Evolution of GSM and its Regulatory Policy structure

The primary objectives of this paper is to discuss the developments taken place since the evolution of GSM and the role of the regulatory policies which takes into account different aspects of the management and technical issues which has lead to the successful deployment of this technology worldwide.

1. Introduction

Global System for Mobile (GSM) communications was earlier known as Groupe Speciale Mobile, which was formed by the Confederation of European Posts and Telecommunications (CEPT) to design a pan-European mobile technology in 1982 [11]. In 1989, GSM was transferred to the European Telecommunications Standards Institute (ETSI) which defined GSM as an “internationally acceptable digital cellular standard” [11]. An enormous amount of development has taken place since the deployment of GSM.

There are over four billion GSM subscribers worldwide and the numbers are rising every second. This depicts the success of this fast emerging technology in an era where the competition in the wireless markets is on its peak with the introduction of new and innovative technologies.

Advances in the technology are not the only criteria that have led to the accomplishment of GSM in today’s world; the regulatory policies also play a major role in its success story. These regulatory policies define a number of objectives such as spectrum allotment, investments, price regulations, licensing of spectrums etc.

2. Evolution of GSM

Figure 1 shows the advancement of GSM since its creation in 1982 till present. 2G, 2.5G, 3G and 4G represent the various generations in which the development of the respective technologies had taken place.

Table 1 represents the technologies shown in figure 1 and their respective data rates, type of radio technology used and applications.

Figure 1: Hierarchical model for the evolution of GSM

Table 1 [2], [6], [12]

Terms used: GPRS- General Packet Radio Service; EDGE- Enhanced Data rates for GSM Evolution; UMTS- Universal Mobile Telecommunications System; LTE- Long Term Evolution; HSPA- High Speed Packet Access; HSCSD- High Speed Circuit Switched Data; WCDMA- Wideband Code Division Multiple Access; OFDMA- Orthogonal Frequency Division Multiple Access

GSM 2.5G packet switching standard, GPRS, and higher data rates offered by EDGE are collectively known as GERAN, i.e., GSM/EDGE Radio Access Network. The GERAN standard is maintained by the Third generation partnership project (3GPP) [1].

3. Latest technology deployment based on the GSM hierarchy

3.1 Universal Mobile Telecommunications Mobile (UMTS)

UMTS is a third generation (3G) technology in succession to EDGE. UMTS uses WCDMA (Wideband CDMA) technology as its air interface since WCDMA supports both packet and circuit switched communications [2]. UMTS has been established worldwide and is proving to be a competitive technology with “attractive multimedia services and global coverage” [2].

Efficient and fast packet access, improved quality of services, data rates up to 2 Mbps in 5 MHz bandwidth, multiple parallel services, future capacity enhancement provisions and decreased number of hand-offs by using Hierarchical Cell Structure (HCS) technique are some of the key features of UMTS [2]. Table 1 shows various applications of UMTS.

3.2 Long Term Evolution (LTE)

LTE is a fourth generation technology (4G) which is in the process of enhancement and will be deployed in 2012. LTE will use OFDM as its air interface with improved features and it is being built on the foundation of UMTS and HSPA. It is defined by the third generation Partnership Project (3GPP) and will have a highly flexible air interface with reference to its compatibility to other upcoming wireless technologies [4].

High spectral efficiency, flexible radio planning, reduced latency and all-IP architecture [12] are the key attributes of LTE. Data rates up to 100 Mbps on the downlink and 50 Mbps on the uplink [6] are expected to be provided, which are even higher than the data rates of UMTS or HSPA. The distinctive applications of LTE are given in table 1. LTE is bound to focus on quality of service (QoS) and quality of experience (QoE) which includes throughput, latency, reliability, security and traffic/service based models [5].

4. Regulation

4.1 Regulatory risk and sector growth

Investment and risk are closely related to each other. Companies tend to make huge profits by attracting the customers or investors, especially when the market is competitive. This also helps in improving the QoS of the products launched in the market and encouragement to new innovations can be observed by which a number of distinct products can be made available to the consumers [7].

Generally, investors are attracted more towards the low-risk businesses. Businesses that work with lower risks make less profit or get low returns on investment (ROI). Since there are more investors or companies in the markets involving low-risk businesses, the profit margins are less as compared to businesses that involve higher risks. Expansion of wireless or wired connectivity in rural areas is an example of a high risk investment. The risk involved could be the use of the services provided on a smaller scale. But if the services launched go well with the customers, then the ROI and profits would certainly be higher than compared to markets with lower risks.

The level of regulatory risks impact the growth of the telecommunication sectors by the following two ways:

1. Increasing the hurdle rates and decreasing the investment levels [7]
2. Increasing the total cost of ownership (TCO) and decreasing the penetration [7].

4.1.1 Investment levels and hurdle rates

Figure 2: Risk and investment projects [7]

The minimum amount of return that an investor needs before investing into another asset is termed as hurdle rate. Reduction in the hurdle rates due to a stable regulatory environment will increase the investment opportunities (as shown in figure 2) resulting in additional sector growth and consumer benefits [7].

4.1.2 Costs of operation and the total cost of ownership (TCO)

By reducing the operational costs the consumers will get services at reduced prices, for example paying less for making a call from India to United States. These reduced costs will increase usage and penetration. Due to this effect, the mobile operators can recover costs, therefore result in greater revenues.

“The total cost of ownership of a mobile phone is composed of all expenses that a consumer incurs in owning and using a mobile phone, including the costs of the handsets, connection, line rental (if any) and call charges including VAT” [7]. The retail prices offered to users are set in order to recover the operating costs and the network costs including non-network assets, i.e., depreciation and the cost of capital [7]. The TCO also includes the following [7]:

1. Direct and indirect taxes
2. Duties ( customs and excise duties)
3. Site acquisition costs
4. Cost of building and maintenance of base stations
5. Cost of power generation to operate the network
6. Cost of security measures taken by the operators.

The above costs must be low and it is the responsibility of the regulators and the government to control them so as to deploy the telecommunications network architecture by making significant profits.

4.2 Influence of Regulation on risk

Figure 3: Regulatory issues impacting on risk and operating environment [7]

The regulatory framework and regulatory conduct are considered together while managing a business plan(s) for any mobile operator(s) so that unnecessary risks can be avoided that involve increasing operating costs. Aspects to be considered while managing the mobile operator’s business plan is depicted in figure 3.

4.2.1 Regulatory framework

“License fees, license renewal, spectrum allocation, interconnection, Universal Service Obligation (USO) funding, numbering plans and dispute resolution processes” [7] are the areas of regulation which must be considered for studying the impact on risk and operating environments by the regulatory issues while considering the mobile operator’s business plans.

4.2.2 Regulatory conduct

The service provider’s business plan also depends upon the regulatory conduct once the regulatory framework is taken into consideration. The two main regulatory conducts are avoiding any unexpected changes and creating a reputation for consistency of the work [7].

4.3 Regulatory regime and Policy

4.3.1 Regulatory Regime

A well defined regulatory regime must be used for the smooth operation of the network providers and the services provided by them. The following elements are an integral part of the regime:

1. An updated statement of sector policy
2. A Telecommunications law
3. Set of regulations implementing the Telecommunications law
4. A National Regulatory Authority (NRA) such as NRA of India (NRAI), having sufficient resources, an independent status, funding and nomination of key persons and sufficient power to enforce laws and regulations [7]
5. An effective appeal process and dispute resolution process.

4.3.2 Regulatory Policy

A regulatory policy defines certain objectives such as the level of competition in the market, affordable rates proposed by the service providers, coverage of network and its easy access. The policies must be followed based on the priorities assigned by the regulators or government. While designing the policies objectives of the country, geographical distribution, economy and development of the telecom sector till date must be considered [7]. The policy structure is different for different countries depending upon the designing criteria mentioned earlier.

Factors affecting the regulatory policies include the type of technologies used, level of competition in the market, demand patterns, supply structures, size of the market and purchasing power of the consumers in the respective countries [7].

4.3.3 Price Regulation

Price regulation is determined by the market structure. If the market structure is unstable or there exists a competitive failure, price regulation is not preferred for such scenarios and restriction is imposed.

Wholesale prices of voice and data, collectively known as interconnection rates, are offered at relatively low rates due to which there is a broad consensus to regulate the prices. Appropriate interconnect rates must be set in order to regulate these prices. If the regulation of the interconnect rates are done poorly, then market distortions would be visible and competition would reduce effectively.

4.4 Licensing and spectrum allocation

It is evident that spectrum is a scarce resource and its allocation and licensing must be regulated by the government or regulators to preserve the resource and maintain competition in the telecommunications market.

4.4.1 Introduction of Spectrum caps

“Spectrum caps have been introduced in several countries to implement the competition policy in mobile communications markets” [9]. Guidelines set by the regulators or governments are as follows:

1. No single mobile operator can acquire all or most of the total spectrum either at the time of auctions or subsequent mergers or deals between operators [9]
2. Anti-competitive measures must be taken by preventing any mobile operator(s) to acquire more or all of the spectrum
3. Some parts of the spectrum are reserved for new entrants in the market or for upcoming technologies during the auctioning of the spectrum.

4.4.2 Impact of Mobile Broadband

Growing demands for mobile services for voice and data, innovations and distribution of mobile services and enormous progress in wireless technologies have led to the modification of spectrum caps in some countries.

The requirement for the spectrum has been large due to large mobile broadband markets which are considering taking up a part of the spectrum. Voice-based services have used wide bandwidths in the past. The emerging mobile broadband market, for example HSPA 7.2 offered by AT&T, introduces a challenge for regulators to impose spectrum caps as the voice traffic has increased immensely. These mobile broadband technologies require wider bandwidth than required by the earlier technologies.

Data services offered by the mobile broadband operators have generated significant traffic and revenues in the developed markets in Europe, Asia and North America [9]. Flexible ways are being introduced to allocate spectrum to mobile operators providing these services. As per [9] released by the GSMA (GSM Association) on January 2009, new frequency bands, typically, 2.6 GHz and UHF (Ultra High Frequency) have already been utilized in many countries either by planned auctions “or other forms of spectrum attributions in bands” [9]. The utilized spectrum bands are as follows:

1. Personal Communication Services (PCS) have used 1.8/1.9 GHz bands [9]
2. Advanced Wireless Services (AWS) have used 1.7/2.1 GHz and 1.9/2.1 GHz bands [9].

The growth of mobile broadband and the expansion of frequency bands have raised questions to impose formal restrictions on the amount of bandwidth to be given to the mobile operator(s), keeping in mind the competition policy and entry of new entrants in the market.

4.4.3 Band plan of frequencies in North America-United States [9]

Figure 4: U.S. 700 MHz band plan [9]

FCC had auctioned for 700 MHz spectrum in 2008 and released the band plan as seen in figure 4. Following are the conditions that were set by the FCC for the 700 MHz band auction:

1. “No spectrum caps, but a screening guideline of 95 MHz” [9]:- An operator’s spectrum holdings and guidelines for a check on competition problems could be reviewed
2. “Technology Neutrality” [9]:- Homogeneous products can use other or similar technologies to make the products be available in the market
3. “Anonymous bidding” [9], which was in contrast to the earlier AWS-1 auction of 2006
4. “Open access requirement for block C (2x11 MHz in 12 Regional Economic Area Groups) covering open devices and open applications. It is yet unclear how these conditions will be applied in practice” [9]
5. Reserving 20 MHz (Block D) for public/private partnership for public safety requirements while deploying a new nationwide broadband network [9]
6. “Mix of licenses by different geographical groupings” [9]

The total winning bids for this auction was about $19 billion [9]. “Verizon wireless and AT&T mobility accounted for over 80% of this sum (mainly Block C and Block D respectively)” [9].The major winners of the bidding process are likely to set up the upcoming LTE technology in this spectrum. Cost-effective coverage in rural areas will also be examined under the 700 MHz frequency plan as compared to AWS or higher frequencies [9].

5. Universal Access and Universal Service

The terms Universal Access and Universal Service are inter-related but are different from each other. Universal Service (US) is defined as “provision of telecommunications services to all households” [10] and in high density rural and urban areas. According to [10] by GSMA, “penetration of mobile service has reached 75% of household in urban areas” [10]. The mobile services are acquired at affordable rates and provision for the latest GSM technologies such as HSPA and UMTS are under process worldwide.

“Ensuring all people have reasonable means of access to a publicly available telephone and emerging services in their communities” [10] is termed as Universal Access (UA). In majority of the countries, around 95% [10] of the population can economically afford the mobile networks.

6. Mobile coverage related to penetration and population of countries

Figure 5: Penetration vs. population under GSM network [10]

Penetration of coverage with respect to the population is different for different countries, depending mainly upon the emerging power of the particular country in terms of GSM technologies. Penetration is the highest for Europe, closely followed by North America and Asian countries like Japan and South Korea. This is visible from the graph in figure 5. The GSM coverage is not the centric point of discussion, the usage of the coverage by the population is the key issue, also known as penetration.

Figure 6: GSM coverage and penetration schematic representation for India [10]

From figure 6, it is evident that India’s GSM network coverage has been doubled from 2005 to 2006 covering almost 60% of the population. The penetration has risen significantly to 11% [10] in 2006. By the end of June 2009, the total mobile subscribers were raised to 315.8 million [8]. Approximately 8.89 million GSM subscribers were added in the same month [8].

7. Current Regulatory issues in the GSM world

7.1 Promoting development regulation in developing markets

Mobile communications have seen major developments in developing markets like India and China in recent years. Demands for mobile broadband internet access have also risen over these years. “According to Wireless Intelligence, there were 3.8 billion mobile connections in September 2008, including 340 million in Africa and 1.6 billion in Asia” [3]. The number of HSPA mobile broadband customers had crossed the 50 million mark in August 2008 [3].

7.2 Licensing

The operating licenses must be separated from the spectrum licenses according to the GSMA Public Policy Annual Review 2009 report. Since the spectrum licenses are required by the mobile operators to own the spectrum, operating licenses are required for the improvisation of services, maintenance work on towers or base stations and the effective operation of the network spread in large geographical areas [3].

7.3 Effective Spectrum utilization

1. The use of analog TV which operates in the UHF band between 470-862 MHz [3] will be shut down to utilize the same bandwidth for new and innovative services. The same band can be used for digital TV and mobile broadband which provides better QoS at competitive rates. “The mobile industry believes that 100 MHz of the low frequency spectrum” [3] will be reserved for mobile broadband services
2. Deployment of mobile broadband services in the rural areas has been started at a steady pace since the auction of the 700 MHz spectrum auction. This is because “a mobile broadband network operating at 700 MHz will only need one-third of the base stations it would need if it were using 2100 MHz” [3] This is because at lower frequencies the radio signals has the capability to travel large distances with greater penetrating power. It is a cost-effective solution for the mobile operators and improvisation in the urban areas can also be done
3. New spectrum has been allocated for the upcoming services like LTE. In addition to high data rates, lower network operational and capital costs will be incurred, as the number of base stations to be constructed would be less
4. According to Wireless Intelligence, the numbers of users using the HSPA mobile broadband technology are rising at 4 million per month in over 93 countries [3]. By the end of 2012, 300 million additional users will have access to HSPA technology across Asia, Europe and Africa operating in the low frequency spectrum [3].

8. Conclusion

GSM has been a leader in the race of wireless mobile technologies for the past three decades. The development of wireless technologies following the GSM hierarchy and the enhanced features and services offered by them will enable GSM technologies to be on the top spot for many more years to come.

Earlier the main competitor of GSM was CDMA technology. GSM has more users than CDMA and the network coverage established by GSM is spread far more than CDMA worldwide. There are over 4 billion users of GSM whereas there are just 502 million global subscribers [13] of CDMA when compared to GSM.

A lot of speculation has been made about WiMax, a major rival to the UMTS/HSPA technologies of the GSM family. The upcoming LTE will prove to be a superior technology when the technical specifications such as data rates are considered.

The effective use of the GSM spectrum will encourage more advanced technologies with even better QoS at competitive prices.

References

[1] Evolution of GSM into next generation wireless world

Chitrapu, P.; Aghili, B.; Systems, Applications and Technology Conference, 2007. LISAT 2007. IEEE Long Island; 4-4 May 2007;

Digital Object Identifier 10.1109/LISAT.2007.4312632

[2] GSM Evolution towards Third Generation UMTS/IMT2000

Prasad, N.R.; Personal Wireless Communication, 1999 IEEE International Conference on

17-19 Feb. 1999;

Digital Object Identifier 10.1109/ICPWC.1999.759583

[3] GSMA Public Policy Annual Review 2009

http://gsmworld.com/documents/GSMA_Public_Policy_Annual_Review_09.pdf?PUPOL=ANREV

[4] LTE: The Evolution of Mobile Broadband