Incumbents seek mobile review

Incumbents operators are imploring national regulators to scale back regulation in local markets where mobile phones far outstrip fixed lines.

Pacific Century CyberWorks, in Hong Kong, and Bezeq, in Israel, have both recently asked their regulators to redefine the fixed line and mobile markets as just one voice market, regardless of the infrastructure. The requests mark a significant shift in the way telecoms markets are defined and regulated.

In both markets, there are significantly more mobile users than fixed lines, and the incumbents are not necessarily dominant in the mobile markets.

PCCW claims that mobile communications is now a substitute for fixed communications, and they're looking for a change in regulations to reflect this situation.

"People are using mobile more and fixed less, so we see a merger of these two markets," said a PCCW spokesman in Hong Kong.

Legal experts are following these arguments with interest, because they could set precedents for similar markets, depending on how the national regulators react. The requests indicate future changes in telecoms regulation to a more "technology neutral" approach, which is championed by the European Commission in its new regulatory framework approved last week.

The Hong Kong regulator, the Office of the Telecommunications Authority (OFTA), says PCCW has not submitted an official application, and that it is still in the dominant position in the local fixed-line market.

But the operator claims that its market share in the combined fixed and mobile market is about 40%, which would merit a reduction in the fixed-line regulations imposed.

"PCCW's dominance in the market is still strong, but in certain sectors it's losing ground," said Christopher Slaughter, an analyst at the Yankee Group, based in Hong Kong. "[PCCW] is trying to adapt to this."

In Israel, Bezeq has proposed a similar argument to PCCW's. Even though Bezeq has virtually no competition in the fixed-line market, it says it has significant competition from mobile operators for voice services.

"The real competition is between cellular and fixed lines. Voice is the market, not the infrastructure," said Ilan Biran, president and chief executive of Bezeq. Biran said there are more than five million cellular units and three million fixed lines in Israel, to serve a population of six million people.

However, the Ministry of Communications has rejected Bezeq's request. The Ministry stated after a review last month that it will not change how it regulates the mobile and fixed-line markets. The markets will remain separately regulated for the time being, according to a Ministry official.

"There is no competition in the fixed [line] market, and that really adds to the value [of Bezeq's privatization," said Joseph Braude, senior analyst, Middle East, at Pyramid Research Inc., of Cambridge, Massachussetts.

COPYRIGHT 2001 EMAP Media Ltd.
COPYRIGHT 2002 Gale Group