1

Nathan KwasamNathan Kwasam

Lecturer Lecturer Information & Communication ScienceInformation & Communication ScienceThe University of Papua New GuineaThe University of Papua New Guinea

The Politics of Mobile The Politics of Mobile Phone Competition in Phone Competition in Papua New GuineaPapua New Guinea

ØØ ICT Policies & Laws can either stall or enable ICT Policies & Laws can either stall or enable real and/or open competition in the real and/or open competition in the telecommunications industry. In Papua New telecommunications industry. In Papua New Guinea, politics has played a major role in the Guinea, politics has played a major role in the shaping of the model of mobile phone shaping of the model of mobile phone competition. Digicel, an international and competition. Digicel, an international and private mobile phone company is being private mobile phone company is being restricted through two Government instruments; restricted through two Government instruments; the 2007 National ICT Policy and the 2008 the 2007 National ICT Policy and the 2008 amendments to the Telecommunications Act amendments to the Telecommunications Act 1996, from competing openly with the State1996, from competing openly with the State--owned Pacific Mobile.owned Pacific Mobile.

OutlineOutline

ØØBackgroundBackgroundØØModels of mobile phone competitionModels of mobile phone competitionØØThe NetcoThe Netco--Servco ModelServco ModelØØKey InstrumentsKey InstrumentsØØThe Playing FieldThe Playing FieldØØKey PlayersKey PlayersØØMajor DecisionsMajor DecisionsØØConclusionConclusion

BackgroundBackground

ØØThe long road to a National ICT policy in The long road to a National ICT policy in PNG.PNG.ØØState Administration of the ICT sectorState Administration of the ICT sectorØØTelecomunications InfrastructureTelecomunications InfrastructureØØDigicel arrivedDigicel arrivedØØFirst weeks of competitionFirst weeks of competition

The long road to a National ICT The long road to a National ICT PolicyPolicy

ØØ It took Stakeholders including the State 10 It took Stakeholders including the State 10 years to formulate the National Policy on years to formulate the National Policy on Information and Communication (NPIC), Information and Communication (NPIC), ten years of unsuccessful/no ten years of unsuccessful/no implementation, four years of review, and implementation, four years of review, and two years to formulate the National ICT two years to formulate the National ICT Policy (2007)Policy (2007)??

2

State Administration of the ICT State Administration of the ICT SectorSector

ØØNo Ministry responsible for ICT sector for No Ministry responsible for ICT sector for 30 years30 yearsØØFirst Ministry in 2007First Ministry in 2007ØØActing Appointment 2007Acting Appointment 2007--20082008

Telecommunication Telecommunication InfrastructureInfrastructure

ØØ52 years of state monopoly52 years of state monopolyØØCompetition in 2007Competition in 2007ØØState/Telikom (PNG)/PANGTEL/Pacific State/Telikom (PNG)/PANGTEL/Pacific

MobileMobile

Digicel arrivedDigicel arrived

ØØDigicel is a new entrant to the mobile phone Digicel is a new entrant to the mobile phone industry in PNG after the NEC decision no. industry in PNG after the NEC decision no. 257/2005 dated 15 November 2005 257/2005 dated 15 November 2005 decided that mobile phone competition decided that mobile phone competition should be introduced.should be introduced.ØØCommenced operation on 17 July 2007.Commenced operation on 17 July 2007.

Digicel arrivedDigicel arrivedØØ Since its network rollSince its network roll--out program, Digicel has successfully brought out program, Digicel has successfully brought

affordable mobile phone services to other main centres and ruralaffordable mobile phone services to other main centres and ruralcommunities of PNG. Despite its successful operation, Telikom Pcommunities of PNG. Despite its successful operation, Telikom PNG NG Ltd and PANGTEL have been challenging the validity of DigicelLtd and PANGTEL have been challenging the validity of Digicel ’’s s spectrum and mobile phone licences in court. Courts have alwaysspectrum and mobile phone licences in court. Courts have alwaysruled in favour of Digicel. Recently, a Supreme Court decision nruled in favour of Digicel. Recently, a Supreme Court decision no. o. SC906 dated 28 March 2008 dismissed an appeal by Telikom SC906 dated 28 March 2008 dismissed an appeal by Telikom confirming the National Court decision which ruled in favour of confirming the National Court decision which ruled in favour of Digicel Digicel that the licence issued to them (Digicel) was properly issued bythat the licence issued to them (Digicel) was properly issued byICCC ICCC in accordance with existing laws and processes. In the recent pain accordance with existing laws and processes. In the recent past, st, Digicel has commenced proceedings in the National Court to proteDigicel has commenced proceedings in the National Court to protect ct its international gateway licence.its international gateway licence.

First weeks of competitionFirst weeks of competition

ØØWith the entry by Digicel into the mobile With the entry by Digicel into the mobile phone market, the benefits promised by phone market, the benefits promised by competition have been instantly realised. A competition have been instantly realised. A notice published in notice published in ““The NationalThe National”” on 13 on 13 August 2007 by the PNG business August 2007 by the PNG business community tells the story.community tells the story.

First weeks of competitionFirst weeks of competitionNo competition 52 years (Telikom only)No competition 52 years (Telikom only)??ØØ Fixed lines = 65,000Fixed lines = 65,000ØØ Mobile connects = 160,000Mobile connects = 160,000ØØ Phone penetration = 3.75%Phone penetration = 3.75%Competition for 3 weeks (only 1 new entrant)Competition for 3 weeks (only 1 new entrant)??ØØ Fixed lines = 65,000Fixed lines = 65,000ØØ Mobile connects = 315,000 (est.)Mobile connects = 315,000 (est.)??ØØ Phone penetration = 6.3% (est.)Phone penetration = 6.3% (est.)??(Figures are market intelligence; phone penetration estimated co(Figures are market intelligence; phone penetration estimated connects nnects

divided by 6m Pop.) A 69% increase in total connects for PNG usedivided by 6m Pop.) A 69% increase in total connects for PNG users rs in 3 weeks in 3 weeks –– the fastest growing network in the Asia pacific Region !the fastest growing network in the Asia pacific Region !

3

Models of mobile phone Models of mobile phone competitioncompetition

ØØState monopolyState monopolyØØDirect CompetitionDirect CompetitionØØ Indirect CompetitionIndirect CompetitionØØMixed modelMixed model

The NetcoThe Netco--Servco ModelServco Model

ØØState owns the networkState owns the networkØØState is the Service Provider (Netco)State is the Service Provider (Netco)??ØØState is also the competitor/distributor State is also the competitor/distributor

(Servco)(Servco)??with Digicel & GreenCom with Digicel & GreenCom (GreenCom pulled out in Feb 2008)(GreenCom pulled out in Feb 2008)??

Key InstrumentsKey Instruments

ØØPapua New Guinea National ICT Policy Papua New Guinea National ICT Policy (2007)(2007)??ØØPNG Telecommunications Blue Print PNG Telecommunications Blue Print

(2007)(2007)??ØØPapua New Guinea Telecommunications Papua New Guinea Telecommunications

Act 1996 (Amended 2008)Act 1996 (Amended 2008)??ØØ Independent Consumer and Competition Independent Consumer and Competition

Commission Act 2002Commission Act 2002

The Playing FieldThe Playing Field

Phase 1 Phase 1 –– Transitional periodTransitional periodØØExisting structure remains Existing structure remains –– for Telikom to continue as the for Telikom to continue as the general carrier and a mobile carrier with competing network general carrier and a mobile carrier with competing network mobile competitors.mobile competitors.ØØOne general carrier One general carrier –– Telikom will continue to operate as Telikom will continue to operate as the ONLY general carrier and as a mobile carrier under its the ONLY general carrier and as a mobile carrier under its existing licences. No general carrier licences will be issued existing licences. No general carrier licences will be issued to mobile carriers or others during this period.to mobile carriers or others during this period.ØØReserved rights Reserved rights –– as the only holder of a general carrier as the only holder of a general carrier licence, Telikom will continue to have the reserved rights licence, Telikom will continue to have the reserved rights over the fixed line network and the international gateway. over the fixed line network and the international gateway.

The Playing FieldThe Playing FieldØØ Digicel Digicel –– will continue to operate as a mobile carrier using will continue to operate as a mobile carrier using

its own network infrastructure and operating in its own network infrastructure and operating in accordance with its licence and the law.accordance with its licence and the law.

ØØ Transformation of Telikom Transformation of Telikom -- this will involve a strict this will involve a strict program of transformational change. (The policy does not program of transformational change. (The policy does not elaborate further on this).elaborate further on this).

ØØ Promote efficient development of backbone network Promote efficient development of backbone network --amendments to relevant laws will be made in order for amendments to relevant laws will be made in order for both general and mobile carriers will have the right to both general and mobile carriers will have the right to supply telecommunications services across the country by supply telecommunications services across the country by satellitesatellite--based and microwave facilities based and microwave facilities –– these current these current exclusive reserved rights to general carriers will be exclusive reserved rights to general carriers will be removed.removed.

The Playing fieldThe Playing field

ØØ Private networks Private networks –– issuance of new licensing issuance of new licensing regime to private networks.regime to private networks.

ØØ Interconnection Interconnection –– interconnection to be revised interconnection to be revised aimed at providing additional clarity and certainty aimed at providing additional clarity and certainty in securing interconnection between carrier in securing interconnection between carrier networks. 12 midnight 26/6/08 interconnection networks. 12 midnight 26/6/08 interconnection established between Bestablished between B--Mobile & Digicel).Mobile & Digicel).

4

The Playing FieldThe Playing FieldØØ Regulatory powers Regulatory powers –– broad review of the mandate to each broad review of the mandate to each

of the telecommunications regulators being PANGTEL of the telecommunications regulators being PANGTEL and ICCC will be undertaken during Phase 1 aimed at and ICCC will be undertaken during Phase 1 aimed at improving regulatory structures and processes; andimproving regulatory structures and processes; and

ØØ Rural Development Fund Rural Development Fund –– development of a Community development of a Community Services Obligation regime to be applied in the Services Obligation regime to be applied in the telecommunications sector in PNG. This will involve telecommunications sector in PNG. This will involve providing a strong funding basis to aid in the development providing a strong funding basis to aid in the development of telecommunications networks and the provision of of telecommunications networks and the provision of telecommunications services to residents in rural centres. telecommunications services to residents in rural centres.

The Playing FieldThe Playing Field

Phase 2 Phase 2 –– Open competitionOpen competitionØØPhase 1 will be reviewed after 12 months, Phase 1 will be reviewed after 12 months, following that, Phase 2 which relates to open following that, Phase 2 which relates to open competition will be introduced. competition will be introduced. ØØ12 months ?12 months ?ØØPolitics Politics –– its not over its not over –– Digicel is filing court Digicel is filing court case for its own international gatewaycase for its own international gateway

Key PlayersKey Players

ØØThe PublicThe PublicØØTelikom (PNG) LimitedTelikom (PNG) LimitedØØPANGTELPANGTELØØ ICCCICCCØØDigicelDigicel

Key PlayersKey PlayersØØ Public: interests of consumers or users of the products Public: interests of consumers or users of the products

must be protected in accordance with Part VII of the ICCC must be protected in accordance with Part VII of the ICCC Act. This part relates to consumer protection. Consumers Act. This part relates to consumer protection. Consumers have the rights to: a right to choice; a right to consumer have the rights to: a right to choice; a right to consumer education; a right to information; a right to representation; education; a right to information; a right to representation; and a right to redress. ICCC is mandated to enforce and a right to redress. ICCC is mandated to enforce these rights on behalf of the consumers.these rights on behalf of the consumers.

ØØ Telikom PNG Ltd: it is mandated to provide Telikom PNG Ltd: it is mandated to provide telecommunications services for use in PNG and telecommunications services for use in PNG and overseas.overseas.

ØØ NBC: it is mandated to provide balanced, objective and NBC: it is mandated to provide balanced, objective and impartial broadcasting services within and, if so directed impartial broadcasting services within and, if so directed by the Head of State, acting on advice, outside the by the Head of State, acting on advice, outside the country.country.

Key PlayersKey PlayersØØ PANGTEL: it is the principal regulatory agency PANGTEL: it is the principal regulatory agency

for matters relating to technical regulation of the for matters relating to technical regulation of the telecommunications and radio communications telecommunications and radio communications industry, including television and broadcasting industry, including television and broadcasting services.services.

ØØ ICCC: it is specifically mandated to foster ICCC: it is specifically mandated to foster competition and fair trading and protect competition and fair trading and protect consumers by ensuring that there was no consumers by ensuring that there was no uncompetitive conduct and other illegal trade uncompetitive conduct and other illegal trade practices. practices.

Key PlayersKey PlayersØØ Under Part IIIA of the Telecommunications Act 1996, Under Part IIIA of the Telecommunications Act 1996,

particularly under Section 19C, ICCC is the principal particularly under Section 19C, ICCC is the principal regulatory agency in respect of the provisions under the regulatory agency in respect of the provisions under the Telecommunications Act 1996. Both PANGTEL and ICCC Telecommunications Act 1996. Both PANGTEL and ICCC are given concurrent powers given them under their are given concurrent powers given them under their respective legislation and they must exercise their powers respective legislation and they must exercise their powers in consultation with each other. In the event that they are in consultation with each other. In the event that they are unable to agree, the views of the ICCC shall prevail.unable to agree, the views of the ICCC shall prevail.

ØØ In relation to the issuance of carrier license ICCC has In relation to the issuance of carrier license ICCC has been given specific powers to issue carrier license e.g. been given specific powers to issue carrier license e.g. Digicel Digicel –– the new entrant to the mobile sector, it is under the new entrant to the mobile sector, it is under this provision that ICCC issued licenses to Digicel and this provision that ICCC issued licenses to Digicel and GreenCom.GreenCom.

5

Key PlayersKey PlayersØØ Telecommunications industry is declared to be a regulated Telecommunications industry is declared to be a regulated

industry for purposes of ICCC. This is provided under industry for purposes of ICCC. This is provided under Section 19A of the Telecommunications Act 1996. Hence, Section 19A of the Telecommunications Act 1996. Hence, it was in that capacity that ICCC made the declaration it was in that capacity that ICCC made the declaration which is in accordance with Section 33 of the ICCC Act.which is in accordance with Section 33 of the ICCC Act.

ØØ Dicigel Dicigel –– operating license & Spectrum Licenseoperating license & Spectrum LicenseØØ All key players in the telecommunications industry, all of All key players in the telecommunications industry, all of

which I have identified and discussed in the paper, must which I have identified and discussed in the paper, must understand that mobile phone industry is a declared entity understand that mobile phone industry is a declared entity done in accordance with section 33 of the done in accordance with section 33 of the ICCC Act, ICCC Act, hence ICCC was mandated to make that declaration.hence ICCC was mandated to make that declaration.

The DecisionsThe DecisionsØØ 1. NEC decision no. 257/2005 dated 15 November 2005 provides for1. NEC decision no. 257/2005 dated 15 November 2005 provides for

the early introduction of competition limited to mobile the early introduction of competition limited to mobile telecommunications sector. telecommunications sector.

ØØ 2. NEC decision no. 188/2007 dated 21 June 2007 which is a 2. NEC decision no. 188/2007 dated 21 June 2007 which is a comprehensive ICT Policy and Deregulation Blueprint identified comprehensive ICT Policy and Deregulation Blueprint identified broader policy benefits of ICT sector reform and aims to implemebroader policy benefits of ICT sector reform and aims to implement nt competition on a reseller basis permitted in all sectors (not jucompetition on a reseller basis permitted in all sectors (not just st mobile); Telikom to be vertically separated into NetCo (network mobile); Telikom to be vertically separated into NetCo (network owner) and ServCo (retail service provider); NetCo would retainowner) and ServCo (retail service provider); NetCo would retainan an indefinite monopoly on all network assets including infrastructuindefinite monopoly on all network assets including infrastructure used re used by ISPs; to rescind NEC Decision No. 257/2005 particularly the by ISPs; to rescind NEC Decision No. 257/2005 particularly the issuance of mobile licenses to be declared void and new resellerissuance of mobile licenses to be declared void and new resellerlicenses to be issued to Digicel and GreenCom. (This policy declicenses to be issued to Digicel and GreenCom. (This policy decision ision was never implemented based on NEC decision no. 13/2007).was never implemented based on NEC decision no. 13/2007).

The DecisionsThe DecisionsØØ 3. NEC decision no. 13/2007 dated 3 October 2007 the Nat3. NEC decision no. 13/2007 dated 3 October 2007 the Nat’’l Govl Gov’’t. t.

approved to amend its policy by noting the September 2007 documeapproved to amend its policy by noting the September 2007 document nt which outlined the proposed refinements to government policy forwhich outlined the proposed refinements to government policy for the the ICT sector reform which involves restructuring the ICT sector reform which involves restructuring the telecommunications sector in PNG in two (2) phases. The first betelecommunications sector in PNG in two (2) phases. The first being ing the transition period and second, open competition; and the the transition period and second, open competition; and the transformation of Telikom PNG as the incumbent operator . It furtransformation of Telikom PNG as the incumbent operator . It fur ther ther approved to remove the proposed concept of operational/separatioapproved to remove the proposed concept of operational/separation n model or the NetCo/ServCo model.model or the NetCo/ServCo model.

ØØ 4. NEC Decision no. 21/2008 dated 13 February 2008 the Nat4. NEC Decision no. 21/2008 dated 13 February 2008 the Nat’’l. Govl. Gov’’t. t. endorsed the Revised government policy for ICT sector reform whiendorsed the Revised government policy for ICT sector reform which ch is dated February 2008. Under this policy the National Governmeis dated February 2008. Under this policy the National Government nt maintains its commitment to competition in the supply of maintains its commitment to competition in the supply of telecommunications services with a long term objective to open telecommunications services with a long term objective to open competition in all sectors.competition in all sectors.

ConclusionConclusion

ØØState controlledState controlled--competition Vscompetition VsØØOpen competition/Free marketOpen competition/Free marketØØPacific Island trendPacific Island trendØØThe Politics The Politics –– access to spectrum access to spectrum

restricted to NETCO restricted to NETCO –– is this open is this open competition?competition?ØØThe Politics The Politics ––state owns international state owns international

gate way gate way –– is this open competition?is this open competition?

ØØ International gateway by StateInternational gateway by StateØØFixed line monopoly by StateFixed line monopoly by StateØØ

ØØDigicel case is a good case study whereby Digicel case is a good case study whereby it is placing competition law and the misuse it is placing competition law and the misuse of market power by Telikom to test.of market power by Telikom to test.

6

Thank you for listeningThank you for listening……