Universal ICT Coverage for Latin America and regulation best practices
Guillermo Solomon
Country Manager & Executive Digital Transformation Director U.S. at Beyond Technology
Science and technology have been directly responsible for dramatically reducing mortality and extreme poverty in the world, promoting knowledge, the increasingly better services for the population and increasing productivity.
Today, ICT’s are an essential part to continue that path towards a world with greater equality, justice and progress.
Having an appropriate regulatory framework that encourages the rapid adoption of new technologies in rural areas is the cornerstone.
UNIVERSAL COVERAGE IN LATIN AMERICA, REGULATION RECOMMENDATIONS
REGULATORY FRAMEWORKS
Bringing Broadband to those without coverage
The Challenges are:
1. Spectrum management with a social objective;
2. Policies need to support the deployment and adoption of technological advances
· Conduct bids WITHOUT collection purposes;
· Less taxes to achieve a rapid deployment of new networks and a lower entry barrier for the end user;
· And finally, an improvement of the rules in favor of facilitating the deployment of infrastructure (right of way and other permits).
Wireless broadband in rural areas will bring well-being and equality, fighting the digital divide by promoting education, health and productivity services of quality similar to that of cities.
Why will the Regulation be the basis for the UNIVERSAL COVERAGE? Regulation that really drives economic growth through the fast adoption of technology
The arrival of 5G and the emergence of new tools with machine learning have transformed the landscape of Information and Communication Technologies (ICT), now being the fundamental basis of all economic sectors and key to national growth.
ICTs have moved far beyond the realm of simple "communications" to become the fundamental foundation of all economic and social sectors. At the same time, new challenges arise for regulatory bodies such as data protection and privacy, blockchain, the implications of Artificial Intelligence (AI) technology and much more.
The success of ICT depends on the existence of the basic conditions for its operation. With the right networks and services in place and an enabling regulatory framework, ICTs have the potential to dramatically transform access to education, healthcare, environmental management and agriculture, opportunities for commerce and entrepreneurship, provision government services and much more.
Reaching out to connect the remaining 50% percent of the population requires new collaborative approaches, both in the government, private and civil sectors.
Collaboration is key. Governments and regulators alone will not be able to meet the challenge of connecting the next half of the world, but neither can the private sector.
Flexible, light and open to association. The regulation of the fifth generation should be flexible, light and much more open to the association.
Old models of confrontation that pitted regulators against private companies and private companies with each other should be replaced by new collaborative platforms, where all stakeholders work together to create strategies that benefit the government, companies, and what it is more important, to people.
Without conscious and consistent regulation that drives economic development, health, and education for rural areas before state revenue, Universal Coverage can never be achieved.
It is time to look for new mechanisms that allow Operators to have real business cases in rural areas so that they are motivated to make these investments, and not entirely relay on government funds, but that implies to be successful in the rest of their business, because Operator and State subsidy may always be a part of the formula for Rural Coverage, but it doesn’t necessary needs to be a financial burden.
SPECTRUM, INFRASTRUCTURE AND ECONOMY FOR A SUCCESSFUL DEPLOYMENT AND ADOPTION OF WIRELESS NETWORKS
In this article we will mainly discuss Regulation and for that I would like us to focus on 3 fundamental pillars as basis for successful deployment and adoption of new networks.
SPECTRUM
1) Sufficient spectrum must be allocated and the blocks must be contiguous so that the networks work optimally and thus better costs and therefore prices can be achieved. Top spectrum limits must be increased to have reasonable and internationally competitive quantities.
2) A spectrum balance must be ensured between the Operators so that real competition can occur.
3) Also, the 4G and 5G networks will coexist for several years, so the implementation of new technologies and much more agnostic spectrum will be needed.
Therefore it is necessary that all the Spectrum gets assigned as technologically neutral, and that means that it is the Operators who decide where and how to use it.
In other words, the spectrum should not be assigned by service or technology (Voice, Data, Video, 2G, 3G, 4G, 5G), otherwise flexibility is lost and the very concept with which the technology was developed is deviated, negatively affecting its gradual adoption and therefore, the potential business it was supposed to create.
Infrastructure.
1. When we think about Universal Coverage, we always consider low frequencies that allow better range thus coverage. But rural coverage needs to coexist with the Operator’s business and needs to make financial as well as social sense. Infrastructure cost impacts the financials of any operator, disregarding if it’s rural or urban, and most of the new spectrum assigned will need many more sites and the right of way and site installation becomes more important than ever, so the government must allow anything to become a cell site. Most of the time the permits from local governments (municipalities) completely stop the deployment with inflexible local regulation.
2. Optical Fiber for the transport network is vital for the upcoming load of data, so also the right of way for the Fiber deployment becomes fundamental. The Government must make available to the Operators their properties and public infrastructure so that they can install sites and Fiber.
3. The developers need to leave ready the ductwork for the Operators in the road accesses, the same applies to any development of roads or maintenance and major repairs in them.
Picture Source: Global 5G, Rysavy Research/5G Americas, September 2019 P. 52
Economy
1. Create a tax environment where the adoption of new technologies is encouraged instead of being considered as a luxury service. On the side of the Operators in the import of equipment and the network deployment, and for the Users with the terminals/devices.
2. Spectrum below 1 GHz is essential for rural coverage due to its propagation and penetration characteristics; currently the 700MHz has been assigned in many countries and progress is being made in the 600MHz. The cost of licensing and use for the Operator should be much less than what currently exists for 800MHz, 850MHz and 900MHz, considering that the income from rural areas will be much lower.
3. IoT it’s becoming extremely successful and therefore there will be many things connected transmitting information, so the privacy of data management should be monitored and guaranteed, but taking care not to become a bottleneck.
5G is here and the future of Universal Coverage will also be part of it. So what will happen to spectrum in the next few years?
MULTILAYER SPECTRUM
TO MEET DIFFERENT REQUIREMENTS AND INCREASE EFFICIENCY
It takes a lot of spectrum of different frequencies to meet the current requirements, and much more to those who come with 5G. Efficiency should increase and Migration to better technologies should be promoted, because it will have a tremendous impact in favor of the economy of countries and people. A multi-layered spectrum approach is required to address a wide range of scenarios and usage requirements:
Source: The Mobile Economy, Latin America and the Caribbean 2018. GSMA Intelligence. P. 51
The "Broad-Rural coverage layer" exploits the spectrum below 2 GHz (900, 850, 700 and 600MHz) that provides wide and deep indoor coverage.
In this band, Brazil has earmarked only 200 MHz (3.4-3.6 GHz). Considering that approximately 80/100 MHz per operator will be needed in the mid bands, the country will need to identify ways to extend this range and bring it closer to 3.3-3.8 GHz in order to maximize the full potential of 5G.
· The "suburban coverage layer" exploits lower-middle frequencies, smaller in scope than the previous ones, but with greater bandwidth (1800, 1900 MHz and AWS).
· The "urban coverage layer" will typically use medium-high bands for greater capacity in areas of higher concentration (2.5, 2.6GHz and C band).
· The "dense cover layer" is the one that will explode the millimeter bands with its little reach and penetration, but great bandwidth, based on a spectrum higher than 6 GHz (24.25-29.5 and 37-43.5 GHz).
Most LTE implementations around the world use only five bands. The two most popular of these, the AWS bands in the Americas and the 1800 MHz band elsewhere, were previously used for 3G and 2G services, respectively. 1900 MHz, originally a 2G band in the Americas, also has extensive use of LTE today.
Regulators have been working to make additional frequencies available taking into account 4G services. Of these, the 2.6 GHz band has been widely deployed in all regions for capacity, while the 800 MHz band has been used extensively for coverage.
Beyond these central bands, spectrum managers seek to alleviate network congestion by choosing from a menu of potential bands, depending on the particular circumstances. Of these, the 450 MHz, 850 MHz, 900 MHz, and the 2.1 GHz bands can be re-farmed from 2G / 3G services, while some regulators are making available the 2.3 GHz bands.
In recent years, regulators have identified several bands of "low" (<1 GHz) and "medium" (1 - 6 GHz) for 5G services. These bands are likely to see the provisional use of 4G until the 5G equipment is widely available. The low bands identified for 5G are the 600 MHz and 700 MHz bands. In the middle band, regulators are exploring the possibility of offering 3.3 - 3.8 GHz and 3.7 – 4.2 GHz bands.
SPECTRUM PRICES
Spectrum efficiency has increased 100X: 2G è 3G è 4G è 5G: The cost per bit has dropped accordingly
It is an important point for pricing the spectrum.
If the increase in data has grown exponentially, the efficiency of the spectrum must go in parallel so that the business case is feasible.
When we refer to spectrum efficiency, I refer to the cost per Bit transmitted. 5G is at least 8 times MORE efficient than 4G.
Source: National ICT Plan – Scanlan P. and Morrison D. CTO and Director of Transformation. Huawei. March, 2019
There are technologies that make the spectrum more efficient, such as Huawei's Cloud Air, which allows us to do a dynamic re-farming of the spectrum between technologies. It also allows us to coordinate the frequencies in FDD and TDD technology, (that is, the current frequencies, with the frequencies that now come from the C band).
What these technology allows, is that the frequencies can be combined to give greater coverage and penetration in buildings.
This is the challenge of spectrum prices
IF A SPECTRUM HAS AN ENTRY PRICE AND THEN AN ANNUAL PRICE, ABOVE WHAT IS NECESSARY, IT WILL INHIBIT THE DEPLOYMENT OF TECHNOLOGY AND THE DEVELOPMENT OF MARKETS, ESPECIALLY IN RURAL AREAS.
If we consider in terms of spectrum, which are the current problems in developing economies, we can mainly mention:
Source: Spectrum pricing in developing countries Evidence to support better and more affordable mobile services, GSMA. July 2019
. the artificial shortage of spectrum,
· reserve prices and high annual license fees,
· short license terms,
· obligations of inadequate coverage and uncertainty about their renovations, and
· new assignations
Countries that artificially inflate the prices of spectrum impair access to broadband and their digital economies.
Public policy decisions that distort the spectrum awards through purely collection objectives, discourage their efficient use and affect mainly the final consumer, and without realizing it, they reduce years of progress to the economy of their countries.
INCENTIVAZING NETWORK INVESTMENT IS A KEY ENABLER
Source: NERA Economic Consulting with data from the OpenSignal database, GSMA Intelligence 2019 and Telegeography GlobalComms report 2018
a) Reserve prices and moderate annual charges must be established to allow the development of the industry. In other words, the objective should be, for example, Coverage and Convergence, not the maximum income.
b) Licensing the spectrum as soon as it is needed.
c) Avoid measures that increase risks for operators, in other words, give security to investments.
d) Publish long-term plans to award spectrum, marking the technological route well and that these plans give priority to welfare and economic growth instead of revenues for the State.
Wireless score by country
Source: NERA Economic Consulting. Impact of excessive spectrum prices. 3rd Annual Asia Pacific Spectrum Management Conference Bangkok, 2 May 2017
Here we can see the Score that Nera Economic Consulting gives us about LATAM countries. The Score is calculated as Coverage (%) x Subscriber 4G (%) x Average speed (Mbps). Investment in the Network is key to providing quality mobile broadband services with adequate coverage. The relationship between spectrum costs and the wireless score in LATAM
There is a correlation between the lowest spectrum spending of 2007-2017 and the highest wireless scores. These results reflect the findings of the NERA global report and support the hypothesis in the academic literature that high input costs can suppress investment. They contradict the more simplistic hypothesis that licensing costs do not affect investment because they are irrecoverable costs.
Although the cost of the spectrum is one of a series of factors that cause differences between the countries in the investment of the network, the results reinforce the previous conclusion that they are an important factor.
The relationship between the price of data and the total spectrum biding in latam
Source: NERA Economic Consulting. Impact of excessive spectrum prices. 3rd Annual Asia Pacific Spectrum Management Conference Bangkok, 2 May 2017.
Above we see a graph with the relationship between the prices of the data against the total cost of the spectrum. Prices are adjusted to PPP exchanges rates, inflation and the duration of a 15 year license, and include annual fees.
There is a correlation between lower spectrum costs and lower consumer prices for data services. These results support the hypothesis that high input costs can suppress incentives for price competition.
This suggests that the high prices of the spectrum can be transmitted partly to consumers through higher prices for mobile data.
High spectrum prices not only impede the development of the mobile market, but also prevent societies from taking full advantage of the potential of mobile technology to accelerate social and economic development.
Fast deployment and adoption of new technologies are directly related to pricing. So having the right prices of spectrum nowhere is a great concern as in addition to contributing to economic growth, mobile connectivity provides a wide range of social and economic benefits, these include the promotion of digital inclusion and in rural areas, support for the provision of essential services and key development objectives, such as poverty eradication, medical care, education, financial services and of course, boosting productivity.
Therefore, governments should prioritize these objectives over short-term objectives related to maximizing spectrum revenues.
COVID-19 IMPACTS THE DEVELOPMENT OF UNIVERSAL COVERAGE
SUPPORT OPERATORS TARGETING RURAL AREAS
The crisis has triggered a greater disaggregation of the labor force and seen a larger share of economic activity conducted from a study or a dining room. With remote working set to be the norm for office workers for some time, policymakers must maintain focus on extending connectivity beyond urban centers.
Networks have weathered the storm pretty well, but incentivizing private sector investment will be paramount. Policymakers must embrace ambitious strategies to expand high-speed broadband services to the underserved by addressing bottlenecks to capex and rapidly disbursing public funding without encroaching on state aid rules. These challenges may bolster the case for network sharing, such as the UK’s Shared Rural Network, to create synergies and promote mobile broadband investment in the most rural geographies, while moderating competition concerns.
Ofcom has announced the base prices of the next spectrum auctions, in the 700 MHz and 3.5 GHz bands. In addition, to highlight a lower value than other processes, it has decided not to include coverage obligations.
As for mobile operators, they have agreed to share the network and spectrum to cover areas without access or with limited access with at least LTE.
The mobile operators have agreed to their 900 MHz and/or 1800 MHz licenses being varied to give effect to these commitments in the form of new coverage obligations. Each operator has also agreed to meet certain coverage thresholds in each UK nation after four and six years, and provide a certain extent of new coverage in areas where roads and premises are located. https://www.mobileuk.org/news/shared-rural-network-new-explainer-videos-published
FOCUS ON UNSERVED COMMUNITIES
Connectivity is a foundational aspect of modern life, with an importance that stretches beyond entertainment or social media. Policymakers should remain conscious for the scope of this crisis to exacerbate the inequalities between those who are connected and those who are not.
Millions of people either live beyond the reach of mobile broadband networks (3G or higher) or they are covered but do not have an active connection. Consequently, these individuals are facing Covid-19 without the information channels and communications tools that many in developed markets have only just come to appreciate. Addressing coverage and usage gaps by guaranteeing service availability must be at the top of the regulatory agenda. Hastening reductions in the digital divide will help markets rebuild and new businesses thrive, supporting future economic repair and value creation.
CITEL AND OAS COORDINATED EFFORTS
Given the importance of communications and with the aim of promoting debate, cooperation and regional coordination in the field of telecommunications that facilitate the fight against COVID-19, the Secretariat of the Inter-American Telecommunication Commission - CITEL-, a body specialized in Information and Communication Technologies / Telecommunications - ICT - of the Organization of American States - OAS - has joined the actions that the OAS has undertaken to stop the spread of the COVID-19 virus.
The work that the Member States and Associate Members are doing to reduce and control this pandemic, including:
1. Streamline actions to encourage the expansion of Internet coverage and other telecommunications services, especially in areas that do not have access: These actions include the expeditious granting of permits for the temporary use of spectrum and for the deployment of infrastructure with the in order to expand the coverage of networks. As well as allowing the agile entry of telecommunications equipment through the eventual review of the approval and import processes.
2. Prioritize the connectivity of strategic points in the response to the COVID-19 pandemic: That is, the prioritization of projects aimed at connecting strategic institutions such as hospitals, health centers and food collection centers, as well as key infrastructures such as example ports, airports, highways, power plants and borders.
3. Promote actions to encourage the rational use of the internet: These actions include strategies for the disclosure of habits of rational use of the internet and constant monitoring of the evolution of network traffic to determine additional actions aimed at guaranteeing the correct provision of the service. These actions are more effective if the various actors in the industry are involved.
4. Give priority to the tasks of support, operation, maintenance and deployment of additional capacity of telecommunications networks: This includes allowing the circulation of technical personnel in charge of the networks and coordinated work with public service companies and other authorities to serve possible interruptions in service.
5. Continue the maintenance and surveillance of both physical and virtual telecommunications infrastructure: Avoid that the infrastructure of telecommunications services is compromised in these times where they are essential.
SEVEN KEY CONSIDERATIONS FOR SPECTRUM
1. 2G and 3G must migrate to 4G and eventually 5G, so license renewals should promote it.
2. 5G requires spectrum in low, medium, and high bands.
3. The Operator revenue per MHz decreased and will decrease further, making rural coverage investment even harder.
4. Limited financial resources to build Rural and 5G Networks.
5. If it is an auction, the regulator must ensure that spectrum prices do not jeopardize the 4G and 5G development objective.
6. At less $ paid in spectrum, more success will have a country in the Universal Coverage and the 5G race.
7. If it is an administrative assignment, the regulator must establish prices that guarantee the investment in Universal Coverage and 5G in a timely manner.
Relevant considerations for auctions or spectrum assignments
When a new band is released, the entire spectrum in that band must be available at the same time because the new technologies and therefore the current requirements that come with them, demand much more bandwidth.
When few lots are offered or these lots are divided into portions smaller than 20MHz for eLTE, the demand will exceed the supply. Small amounts of spectrum trigger implementation costs. It is not convenient at all.
Also retaining the spectrum by the Government, the only thing that causes is to increase the operating costs of licensees and this results in higher prices for the end user.
Subtracting small amounts of spectrum is inefficient:
? When few lots are offered, the demand exceeds the supply. High auction prices will reduce investment.
? Small amounts of spectrum increase implementation costs and prevent operators from delivering true Mobile Broad Band (MBB) services.
? eLTE require an allocation ideally 2x20MHz of contiguous spectrum per operator.
Retaining the spectrum will also increase operator’s cost and, therefore, retail prices.
? With MBB, capacity is a problem; more spectrum reduces the CAPEX and OPEX of the site.
Ensuring a minimum block size of 2x15MHz is key to an efficient deployment of LTE
? Implementing LTE at 2x15MHz costs around US $3,900 per MHz; deploying only 2x5MHz costs $9,900 US per MHz.
? The maximum downlink speed at 15MHz is 112 Mbps compared to only 35 Mbps at 5MHz.
Potential solutions:
? Assign sufficiently wide bands to individual operators.
? Allow spectrum sharing so that operators that have, say 2x5MHz each, can deploy together in 2x10MHz.
? Allow the exchange or commercialization of the spectrum.
COUNTRIES IN LATAM INCENTIVIZING UNIVERSAL COVERAGE
CHILE SIGNS BILL TO INCREASE COVERAGE OF TELEPHONY AND INTERNET SERVICES IN RURAL AREAS
Last August, 2019 the President of Chile, Sebastián Pi?era, signed the draft of the National Automatic Roaming Law (RAN), seeking an improvement in connectivity throughout the country. The initiative establishes as an obligation for telecommunications companies to allow the use of their networks, with their respective remuneration, without this implying an additional cost for people.
The lack or deficiency of connectivity in rural or isolated areas means that users resort to more than one mobile service to be able to connect to the networks wherever they are. To address this deficit, the project will allow users without connectivity in those areas, by law, to use the available networks of other concessionaires; Companies must pay each other for the services provided.
The Undersecretary of Telecommunications, Pamela Gidi, stated that “with this project, we will generate more competition and eliminate the fact that users have two or three chips to be able to call or connect to the Internet”
According to the project, telecommunications companies must formulate and update their wholesale offers, together with their technical, economic, operational and commercial conditions, under which they will give access to their infrastructure. Bids must have the approval of the Vice-Ministry for Telecommunications (Subtel).
ECUADOR ISSUES NEW SPECTRUM POLICY TO INCENTIVIZE INFRASTRUCTURE DEPLOYMENT
Arcotel will apply differentiated regulations for the payment of rights for the use of spectrum in the upcoming 700 MHz and 2.5 GHz auctions, taking into account coverage in rural and border areas.
The 700 MHz and 2.5 GHz bands will be tendered towards the end of this year under this public policy vision, so the process should prioritize the expansion of broadband coverage, the affordability of services and the adaptation of spectrum rates. To connect to rural and marginalized areas of the country.
After this contest, the Telecommunications Regulation and Control Agency (Arcotel) will tend to assign and use the 3.5 GHz spectrum for 5G. The Mintel and the regulator will draw up a roadmap to promote the development of mobile technologies in the country and it will be appreciated to make other bands available for this type of service.
In addition, the Ecuadorian regulator will analyze the feasibility of removing the current spectrum caps and, if necessary, determine a dynamic mechanism to set the amount of spectrum that operators may have.
THE COLOMBIA 700MHZ AUCTION CASE TO ACHIEVE UNIVERSAL COVERAGE
The Colombian Government understood the reasons behind Market Stagnation and that universal coverage would generate economic and social well-being.
What did the Colombian government do differently?
Operators in Colombia invested in their LTE networks in 2012 and 2013, but just as they completed their deployment, the government changed its regulation by prohibiting postpaid contracts with a mandatory term. This made it difficult for end customers to buy subsidized and financed LTE terminals.
Additionally, they regulated that smartphones of less than $150 dollars would not have a value added tax, so 3G was encouraged instead of LTE.
Not only that, an additional 4% special tax was also imposed on data packages that exceeded $ 25 dollars a month.
Also there was a high spectrum licensing cost that caused high operating costs and a short licensing period (just 10 years) that wouldn’t help the Return of Investment (ROI).
In the case of Rural Coverage things got worse as there was no incentive and no Business Case to make a reasonable ROI.
All this caused the market to stagnate. The money from postpaid customers who were the highest in ARPU did not flow to the LTE network and operators stopped investing. So they settled for what there was, and given that they had a more or less balanced market share (between 25 and 35% of the market), they stayed there, without competing strongly to gain new customers.
THE GOVERNMENT UDERSTOOD THE ROOT OF THE PROBLEMS
In 2018 the new government understood that in order to turn the market stagnation around, it had to make strategic changes regarding spectrum regulation and licensing.
They also accepted that the real value of covering Rural Areas was to achieve social well-being and provide with quality services and better opportunities to the people of such areas instead of generating revenue for government coffers.
CHANGES IN REGULATION AND INNOVATIVE AUCTION
- So they planned an auction for the remaining spectrum of 1900MHz, 2.6 MHz and the whole 700MHz spectrum.
- They increased Spectrum Acquisition Cap Limits (Jan 2018): For Lower 1GHz Band 30 MHz -> 45 MHz and for Higher 1GHz Band 85MHz -> 90 MHz
- The also increased the use of the spectrum license from 10 to 20 years (2019), with the purpose that operators who acquire APT700 have more time to achieve their ROI. This in turn benefits the licensing of the other frequencies, making the investment more appealing.
The APT700 was meant to be used for Universal Coverage and had the following characteristics:
· Band Total: 90MHz, for Auction: 90MHz. 703MHz to 748MHz pared 758 to 803MHz
· Total Price was divided: 40% in money minimum and 60% in deployment obligations (deployment investment).
The auction was time descending, multiple rounds (max 9 for 20MHz and max 2 for 10MHz) and based on coverage
The total of new towns to be covered was 5,766 and each operator would generate the strategy in which and how many populations would they covered, and from there the price estimate was generated, where finally a score based on the previous formula was used.
The payment was divided in 17 years: 10% the 1st year followed by 5% from year 2 to year 15 and ending payments of 10% for the remaining 2 years.
Of the 700 MHz band, 80 of the 90 MHz available were auctioned, representing 62% of the capacity and 80% of the revenue projected in the auction.
Three established operators plus a new participant participated in the process: Claro (América Móvil), Movistar (Telefónica), Tigo (Millicom) and "Socios", of Novator (Wom controller in Chile).
48% of the value of the 700 MHz band corresponded to the amounts of the offers to bring coverage to specific localities and this is explained from the investment component for social coverage. These amounts correspond to 39% of the value of the entire spectrum auctioned in the process.
Tigo must attend 1,636 locations as part of its coverage offer; Claro 1,348 locations and 674 partners.
MOTIVATING A SMOOTH RIGHT OF WAY
The right of way is a serious problem since the legislation at the constitutional level empowers the Municipalities to issue the rules in each locality. This hinders the deployment of fixed and wireless networks, but the option of changing the Constitution is a very difficult matter considering that the Executive Branch does not have a majority in Congress.
An excellent idea to turn this problem around was that the government has a special budget for works and support for ICT, and established its preferential allocation to those Municipalities that facilitate deployments in Urban, Sub-urban and Rural areas, thus motivating easy implementation.
GLOBAL HARMONIZATION, TECHNOLOGICAL NEUTRALITY AND SERVICES
What is needed? Standardize
Globally harmonized spectrum enables economies of scale and facilitates cross-border coordination and roaming for end users. Regulators and the industry should take immediate action towards the following objectives:
1) Technology, to achieve economies of scale suitable for the success of Universal Coverage eLTE and 5G. There is already a widespread trend in this regard.
2) A globally harmonized spectrum framework will facilitate cross-border coordination and roaming for end users. Spectrum release schedules and consistent harmonization measures are key factors for the success of eLTE Universal Coverage and 5G.
SOURCE: The Need for Globally Harmonized 5G Spectrum. Public Policy. 5G Spectrum. Huawei New Zeland. January 2018.
Licenses that offer exclusive use of nationally available bandwidth remain the primary and preferred licensing model for accessing the spectrum, providing security for investments, predictable network performance and quality for end-user connectivity.
3) And of course, the development of Applications to fight inequality and bring education, health and productivity to underserved areas, as well as new services and productivity that will as never seen before.
Challenges for harmonized spectrum
What are the Challenges?
The globally harmonized spectrum framework is being developed with the participation of different qualified entities, Institutions and Associations, which are agreeing for this to happen.
As we have already seen, eLTE or 4.5G is fundamental to fight the digital divide in Rural Areas and also to start offering services that will be common, optimized and maximized with 5G.
The main challenges are:
1o The capacity and management of the Resources, which is done through public policies, technology, sufficient investment and good management of spectrum efficiency.
2o The management of the life cycle of the technologies, the costs, the services, the balance of the spectrum and the fast migrations towards new technologies and more and better services. There should also be subsidies and economic incentives, such as tax incentives, so that users can acquire terminals to adopt these new technologies.
3o The ordered, planned and efficient evolution of the architecture of the Infrastructure, with support of policies that facilitate the deployment and right of way at the local Government level (Municipality), as well as networks that tend more to virtualization, optimization of operations, until reaching Artificial Intelligence. All this will lower the costs of Operation and therefore of the services.
8 MAIN ACTIONS TO BE TAKEN:
Action # 1: Complementary Coverage 4.5G in capacity layers
The first action to be taken is to consider for the new architecture, the multilayers of spectrum and to implement the density of suitable sites and cells, depending on the possible demands of traffic by density of population considering that all of them could work with eLTE through Solutions like Spectrum Sharing Technology that dynamically transfer the spectrum from one technology to the other depending on the technology traffic demand.
Action # 2: Application of Key SCALABILITY Technologies to evolve to 4.5G and leave the sites ready for 5G;
Action # 3: Prepare the aggregation of carriers in order to make effective the bandwidth of the multilayer;
Action #4 assign the 700MHZ band with neutral technology and at least 15 MHz or even better, 20 MHz per block;
Action # 5 scale the network to 256QAM;
Action # 6 use Spectrum Sharing Technology to optimize the use of the spectrum and make smooth migration of users;
Action # 7 Scale the Bands currently assigned in LTE to MIMO 8T8R and assign the 3.5GHz band for a TDD deployment in LTE of 32T32R MIMO and leave it ready for 5G;
Action # 8 Use a residual part of 850 MHZ for NB IOT and start to promote intelligent services such as metering, public lighting, agriculture, logistics, transport, health, retail, etc.
“But the technology will never be implemented and will never provide the favorable social impact that implies the integration of a country into the digital economy, until there is an adequate public policy”.
WHAT SHOULD INCLUDE A PUBLIC POLICY AIMED AT FULLY INTEGRATING A COUNTRY TO THE DIGITAL ECONOMY?
The regulatory frameworks for the available mobile communication bands should be reviewed and new frameworks should be established for the deployment of Rural Coverage and 5G-NR in new frequency bands. These frameworks will facilitate upgrades, deployment and adoption of new technology by eliminating any potential barrier.
1. Regulatory frameworks should embrace the principle of technology and service neutrality we have been referring to, for the smooth introduction of the latest technologies and services available in existing and new bands that will be available for Rural Areas and for 5G in Urban Areas.
· Provisions to support duplex flexibility should also be considered as the next step that allows a more flexible use of the spectrum resource.
2. Redesign policy frameworks and regulation.
· It is important to have public policy frameworks that are flexible and aim to provide certainty and predictability, both for companies to continue investing in networks, and for users to access the benefits of quality connectivity. The idea is to promote digital development by stimulating the market based on incentives and with a social, economic and technological vision of the future.
· The extension of licenses (which should ideally be up to 30 years) need to include incentives to upgrade to eLTE and 5G, especially if they include deployment to cover Rural Areas.
· Creating a convergent authority and unification of funds for ICT access and service (in some countries there are still different authorities for Telecommunications and Broadcasting).
· Seek to maximize the benefits in terms of economic growth and dynamism of the economy and digital inclusion, which are medium-term benefits, instead of the short-term collection of spectrum auctions.
3. Increase affordability with tax reforms.
· The tax policy should have the objective of reducing the digital dividend and not obtaining money in the short term.
· The service and technology should not suffer from high taxes, neither for the end user nor for the Operator.
Examples:
Mexico, access to ICT and the Internet is considered a constitutional right, which is great, but it pays taxes as a “luxury service”, which is not. This tax is called IEPS (Special Tax on Production and Services), and should be eliminated from commodities such as Telecommunications.
According to a study by Deloitte for GSMA, if IEPS were eliminated, Mexico could add 1.5 million new users who do not have the service today. This would help increase the country's GDP by $ 4.5 billion.
Source: Digital inclusion and mobile sector taxation in Mexico. Tax reform in Mexico: Releasing the potential of the digital inclusion to encourage economic and social development. GSMA/Deloitte. 2015.
In a similar case, in Colombia, the tax regulation is limiting the adoption of new technologies; there is a 4% tax on Data packages that exceed a $25US monthly rate, and smart phones of less than $150US would not pay a value added tax, but then that implies only 3G devices. Also a GSMA study from April 2017 says that removing taxes on Voice services would connect more than 310 thousand Colombians in 5 years.
Argentina also made a tax reform in 2017 in which it lowered the internal tax from 17% to 10%, however, increased the internal tax on mobile services and also increased the value of annual taxes for spectrum use. That is, on the one hand, it lowers the user cost, but it increases the Operators’, which in any case translates into price increases as the Operating Cost goes up.
2. Have enough spectrum for the Universal Coverage.
· Migration of 800MHz, 850MHz, 900MHz to eLTE and the licensing of 600MHz and 700MHz will dramatically change the economic and social opportunities of Rural Areas.
3. Strengthen Digital Infrastructure
· It is key to eliminate the barriers that prevent the deployment of infrastructure.
The Development Bank of Latin America says that to meet the demand for broadband in Colombia, operators should be able to deploy 19 thousand additional sites, in the case of
Mexico, it will be necessary to deploy 40 thousand more base stations to cover the demand of users by 2020.
Source: Telecommunications Governance: Toward the Digital Economy. Author Prats Cabrera, Joan Orio; Puig Gabarró, Pau. December 2017
· The development of infrastructure is limited by one of the main regulatory barriers in the world: In most municipalities, the rules for the right of way are so rigid that the implementation of new sites becomes impossible, and in turn, it becomes a breeding ground for corruption.
· It is necessary to simplify and standardize procedures and requirements for the deployment of infrastructure. For operators this will result in lower deployment costs, and will allow them to cover areas that are currently unattended.
Reducing bureaucracy at local government levels
One way to strengthen the digital infrastructure is to reduce the bureaucracy at local government levels.
· All unproven local bans must be removed for the deployment of wireless networks. This can be accomplished through standards planning.
· Having a national or federal health and safety regulation with an expedited process for obtaining permits for network deployment.
· Establish national standards for access to land, government and private buildings, utility poles, etc. This is where the government can combat exclusivity of access which is a typical monopolistic practice in the industry, where, for example, in a new residential or office development, an Operator offers to install the pipelines at their cost with the prerogative of obtaining permanent exclusivity in the last mile.
· Change penalties for coverage obligations as Brazil initiative:
Anatel – Brazil’s National Telecommunications Agency – must feel that it has found a new incentive for operators to cover more of the nation. The Brazilian regulator apparently announced recently that it has approved a plan to convert financial penalties imposed on domestic operators into 4G coverage expansion obligations.
When all of these is achieved, deployments are expedited and CAPEX and OPEX decrease dramatically, which results in more competitive prices for the end user and a faster arrival of services.
REGULATIONS FOR INDUSTRY CONVERGENCE, DIGITAL INCLUSION AND INVESTMENT PROFITABILITY
The regulations should support the convergence of the industry in the short and long term, promote digital inclusion and investment profitability.
IMT networks are providing the platform to serve a growing number of vertical industries. The regulations should not add restrictions to the introduction of such platforms, for example: NB-IoT, Cellular vehicle-to-everything (C-V2X), IMT for Trunking and Public Protection and Distress Operations (PPDR), etc.
Regulators should also consider the possibility of facilitating future strategies to support the convergence between TV transmission networks and IMT systems.
The future use of the UHF spectrum will be an important theme at the World Radio communication Conference (WRC-23), with key discussions that started at WRC-19.
One of the main objectives of 5G is to provide wireless connectivity to vertical industries: more than improving the performance of previous generations of mobile technologies. This applications and services are starting already with eLTE and they will potentiate when they migrate to 5G, so their success will depend, therefore, on a positive collaboration between the telecommunications industry and a wide range of potential industrial users of this new networks, which go beyond the telecommunications sector.
RECOMMENDATIONS OF BEST PRACTICES IN PUBLIC POLICIES
Institutional design
1. To have a regulatory authority independent of the political cycles, acting on a framework of convergence and integrating the entire IT value chain.
2. Prefer regulatory frameworks based on general principles, with ex post interventions when necessary, especially not to restrict innovation with restrictive regulations.
3. Consult good international practices to understand the risks and opportunities of public policy decisions.
4. Carry out public consultations to nurture the processes of the experiences of the different linked interest groups.
5. Locate the national digital agenda as a transverse axis of a State policy. Clearly define the powers and roles, seeking cooperation for the execution of policies.
TAX policy
1. Consider tax exemptions as incentives for the installation of new infrastructure (including upgrades in current infrastructure).
2. Enable demand subsidies for Rural Areas coverage as well as the implementation of services related to education, health and productivity.
3. Tax exemptions, especially in activities that will boost economic growth, education and health services (such as migration to eLTE and 5G considering technologies such as IoT, AI, Robotics and Cloud).
4. Eliminate specific taxes that distort access to devices and wireless services.
5. Transform the use of Universal Access / Service Funds to connectivity projects Rural Areas or any regarding the non-connected.
6. Promote public-private partnerships for connectivity projects.
7. Encourage investments, through a tax system with broad, simple and transparent bases, with a stable and predictable design that generates less costs for companies and creates greater certainty for investments.
Spectrum
1. Participate in the instances of international dialogue on the bands that will be necessary for the future of communications, otherwise expedite and successful deployment of new technologies as well as reaching economy of scales for them will be jeopardize.
2. According to international standards and agreements, plan the granting of spectrum, understanding its essence as an enabler of economic growth and social equality, and not with a purpose of generating government revenue.
3. Create a sustainable plan for future spectrum with periodic goals. Roadmaps are essential to ensure that there is sufficient spectrum available to meet the growing demand from users.
4. Periodically review roadmaps - such as documents in constant evolution, the available bands and their time line.
5. Implement a clear and timely process for the renewal of spectrum licenses always with the vision of incentivizing the network upgrade to newer technologies, especially 4.5G and 5G, as well as incentivizing Broad Band (eLTE preferred) Rural Coverage in the lower 1GHz.
Digital TRUST
1. Plan a strategic vision of education in digital skills and digital literacy, both for trainers and for children and young people.
2. Promote the principle of transparency towards consumers, which will allow users to compare available offers, in order to stimulate competition.
3. Have a horizontal and neutral privacy policy framework with the aim of strengthening digital trust.
4. Encourage the creation of relevant local content, especially to enhance the productivity of local communities.
Digital infrastructure
1. The deployment of rural infrastructure must be implemented not with the objective of providing coverage, but with the objective of bringing better health and education services to marginalized areas, as well as to bring opportunities for economic growth and employment. The government should play a driving role, but also as a client for internet services in rural schools, clinics and government offices, so that business models are more attractive to operators.
Bundled model proposed for trials by Huawei to MINTic Colombia, 2019.
2. Incorporate within the deployment projection the potential density needed for 5G.
3. Enable public buildings, roads and general infrastructure for the installation of telecommunications infrastructure.
4. Create incentives to accelerate migration to new technologies.
5. Promote ex-post regulation with frameworks of general principles, to allow innovation to bring new high-traffic services, urban, rural and massive.
6. Coordinate the agendas of the policy makers of the ICT sector with other sectors, which will enable the development of the different verticals for 5G.
Summary of global best practices to promote investment and competition
And finally, these are the 9 main regulatory policies that have the greatest impact to achieve connectivity quickly and extensively. These in turn drives the Economy.
Source: National ICT Plan – Scanlan P. and Morrison D. CTO and Director of Transformation. Huawei. March, 2019
1. It is necessary to install fiber in all possible places as it is the fundamental basis for the transport of eLTE and especially 5G.
2. All the necessary spectrum must be assigned in a timely manner and with neutral technology.
3. It is necessary to foresee the construction of pipelines for Fiber in everything that is built or maintained, whether roads or buildings.
4. Make utility poles available for operators for the eLTE and 5G deployments.
5. Guarantee the right of way through a homogeneous national legislation and not by municipality, with fast approvals for the installation of sites.
6. Put an import rate of ZERO to infrastructure equipment and terminals, in order to lower the costs of the service and the devices, promoting their rapid adoption.
7. Promote financing for infrastructure and devices.
8. Deploy Narrowband Internet of Things to drive a standardized ecosystem by driving new services to vertical markets.
9. Encourage the migration of customers who are in 2 or 3G to 4G and later to 5G; as well as things connected in other old-fashioned technologies, to the Narrow Band of the Internet of Things.
Bibliography
· Forum of Artificial Intelligence and IoT in Smart Cities, Buenos Aires, Argentina. May 30, 2018
· ITU World Telecommunication /ICT Indicators database 2018, 22nd edition, January 2019
· The Mobile Economy, Latin America and the Caribbean 2018. GSMA Intelligence. P. 9 – 19, 38, 39, 47, 51.
· Tap into New Growth with Intelligent Connectivity, Mapping your transformation into a digital economy with GCI 2018. Huawei global connectivity index 2018. P. 17, 50 – 54.
· 5G Americas, 3GPP specification 5G NR NSA and Wireless 20/20, December 2018.
· Global 5g, Rysavy research/5g Americas, September 2019
· NERA Economic Consulting. Impact of excessive spectrum prices. 3rd Annual Asia Pacific Spectrum Management Conference Bangkok, 2 May 2017
· NERA Economic Consulting with data from the OpenSignal database, GSMA Intelligence 2018 and Telegeography GlobalComms report.
· CIU report - 2Q 2018
· Digital inclusion and mobile sector taxation in Mexico. Tax reform in Mexico: Releasing the potential of the digital inclusion to encourage economic and social development. GSMA/Deloitte. 2015.
· Spectrum pricing in developing countries Evidence to support better and more affordable mobile services, GSMA. July 2018.
· Spectrum pricing in developing countries. Evidence to support better and more affordable mobile services, GSMA. July 2018
· Cost Analysis of 5th Generation Technology. 27th International Conference on Computer Applications in Industry and Engineering, Volume: New Orleans, Louisiana. October 2014.
· Telecommunications Governance: Toward the Digital Economy. Prats Cabrera, Joan Oriol; Puig Gabarró, Pau. December, 2017.
· National ICT Plan – Scanlan P. and Morrison D. CTO and Director of Transformation. Huawei. March, 2019
· www.Tradingeconomics.com, several LATAM Countries.
· www.Mediatelecom.com - Brazil, Mexico and Chile leading assigned spectrum in LATAM 2018
· www.mobileconnectivityindex.com/#year=2017
· www.huawei.com/br/about-huawei/public-policy/5g-spectrum/need-for-globally-harmonised-5g-spectrum
About the author
? Carlos Guillermo Solomon. Mr Solomon holds degrees in Law and Marketing from the Autonomous Institute of Technology in Mexico; and MBA from the same Institution; a CRM Executive Degree from the University of California at Berkeley and an Artificial Intelligence for Business Exec. Degree from the Massachusetts Institute of Technology (MIT).
He has had CxO level positions in the telecom industry during his 27 years of experience in companies such as Iusacell/Verizon, Unefon, Nera and Globalstar.
He joined Huawei in 2015 as head of the Business & Network Consulting Department for Latin America and now he works for the Global Chief Transformation Officer as Executive Director of Latin America.
His previous experience in ICT covers the areas of Commercial Operations, Regulatory Analysis and Business Strategy in New Technologies, with special emphasis on Artificial Intelligence, IoT, 5G, FTTX and Video.