INTUG - Denmark - IDF 2002

INTUG - International Telecommunications Users Group

IT- og Telestyrelsen
International Discussion Forum, Nyborg

The state of Denmark: telecommunications

18-19 October 2002

Good afternoon ladies and gentlemen

It is quite a challenge to say something profound or contentious in three minutes.

Many years ago, the BBC Television series Monty Python's Flying Circus had a parody of a television game show. Contestants had to summarise the entire works of Marcel Proust in 45 seconds. It rather defeated the purpose of Proust.

The Brussels hearing

I have to confess that a few days ago I attended the hearing on Denmark at the European Commission in Brussels. It was one of a series forming the preparation for the eighth annual report on regulatory implementation.

I attended about half the hearings which showed the remarkable diversity of telecommunications within the single market and the Union.

Some of the variablility could be written off in terms of national stereotypes, of agreeability and beligerence, of loquaiciousnness and reticence, of emotionalism and rationality. I will come back to some of those themes and the lack of pace in development of a single market in a couple of weeks time in the Den Haag for OPTA.

I think that all countries might benefit if they attended one or two hearings for other countries. They might learn how to make more progress or just to be grateful for what they have. It it is important to share best practice.

I have to commend the European Commission for holding these hearings. They are a valuable part of the the process of ensuring that the regulatory framework is properly implemented. INTUG and our national associations place great value in seeing that justice is done. We would like to record our thanks to Commissioner Liikanen and Director-General Colasanti.

In the case of Denmark, there was a general acceptance of the settled political order, in which the IT- og Telestryrelsen clearly plays a central role. Even if Denmark is at or close to the regulatory lead on a number of issues, there was very little acrimonious debate or disputation.

Yet for all that there was a positive and constructive atmosphere we have to ask how much sustainable and effective competition there is? To what extent do the big players want or need to be present on the Danish market? Or indeed on the Nordic market?

Are some of them now going to withdraw, such as Orange? And to what extent would that matter?

The broadband league tables

If one looks at traditional, rather sedate, annual statistics, Denmark looks to be well or very well placed. It is not quite at the bleeding edge of developments. Yet I wonder how far those numbers tell the full story.

The ITU in its report on the Internet for a Mobile Generation ranked Denmark 6th for fixed teledensity, 17th for mobile teledensity and 9th for Internet users. To combine these, the ITU has tried both addition and a more complicated index. Denmark scores very well.

Combined teledensities	Mobile//Internet index
Iceland Norway Sweden Luxembourg Denmark Hong Kong SAR Taiwan Switzerland Singapore United Kingdom	Hong Kong SAR Denmark Sweden Switzerland USA Norway South Korea United Kingdom Netherlands Iceland
ITU (2002) Internet for a mobile generation.

The OECD broadband league table [DSTI/ICCP/TISP(2002)3, data for 31 March 2002] has become a matter of contention. This is largely as a matter of public interest (or at least of interest to the public) related to perceptions of national image and selfworth. It does not mean that the simple teledensity measure is a correct or a complete measure.

Korea (17.16)
Canada (8.40)
Sweden (4.96)
USA (4.47)
Belgium (4.46)
Denmark (4.14)
Iceland (3.49)
Netherlands (3.00)
Austria (2.98)
Germany (2.36)

We have seen the United Kingdom become upward movers on that league table, while Australia and New Zealand have been overtaken. Flanders has dragged Wallonia kicking and screaming past the USA. Greece and Ireland sit resignedly at the bottom. It is destroyng the myth of a Digital Ireland and reinforcing the myth of OTE.

We now see new number from IT- og Telestyrelsen showing it to have overtaken Belgium, the USA and Sweden and having a sporting chance of catching Canada in 2003.

The headlong rush to follow South Korea on broadband means that we need to think about quarterly and even monthly data.

South Korea is forecasting 10,000,000 lines by the end of this year. With a population of close to 48 million, I will leave you to do the arithmetic.

If I have the numbers correct, the European Union.total will be about 9,000,000 at the same time South Korea reaches 10,000,000. Moreover, many of those lines will be at higher speeds than in Europe.

We are looking at much more dynamic phenomena than in traditional fixed telephony. There has been much faster movements than we can cope with in conventional regulatory frameworks or competition law.

We need to unpick from the raw broadband numbers the bandwidth that is being delivered. Is it 512k, 1M, 2M, 4M, 8M, 20M or morre? We need to be confident that the several operators who are going to reach all Danish homes are laying pipes of a substantial diameter.

We have to be clear in our minds what is the target. The South Korean "bumper sticker" is "20 Mbps to the home by 2008".

That sort of expansion needs considerable dynamism in the market.

An obvious question in Denmark is whether it would not, even at this late date, be beneficial to remove TDC from the cable market?

The OECD gives the example of how Telia performs much better on its cable networks here in Denmark than at home in Sweden.

We also have to have some idea that the bandwidth being delivered is being used and what it is being used for.
Senator Richard Alston, the Australian minister, dismissed Korean broadband as being used merely for pornography. Sadly, we have no comparative figures on the consumption of adult services to quantify this alleged propensity.

At the FCC hearing on 7 October, Professor Lawrence White of the Stern Business School dismissed the use of network video games as something the USA did not need. Clearly, South Korea envisages selling broadband hardware and services throughout Asia and plans to steal the games software lead from Japanese firms such as Sega and Nintendo.

As rhetoric these are easy, even cheap points to score. However, I doubt we can be so certain about the economic benefits of broadband or the absence of them. Do we know what they are? Do we have an alternative policy to pursue? Does racing South Korea make sense in terms of the Danish economy.

Local Loop Unbundling has worked by kicking the dinosaur incumbents into action, rather than in the direct way we envisaged. I do not mean the kind of dinosaur you find in Hollywood movies, they are fast moving carnivores with a taste mammalian flesh. I mean the big fat herbivores with tiny brains.

Denmark is the exception that proves the rule. ECTA was reporting 27% of DSL lines were on unbundled copper. No other country comes close.

One objective is to create a broadband market on which experiments for service delivery can be conducted. When are we going to reach video on demand? Is the competition between cable and DSL really working? Are Danish companies conducting such trials?

Wireless

It would be a brave politician or regulator who staked his or her future on wireless. We have already seen the operators lose their shirts on that gamble. It may yet end up that 3 is the total number of customers.

Propping up the operators with state aid or by delaying legal and regulatory processes will merely incur economic costs for consumers and European business in general. It will also give a weapon to the US Trade Representative, which it will use.

Denmark looks uncharacteristically average in terms of addressing the unresolved market abuses of wireless. We really must see resolutions to the dreadful problems of international mobile roaming and fixed-to-mobile termination. It is not only that they are market abuses of the worst sort, they have corrupted the mobile operators who persist in relying on income from voice telephony when we all know that this must decline in the next few years.

The operators are shameless in sending CEOs and government ministers to argue their case with NRAs and with the European Commission. They utter the threat that there will no 3G unless they are allowed to continue these abuses. It is a hollow threat, since there is no evidence of demand for 2.5G, let alone 3G services.

Mobile Number Portability (MNP) in many countries remains asomething of a joke, having been made so by the obstruction of the operators.

The following chart is an example of the price differences in termination rates. For sake of simplicity in data gathering, it is taken from the international spot market.

Figure 1 Percentage difference between mobile and fixed termination on the international spot market (October 2002)

International mobile roaming is a slightly smaller abuse, representing only 15% of the income of mobile network operators, as against 25% for termination. But it is even more blatantly abusive. DG Competition has been working hard to show that it is an instance of collective dominance, what the newspapers like to call a cartel.

It is clear that many consumer groups and several regulators are pushing for action on SMS prices.

I can think of no better way for NRAs or for the European Commission to get some positive publicity. European youth would be right behind any action. Danish teenagers would be sending congratulatory messages to jaa@itst.dk.

It would be interesting to learn about the roll-out of private and public access points for WLAN. I know that Novo Nordisk has covered its own offices, as have some universities. Accenture and other management consultancies are rolling it out.

Do we know how many hot spots there are in Denmark? When will WLAN be available in the trains and stations of DSB, at Kastrup Airport?

Are the private and the residential WLANs properly secured?

There is no evidence whatsoever of revenues for data or value-added services on GPRS, EDGE or 3G anywhere in Europe. To return to Monty Python, this parrot is deceased, it has gone to meet its maker. No amount of "regulatory flexibility" is going to cause this one to get up and walk, let alone fly.

There is a lot of talk of secondary trading. This seems to be a means by which competitiors buy up spectrum with the sole purpose of creating an insurmountable barrier to market entry for future competitors.

It would be far better if the state reclaimed the spectrum and released it to appropriate player when the market conditions would support it.

It will take more than President Chirac and Chancellor Schröder to breathe life into 3G.

We all now know that it stands for Games, Gambling and Guys or, for the less politically, correct Girls. If that is true, then the economic benefits will be very limited indeed.

We will need to watch assiduously for signs of money flowing on real data and VANs. Without that 3G will remain an undead or zombie service.

Looking at 3G, we should recall the biblical warning about the sins of the fathers being visited unto the third and the fourth generations. The mobile operators are trying to wriggle and lobby their way out of paying for their second generations sins. That means that consumers and business must pay it for them, a solution which is utterly unacceptable. The downstream economic consequences would continue to be very serious.

One possible lesson from South Korea is that it will take an integrated platform across all pipes, whether twisted pair, co-axial, fibre or wireless. This raises some very difficult regulatory and competition law problems of leverage between markets and of alliances between operators. We will also have to face up to the dominance of Microsoft and of AOL-TimeWarner, which means working with authorities in the USA and the whole politico-regulatory circus inside the Washingotn Beltway.

One ominous threat is that prices for fixed telephony may collapse as various forms of IP telephony come into play. This could reverse the swing to using mobiles. It would also re-emphasise the need for mobile network operators to tap revenues for mobile data services.

Leadership in mobile telecommunications lies in Asia. South Korea seems to be beginning to make revenue from data and VANS; wireless exports just overtook cars for the number two position. China adds millions of customers a month.

Insolvency

Many users have been confronted by rumours and then the reality of insolvency of their operators. There are few provisions to ensure that their service is maintained and that networks and numbers do not simply cease to work.

The DTI in the United Kingdom has been looking at this for some months. They are considering conditions on general authorisations to give some protection. We need this discussion at a European level to ensure that barriers to market are not created and that similar levels of protection are offered to all consumers.

Sometimes, the insolvency occurs elsewhere and you are the mercy of US or Dutch insolvency laws.

The FCC Hearing on 7 October saw a discussion of the merits of insolvency for restructuring. It even raised the spectre of strategic bankruptcy, so as not to be disadvantaged compared to competitors who have thrown off the burden of debt.

Perhaps now is the time for mobile network operators to write off their 3G losses.

Measuring policy outcomes

How do we measure success for Denmark?

With Commissioner Liikanen and Señor Colasanti in the room I will simply flag up the question of comparisons about competitiveness and the importance of telecommunications as an input to other, much more important, economic sectors. The primary role of telecommunications is as an input.

We should be looking for:

jobs being created in services

mobile
broadband

productivity gains (downstream)
competitiveness

We should also be looking for barriers to remove.

We need to find a better model. Some colleagues are using ecology as a concept, with different technologies in their respectives niches.

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Last updated 18 October 2002.