.
5. Develop a federating ICT project with an economic slant founded on innovating services, with private partners, to help unite the resources of the three countries.
This major federating project would be a means of receiving European aid, uniting private resources from the three countries and boosting partnerships, mainly between private operators, both for technological choices and clearly identified applications (with mid/long-term commitments). The project would also facilitate moving on from the existing fragmented market and competition between national markets, and would foster networks of exchanges and “horizontal” partnerships (between Maghreb countries) and “vertical” ones (North/South). The World Bank is keen to support this kind of initiative, which some Arab countries (Egypt, Jordan, Morocco and Tunisia) have (so far unsuccessfully) attempted with the “Agadir Initiative”.
6. Seek uniform domestic pricing for mobile phones, including free roaming, in countries in the South.
This already exists for landlines. Its extension to mobile lines with preferential trans-Maghreb pricing would have the effect of increasing market size, fostering connections between technology parks (or strong innovation sites), and between some transboundary zones.
7. Urge the development of common technical standards in the Maghreb
This would make it possible to unify markets, give them a bigger critical size, and foster the emergence of powerful industrial groups from the Maghreb. As far as possible, these technical standards should be consistent with those applied in Europe.
8. Consolidate community exchanges to create a transnational cultural area in the South and encourage the development of an industry of content.
The current technological innovation is Web 2.0, which brings together community exchanges. Self-production methods are set to arrive on the market. Content can be created using a mobile phone and imported to the Web. The three Maghreb countries are largely equipped with these tools. Is self-produced content likely to create a social, cultural and transnational space for the Maghreb? National and security considerations will clearly be issues, but one possibility is the creation of sites providing services for the three countries, similar to eBay and Dailymotion (with production help from the North), or perhaps the digitalization of common cultural funds.
9. Support the Maghreb’s movement towards sub-Saharan Africa already underway in Tunisia and particularly Morocco, via strong partnerships between operators from North and South.
This involves fostering a win/win “vertical association” between the North/Maghreb and sub-Saharan Africa, illustrating the so-called “orange segment” general strategy promoted by IPEMED.
10. Look for alternative types of contractual relations over the mid/long term
This involves not just taking an approach of international calls for tender, but trying to develop a system based on mid-term contracts. A policy on calls for tender that is too strict would undermine the growth rate. Yet the digital economy increasingly involves fixed costs that imply a certain guarantee of recurrent revenue. The state could possibly cover payment of both material and soft services, but over the long term. Donor agencies have their own assumptions, like are calls for tender of the right length and size? Competition that is too fragmented does not encourage the industrial consolidation required to tackle international competition. These approaches make it impossible to consolidate or capitalize. In the three Maghreb countries with strong state systems, a BOT-type formula could sometimes bring advantages, for example in niche markets. It is the government that computerizes step by step and possesses recurrent revenue. It is unacceptable that “locals” should not have any kind of hold at any level. Opening up the market, e.g. the computerization of a major public service, could provide an opportunity for an industrial policy and reinforce small offers and help them to grow so as to prefigure a computer service supplier.
It could be worthwhile organizing a meeting to at least pinpoint the smallest common denominator of current projects so as to be able to launch common international calls for tender, e.g. for the three Maghreb countries, which would result in having the same applications and so mutual assistance between the three countries (with a core agenda and adaptations according to national contexts).
11. Develop knowledge on using ICT
This involves carrying out more investigation, developing or reinforcing observatories and building genuine socio-economic analysis capabilities on how to use ICT and telecommunications.
12. Develop training courses and top telecommunications schools, similar to the ENST and INT (Institut National des Télécommunications) and create or strengthen partnerships between existing schools and telecommunications training schemes in the North and South.
Refusing to blindly copy regulations in the North, promoting national champions and developing local content that can work on the high-speed market does not mean turning away from the North. On the contrary, building long-term partnerships between North and South will make it easier to reach these objectives.
1) Not curb investments, especially those linked to converging televisions, telephones and computers, but also foster innovation in a sector where technological progress will remain very strong;
2) Encourage investment from local industry, partly through the creation of technological clusters, and industry group champions;
3) Urge unification of the Maghreb. This regulation must lead to a common Euro-Mediterranean policy;
4) Remain autonomous and have a voice in the evolution of traditional operators.
The authors and the group of experts identified twelve concrete proposals leading to better regulation.
1. Create a permanent Euro-Mediterranean conference involving different stakeholders (operators, industrials, regulators, research centres, public authorities, consumer associations, etc.), based on the two existing telecom regulator networks.
Two regulator networks already exist. One is Arabic – the Arab Regulators’ Network (AREGNET), and the other is Francophone – Fratel, created in Bamako in 2003. These different regulator networks could coordinate the Euro-Mediterranean conference, which would boost their cooperation and inter-organization. The major themes of the conference could also be the two questions raised in this report:
- What should the mid- to long-term (7-12 year) industrial policy be regarding these infrastructures, particularly the future of wired networks? And what is the prospective vision for the telecommunications and ICT sector?
- What should the industrial policy be regarding service and content for ICT and multimedia? What is the long-term vision for developing uses?
2. Help build the expertise capacities of independent regulation authorities.
The objective is to exchange “good practices” and define concerns common to all operators in North and South. A common ICT policy would start with cooperation from all regulators. One of the challenges would be to ease European regulation and adapt it to the realities of southern countries.
3. Envisage new industrial partnerships between operators from North and South of the Mediterranean, apart from capital participation, in particular at the time of privatization.
Industrial partnerships are the most likely source of future national and North African champions. What forms of company “sponsorship” could be promoted that would more or less systematically encourage the mid-term emergence of national champions? How can a kind of strategic convergence be created in the sector with an objective of bringing out national champions? This could be supplemented by a territorial development policy.
This should involve encouraging industrial partnerships between North and South with long-term investments. The result would be a move away from short-term projects based on traditional sales contracts, and would foster the emergence of national and North African champions. This implies:
- that infrastructure operators would focus on a narrow industrial network, possibly with suitable regulation enabling them to offer the best tariffs;
- that in their calls for tender, partners would emphasize what they have to offer in a precise set of technical specifications established for the mid term.
4. Create a network of existing technology parks in Arab countries, connecting them to each other and to countries in the northern Mediterranean.
This networking should involve encouraging technology transfer and especially developing partnerships in Research & Development and service innovation. The latter is increasingly important in the developing network economy to ensure that the services proposed on future networks in Africa and the Middle East will be as appropriate as possible.
5. Develop a federating ICT project with an economic slant founded on innovating services, with private partners, to help unite the resources of the three countries.
This major federating project would be a means of receiving European aid, uniting private resources from the three countries and boosting partnerships, mainly between private operators, both for technological choices and clearly identified applications (with mid/long-term commitments). The project would also facilitate moving on from the existing fragmented market and competition between national markets, and would foster networks of exchanges and “horizontal” partnerships (between Maghreb countries) and “vertical” ones (North/South). The World Bank is keen to support this kind of initiative, which some Arab countries (Egypt, Jordan, Morocco and Tunisia) have (so far unsuccessfully) attempted with the “Agadir Initiative”.
6. Seek uniform domestic pricing for mobile phones, including free roaming, in countries in the South.
This already exists for landlines. Its extension to mobile lines with preferential trans-Maghreb pricing would have the effect of increasing market size, fostering connections between technology parks (or strong innovation sites), and between some transboundary zones.
7. Urge the development of common technical standards in the Maghreb
This would make it possible to unify markets, give them a bigger critical size, and foster the emergence of powerful industrial groups from the Maghreb. As far as possible, these technical standards should be consistent with those applied in Europe.
8. Consolidate community exchanges to create a transnational cultural area in the South and encourage the development of an industry of content.
The current technological innovation is Web 2.0, which brings together community exchanges. Self-production methods are set to arrive on the market. Content can be created using a mobile phone and imported to the Web. The three Maghreb countries are largely equipped with these tools. Is self-produced content likely to create a social, cultural and transnational space for the Maghreb? National and security considerations will clearly be issues, but one possibility is the creation of sites providing services for the three countries, similar to eBay and Dailymotion (with production help from the North), or perhaps the digitalization of common cultural funds.
9. Support the Maghreb’s movement towards sub-Saharan Africa already underway in Tunisia and particularly Morocco, via strong partnerships between operators from North and South.
This involves fostering a win/win “vertical association” between the North/Maghreb and sub-Saharan Africa, illustrating the so-called “orange segment” general strategy promoted by IPEMED.
10. Look for alternative types of contractual relations over the mid/long term
This involves not just taking an approach of international calls for tender, but trying to develop a system based on mid-term contracts. A policy on calls for tender that is too strict would undermine the growth rate. Yet the digital economy increasingly involves fixed costs that imply a certain guarantee of recurrent revenue. The state could possibly cover payment of both material and soft services, but over the long term. Donor agencies have their own assumptions, like are calls for tender of the right length and size? Competition that is too fragmented does not encourage the industrial consolidation required to tackle international competition. These approaches make it impossible to consolidate or capitalize. In the three Maghreb countries with strong state systems, a BOT-type formula could sometimes bring advantages, for example in niche markets. It is the government that computerizes step by step and possesses recurrent revenue. It is unacceptable that “locals” should not have any kind of hold at any level. Opening up the market, e.g. the computerization of a major public service, could provide an opportunity for an industrial policy and reinforce small offers and help them to grow so as to prefigure a computer service supplier.
It could be worthwhile organizing a meeting to at least pinpoint the smallest common denominator of current projects so as to be able to launch common international calls for tender, e.g. for the three Maghreb countries, which would result in having the same applications and so mutual assistance between the three countries (with a core agenda and adaptations according to national contexts).
11. Develop knowledge on using ICT
This involves carrying out more investigation, developing or reinforcing observatories and building genuine socio-economic analysis capabilities on how to use ICT and telecommunications.
12. Develop training courses and top telecommunications schools, similar to the ENST and INT (Institut National des Télécommunications) and create or strengthen partnerships between existing schools and telecommunications training schemes in the North and South.
Refusing to blindly copy regulations in the North, promoting national champions and developing local content that can work on the high-speed market does not mean turning away from the North. On the contrary, building long-term partnerships between North and South will make it easier to reach these objectives.
To focus on this area, a working group was set up comprising a dozen experts, researchers and economic stakeholders from the ICT sector, balanced equally between the North and South Mediterranean.
The following stakeholders and experts from the Mediterranean took part:
Pierre Beckouche, IPEMED’s scientific advisor
Amina El Fatihi, ANRT Morocco,
Laurent Gille, Lecturer at ENST Paris
Jean-Louis Guigou, IPEMED’s Delegate General
Yamina Mathlouthi, Research manager at IRMC
Mihoub Mezouaghi, economist at AFD
Pierre Musso, Lecturer at Rennes 2 University
Giuseppe Richeri, Lecturer at Lugano University
Hedi Sraieb, Tunisian consultant
Mohamed Tahar Hakimi, from ARPT, provided written remarks and contributions
The following stakeholders and experts from the Mediterranean took part:
Pierre Beckouche, IPEMED’s scientific advisor
Amina El Fatihi, ANRT Morocco,
Laurent Gille, Lecturer at ENST Paris
Jean-Louis Guigou, IPEMED’s Delegate General
Yamina Mathlouthi, Research manager at IRMC
Mihoub Mezouaghi, economist at AFD
Pierre Musso, Lecturer at Rennes 2 University
Giuseppe Richeri, Lecturer at Lugano University
Hedi Sraieb, Tunisian consultant
Mohamed Tahar Hakimi, from ARPT, provided written remarks and contributions
