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on behalf of MoTC are the views of the contributors/writer and the TRA may not agree to these fully or partially. However, the TRA shall consider all these contributions diligently and use them in the process of regulatory dispensation where ever appropriate or to make a recommendation to the Ministry in the context of policy formulation.
Omantel is generally in support of the scope of services to be included in the universal service, it has reservations about the need for and the cost effectiveness of the inclusion of some of these services Public call boxes: Omantel believes that payphones business is declining and it may not be of benefit to consumers to provide this service as a component of universal service if there is little or no demand for it. Also mobile phones are allowed everywhere including in hospitals (frequency jammers are not allowed under current regulations anywhere including in the hospitals). However, if the Authority decides to include public call boxes as a component of the Universal Service, the resulting amount of subsidy allocated for this service could be much higher than anticipated if the service subsequently declines. Telecentres: Omantels experience shows that the demand for Staffed Telecentres is almost negligible even in the high population areas and that is why we do not have any such centers around. This being the case, the service may not attract enough customers and, thus, may not take off. Provision of Maritime Services: For the provision of USO, equipment that will serve the mandatory requirements of International Maritime Organization (IMO) should be used.
Omantel successfully completed 3 years of providing maritime services in 2007 as mandated by the license and has informed TRA of its intention to cease as per the condition of the license. Omantel, honoring the request of the Authority, is continuing to operate and maintain the Coastal Radio station although it is uneconomical and difficult. Therefore, if Omantel is to continue to provide this service, appropriate subsidies should be provided based on the costs of purchasing and deploying the IMO compliant equipment.
The Company believes that in order to clearly identify the areas in which universal service ought to be provided, a more precise operational definition is required. Such an operational definition is not discussed in the consultation paper, and no definition for served area exists in the existing regulations (e.g. Telecom Regulatory Act, Omantel license, etc.). Therefore, a clear definition of served areas is required to precisely specify the obligations of Omantel as the incumbent operator, while at the same time providing clarity and identifying and selecting areas to be potentially served by the USO operators. Accordingly, Omantel believes that a definition of served area should be finalized before implementing any USO mechanisms. As an illustration, served areas may be defined as areas within X meters (say 200 meters) of an Omantel distribution point (DP) in uneconomic areas with normal terrain and within X meters (say 75 meters) of an Omantel DP in uneconomic areas with difficult terrain (e.g. wadis, hilly areas, rocky areas, etc.), subject to availability of spare capacity in the DP. In cases where wireless technology is used, served areas may be defined as areas for which coverage is provided with existing radio sites. The policy makers also should make it clear that such a definition of served area clearly applies in the case of uneconomic areas. For example, new economic zones or large clusters of development would offer Omantel the opportunity to expand its network cost effectively regardless of distance from the existing DP. It is to be noted that it is a practice in many jurisdictions to define areas that qualify for universal service subsidies this is usually done by first defining served areas so as to identify areas to be potentially served by USO operators. A served area definition should allow the incumbent operator to serve new customers at reasonable additional costs, i.e, without undue capital or ongoing cost to expand its network. Obligations that include, for example, wider distances than illustrated above would impose undue costs on the incumbent and would put it at a competitive disadvantage where it would have to serve higher cost areas without subsidies, and therefore should be avoided. In the Companys view underserved areas are a subset of served areas in the sense that all services may not be available in some of the served areas. The Company believes that its obligation in underserved areas should be restricted to the provision of access to fixed line voice service only. All other services such as functional internet and broadband should be part of the subsidy scheme.
The definition of selected criteria in table 2-1 should be tentative at this stage. It is suggested that a detailed survey be conducted to assess the actual conditions and collect more information just prior to making a final decision on the implementation specifics.
d.
e.
2.3.1 Tendering
Omantel welcomes the opportunity to compete and bring its extensive experience to bear to provide service in the USO funded areas. The TRA proposes that in Stage 2 of the tendering process, technical and legal criteria would be specified in the tender documents.
The consultation document has very little details on the tendering aspects, and hence cannot provide substantive comments. For example, there are no details on what the technical or legal criteria would be. There are no details or at least guidelines on the pre-qualification criteria that would be applied, and hence there is no visibility on who could possibly apply to be a USO operator. Notwithstanding the above comment, Omantel believes that the technical criteria should be broad based and include experience in providing service in high cost and remote areas, especially in Oman; experience in providing a wide variety of telecommunications services such as the ones specified in the scope of services; technical and financial resources to sustain during the period of license, and so on. Pre-qualification criteria also should be stringent enough to ensure entry of organizations with telecom experience and sufficient financial resources.
4. Strategy for Implementing the Universal Service Policy 4.1 Type of Licenses Awarded to the USO Operators
The TRA proposes that USO operators may apply for the right to provide communications services within other parts of Oman against payment of the applicable fees. The Company has several
concerns in this regard: a. Such licensing in other areas should be limited to operation in USO areas. b. Extending the license of a USO operator to operate in non-USO areas of the country will lead to many fixed licensees operating across the country. This will not be economically viable in the long run as the Omani market cannot support a large number of operators. This in the long term will destroy value in the fixed line market and lead to situations where operators cannot earn reasonable returns on their investments which is not in the long term interests of consumers. c. Opportunities to expand outside USO areas will distract these USO operators from the intended TRA objective of providing universal service to customers in uneconomic areas in a focused manner. However, this should not preclude Omantel from competing for these USO areas for receiving the attendant subsidies because Omantel is an incumbent operator and is already experienced in providing fixed line services across the country including in high cost areas. The consultation document proposes that USO operators would have a Class I license. However, the consultation document has little detail on the license terms and conditions, other than the issues discussed in the consultation paper such as tariffs. It would be useful for participants to be able to comment on a draft license. 4.4 Allocation of Frequency Spectrum for USO USO operators should not be allowed to apply to use the assigned frequencies to areas other than USO areas. Extending the frequency license to non-USO areas will expand the scope and scale of their operation which will be tantamount to having many fixed licensees operating across the country. This will not be economically viable in the long run as the Omani market cannot support a large number of operators. This in the long term will destroy value in the fixed line market and lead to situations where operators cannot earn reasonable returns on their investments which is not in the long term interests of consumers.
certain terms and conditions including points of interconnection. These should form the basis for negotiations. With respect to interconnection rates, Omantel notes that the tariffs that appear in the RIO and RAO are indicative and will need to be updated and/or costs need to be developed based on specific services requested by the USO operators.
Nawras fully supports the role of mobile technology in providing universal service because it can provide a cheaper, faster and more effective access for people without communications than fixed lines. This point has been made by numerous studies into the provision of universal service. For example, in its report on international best practice in universal service, Intelecon reaches the following conclusions: mobile provision in rural areas is often cheaper than fixed provision because it avoids the cost of cable laying mobile operators are more innovative in providing tariff packages that suit universal service customers; prepay arrangements are particularly suitable for universal service customers as they avoid budgeting and debt problems; mobile telephony offers features that are particularly advantageous to universal service customers, such as SMS, beep and call back, voice mail boxes and money transfer services.
In a number of countries mobile operators have provided local agents with a container of phones linked to the mobile network, and enabled the local agents to develop a business from providing telephony services to their village or community, thus developing enterprises at a local level and providing local management of the facility.
The important difference in these two approaches lies in the provision of local support and management, especially for local telecenters, which provide internet, data and broadband services in a centre. Experience from other countries demonstrates that it is necessary to have a local organization providing management of the facility, equipment maintenance, user education and support and local promotion. The organization can be a school, local bank, the local administration, or voluntary organizations. Hence if these organizations have an opportunity to become involved at the start, they will be committed to making a success of the project. Nawras would therefore urge TRA to consider a bottom-up approach in addition to the proposed top-down approach. While the statistical approach can be used as a first filter to identify the priority areas for universal service, we suggest that this should be supplemented by the involvement of the local communities in designing and operating the universal service projects. Nawras suggests a simpler process based on the following observations: the lack of commercial viability will be reflected in the current distribution of fixed and mobile telephony as the operators already provide services in commercially viable areas; the presence or absence of high cost areas are already taken into account in the assessment of commercial viability by the operators; distance from a fixed network exchange is not a proxy for the cost of a mobile or WiMAX network; Omantels current topology of local exchanges may change significantly over the next few years if it decides to rationalise its network or move to a next generation network; Table 2.1 does not take into account the distribution of mobile customers, and as a result the TRA may mistakenly assume that an area does not have internet services (as indicated by the lack of fixed lines) when in fact they are available through the mobile networks; no account is taken of the roll out plans of the existing fixed and mobile operators, or of the plans of the second fixed network operator (when licensed).
Nawras suggests that the TRA could undertake a simpler three stage approach: compare the number of fixed and mobile subscribers with the total population in each settlement, with priority being given to those with the lowest penetration rates; compare the availability of broadband fixed and mobile services to the location of institutions, with priority being given to those settlements without broadband services and with the most institutions; Examine the roll out plans of the Class 1 operators to see whether services will be provided to the priority areas in the near future.
TRA would then invite local organizations in the un-served or underserved priority areas to submit schemes for provision of universal services in their areas, either as new licensees or in conjunction with existing operators. If an existing licensee has a responsibility in its license obligations to provide the relevant narrowband or broadband services, TRA would either enforce those requirements or seek to bring them forward if the services are to be provided in the future.
With the development of GPRS, EDGE and 3G mobile networks, it is quite possible to provide broadband services over mobile and other wireless networks. Indeed all the universal services listed in Table 2.2 (page 7 of the draft Policy) can be provided over mobile networks (except maritime services). Even public payphones in areas where individual mobile phones are banned can be linked to external antennae. As a result, Nawras believes that the policy should give more weight to the potential of mobile in providing universal service. The present document recognizes the role of mobile services, but the policy and its implementation are framed as if universal services are to be provided only through the fixed network. As details, we suggest that: In Table 2.1 (page 6) the distribution of mobile customers should be taken into account in assessing the priority areas for universal service; In Table 2.2 (page 7), the roll out responsibilities placed on mobile operators through their license conditions should be included.
As suggested in section 2.1, the roll-out requirements placed on mobile operators should be mentioned in table 2-2. Additionally, row 6 of table 2-2 mentions the liberalization of access and ISP segment. Nawras notes that while internet service provision was liberalized in June, 2007, the development of this market has been prevented by the wholesale prices offered by Omantel, because they are higher than retail prices. Hence TRA needs to ensure that all its policies support and enable the achievement of its universal service objectives.
2.3.1 Tendering
The existing Class 1 licensees in Oman should not be required to submit a detailed Expression of Interest as TRA will already be well aware of their qualifications, experience and general suitability. For Class 1 licensees, which would include any Class 1 universal service providers, a brief letter to register their interest should be sufficient.
Table 2.1:
1 1 1 1 0.2
At this point Nawras is not proposing that the percentage levied in Oman should be reduced. Rather it suggests there needs to be some form of control on the universal service fund to ensure that the moneys are being spent on necessary and effective projects (see our specific comments on the economic and financial model in para 3.7 below). The universal service fund in Oman will have more contributions as a percentage of operator revenues than in other countries, and this should result in rapid progress in the undertaking of universal service projects. There will come a time when the need for universal service projects will reduce, and the proportion of revenues required from operators should also be reduced. At present there is no mechanism to achieve this transition, and without it, there is a danger that the moneys will be spent on unnecessary projects or diverted to other expenditures. We would therefore invite TRA to consider how this can be managed. As a suggestion, at the start of the programme there could simply be a meeting with the operators to explain the annual plan for universal service expenditures, and later on the meeting could offer advice to TRA on the size of the universal service budget. Coordination with other infrastructure providers: The expenditure of universal service funds can be made more effective if they are co-ordinate with other providers of infrastructure to remote areas, for example the electricity, education, health, road or water suppliers. Telecommunications facilities can be provided at the same time, with a resulting reduction in cost and improved impact on the local community. In its administration of the universal service fund, we suggest that TRA should regularly liaise with the appropriate agencies, and that plans to provide other infrastructures should be included in its criteria for selecting areas and projects for investment.
Nawras questions whether there is a need for TRA to invest in a costly model and in its operation. In most countries the universal fund administrator does not undertake its own modeling because it receives real bids from commercial operators based on tenders issued. It is suggested that instead the TRA and the Treasury should take a decision on the value for money based on bids received from
the competing operators. The economic model cannot second guess the operators estimates of costs and revenues. Nawras is concerned that the royalties paid by the operators may be misused on for unnecessary projects such as the financial model. It is noted that there is no reference to revenues from call termination from calls made to universal service customers in the text. This is included in all universal service models, and if TRA does decide that it needs an economic and financial model, terminating revenues should be mentioned here for the sake of completeness.
4. Strategy for Implementing the Universal Service Policy 4.1 Type of Licenses Awarded to the USO Operator
The draft Policy envisages the issuing of new Class 1 licenses to universal service operators. While Nawras will welcome new operators providing these services, the creation of new operators to provide universal services has had limited success in other countries. For example, in South Africa there has been a clear policy to encourage new operators to provide universal service, but they have generally not proved to be viable. Small operators lack economies of scale, and so may prove to be an expensive solution. It is expected that the most successful model is likely to be a combination of local organizations and the national Class 1 licensees.
charged by the dominant mobile operator; placing separate tariff controls on universal service projects; including a consideration of proposed tariffs in the evaluation of proposals for universal service funds; agreeing a cap on universal service retail prices with each universal service provider as part of the negotiations; Deleting this paragraph.
At present Nawras does not have a simple solution to this issue, and would be pleased to discuss it further with TRA. The proposal in section 2.1 to limit universal service prices to those charged by Omantel may have unforeseen consequences by deterring the involvement of mobile and other wireless operators in providing universal services. Moreover, as Omantel has started to restructure its retail prices by including free minutes in its packages, it will be increasingly difficult to make a clear linkage between Omantels retail prices and universal service prices The policies proposed here should be the subject of more detailed discussion and consideration, and we propose some alternative approaches in para 2.1.
3. Universal Service Funding 3.4 Timing of Payments and Operational Sustainability Provisions
TRA need to decide whether the provision of services will be retendered periodically. If infrastructure and services are subject to periodic tendering, the value of the project will be equivalent to the NPV of the cash flow over the period of the contract. If it they arent to be retendered, the winner will have the benefit of an ongoing business with little requirement for additional capital investment. Therefore, there should be a positive terminal value. This could be taken into consideration. The bidders could be asked to provide their estimate of the terminal value discounted back as well as the estimate of the NPV of the cash flow. That should reduce the subsidy requirement a bit. This approach would mean that the word project was inappropriate, because that would mean that it was time limited. This change may have an effect on the timing of payments, but doesnt need to. Many areas would cover their annual operating costs, so the regulator would just be deferring payment of the subsidy for initial network build over ten years. Following on from then, if the network does not cover its capital replacement costs, the terminal value would also be negative, and would continue a requirement for subsidy. If positive, it wouldnt need a subsidy.
The TRA also recognizes the need to define what types of services should be funded and why. This task is complicated by the fact that the services available have continued to evolve. Customers in developed areas of countries around the world have access to more advanced services year after year. As a result, citizens living in un-served and under-served areas are being left farther and farther behind. The Consultation Document notes, for example, that the availability of voice services is now widely regarded as a right for every citizen in developed countries as a prerequisite for the participation in society. Consultation Document at 5. This is certainly true, but today access to the Internet and indeed, broadband access is also increasingly regarded as a prerequisite for participation in society. Indeed, broadband networks inherently have the capability to deliver voice services in addition to data services, so deployment of broadband facilities will also address the need to provide access to voice services. Furthermore, the value to be connected to broadband is exponentially greater than the value of simple dial tone. In addition, many governments, including in the Middle East, are actively developing ambitious eGovernment programs. For example, Saudi Arabia attaches high significance to the e-government concept and the Saudi government established the e-government program to help lead Saudi Arabias transformation to an information society. Despite such efforts, broadband penetration rates in Saudi Arabia and in the region are still relatively low. According to the International Telecommunication Union, broadband penetration in Oman is just 0.73% of the population and in many other countries in the region penetration is also less than one percent. In Saudi Arabia, broadband penetration is just 2.43% and Qatar has by far the highest broadband penetration in the Gulf region at 8.37 percent. In contrast, Denmark leads the world with a broadband penetration rate of over 36%; South Koreas penetration rate is almost 30% and the United States and much of Western Europe have penetration rates between 20 and 25%. Cisco believes that increasing broadband penetration will significantly enhance economic productivity in Oman, as it has around the world. In the Consultation Document, the TRA only proposes to provide universal service support for broadband services to institutions such as schools, hospitals, government offices, post offices and police stations. Rather, Cisco recommends that broadband also be made available to business and residential customers in areas where universal service projects are awarded. Deployment of additional telecom infrastructure will benefit not only residents of un-served and under-served areas, but the overall economy and population of the Sultanate. In particular, Cisco
urges the TRA to focus more attention on promoting the deployment of broadband infrastructure and opening the necessary spectrum to facilitate new network buildout. Building the essential infrastructure for the information economy and expanding the reach of connectivity is clearly a necessary condition for the Sultanate to be part of the information society.
4. Strategy for Implementing the Universal Service Policy 4.3 Royalty and Fees
In discussing its strategy for implementing its universal service policy the TRA makes clear that its main objective is to promote deployment of communications infrastructure. The TRA also proposes, however, to require universal service providers to pay a percentage of its revenue as a royalty to the Government of the Sultanate. The requirement of a royalty payment for universal service providers may be counter-productive, however, for two reasons. First, royalty payments will decrease the amount of money that universal service providers have to deploy infrastructure. And
further, the TRA has recognized that universal service projects are needed in areas where telecom services have a low likelihood of commercial viability. A requirement to pay a royalty will make it even less likely that services will be commercially viable. Therefore, if possible, Cisco recommends that the TRA waive the royalty requirement for universal service providers.
appropriate regulatory policies, including allocating sufficient spectrum for the provision of new services, is likely to be at least as important to promoting the development of telecom infrastructure in Oman as the proposed universal service program will be.