BARCELONA, Spain--The recession is over and wireless operators are finally growing again, but they are warning regulators in Europe, Latin America, and the United States to keep their paws off.
CEOs from some of the largest wireless operators in the world took to the stage here today, the second morning of the Mobile World Congress, to discuss the challenges facing their industry. While each of the executives participating in the keynote panel said he is optimistic about the future as more consumers upgrade to smartphones, they lamented the challenges of keeping up with high traffic demands on their networks.
Also high on their list of issues is making sure that regulators don't stifle growth in the nascent market of mobile data. With data traffic growing about a 100 percent a year, operators say they are doing all they can to keep up with demand from consumers. But they warn that regulators should not restrict new business models because it could slow investment in the networks.
Cesar Alierta, CEO of Telefonica, which owns and operates mobile networks in Spain and much of Latin America, said he wants to see regulators allow operators to recover more of the costs associated with upgrading their networks to keep up with increased traffic demands. He doesn't see a need for more regulation in the mobile market. According to the GSM Association, the mobile market is expected to generate $1 trillion in revenue in the next two years.
"I still don't understand why we are regulated at all," Alierta said. "What we need is competition and openness. If they let us do that, we'll do the rest. This is the fastest evolving industry in the world, and the regulators are always at least a step behind in their policy."
Vittorio Colao, CEO of Vodafone, echoed those sentiments. Regulators can't be on autopilot and simply apply rules for older generations of networks on the mobile networks of today and tomorrow, he said. Instead a new "industrial" approach is necessary to encourage investment, he said.
Randall Stephenson, CEO of AT&T, agreed. He said regulators should take a light approach in the rules they impose on wireless networks. History has demonstrated that when there is more certainty in the market regarding regulations that investment pours in, he said.
"Just let us know what the rules are," he said. "And then get out of the way and let us compete."
In the U.S., phone companies are unhappy with the Federal Communications Commission's new Net neutrality rules, which impose some restrictions on wireless networks. Verizon Wireless, the largest wireless operator in the U.S., has filed a lawsuit in federal court to challenge the new rules.
Meanwhile, in Europe, Vodafone's Colao said that he feels comfortable with how European regulators have handled the issue.
"The way that regulators have dealt with the Net neutrality issue in Europe is healthy," he said. "It recognizes the competitive environment. And I think it's something that U.S. regulators can learn from."
But he said that issues dealing with inter-carrier compensation, or the way operators compensate one other for accessing networks, need to be revisited. Specifically, the government tariffs that are charged to access networks between countries are too high, which leads to higher prices for wireless consumers.
Interoperability and cooperation
While each of the executives said healthy competition will fuel growth in the market, they also acknowledged the need to cooperate with one other to ensure that consumers get access to the best user experience from new services.
AT&T's Stephenson said that operators need to come up with standard ways of allowing consumers to port content across different devices, operating systems, and even carrier networks. He referenced the evolution of the SMS text messaging market to make his point.
In the early days, people could only use SMS to text one other if they were on the same carrier network, he explained. As a result, few people used the service. But then operators allowed inter-carrier SMS texting.
"And then y'all know what happened," he said. "Demand exploded, and a business model was created to enable services like Twitter."
Indeed, text messaging today is a significant revenue driver for every operator in the world, and it's all because consumers are not restricted in how they use the service.
Stephenson said the key to interoperability is keeping the customer in mind and delivering a service and experience that they want. He used Amazon.com as another example of success. He called the company's decision to turn its e-reader technology into an app after the Apple iPad launched, one of the gutsiest business moves. Instead of sticking to a model in which Amazon restricted its e-reader to its own hardware device, it began offering an e-reader app that works not only on its own Kindle device, but also on the iPhone, iPad and other devices. He called the Kindle an OS-agnostic user experience.
If the industry doesn't come up with business models that allow consumers to take their content with them across devices, operating systems, and networks, Stephenson added, then the industry risks losing control of the business model.
"You saw what happened in music," he said, "If you are slow to develop a business model, consumers will do it for you."
Stephenson sees a similar trend happening in the app market.
"If you want to go to another device, you have to buy the same app again," he said. "And if you go to a third device, you buy it a third time. That is not how customers want to experience this content."
Wireless regulators also have a hand in ensuring interoperability, especially when it comes to using devices while roaming on other carrier networks around the world. Today, 18 operators globally have deployed so-called "4G" LTE networks. There are another 184 networks planned over the next few years. But unless regulators harmonize their spectrum plans among different regions of the world, LTE devices for service from one carrier in one part of the world will not work on LTE networks in another part of the world. If something isn't done to coordinate the spectrum plans for these services, "handsets and tablets will not be interoperable across geographies," Stephenson said.
"Regulators need to be mindful of this," he said, warning that if efforts aren't made to bridge these divides, then the entire mobile market will not grow as much as it could. "I've never seen the entire 'pie' grow, if we don't have interoperability," he said.