Connecting Thailand’s Digital Economy | Unused Spectrum Capacity, MVNOs and the Digital Economy

CONNECTING THAILAND’S DIGITAL ECONOMY

CONNECTING THAILAND’S DIGITAL ECONOMY UNUSED SPECTRUM CAPACITY, MVNO AND DIGITAL ECONOMY IN THAILAND

December 2015

1800MHz 2600MHz

900MHz

2100MHz 2300MHz

UNUSED SPECTRUM CAPACITY, MVNO AND DIGITAL ECONOMY IN THAILAND YOZZO WHITE PAPER | DECEMBER 2015

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CONTENTS INTRODUCTION............................................................................................................................................4 UNUSED MVNO CAPACITY ON THE 2100MHz SPECTRUM ..............................................................................5 REGARDING 850MHz SPECTRUM – CAT TELECOM AND TRUE CORP...................................................................6 UNUSED MVNO CAPACITY ON THE 900MHz and 1800MHz SPECTRUM ..........................................................7 AIS - TOT PARTNERSHIP ........................................................................................................................................8 POSSIBLE 2300MHz AND 2600MHz SPECTRUM AUCTION ..............................................................................9 DEMAND FOR CHANGES ............................................................................................................................. 11 RECOMMENDED CHANGES TO THE MVNO REGULATION................................................................................. 14 MONOPOLY ....................................................................................................................................................... 17 SOLUTION – BREAKING DOWN THE SILOS AND ENABLE DIGITAL ECONOMY................................................. 19 THE MVNE/MVNO/OPERATOR ECOSYSTEM = WIN/WIN .................................................................................. 21 BENEFITS FOR THE MVNOS/SERVICE PROVIDERS ............................................................................................. 22 BENEFITS FOR THE NETWORK OPERATORS....................................................................................................... 23 BENEFITS FOR THE COUNTRY ............................................................................................................................ 23 OPPORTUNITY TO DRIVE INNOVATION AND ECONOMIC DEVELOPMENT ..................................................... 23 ANNEX ....................................................................................................................................................... 24 CAT TELECOM – TRUE 850MHz MVNO SETUP .................................................................................................. 24

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DEFINITIONS USED THROUGHOUT THIS DOCUMENT MVNO - MOBILE VIRTUAL NETWORK OPERATOR It is an organization, which offers mobile services. The MVNO does not own spectrum, instead it enters into an agreement with either a network operator or MVNA to obtain bulk access to network services at wholesale rates, and then sets its retail prices independently. An MVNO may use its own customer service, billing support, marketing systems or employ these services from a MVNE

MVNE - MOBILE VIRTUAL NETWORK ENABLER It is an entity, which provides infrastructure and services to both network operators and MVNOs, which enables existing, and new MVNOs to offer their services on the operator’s network, while leaving the backend enablement to the MVNE. The MVNE provides services, such as billing, business workflow, product setup, service delivery, customer care, fraud management, web services, reporting, sale platforms, etc.

MVNA- MOBILE VIRTUAL NETWORK AGGREGATOR The MVNA is an entity, which purchases mobile airtime in bulk from the partner network, and then wholesales this airtime and service to multiple MVNOs, who each in turn sells the mobile service to end-users.

MVNA/MVNE - MOBILE VIRTUAL NETWORK AGGREGATOR & ENABLER is a combination of, Mobile Virtual Network Aggregator and Enabler. The MVNA/MVNE is an entity, which purchases mobile airtime in bulk from the partner network, adds its service platform (MVNE) on top, and then wholesales this airtime and service as end-to-end to multiple MVNOs and service providers.

GLOSSARY AIS ASEAN AWN BTO CAT CRM Dtac EC ICT IoT M2M NBTC MHz TOT True SIM SME

Advanced Info Service | Mobile network operator Association of Southeast Asian Nations Advanced Wireless Network Build-transfer-operate Communication Authority of Thailand | State-owned telecom operator Customer relationship management Digital Total Access Communication | Mobile network operator European Commission | The executive body of the European Union Information and Communication Technology Internet of Things Machine-to-machine Thailand’s National Broadcasting and Telecommunications Commission Megahertz Telephone Organization of Thailand | State-owned telecom operator True Move (True Corporation) | Mobile network operator Subscriber identity module Small and medium sized enterprises

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INTRODUCTION In this paper, we highlight the vast unused telecom network capacity set aside for Mobile Virtual Network Operators (MVNOs) in Thailand due to reluctance from the mobile network operators, AIS, Dtac and True, to accept these on their networks.

Drawing on our experience as an ICT specialist and leading MVNO consultancy, we suggest a few additions to the National Broadcasting and Telecommunications Commission’s (NBTC) notification regarding network capacity and obligations for Mobile Virtual Network Operators (MVNO) in Thailand.

The introduction of MVNOs in Thailand six years ago has not succeeded in laying the foundation to ensure innovation, the achievement of the broader industry and national economic objectives. The MVNOs has been tethered with the legacy infrastructure and thinking behind the conventional mobile operator services.

However, there are lessons to be learned, and first lesson is - a new approach is needed.

We recommend the introducing of a Mobile Virtual Network Enabler (MVNE) to act as a one-stop clearing-house for MVNOs, service providers, and telecom network operators, to utilize the spectrum

resources effectively in a manner, which strives to achieve broader digital economy objectives and national interests.

This includes enhancing Thailand’s competitiveness, creating opportunities for foreign investment and local start-ups, and leveraging Thailand’s hub status to deliver emerging Infocomm services to ASEAN. With Thailand’s rich diversity, consumers increasing reliance on data and mobile broadband, the policy on digital economy, and the technology and service evolutions in the industry (e.g., Internet of Things (“IoT”) and M2M communications), there are attractive and viable opportunities for new players to enter as MVNO in Thailand to fill important market gaps (digital divide) and create new services.

We are aware of a number of local and large international players eyeing the opportunity to establish an MVNO business in Thailand, but are either lacking the telecom experience, or waiting for a more attractive wholesale package in order to unleash their creativity and design their own differentiated service.

Allan Rasmussen Managing Director, Yozzo Co., Ltd.

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UNUSED MVNO CAPACITY ON THE 2100MHz SPECTRUM Prior to Thailand’s 2100MHz 3G auction in 2012, the National Broadcasting and Telecommunications Commission (NBTC) released a notification1 regarding Criteria and Procedure for the Spectrum.

The notification contains a paragraph regarding network capacity and obligations for Mobile Virtual Network Operators (MVNO’s) in Thailand.

16.5 Mobile Virtual Network Operator (MVNO) 16.5.1 The Licensee shall provide telecommunications network service with the minimum capacity of 10 percent of its networks to the MVNO who is not the Connected Person in the Shareholding Structure with any licensee when receiving such service request

In October 2012 Advanced Info Service (AIS), via its subsidiary Advanced Wireless Network, Digital Total Access Communication (DTAC), through its DTAC Network unit, and True Corp subsidiary, Real Future, each won a 15year license with 2×15MHz frequency blocks on the 1900/2100MHz. Given the NBTC notification above, and the fact that no MVNO has launched on any of the private operators 1900/2100 MHz network, this means that now, three years later Thailand has: 

AIS - Advanced Wireless Network (AWN): 10 percent unused MVNO network capacity



Dtac - DTAC Network: 10 percent unused MVNO network capacity



True Corp - Real Future: 10 percent unused MVNO network capacity Figure 1: Unused capacity (dark color) on the 1900/2100 MHz 3G Network (private operators) as of 2015

1

PDF | NBTC Notification | http://www.parliament.go.th/ewtcommittee/ewt/tele/ewt_dl_link.php?nid=144&filename=index

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In addition, the state-owned telecom operator, Telephone Organization of Thailand (TOT) holds a 2×15MHz block on the 1900/2100MHz bandwidth, which was launched in December 2009. TOT’s 2100MHz is highly underutilized with less than 100,000 subscribers between TOT’s own 3G service and its remaining MVNOs2.

Given the high data usage from mobile device consumers in Thailand today, it is estimated that TOT’s service on the 2100MHz would be able to serve approximately 7 million users.

However, there may be various universal service obligations (USO) and usage on TOT’s 2100MHz, which we are unaware off, therefore we estimate TOT and its MVNOs are currently using (best-case scenario) maximum 2% of full capacity its 2100MHz. Which shows that we have 3 x 10% unused MVNO capacity on the private telecom operators (AIS, Dtac, True) 1900/2100MHz Network (Figure1 above) plus additionally 98% unused capacity on TOT. Figure 2: Unused MVNO capacity (dark color) on the 1900/2100MHz network private operators and TOT

REGARDING 850MHz SPECTRUM – CAT TELECOM AND TRUE CORP Although the other state-owned telecom operator, Communications Authority of Thailand (CAT Telecom) has the operating license for the 850MHz frequency band, CAT Telecom has outsourced the network operations and management to “BFKT” (a True Group subsidiary), without transferring the spectrum itself.

See Annex: CAT TELECOM – TRUE 850MHz MVNO SETUP BFKT build and operates the 3G network infrastructure, and CAT Telecom then leases the equipment from BFKT. Another of True group’s subsidies “RealMove” buys 80% of the network capacity to resell under the True Move H brand, thereby technically functioning as a MVNO to CAT Telecom, although the Thai Auditor-General has recently questioned this. This leaves CAT Telecom’s own 3G sub-brand “MY CAT” and CAT Telecom’s MVNOs with 20% of network capacity to share.

2

Yozzo | 02/10/2015 | http://www.yozzo.com/news-and-information/mvno-mobile-operator-s/thai-sim-registration-a-catastrophe-forthe-mvnos-or-the-regulator

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UNUSED MVNO CAPACITY ON THE 900MHz and 1800MHz SPECTRUM The National Broadcasting and Telecommunications Commission (NBTC) recently auctioned two licenses on the 1800MHz spectrum, and will auction two more licenses on the 900MHz licenses December 15, 20153.

As with the 2100MHz spectrum, the NBTC has also added a clause in the terms and condition for the 900MHz4 and 1800MHz5 licenses: Clause 18 Service of Mobile Virtual Network Operator (MVNO)

(1) The Licensee shall comply with the Commission’s Notification Regarding Mobile Virtual Network Operator Service B.E. 2556 (2013).

(2) The Licensee shall provide telecommunications network service at least 10 percent of its network’s capacity to MVNO(s) that is/are not the connected person(s) with any licensee under this Notification, upon receiving such service request.

All four licenses carry the same clause and terms regarding MVNOs, that the license holder must provide telecommunications network service of at least 10% of its network’s capacity to MVNOs The consequence of which will be, that post the 900MHz and 1800MHz auction we will see an additional unused 40 percent (4x10 percent) MVNO capacity in the market.

Figure 3: Unused MVNO capacity (dark color) on the 900/1800MHz Network

3

PDF | Presentation: The 4G LTE auction in Thailand | http://www.slideshare.net/yozzo1/the-4g-lte-auction-in-thailand PDF | NBTC 900MHz Criteria (English) | http://auction.nbtc.go.th/getattachment/HOME/900MHz_Criteria_Eng.pdf.aspx 5 PDF | NBTC 1800MHz Criteria (English)| http://auction.nbtc.go.th/getattachment/HOME/1800MHz_Criteria_Eng.pdf.aspx 4

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AIS - TOT PARTNERSHIP However, on November 13, TOT’s board officially selected AIS as TOT's 3G-2100MHz partner for 10 years.

According to the reports6, TOT will wholesale 80% of the bandwidth on all TOT's existing and planned base stations to AIS. TOT will then wholesale, or seek another partner to wholesale the remaining 20%.

TOT has been looking for partners to make use of its network to replace lost revenue from the transition to a spectrum-licensing model from a build-transfer-operater (BTT) concession mode for almost a year.

Figure 4: Unused MVNO capacity (dark color) on the 900/1800/2100MHz Network - post AIS/TOT partnership

Which brings the total sum of unused network capacity set aside for MVNO operations across the 900MHz, 1800MHz and 2100MHz spectrum (after a successful AIS/TOT partnership) to: Spectrum

2100MHz

2100MHz TOT

900MHz

1800MHz

Unused MVNO Capacity

30%

10%

20%

20%

6

The Nation | 14/11/2015 | http://www.nationmultimedia.com/business/Great-AIS-week-culminates-with-TOT-partnership-for30272885.html

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POSSIBLE 2300MHz AND 2600MHz SPECTRUM AUCTION More unused MVNO capacity could be added in the near future, as the government has agreed with the digital economy panel's resolution7 to set aside other telecommunications spectra for 4G LTE. Some portion of the 2300 MHz and 2600 MHz spectra could be options.

Figure 5: Unused MVNO capacity (dark color) on the 2300/2600MHz Network – in case of four licenses

Which will bring the total sum, of unused network capacity set aside for MVNO operations, across the 900/1800/2100/2300/2600MHz spectrum to:

7

Spectrum

2100MHz

2100MHz TOT

900MHz

1800MHz

2100MHz

2600MHz

Unused MVNO Capacity

30%

10%

20%

20%

20%

20%

Bangkok Post | 01/04/2015 | http://www.bangkokpost.com/print/514543/

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36 MVNO LICENSES HAS BEEN ISSUED SO FAR SINCE THE INTRODUCTION IN THAILAND 6 YEARS AGO

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DEMAND FOR CHANGES The rationale for the introduction of MVNOs, include - but are not limited to,    

Stimulate competition, Efficient utilization of network resources, Introduce new or better services aligned to lifestyle propositions currently unserved/underserved, Promote investment opportunities for local and international businesses in the telecom market.

Consequently, MVNOs are intended to support innovation, bridge digital divide, and contribute to the growth in the ICT sector to ensure the achievement of the broader industry and national economic objectives.

With Thai consumers’ increasing reliance on data and mobile broadband, the government’s policy on digital economy, technology and service evolutions in the industry (e.g., Internet of Things / Machine-to-Machine), there is a need and attractive opportunities for new players to enter as MVNO in Thailand to provide services.

The number of MVNOs worldwide increased by 70% between June 2010 and June 2015, reaching 1,017 this year, according to GSMA Intelligence8.

The clear international evidence is that MVNOs have delivered:    

More consumer choice Innovative pricing plans Innovative products and services innovation in, and better customer service

We are aware of leading international MVNOs/Service providers seeking to establish themselves in Thailand but are meet with reluctance from the private operators, as well as vital missing parts of the MVNO ecosystem.

In addition, local brands are also interested, but lacks the telecom knowhow to succeed.

One such example is the MVNO Tesco Mobile who had been knocking on the doors of AIS and Dtac for 2 years, before finally giving up and going to CAT Telecom instead9 The 50:50 JV investment contract with CAT, is expected to be signed early next year, while commercial service would be launched in mid-2016 The NBTC has issued 36 MVNO licenses10 so far since the introduction of MVNOs in Thailand 6 years ago.

However only 6 MVNOs have launched, with no one showing promising signs so far. Combined with TOT and CAT’s own customers, the MVNOs have only managed to obtain < 100,000 subscribers11 over the last six years.

8

Fiercewireless | 02-09-2015 | http://www.fiercewireless.com/europe/story/report-number-mvnos-exceeds-1000-globally/2015-09-02 Bangkok Post | 02-09-2015 |http://www.bangkokpost.com/tech/local-news/677424/cat-board-gives-nod-to-tesco-3g-venture 10 NBTC | List of licenses in Thailand (Thai) | http://apps.nbtc.go.th/license/ 11 Yozzo | 02-10-2015 | Was the Thai SIM registration a catastrophe for the MVNOs or the regulator? | http://www.yozzo.com/news-and-information/mvno-mobile-operator-s/thai-sim-registration-a-catastrophe-for-the-mvnos-or-theregulator 9

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MVNOs in Thailand have failed because of   

MVNO reluctance from the private operators Insufficient network capacity at launch Insufficient MVNO experience and quality

  

No MVNA/MVNE platform with experience Poor planning and execution Legacy systems and red tape

MVNOs need to overcome challenges similar to those of a start-up, such as:    

Limited specialized workforce, Limited knowledge in strategic business planning for launching successful MVNOs, Minimal technological and architectural knowledge of the MNO/MVNE/MVNO ecosystem.

Insufficient experience of management teams with hands-on experience in launching successful MVNOs,

Likewise, the Thai telecom operators also lack fundamental skills regarding MVNOs e.g. wholesale pricing structure towards MVNOs, as well as being able to determine the value proposition of MVNOs. Even though the NBTC notification regarding MVNOs use the words like “fair, reasonable, non-discriminatory“, it clearly hasn’t provided the intended results.

The NBTC Notification Regarding Mobile Virtual Networks Service B.E. 2556 (2013)12

...to promote free and fair competition, as well as to promote market entry for small entrants in order to escalate mobile service competition and provide service alternatives to customers.

The Notification requires the licensee (Type III mobile operators and mobile operators under concessions), who is a wholesaler - to treat Mobile Network Operators (MVNOs) on a fair, reasonable and non-discriminatory basis, and charge can be determined by the agreement between the wholesaler and MVNOs on a fair, reasonable, and non-discriminatory basis, as well as must be reasonable comparing with the retail rate paid by the wholesaler’s customers.

In addition, this Notification has also prescribed criteria and procedures for contract negotiation and dispute resolution where an agreement cannot be reached among the licensees.

Thailand’s National Broadcasting and Telecommunications Commission (NBTC) seems to have noticed the lack of success and recently announced it had hired a consulting company to look into the MVNO market in Thailand. We welcome such initiative, and concur that after 6 unsuccessful years, it is very much needed.

It has however, come to our attention that the consulting company13 is virtually unknown among MVNOs and mobile operators, when it comes to MVNO.

12 13

NBTC | PDF | 900MHz Information Memorandum | http://auction.nbtc.go.th/getattachment/HOME/900MHz_IM_Eng.pdf.aspx Interconnect Communications | http://www.icc-uk.com

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Similarly, we have not seen any documents for the consulting project, or process, in regards of public hearing or invitation to comment14. Therefore, we feel the need to add our comments and ideas to the table.

Based on our local and international research, as well as information from MVNOs, colleagues and former employees from the private telecom operators in Thailand, we clearly see AIS, Dtac and True, being reluctant to open up for wholesale partnership with MVNOs. So much so, that we have encountered claims of the private operators having a “mutual agreement” not to enable MVNOs on their networks. Or, if not the result of a coordinated behavior between the operators, then by deciding individually that MVNO access should be prevented, in which their self-interest causes a collective outcome of resisting MVNOs on their networks.

Doing so, the telecom network operators act as gatekeepers to the essential radio network access needed by MVNOs. Where we would anticipate it is the NBTC, which should retain the gatekeeper role, and prevent the operators exercising such power in the market.

The reluctance to open their networks to MVNOs, manifest itself in:   

Refusing to reply to questions regarding MVNO/wholesale on their network.

Claiming not to be aware of the 10% capacity for MVNOs in their own license terms.

Saying they are already in talks with other MVNOs for x years now and waiting for them.

- or alternatively, expressing an interest, but then suggesting a margin share offer so low, knowing it is impossible for an MVNO to do business on.

Although these accusations could be brushed aside as being speculative, the proof of the reluctance is however evident from the fact, that no MVNOs have launched on any of the private telecom operators network, despite 3 years since the introduction of notification 16.5.1 regarding MVNO capacity, in the 2100MHz licensing terms.

Figure 6: Current and coming MVNOs. No MVNOs on the private network of AIS, DTAC or True

CAT

TOT

AIS

DTAC

TRUE

850/1800MHz

900/2100MHz

1800/2100MHz

850/1800/2100MHz

1800/2100MHz

168 Communication

i-Kool 3G

None

None

None

NTT Communications

Mojo 3G

Tesco Mobile (2016)

AIS

i-mobile (2016) CTH (2016) TrueMove H DTAC

14

The Nation | 08/10/2015 | http://www.nationmultimedia.com/business/Bt100-bn-sent-from-NBTC-to-state-coffers-30270396.html

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The reluctance and missing efforts of the telecom network operators to negotiate and launch MVNOs, represents a failure in normal market forces, which warrants intervention. The current approach has proved unrealistic and unworkable in practice and we therefore advocate for specific competitive safeguards in addition to the current, more regulatory oversight of the market.

We believe that without some form of regulatory measures, competition and innovation of mobile services in Thailand, and thereby the digital economy, may not evolve as it should, or at all. We agree that commercial negotiation should be the main principle for MVNO provisioning. MVNO wholesale agreements must be a winwin for both the telecom operator and the MVNO. However, without some form of safeguards or intervention mechanism, and some basic ground rules establishing a framework, in which commercial negotiations can take place - e.g. specifics as to what, how and within what timeframe, significantly weakens the chances of mobile network operators seeing MVNOs as serious, equal and credible partners in negotiations.

RECOMMENDED CHANGES/ADD-ON TO THE MVNO REGULATION 1. The NBTC should publish a clear policy statement requiring the telecom network operators to provision MVNOs on their network, 2. The detailed terms and conditions of MVNO provisioning should first be left to the parties to negotiate on a purely commercial basis, 3. The NBTC should exercise its regulatory mandate to monitor the market and the negotiations to ensure that mobile network operators conduct negotiations fairly and in good faith - and that the policy objectives of the mobile market are fulfilled, 4. It would be in the public interest for the NBTC to intervene, and assist the parties - or if necessary, settle and resolve in case a mobile network operator is acting in bad faith, engaging in any form of anticompetitive conduct, or if, after a reasonable period (2 months) of in-good-faith negotiations, a commercial agreement cannot be reached between the parties.

In addition, as a last resort only, a regulatory mechanism allowing the NBTC to intervene in the negotiation, to:     

Ensure fair and reasonable terms for access Safeguard fair and non-discriminatory competitive behavior Bring parties to the negotiating table at the earliest opportunity Avoid any potential frustration of the policy goal and legislative purpose Introduce and safeguard the principle of in-good-faith commercial negotiations.

E.g., the mobile network operator shall enter into a wholesale agreement with the MVNO, within a period of 2 months from the date of issuing a Letter of Intent (LoI) or Memorandum of Understanding (MoU) and submit a copy of the same to the NBTC (licensor).

NBTC would have the power to intervene in the agreement if deemed necessary by the parties.

The Regulations/Directives/Orders of NBTC in this regard would be binding on the telecom network operators and the Mobile Virtual Network Operators (MVNO).

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With more than 15 years of history, MVNO is no longer a new concept but a proven business, and the development of the MVNO market has long been encouraged by regulators in Europe. This has recently been underlined by the importance of MVNOs as a regulatory remedy in mobile telecoms mergers for the European Commission15 to preserve competition in the region.

The past few years have seen a number of mobile mergers in in Austria, Ireland and Germany where each merger was subject to conditions involving MVNOs. E.g., the Austrian merger between Hutchison 3G and Orange came with the condition16 that the merged entity would provide wholesale access for up to 30% of its capacity and up to 16 MVNOs. An upfront commitment ensured that Hutchison could not complete the acquisition of Orange, before it had entered into such wholesale agreement with an MVNO. Likewise, before approving the merger between O2 (Telefonica) and 3 in Ireland, 3 was required to commit up to 30% of the merged company's network capacity to minimum two MVNOs. While in Germany, E-Plus and Telefonica agreed to similar conditions, which would potentially create up to three new MVNOs in the country.

Which brings us back to Thailand. One could ask the questions wherein the broader industry and national economic objectives is, in AIS/TOT’s partnership?

Although not a merger, it is after all the largest mobile network operator in Thailand with significant market power (SMP), grapping another big chunk, and thereby actually becoming a MVNO on TOT themselves.

It is ironic that the private telecom operators are reluctant to open up for MVNOs on their own networks but have no issue becoming one themselves, when it suits them17.   

AIS as an MVNO on TOT with 80% of TOTs capacity Dtac as an MVNO with 50-100% capacity of CATs 1800MHz TrueMove already a MVNO with 80% capacity of CATs 850MHz

Would this kind of partnership have passed in other countries/industries, without some kind of regulatory intervention? It would have been interesting to see the NBTC fulfilling its constitutional task by subjecting AIS, DTAC and TRUE to conditions regarding capacity to MVNOs before allowing them to become one themselves.

Instead, the NBTC gave TOT the green light to upgrade its existing unused 2400MHz spectrum to provide 4G service for 10 years18. Saying it would help TOT create a new revenue stream to offset vanished concession revenue. E.g., a state enterprise, who has had six years to turnaround and start making profit, but still as of writing this, have not managed to do so.

15

EC Commissioner for Competition, Margrethe Vestager: Competition in telecom markets from the conference on international antitrust law and policy| https://ec.europa.eu/commission/2014-2019/vestager/announcements/competition-telecom-markets_en 16 EC Commission clears acquisition of Austrian mobile phone operator Orange by H3G, subject to conditions | http://europa.eu/rapid/press-release_IP-12-1361_en.htm 17 The Nation | 16-09-2015 | AIS confident its partnership proposal with TOT suitable | http://www.nationmultimedia.com/business/AIS-confident-its-partnership-proposal-with-TOT-su-30268838.html 18 Bangkok Post | 30-10-2015 | http://www.bangkokpost.com/business/telecom/748552/tot-cleared-for-4g-offer-on-2400-mhz

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AIS will be allowed to rent up to 80% of TOT's 2100-MHz network capacity. TOT can rent the remaining 20% to other companies, this is exactly where we were 6 years ago when MVNOs was introduced on TOT. Back then, TOT also set aside up to 20% capacity to MVNOs. Last year, TOT was told to come up with a turnaround strategy going from BTO to a license scheme.

Since then TOT has been chewing through three acting presidents, two finance ministers, two ITC ministers, months of consulting from Deloitte, and still, a year later haven’t been able to utilize the 20% capacity or find help. Despite a handful of proposals from possible partners - among them the Thai MVNA/MVNE One Development19 who has both MVNO and local market knowledge.

Question is - if TOT is actually signing is own dead sentence with the AIS agreement. For years is has been doing nothing else than holding on to spectrum rights having AIS utilizing it. Which is what put them in the mess they are in today in the first place. Now they are ready to the same thing again. If they cannot do anything with spectrum themselves, is there a need for them – aren’t they just an obsolete expensive middleman.

Perhaps the Nikkei Asian Review publication explained better in its article about the Thai 1800MHz auction20 “TOT and CAT Telecom have been wasting public assets entrusted to them by failing to use their frequencies to deliver high-quality services.

This is something that the companies' management and labor unions would both do well to consider as they move toward starting their own 4G services, but recent actions indicate the two companies might be too self-absorbed to realize their obligations to the public”

AIS/TOT is not the only one, a similar - perhaps not partnership but more a forced marriage has happened between Dtac and CAT Telecom21, where Dtac has been pulled into a 30%-revenue sharing deal with CAT. Having failed at securing a 4G license in the 1800MHz auction, Dtac has decided to spend 5MHz of its (3G) 2100MHz spectrum for 4G services22, capacity that should have been utilized by MVNOs on the 2100MHz for the last 3 years according to the license terms.

In other words, we are back at where it all started, level of competition is only maintained but not enhanced.

AIS is back home at TOT and Dtac and True with CAT Telecom. No new competition to innovate and take the market forward just old wine on new bottles.

19

MVNO Dynamics | 22-02-2015 | MVNA/MVNE One Development keen on partnership with Thailand’s state telco TOT | https://www.mvnodynamics.com/2015/02/22/mvnamvne-development-keen-partnership-thailands-state-telco-tot/ 20 Nikkei Asian Review | 19-11-2015 | http://asia.nikkei.com/Business/Trends/State-run-carriers-try-to-spoil-4G-party 21 Bangkok Post | 19-11-2015 | http://www.bangkokpost.com/business/telecom/769636/dtac-moves-to-settle-cat-spectrum-deal 22 Bangkok Post | 04-12-2015 | http://www.bangkokpost.com/tech/local-news/784457/dtac-adds-bandwidth-for-4g-customers

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MONOPOLY CAT Telecom has however been busy accepting MVNOs, not because they are the best choice, but because they are the only choice, due to the lack of regulatory intervention and the MVNO reluctance from the private telecom operators - which has created a monopoly for CAT Telecom to take advantage of.

Two other options exist, which most MVNOs have chosen instead. Wait for AIS, Dtac and True to live up to the MVNO terms of their licenses. Alternatively, in case of TOT, wait for them to select a partner who has a platform, a track record in launching and creating successful MVNOs, as well as Thai market knowhow.

CAT has even signed up MVNOs who used to be on TOT e.g. 365 Communication (now 168) and i-mobile23 with the latter expected to launch in 2016. The two other MVNOs are Data CDMA Communication and True Move H, which technically is a MVNO (See: REGARDING 850MHz SPECTRUM – CAT TELECOM AND TRUE CORP).

A similar deal is being suggested with DTAC24, who would invest in the 1800MHz network on CAT in exchange for allowing it to lease all capacity of the network. DTAC would lease the network equipment to CAT, and the state enterprise would then sell the network capacity to DTAC through a wholesale deal. Again, the private operators apparently have no issues with MVNOs as long as the MVNO is themselves on another network.

Like TOT, CAT Telecom lacks the fundamental understanding of the MVNO business and this became evident when CAT Telecom announced it had signed up the MVNO 168 formerly known as 365 Communications25.

In September 2013, 365 Communication's agreement with TOT was terminated. TOT reasoned that 365 Communication had failed to place a guarantee of THB 3 million required for the purchase of airtime allotment.

The MVNO resurrected again in 2015 as “168”, and got the all clear from CAT to launch. No one from CAT questioned the lack of a business plan from 168, in their eagerness to sign on MVNOs. The NBTC however, rejected 168’s first approach, reasoning that the company had no clear strategy26. The MVNO has launched today but as expected, is struggling to obtain the needed subscribers having fewer than 10,000 and issues paying its fee to CAT Telecom27.

Another issue is CAT/TRUE’s setup28. BFKT (a TRUE subsidy) is managing CAT’s 850MHz network, and as part of that, likely to get access from CAT - to business information from the MVNOs in order to manage the network, including direct/in-direct competitors. One such competitor could be the coming MVNO “CTH”, set to launch next year on CAT, CTH is a pay-TV/Sat-TV competitor to another of TRUE’s subsidies (True Vision).

23

13-11-2015 | Samart i-mobile signs MVNO agreement with CAT Telecom | http://www.yozzo.com/news-and-information/mvno-mobile-operator-s/samart-i-mobile-signs-mvno-agreement-with-cat-telecom 24 Bangkok Post | 23-11-2015 | CAT seeks partners to explore 4G options http://www.bangkokpost.com/business/telecom/773336/cat-seeks-partners-to-explore-4g-options 25 30-04-2015 | MVNO 168 Communications launches in Thailand| http://www.yozzo.com/news-and-information/mvno-mobile-operator-s/mvno-168-communications-launches-in-thailand 26 The Nation | 27-05-2015 | http://www.nationmultimedia.com/business/CAT-Telecom-names-new-MVNO-partner-for-3G-service-30260961.html 27 The Nation | 10-10-2015 | NBTC queries 168 Communication about customer complaints | http://www.nationmultimedia.com/business/NBTC-queries-168-Communication-about-customer-comp-30272580.html 28 Telecom Asia | 10-12-2015 | True-CAT deal condemned by Thai Auditor-General | http://www.telecomasia.net/content/true-catdeal-condemned-thai-auditor-general

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BREAK DOWN THE SILOS AND ENABLE DIGITAL ECONOMY

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SOLUTION – BREAKING DOWN THE SILOS AND ENABLE DIGITAL ECONOMY A proposed solution could be a one-stop shop, who acts as an enabler or “clearing house” for the digital economy, MVNOs/M2M/IoT service providers, e.g. matching the demand, with the supply of unused MVNO capacity from the telecom operators, and thereby creating a win/win for all stakeholders in the ecosystem.

In other words, what is known as a Mobile Virtual Network Aggregator (MVNA) and enabler (MVNE)29 Figure 6: Proposed solution to underutilized capacity - an enabler for digital economy services (MVNO/M2M/IoT)

A MVNE is an entity, which provides a platform infrastructure along with a portfolio of add-on services together with telecom, MVNO and market knowhow. It matches up MVNOs (incl. M2M/IoT) business cases with telecom network operators, to enable the service to the end-users.

The sharing of mobile networks systems is already present in the telecom sector and MVNO sphere, where mobile virtual network enablers (MVNE) provide core systems and platform for use by multiple MVNOs.

29

Wikipedia | MVNE | https://en.wikipedia.org/wiki/Mobile_virtual_network_enabler

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The MVNE becomes the key enabler and supporter, by providing a turnkey solution. capable of plugging-in new MVNOs and service providers, and scaling up subscribers quickly, which lowers barriers to entry. It provides systems integration expertise complementing the telecom network operator and the MVNOs expertise.

The right MVNE should not only provide a technical platform with real-time rating and charging platform (Billing), Custom relation management system (CRM), SIM cards and handset management, Data intelligence, apps and modules to support point-of-sale, and distribution functionality, etc.

More importantly, it should share its experience in defining, launching and operating successful MVNOs in combination with local retail and market experience, and the right tools to meet and analyze the targets in the Thai market.

Consequently, providing the telecom network operators and MVNOs with the flexibility to select the most suitable operating model to overcome key entry barriers30.

Figure 7: Benchmarks suggest that MVNE/A-supported MVNOs require approximately 60 times less subscribers to break even

30

ONE DEVELOPMENT | Corporate information | http://www.slideshare.net/OneDevelopment/mvne-one-development-we-connect-thailand

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THE MVNE/MVNO/OPERATOR ECOSYSTEM = WIN/WIN 

The MVNE negotiates interconnection and wholesale deals, individually with the telecom network operators, and then packages the airtime with a set of its own value-added services and platform.



The MVNO or service provider signs a contract for airtime and services (revenue share or similar) with the MVNE of a telecom network operator according to their choice.



The MVNE manage different technical architectures, which must be accepted and validated with the telecom network operator in order to provide the MVNOs or service providers with the right tool to create their own packages.



The MVNO launches its operations on the market via the MVNE platform without the need to invest in its own technical infrastructure.



The MVNE can provide its services to an MVNO or to the telecom, network operator and can adapt these to the needs of the customer (MVNO or Telecom Network Operator).



The ability to sign up and support several MVNOs through a multitenancy architecture is critical for a win/win setup, and to achieve economy of scale.



As the business setup between the MVNE/MVNO/Telecom network operator is mostly revenue share based, it is in the interest of all stakeholders that the service becomes a success = win/win.

The MVNE offers a complete platform allowing MVNOs to launch their business in the Thai market with minimum investments and telecom expertise. At the same time, the platform helps the mobile operator easily manage the partnerships with MVNOs, obtaining revenue from wholesale at no extra costs.

MVNE’s has been a well-known solution for years, coincidently in countries who also rank in top of ICT31 and Economy, and has proven the ability to speed up the offering on new services and promotions by bypassing constraints and delays.

A MVNE solution would promote competition, increase efficiency, reduce duplicate investment, and inject greater vibrancy into the Thai telecom landscape, and the vision of building Thailand’s Digital Economy32.

The one-stop enabler would be very well suited as a trial for the coming National Telecom Pool33, maintaining the leasing of airtime between the private and public operators, as the MVNE is independent and not tied or linked to any specific operator.

31

ITU ICT Facts and Figures - The world in 2015 | http://www.itu.int/en/ITU-D/Statistics/Pages/facts/default.aspx Bangkok Post | 12/10/2015 | http://www.bangkokpost.com/business/telecom/726504/uttama-urges-tot-cat-reform 33 Bangkok Post | 25/04/2015 | http://www.bangkokpost.com/lite/topstories/540863/national-telecom-pool-slated-for-2015 32

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The MVNE will build the necessary infrastructure support all standard network interfaces and connect the core service platform to the telecom network pool.

It can bring in additional service from the vast pool of opportunities that already exist, or will be innovated with digital economy in Thailand, as well as actively seek and bring in MVNOs and service providers (IoT/M2M) to the service.

The low barriers of entry also enables more innovation and revenue options to small medium enterprises (SMEs) and start-ups, as the MVNE architecture allows constantly deployment of innovative offers in line with the spirit of the digital economy.

A successful MVNO or Service provider needs to meet a set of key criteria’s34 e.g.: 

The MVNO/Service provider management team needs to have a solid understanding of the mobile market, and have capabilities in the telecom ecosystem.



The MVNO/Service provider need to rapidly grow its customer base in order to reach financial breakeven.

As such, short time to market is absolutely critical



The MVNO/Service provider brand needs to be, or become widely recognized in the target market, in order to achieve the necessary scale level.

Therefor it is critical for these providers to be organized around a centralized facility like the MVNE, which yields economies of scale and operations and thereby yielding lower entry costs along with other benefits for the whole ecosystem, very similar to what we know from cloud services.

BENEFITS FOR THE MVNOS/SERVICE PROVIDERS        

Easy way to adopt new technologies, Do what they do best and outsource the rest, Get guidance - no telecom experience necessary, Significant reduction in necessary Infrastructure investments, Flexibility to position themselves optimally along the value chain, Getting to market quickly – months, before they would be able to launch otherwise, As the MVNE will host a large number Of MVNOs, it will be possible to achieve economies of scale and thereby cheaper services, Focus on sales, marketing and distribution while leveraging expertise and experience from a specialist service and infrastructure platform.

34

Factors for MVNO Success| ONE DEVELOPMENT | http://www.slideshare.net/OneDevelopment/factors-for-mvno-success

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BENEFITS FOR THE NETWORK OPERATORS        

Increase wholesale and revenue, Significant positive impact on Profit & Loss (P&L), Provide better utilization of the spectrum and achieve faster ROI for the associated CAPEX, A one-stop-solution, which dramatically decrease the time, needed to launch MVNOs, Save on infrastructure, subscriber acquisition costs, workload, and platform expenses with no risks, while gaining network market share, Don’t have to deal with administering the heavy processes associated with the launch and day-to-day operations of each individual MVNO, Higher service quality as a dedicated MVNE is more responsive to the different demands of each MVNO, Address specific/niche market segments through MVNOs and gain healthy and sustainable local and international MVNOs.

BENEFITS FOR THE COUNTRY         

Develop the telecom sector and enable digital economy, Efficient utilization of network resources - a national asset, Foreign and local investment in to the industry directly and in-direct, Consolidate a fragmented ecosystem to enable fast IoT M2M services,

Bridge digital divide with MVNOs serving unserved/underserved segments, Inject a new level of competitive robustness into Thailand’s mobile market, Become a “study book example” due to its significant value beyond Thailand’s borders, Create ICT-skilled employees35 directly/indirectly via the MVNOs, vendors, suppliers and business partners, Long-term benefits for consumers through additional, innovative and competitive offerings.

OPPORTUNITY TO DRIVE INNOVATION AND ECONOMIC DEVELOPMENT In this paper, we have outlined our recommendations for introducing a one-stop digital economy enabler to Thailand. We believe this approach will utilize the spectrum resources more effectively in Thailand, achieve the broader industry objectives of driving innovation and economic development.

A number of local and international players have already shown interest in establishing an MVNO business in Thailand.

Thailand’s unique characteristics and the rich diversity of the local market allow for a number of niche segments that an MVNO could target. Considering Thailand as a center of the ASEAN, - foreign and local investors have eyes on the opportunities to use the Thai ICT market as a springboard to other countries.

35

The Nation | 08-12-2015 | Govt to spend big on digital economy boast http://www.nationmultimedia.com/business/Govt-to-spend-big-on-digital-economy-boast-30274465.html

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ANNEX CAT TELECOM – TRUE 850MHz MVNO SETUP CAT Telecom has the operating license for the 850MHz frequency band 1. CAT has outsourced the network operations and management to “BFKT” (a True Group subsidiary).

2. BFKT build and operates the 3G network infrastructure, 3. CAT Telecom then leases the equipment from BFKT, 4. Another of True group’s subsidies “RealMove” buys 80% of the network capacity to resell under the True Move H brand, and thereby technically (on the surface36) functioning as a mobile virtual network operator (MVNO) to CAT Telecom.

36

Telecom Asia | 10-12-2015 | True-CAT deal condemned by Thai Auditor-General | http://www.telecomasia.net/content/true-catdeal-condemned-thai-auditor-general

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Yozzo is a Telecom Consulting firm, specializing in Information and Communications Technology (ICT).

WHAT WE DO We assist public and private sector clients in their decision-making through market insights, experience and technical skills.

Our clients includes Governments, Telecom Regulators, Telecom operators, MVNE’s, MVNO’s, Mobile device manufacturers, Retailers, Software & Service providers, Media and Broadcasting companies.

HOW WE DO IT We approach consultancy engagements, with the aim of adding significant value by identifying and pursuing: growth opportunities create products, services, and businesses that improve the efficiency, productivity, and profitability.

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