Annual book 2012-eng

1. 2012PerformanceandAccountabilityReport

3. 2 - 3 Letter of Transmittal To: H.E.ALTANKHUYAG Norov Prime Minister Mongolia Your Excellency, I am pleased to present you with the Communications Regulatory Commission’s Fiscal Year 2012 Performance and Accountability Report. The report has been prepared in accordance with Article 8.11 of Law on Com- munications of Mongolia, 2001. The report contains an Overview of information and communication technology, telecommunication, broadcasting, postal sector, and a summary of the key initiatives of the CRC on the regulatory issues with reference to the functions mandated by the Law. The Audited Financial Statement of Accounts of the CRC-2012 has also been included in the Report. BALGANSUREN Batsukh Chairman & CEO December 2012

4. CONTENT Letter of transmittal Review of general regulatory Environment in the sector CRC organizational structure CRC legal environment Telecommunications and information infrastructure development Sector development policy and strategy Regulatory frameworks in The sector Introduction of the consulting project Classification of licensees Consumer protection And quality of services 5. 6. 8. 10. 12. 14. 16. 19. 22. 25.

5. 27. 29. 30. 33. 46. 47. 47. 51. 52. 54. Radio frequency Spectrum regulation Regulation of broadcasting Regulation fee and Interconnection tariffs Key statistics - 2012 Regulation of postal sector Attachments A1. Lists of regulations and procedures A2.Classification of communication’s licensing A3. Audited financial report Glossary of terms

6. Review of General Regulatory Environment in the sector Overview of the Communications Regulatory Commission (CRC) INTRODUCTION The CRC is an independent Mongolian Government Regulatory Authority, which was established by the Communications Act of 2001. It is charged with regulating and supervising a wide range of subjects including competition issues, the provision of networks and services for fixed line and wireless telecommunications, television, radio, and satellite transmission, spectrum management, postal services and the Internet to ensure that the public interest is well-served. The CRC’s jurisdiction covers all regions of Mongolia. CRC MISSION In September of 2009, CRC approved “The Strategy and Action Plan for 2009-2013 year” and we are implementing related measures in each year action plan. OUR VALUES • Fairness; • Transparency; • Efficiency; CRC MAIN OBJECTIVES To facilitate access to safe, reliable and affordable ICT and Broadcasting networks and services by pursuing, where appropriate, commercially viable and competitive environment; • To support innovation and expansion in ICT, Broadcasting and Postal markets, through the efficient and impartial oversight of network and service providers and the enforcement of their obli- gations including the USOF. • To protect the interests of users of networks and services in the sector in which we regulate. • To Increase tele-density and access to ICT and Telecommunications services in the country at affordable prices, • To establish an interconnection regime that allows fair, transparent, prompt and equitable interconnection,

7. 6 - 7 • To re-balance tariffs so that the objectives of affordability and operator viability are met in a consistent manner, • To protect the interest of consumers and to address general consumer concerns relating to availability, pricing and quality of service and other matters, • To monitor the quality of service provided by the various operators. In order to support our mission, values and objectives, the CRC employs the following workplace principles: 1. Well informed Through research, investigation, inter-agency cooperation, ongoing public consultations, and by monitoring and resolving complaints and disputes data, we commit to operate from a solid base of evidence. 2. Openness By publishing objectives, procedures, annual strate- gic plans, divisional remits and responsibilities, decision making processes, the reason for our decisions and by conducting open consultations, we seek continuously to engage with our stakeholders to inform them, and to have them inform our policy decisions. 3. Timeliness By setting organizational timeframes and goals for granting licenses, consultations, investigations, adjudications, resolution of disputes, and by publishing these timeframes, we are committed to providing an efficient service without sacrificing thoroughness. 4. Profession- alism By adhering to best practice and laws on handling confidential information, adopting international standards, committing to staying informed, setting and meeting deadlines, and by offering an open complaints channel, we seek to reflect a consistently high level of professionalism in everything that we do. 5. Account- ability By evaluating our own effectiveness and publishing these findings in our Annual Report to the State Ikh Hural; operating a complaints procedure; assigning particular functions to named individuals; providing an appeals process; an independent external auditing process; and setting out open consultation, decision making and complaints processes; the CRC is fully accountable for its actions. 6. Quality of human resources By ensuring that we employ the best staff available; training these people in the CRC’s methods of carrying out its operations; giving individual contracts setting out clearly what is expected of them; affording them comprehensive training to improve skills and ensuring whether they receive annual appraisals; offering a competitive salary and an incentive bonus scheme; we are committed to attaining higher staff standards.

8. CRC ORGANIZATIONAL STRUCTURE The CRC consists of seven commissioners, appointed by the Prime Minister for six-year terms. The Prime Minister appoints the Chairman and CEO, and six non-executive Commissioners. The list of Commissioners during FY 2012 (since October) was the following: Commissioner Mr.AMGALANBAATAR Delegdorj Commissioner Mr.DAVAAJAMTS Choindon Commissioner Mr.MUNKHBAT Buyandelger Commissioner Mr.JADAMBAA Tsagaan-Uvgun Commissioner Mr.ENKHTSOG Davgadorj Commissioner Mr.MYAGMARNARAN Bavuujav Chairman & CEO Mr.BALGANSUREN Batsukh

9. 8 - 9 The Commission’s Chairman leads the Commission as head of the agency. The Commission has five operating departments that implement the following functions: The Commission’s organizational chart is below in figure. 1. Justice, Information and Administration Department – general counsel and legal advi- sory, consumer protection, investigations team, compliance, complaints and dispute resolution, public relations, administration, finance, international relations, human resource and training, IT and website management. 2. Regulatory Department – licensing, development of standards, technical aspects of interconnection, numbering assignments, technical requirements and Internet affairs. 3. Radio Frequency Regulation and Monitoring Department – radio frequency spectrum planning, technical analysis, radio frequency allocation and management, radio frequency monitoring and inspections, radio frequency utilization licensing and broadcasting. 4. Market and Tariff Regulation Department – market strategy analysis, market research statistics, competition and network access, tariff and interconnection, and USOF. 5. Postal Regulation Department – international, domestic postal and parcel service licensing and regulation, interconnection, define reserved areas of postal service and USP, postal zip code assignment and regulation. THE CHAIRMAN’S COUNCIL IS RESPONSIBLE FORMAKING DAY-TO-DAY DECISIONS AND ASSISTING TO THE CHAIRMAN. Chairman and CEO The CRC Commissioners-6 Justice, Information and Administration Department Regulatory Department Radio Frequency Regulation and Monitoring Department Market and Tariff Regulation Department Postal Regulation Department

10. CRC LEGAL ENVIRONMENT Law on Radio Wave (1999) The Law on Radio Wave was approved in 1999. The purpose of this Law is to regulate relations derived from allocation, usage, protection, ownership and possession of radio waves. 1999 2001 2001 2003 Law on licensing business activities (2001) The Law on licensing business activities was approved by the Parliament in 2001. The purpose of this Law is to regulate relations related to issuance, revocation and cancellation of licenses for engagement in some utility activities that require particular circumstances and specific professions or might be danger- ous to public interest, human health, environment and national security. Licensing in radio communications and telecommunications is subject to articles 2.2. Law on Communications (2001) The first Law on Communications was approved in 1995 and it was revised in 2001. The purpose of Law on Communications is to regulate relations between the state, citizen and legal person on construction, operation and protection of communications networks in Mongolia. Law on Post (2003) The Law on Post was approved by the Parliament in 2003. The purpose of this Law is to regulate relations associated with postal networks, their operation and maintenance. The CRC’s regulatory functions are subject to the following laws and regulations: • Law on Radio wave, • Law on Communications, • Law on licensing business activities, • Law on Post, • Law on Governments’ Special fund and etc. • Law on competition, • Law on Signature and etc.,

11. 10 - 11 OBJECTIVES A regulatory approach that promotes benefits to end-users and contributes to an efficient and competitive Mongolian communications sector. 2006 2010 2011 Law on Governments’ Special Fund (2006) The Law on Governments’ Special Fund was approved in 2006. The purpose of this law is to regulate Governments’ special funds, including USOF in the ICT and Telecommunications sector. Law on Electronic Signature (2011) The Law on Electronic Signature was approved in 2011. The purpose of this law is to regulate relations regarding determi- nation to the legal basis for the use of electronic and digital signatures, and public key infrastructure. Law on Competition (2010) The Law on Competition was approved in 2010. The purpose of this law is to regulate relations regarding creation of conditions for fair competition in the market, market dominant, and the prevention of any activity contrary to competition and prohibition, and regulatory authorities to determine the legal basis. Regulatory rules and procedures Regulatory functions and activities are subject to the rules and procedures that are issued and approved by the CRC. A list of procedures and regulations are available at Attachment-A.1. >

12. TELECOMMUNICATIONS AND INFORMATION INFRASTRUCTURE DEVELOPMENT The state owned Mongolian telecom backbone network consists of approximately 1400km of digital microwave, more than 12,100km of opti- cal cable links, plus more than 400 VSAT systems linked to Ulaanbaatar and all provincial centres. Mongolia has made considerable progress in developing its information and communications infrastructure in recent years, particularly in the availability of modern basic service and cellular services. The number of main fixed lines grew from 3.5 per 100 inhabitants in 1996 to 6.1 in 2011. Mobile telephone penetration rate per 100 people has grown from 9.2 in 2002 to 103.8 in 2011. The number of cellular subscribers grew from 1800 in 1996 to 2.9 million in 2011 (December) with the licensing of five operators. Mongolian Telecommunications backbone network Special symbols City Center of soum Settlement Boundary Train stop ICNC (state owned company) fiber optic network Mobicom LLC fiber optic network Ulaanbaatar railway fiber optic network Gemnet LLC fiber optic network Skynetworks LLC fiber optic network Project on “Extension of backbone network“

13. 12 - 13 Mobicom Corporation, RailCom, a subsidiary of Mongolia Railways, and Gemnet LLC operate their own private fiber optic and microwave infrastructure along main backbone networks, road and railways. This creates a favorable environment for both the Government and customers, by providing affordable bandwidth while increasing returns on state owned assets and investments. A number of licensed VSAT service providers also provide various value-added services such as managed network services and on-line services of commercial bank services. The Internet service market is fully liberalized and there are approximately 657.009 Internet subscribers by the end of 2012. As the broadcast media has an important role to play in the development of Mongolia by providing information to its citizens, the equipment of radio and TV studio, transmission systems and TV broadcasting stations were upgraded in 2006-2008. Within this framework, Mongolia started broadcasting 6 domestic digital TV (including the National Public TV and other commercial TV channels) through whole Mongolia. Mongolia will ensure that the policy and regulatory environment allows fair and competitive provision of infrastructure and services. Two 3G/ GSM system operators - Mobicom and Unitel LLC - and two CDMA system operators – Skytel LLC and G-Mobile LLC - are providing mobile communications services in Mongolia. There were 50 Internet service providers in the market at the end of 2012. Internet service providers connect with key ISPs via fibre-optics networks; these are connected to Russia and Chi- na, and are operated by the Railcom Center, Gemnet Company and MobiCom Corporation.

14. SECTOR DEVELOPMENT POLICY AND STRATEGY ICT applications can support sustainable development, in the fields of public administration, business, education and training, health, employment, environment, agriculture and science within the framework of national e-strategies e.g. e-government, e-commerce, e-learning, e-health, e-environment, e-agricultural and e-science. The Information Technology, Post and Telecommunication Authority (ITPTA) of Mongolia is responsible for all ICT policies, coordination and implementation under the direct auspices of the Prime Minister of Mongolia. The ICT sector has been given great priority and is regarded as the leading direction of the Government development strategy. The government’s development strategy considers the ICT sector among its greatest priorities. The government’s 2005 Mid-term Strategy for the Development of the ICT Sector will be implemented according to the E-Government Master Plan, and the subsequent E-Mongolia National programme. The E-Mongolia National programme intends to establish an information society and the foundation of a knowledge based society in Mongolia through the extensive use of ICT in all sectors of our society so that, by 2014, Mongo- lia becomes one of the top ten ICT developed countries in the Asian Region. The Visions of the “e-Mongolia” National program are to establish the information society and the foundation of the knowledge based society in Mongolia by enhancing extensive application of ICT in all sectors of society and to make Mongolia one of the top ten ICT developed countries in Asia on a per person basis by 2014. Mongolia’s E-Government initiatives include a build-up citizen-centred, result-oriented, mar- ketbased government by utilizing ICT throughout the government sector, including central and local administrative units. The Government Action Plan 2012-2016 defines practical actions concerning the introduction of e-Government into all government institutions at all levels, to modernize and cen- tralize the basic telecommunications network to international broadband standards, to provide an integrated information system by creating a Nationwide numbering code, to establish an integrated information network for hospitals, to provide computers to homes and schools in all population centers with a regular source of energy.

15. 14 - 15 Mongolia’s National Broadband program, to be implemented by 2015. Its main goals are to improve the quality of life for all citizens by: • by enhancing industrial productivity via ICT, to upgrade Mongolian competitive- ness; • to establish a high speed DWDM backbone network and national IP/MPLS network and migrate to IPv6. • to provide universal data service for public and private organizations and households. This policy document was based on global ICT development trends guided by the monitoring and evaluation on midterm implementation strategy of the World Summit on Information Society-2008 conducted by international Telecommunications Union (ITU), 10 proposed objectives up to 2015, the monitoring and evaluation on information and communications technologies of European Union countries. Also, as a part of the objective to support the development of business and the private sector, the Government intends to create a favourable policy and regulatory environment for Public and private partnership (PPP) development in the ICT sector. As a first step, the Government implemented the policy and regulatory framework for building the appropriate regulatory and management structure, and renovation of the backbone telecommunications network. The State policy on ICT development up to 2021 was drafted in the end of 2011 and it based on the MDGs based comprehensive National Development Strategy of Mongolia; “E-Mongolia” national program and other sectors’ policy guidelines and programs; the studies and recommendations from international organizations; and ICT policy documents of some foreign countries. • by increasing wide range, always-on, applications such as e-government, e-commerce, e-learning, e-health etc; • through high speed and low cost broadband network with an IPv6-based backbone network (IP/MPLS) which covers all of Mongolia;

16. The Internet of things, cloud computing and mobile Internet networks convergence, and more, are all important advances. The next generation of Internet addressing - IPv6 – will be essential to their development. A rich supply of Internet addresses is vitally important to the deployment of many new technologies including cloud computing, smart grids, RFID, IPTV among others. The telecommunication sector has been subject to reforms since the end of the 1990s. It should be mentioned that Mongolia signed an agreement with the WTO in 1997, which oblig- es it to liberalise the telecommunication sector. The agreement makes provision for a roadmap, which includes the allocation of a second mobile licence, a licence for a data transmission operator, a licence for a fixed-line operator and the partial privatization of the incumbent operator. The opening of the telecommunication sector created a new context for the incumbent operator on the one hand, and on the other necessitates a de!nition of the action rules for operators who plan to establish themselves in the Mongolian market. In order to organize the sector in this new framework, a Communica- tions Act was promulgated in 2001. The CRC, established by the Communications Act of 2001, is an independent Mongolian Gov- ernment regulatory agency. The CRC regulates and supervises a wide range of subjects including competition issues, the provision of networks and services for fixed line and wireless telecommunications, television, radio, and satellite transmission, spectrum management, postal services and the Internet throughout Mongolia. Key operators like Mobicom Corporation, Rail- Com, a subsidiary of Mongolia Railways, and Gemnet LLC operate their own private fibre-optic and microwave infrastructure along main backbone networks, roads and railways. A number of licensed VSAT service providers also provide value-added services such as managed network services and online commercial bank services. During 2009, the Government of Mongolia introduced DTH multichannel TV broadcasting covering all of Mongolia by satellite. The CRC licensed earth stations, which began operations in July 2009, for the Ku-band satellite; they provide capacity for more than 20 DTH television channels. In November 2009, the CRC granted two IP television (IPTV) and two Mobile TV licences in Ulaanbaatar, the capital city. This important step introduced IP services and new mobile applications and content to Mongolian people. In April 2011, Univision LLC was launched the first IPTV services in Ulaanbaatar. In 2012 Skymedia IPTV service also launched in Ulaanbaatar. In 2010-2012, four existing mobile operators- Mobicom Corporation, Skytel LLC, Unitel LLC, G-Mobile LLC - began 3G services. The CMMB and DMB standards have been adopted in Mongolia for the provision of mobile digital television services. These services will be established by private companies who make the choice of technology between the systems. Oth- er than the fact that they are most likely to operate within the Band III Television Band, there REGULATORY FRAMEWORKS IN THE SECTOR

17. 16 - 17 is no specific requirement that they be interoperable with the terrestrial broadcast standard. In October 2010, CRC and ICTPA jointly prepared and submitted the “National Program on Radio and TV Broadcasting Transition to Digital Technology” to the Mongolian Government, Government of Mongolia has been approved and decided to migrate all analog television to digital, and has announced that analog services will switch-off on 31 July 2014. The broad objectives for the Mongolian Government’s DTV migration plan can be summarized as follows: 1. Analogue switch off will occur 31th of July 2014, 2. The Government plans to migrate all of the terrestrial rebroadcast transmitters to digital under a Government-funded project. 3. The Government would like the first stage of this project to be completed by October 2011 (basically a pilot programme to demonstrate the system capability and implementation). De- pending on costs, this might establish up to ten provincial or regional transmitters and the necessary up-linking arrangements. 4. The Government would like to see at least ten SDTV programme services on the digital multiplex available across the country. 5. Guidance has yet been provided about coverage of digital services. A reasonable assumption would be that the digital services should, as a minimum, match the coverage of existing analog transmissions and that when necessary the DTV coverage be extended to cover growing urban areas, and to address any nine coverage deficiencies with the current analog services. 6. If possible DTV implementation should allow for competitive proposals for the provision of up-linking and satellite capacity for distribution of the services. 7. The proposed initial services should share a single multiplex. 8. The ability to insert local programs Aimag Centre transmitters should be incorporated within the design, even if implementation is not carried out immediately. These services should, if possible, be part of the single multiplex. 9. The initial Government-funded implementation will install DTV in all existing 374 sites.

18. CRC established its nationwide System for Spec- trum Management and Monitoring (SMMS), which includes mobile, portable and fixed radio monitoring and inspection facilities. With help from the World Bank, CRC purchased the SMMS equipment to strengthen its regulatory capacity, radio frequency regulation and broadcasting services and to properly implement ICT sector reform policies and promote competition and growth in the sector. Services to provide with triple play service access to customers thanks to Internet protocol technology is blooming now. Main confronted issues to develop the service are network quality, video, TV quality and copy right issues. Also difference between terminology “triple play service” and “IPTV service” needs to be clear for customers and the service operators and it is required to be reflected in the license classification. Digital TV standards Regarding the decision on DTV transmission standards, the CRC used one approach that is instead of organizing wide and time consum- ing field tests, CRC organize 4 Research groups which consist of local universities and experts of ICT sector to give a recommendation based on the comparative field tests of the different standards made in many countries in the world. In conclusion of the research in the end of 2011, CRC has decided to use DVBT2 for terrestrial transmission DVB-C2 for cable networks and DVB-S2 in use for the Direct to home services. ITU-UNESCO Broadband Commission for Digital Development set four important targets to be reached by 2015. These are: • Making broadband policy universal. By 2015, all countries should have a national broadband plan or strategy or include broadband in their universal access/service definitions. • Making broadband affordable. By 2015, entry-level broadband services should be made affordable in developing countries through adequate regulation and market forces (for example, such services should cost less than 5 per cent of average monthly income). • Connecting homes to broadband. By 2015, 40 per cent of households in developing countries should have Internet access. • Getting people online. By 2015, Internet user penetration should reach 60 per cent worldwide, 50 per cent in developing countries and 15 per cent in least developed countries Broadband network development and introduction of services issue, which is the main topic of the 12th ITU Global Symposium for Regulators’, is also confronted and crucial issue for Mongolia.

19. 18 - 19 INTRODUCTION OF THE CONSULTING PROJECT Contracted consulting company: “Macmillan Keck Attorneys & Solicitors” Communications is changing very rapidly today. Worldwide, the information and communications technology (ICT) sector is characterised by rapid convergence of services and technologies. Mongolia is no exception, and the changes in market and technology need to be met with commensurate changes in regulatory policy. An increasing variety of wire-line and wireless technologies carry a wider range of types of communications than ever before. Voice calls are made over the Internet using software on user devices, no longer just across traditional mobile networks or a public switched telephone network (PSTN). Consumers communicate across fibre, copper, mobile (2G, 3G and now 4G) Wifi and Wimax networks among others. Video and audio content can be distributed across satellite, cable and traditional broadcast technologies – and over the Internet. Very often any one communication service will rely on a combination of this proliferating array of technologies. Very often also, any one network technology is used to carry many different kinds of services. Leaps in information technology have created ever-more useful devices and an extraordinary multitude of innovative platforms for communication “over the top” of the networks. The development of information technologies and communication networks has transformed the potential of the ICT sector to bring great benefit to countries’ populations, business sectors and Governments around the World. Im- proved communications among people, businesses and Government makes the public and private sectors more efficient, stimulates innovation, attracts investment, leads to economic growth and can strengthen social inclusion. Mongolia too can benefit from these opportunities. Indeed, Mongolia’s large geographic ter- ritory and small population make telecommunications a vital element of the nation’s economic and social development, and its security. Many countries are formulating national ICT policies and introducing next generation legisla- tion to ensure that they enjoy the fullest possible benefit from the ICT sector’s transformation and role as a key engine for growth. These policies have both supply side and demand side elements. On the demand side, ICT policies have focused on use of ICTs by the public sector (e.g., eGovernment, eHealth, eEducation) and increasing ICT literacy in the population. On the supply side, they focus on development of networks, including higher speeds, greater robustness and wider geographic coverage. Competition has been the cornerstone of successful policies for the provision of networks and services. Ensuring that public resources, in Project title: Renewing the vision-Mongolian communications licensing and regulatory policy in an era of convergence (Financed by the World Bank)

20. particular radio spectrum and land, are made as available as possible is increasingly at the fore- front. In some countries, greater private sector investment in such networks is the goal. In others, the public sector has been prepared to sub- sidise large infrastructure projects for backbone networks, access networks that reach customers, and international connectivity. In some cases, cooperatives among operators (and sometimes including the Government) have shared risk and investment costs over essential infrastructure. In this context, the Communications Regulatory Commission (CRC) and its advisers are reviewing the existing licensing regime with the purpose of ensuring it strengthens competition, attracts investment, and deals with the challenges and opportunities of convergence of technologies and services. Key aspects of the Mongolian communications market • Significant growth in penetration and revenue for the past 5 years • Horizontally segmented markets (wholesale vs. retail) • State-owned fibre-optic core and access network (Netco) • Some self provisioning of national backbone infrastructure • Active and competitive mobile sector • Competitive broadcasting sector with large number of CATV providers Role of licensing • Optimizing the allocation of scarce resources • Defining market structure • Managing market forces • Vetting market entry • Reinforcing regulatory certainty and enforcement • Generating revenue (cost-recovery) • Expanding networks and services Key aspects of the current approach to licensing • Licence required to provide “public communications service” • Separation policy as basis of licensing framework • Licence classes separated into A (infrastructure and network), B (services) and C (content) • Applications for all licences subject to individual approval • Some limitations on the number of licences due to concerns over market size, competition, duplication • Certain licences limited to fixed geographic scope • Fixed annual licence fees (and upfront fees for VoIP) Licensing regime issues for discussion The CRC’s advisers have met with sector stakeholders, including discussions with the Information Tech- nology, Post and Telecommunications Authority (ITPTA) and several of the country’s mobile and fixed line service providers and broadcasters. As a basis for that consultation, the CRC seeks to discuss the following areas where reform might be considered in order to keep pace with changes in technology and the market. :

21. 20 - 21 1. Rationale of the licensing framework: The current licensing framework relies on: (1) distinctions between facilities, services and content, and (2) distinctions between wholesale and retail services. How consistently are these distinctions applied? Do they need streamlining? How conducive is the current licensing framework to convergence? 2. Licence scope: How clear are the scope of the different licence categories (e.g., definition of licence classes and types? How could they be improved? 3. Necessity of certain licence types: Are there any types of licences that are redundant or unnecessary (e.g., data hosting licences and content aggregators)? Should the CRC discontinue licensing requirements in any cases and address concerns through other regulatory means? 4. Technology neutrality and convergence: What licensing requirements hinder the ability of operators to take full advantage of service convergence and maximise the usage of their networks? Should a more technology neutral and converged licence classification framework be adopted? 5. Limitations on the number of licences: What limits should apply to the numbers of licences for services? Should the CRC focus more on necessary qualifications to enter markets where excessive number of licences may reduce quality (e.g., cable TV)? 6. Monitoring and enforcement: A number of comments have been made about the inadequacy of regulatory monitoring and enforcement. Should the CRC add terms and conditions related specifically to monitoring and enforcement in licences in order to reinforce this aspect of the CRC’s functions? Should the CRC employ greater use of performance bonds to ensure compliance with licence conditions? 7. Licence duration and renewal: How are licence durations perceived? Should the CRC review licence durations with a view to rationalising them based on objective factors, taking into account the useful life of the underlying assets, so as to allow for an acceptable return on investment for operators? How should the CRC balance the importance of investor confidence through likelihood of renewal and the need for flexibility in regulating where technologies and markets are constantly changing? 8. Geographic scope: Licences are typically set according to geographic location, and some radio spectrum licences will naturally remain geographic in limitation. However, should the CRC as a general matter aim to grant licences on a national level (i.e., generally without geographic restrictions)? Would this help allow operators to take advantage of economies of scale? 9. Licence fees: The CRC is reviewing its licence fee framework. In light of the growing international practice of levying fees as a proportion of revenue, should the CRC set fees in this manner? Should fees be set at levels intended to recover costs associated with the CRC’s regulatory activities? 10. Licence applications: Licence applications for all types of service licences are currently subject to a single standard application procedure, which requires substantial information and review, regardless of the type of licence. The CRC seeks to review the process with a view to accelerating it. Should it ease licensing application processes through increased use of notification and registration processes for some types of licences? 11. Clarity and transparency: What mechanisms can the CRC introduce to strengthen fairness and transparency? E.g., will it help to publish criteria for qualification or selection where possible and, in the case of disqualifications or rejections of applications, providing justification? In the next, CRC is preparing to organize a consultation forum to discuss with licensees the issues identified and recommendations made by its advisers in this project. The purpose is to give licensees an opportunity to express to the CRC and its advisers their perceptions of the challenges in the sector and the priorities for reform.

22. LICENSING AND SERVICE REGULATION While issuing licenses, the CRC has maintained the principles to develop an efficient and fair competitive environment that will better accommodate the interests of end users, technical specifications, network coverage and expansion within the framework of government policy to develop the communications sector. • By the 13th CRC resolution of year 2011, the CRC has approved the general conditions and requirements on building and use of ICT networks and infrastructures (A-class license); on providing information, communications and postal services, installation and maintenance of ICT networks, retailing and distribution services (B-class license); C-class license, that allows a service provider to provide television and radio broadcasting and CATV; providing content services, aggregation of contents and revised the general terms, conditions and requirements for certification of mass media websites. Regulation of ICT, Telecommunication and Postal Sector CLASSIFICATION OF LICENSEES The CRC has responsibility for administering the licensing of ICT and telecommunications, including construction of networks and provisioning of information, communications, and postal public services for promoting competition and ensuring a favourable investment climate for the network and service providers of the sector. There are three classes of licenses plus registration certificate: A-class license, which allows an operator to construct information, communications and postal networks; to build infrastructures; B-class license, which allows a service provider to provide information, communications and postal services; installation and maintenance of Information and Com- munications networks; distribution services and other type of services. C-class license, that allows a service provider to provide television and radio broadcasting and CATV; providing content services, aggregation of contents. Registration certificate, which allows individuals and entities to provide mass media websites.

23. 22- 23 A-class licensing An A-class license must be held by the owner of information, communications and postal networks used to supply network services to the public. The CRC may grant an A class license if the applicant satisfies: • General terms and conditions of Licensing Requirements Procedure; • Technical conditions for interconnection with any other networks operating in Mongolia; • Quality demands during the installation and usage of equipment, specified by the Communi- cations Regulatory Commission; • Technical solutions for the security of information transmitted over a network and any related organizational measures. B-class licensing B-class licenses must be held by service providers for supplying information, communications and postal services to the public. Also, by the 13th resolution of the CRC, a service providers of Com- munications cable network and infrastructure installation and maintenance services and Retailers / Distributor/ and other service providers must have B-class licenses. The CRC grants B class licenses if the applicant satisfies: • General terms and conditions of Licensing Requirements Procedure; • Any interconnection agreement existing in Mongolia, which should be concluded in accordance with the procedure issued from the CRC; • Interconnection fee determined in accordance with the methodology specified by the CRC; • Quality demands set up by the CRC; • Service pricing and tariff in accordance with the methodology developed by the CRC and prior to tariff being applied shall inform customers by publishing in the media; • Consumer rights and confidentiality. C-class licensing C-class licensing is allowing a service provider to broadcast television and radio and CATV; providing content services, aggregation of contents. Registration certificate Registration certificate allows individuals and entities to provide mass media websites.

24. LICENSE TYPE Total issued In 2012 Issued License Terminated License Amended License Extended “A” class license: COMMUNICATIONS NETWORK AND INFRASTRUCTURE ICN 6 1 RTVTN (radio, TV) 1 SN (satellite) 3 1 DSI (data storage) “B” class license: COMMUNICATIONS SERVICE IDD (international) 24 LDD (intercity-mobile) 8 1 LDD (intercity-fixed) 7 1 1 IS (internet) 67 4 19 3 DS (data) 3 1 1 CaTV 81 1 1 5 3 SatTV 1 IPTV 2 1 MobileTV 1 1 CSR (satellite) 6 CSR (PBX) 7 CSR (mobile) 1 1 CSR (message) CSR (radio, TV) NIIM 181 34 72 34 “C” class: CONTENT SERVICE TV 104 10 16 6 4 FM 95 14 28 4 8 TV channel 92 39 4 2 Content Aggregator (online, mobile) 3 2 Total 693 REGISTRATION CERTIFICATE Mass media website 20 Total 20 RADIO FREQUENCY LICENSE HF Radio 2 MMDS 15 Wi-Fi 6 1 SatNonGeo 1 4 Total 24 5 Table 1: CRC License statistics in 2012

25. 24- 25 CONSUMER PROTECTION AND QUALITY OF SERVICES FeedbackRecognition ComplainsCritization IN FISCAL YEAR, TOTAL NUMBER OF CONSUMER COMPLAINTS IS 78 The CRC is required to determine and monitor KPI (Key performance indicators) for each communication service and targeted performances with particular reference to consumer satisfac- tion, consumer benefits and quality of service. DISPUTE RESOLUTION AND COMPLAINTS The CRC is required to receive comments, complaints and disputes from licensees and consumers for settlement under its jurisdiction. The main matters raised throughout 2012 were disputes related to lease agreements, interference, air - to free tv broadcasting, satellite tv and wireless internet access . Licensees’ complaints/disputes – • Licensing and interconnection. • Delay on interconnection payment • Delivery of the service, using suspended license (numbering ) Most complained services were as following; • wireless internet access • service quality of cable TV • TV and web content • unavailability of tv channel • consumer billing of international data roaming THE GOVERNMENT CALL CENTER “11 11” “11 11” Center was established by the new government in order to be open for the citizens and aiming to be transparent, eliminate bureaucracy. It will take citizens opinions, critics by 10 channels such as email, messages, and social networks. Then make an arrangement to answer their questions or concerns with the other government agencies and administrative organizations to give specific answers. This center will use fully automated system in order to take every single individual’s feedback, comments, complaints, and compliments and provide them to related authorities to evaluate the implementation. Number of Request 0 0 1 30 56 10025 12550 150 20075 175 212 COMMUNICATIONS REGULATORY COMMISSION Feedback-212 Recognition-1 Complains-56 Critization-30

26. RUNNING WEBSITES The CRC was developed and run websites to monitor internet connection speed by users, to aware cyber security and skills, postal code finding and identification of users. www.speedtest.mn In 2010 for the first time, the CRC introduced the Ookla’s speed testing program to internet users. In order to improve the measurement accuracy, CRC also presented the line quality test in November 2011 and increased usages of these programs have been proven to be very useful. The research showed that many consumers access the web via their mobile phone, so we need new version for mobile users. CRC speed testing program used by 144 210 consumers in 2012. www.happywebs.mn This web provides the basic knowledge and skills of security system, safety, information security and protection including patch management, Email security, virus, spyware and adware and firewall, piracy. www.cybersafety.mn Web designed to inform public awareness of cyber security, including online protection, tips and lessons. The International Telecommunication Union urged its member countries, information and communications industries and companies to work towards online protection and content of children in online environment in 2012. Since it’s certain that internet environment has become smarter with various achievements, children need to be environmentally secure while they are online. Therefore all member countries, organizations and companies should have training for cognitive development, attend to international exhibitions, seminars and specialized training in order to inform parents and young children to be able to monitor security of online environment. Please find recommendations on “Protecting Children in Cyberspace” trans- lated by clicking this link http://www.crc.gov.mn/main.php?cid=1&do=100&did=0 www.zipcode.mn Mongolia Postal Codes/Zip Codes are provided to the website visitors. An integrated coding system of land location (ZIP code) indentifies the area of the country and provides greater efficiencies to Mongolian postal services. HAPPY webs

27. 26- 27 RADIO FREQUENCY SPECTRUM REGULATION SPECTRUM PLANNING AND MANAGEMENT • 3 kHz-400 GHz. The Table is a legal in- strument that prescribes spectrum usage arrangements for LF, MF, HF, VHF, UHF and SHF in the band of 3 kHz-400 GHz. A range of radio communication services such as broadcasting, mobile, data communications, space communications and special consumption services is arranged in these bands. • LF, MF, HF: LF, MF and HF. These bands are assigned for broadcasting, high power radio transmission, plus transmission of 5 radio programs abroad. An aviation naviga- tion control is also provided in these bands in cooperation with ICAO. • VHF. VHF band is assigned for television and FM radio broadcasting. Walkie-talkie The radio frequency spectrum has a wide variety of users, ranging from amateurs to providers of space communications between satellites and ground stations. An efficient management of the spectrum involves the planning of the spectrum to ensure that capacity meets a wide diversity of different user needs where emerging technologies are consistent with international spectrum allocation principles. It is also necessary to ensure that licensing regimes are in place that enable the allocation of spectrums in a way that clearly defines the rights of users and protects the rights of licensees to use that spectrum without interference. According to the recommendations of the ITU World Radio Conference of 2007, the “National Radio Frequency Table” was renewed, and a new chart for National Radio Frequency allocation was made in 2011. The allocations are: OBJECTIVES Efficiency in planning, allocation and use of national resources such as radio frequency spectrum. stations, special consumption and signaling systems are also covered in the VHF band. • UHF. UHF band is allocated for television channels. 4-6 channels have been provided for each soum (totally 342 soums). Mo- bile (GSM and CDMA), WLL, WiFi, satellite communications services such as Iridium, some types of radio relays are assigned for this band. • SHF. SHF band is planned for WiFi, WiMAX, radio relays and earth stations. • UHF band 694-790 MHz, the CRC is identified for use to implement IMT. (Interna- tional Mobile Telecommunications). The use of IMT in this band will not start until 30 June 2014. Based on the introduction of 3G mobile technology in Mongolia by the policy and approach of CRC, the steps for bidding and selection have been arranged, and approval granted to the bidding winners. With the purpose of introducing and establishing new wireless technology in Mongolia, CRC issued part of frequency bandwidth 2.3 and 2.5 GHz, developed the technical specifications, and undertook measures to implement these. As a result of the bidding selection, one special license has been given for the WiMax on 3.5 GHz bandwidth.

28. RADIO FREQUENCY LICENSING AND REGISTRATION Radio frequency license. Total of 393 organizations and business entities submitted requests to obtain the special licenses for radio frequency in 2012 to the CRC. Upon the decision of the CRC Commission meetings, 43 of the total requests were approved to get the special licenses, which met the requirements and conditions for special license. Special license of 28 business entities and organizations were renewed and extended. Upon the Committee meetings 47 special licenses had been cancelled which had payment prob- lem; the contracts were expired and did not met with related law and requirements. Licenses for radio and television frequencies in Ulaanbaatar, Darkhan and Erdenet cities, and public use mobile and fixed communications radio frequencies are awarded through competitive bidding selection (tendering) in accordance with the Radio Wave Law of Mongolia and the Procedures on Competitive Award of Licenses for Radio Frequency Utilization respectively. Frequencies for other services, including rural service provisioning, are allocated if the applicant satisfies all terms and requirements subject to the requested frequency availability. Radio frequency authorization is granted in two types, which are “License” and “Certificate” in accordance with the Law on Radio Wave of Mongolia. MONITORING AND INSPECTION OF RADIO FREQUENCY ARRANGEMENT The CRC is responsible for interference management by monitoring and detecting illegal users of radio frequency, investigating and analyzing interferences of transmitters, measurement and investigation of radio equipment at customers’ or licensees’ requests. Radio frequency utilization certificate. A total of approximately 846 businesses and individuals sent in requests to obtain a certificate for radio frequency, and 136 requests were approved, 111 requests were extended and 6 of the requests were cancelled in 2012.

29. 28- 29 REGULATION OF BROADCASTING Because the broadcast media has an important role to play in the development of Mongo- lia by providing information to its citizens, the equipment of radio and TV studios, transmission systems and TV broadcasting stations were upgraded in 2006-2009. Within this framework, Mongolia started broadcasting with four domestic digital TV channels (including the Nation- al TV and other commercial TV) throughout the whole of Mongolia. For the first time in Mongolia, the CRC established a Nation-wide System for Spectrum Man- agement and Monitoring (SMMS) including mobile, portable and fixed radio monitoring and inspection facilities. With assistance from the World Bank, the CRC purchased a SMMS for strengthening regulatory capacity, radio frequency regulation and broadcasting services for proper implementation of ICT sector reform policies to promote competition and growth in the sector. The Government of Mongolia introduced DTH multichannel TV broadcasting covering all of Mongolia by satellite. The CRC licensed earth stations, which began operations in July 2009, for the Ku-band satellite; they provide capacity for more than 20 DTH television channels. In November 2009, the CRC granted two IP television (IPTV) and two Mobile TV licences in Ulaanbaatar, the capital city. This important step introduced IP services and new mobile applications and content to Mongolian people. The CMMB and DMB standards have been adopted in Mongolia for the provision of mobile digital television services. These services will be established by private companies who make the choice of technology between the systems. Oth- er than the fact that they are most likely to operate within the Band III Television Band, there is no specific requirement that they be interoperable with the terrestrial broadcast standard. In October 2010, CRC and ICTPA jointly prepared and submitted the “National Program on Radio and TV Broadcasting Transition to Digital Tech- nology” to the Mongolian Government, Gov- ernment of Mongolia has been approved and decided to migrate all analog television to digital, and has announced that analog services will switch-off on 31 July 2014. A NALOG SERVICES SWITCH OFF

30. REGULATION FEE AND INTERCONNECTION TARIFFS revenue sharing between telecommunications operators was renovated. Difference between domestic and local communication service fee has been changed to same tariff by agreement CRC and Information Communication Network LLC, Mobicom LLC, Skytel LLC, Unitel LLC, G-Mobile LLC, and Mongolia Telecom LLC. Re- sults of the implementation this interconnection regime, mobile off net prepaid 2.4, post paid 3.6 times tariff reduced. Fixed subscribers interconnection tariff an average of 1.7-2.5 times. Information Communications Network LLC’s domestic channel lease tariff for internet service is regulated the 1st CRC resolution in 2010. As a result of tariff approval, internet subscriber’s monthly payment reduced and enables to increase internet connection speed of customers. At the CRC fourth meeting on April 14th of 2011, the Interconnection income distribution principle on monitoring and approved tariff of office telephone users of Mongolian Telecom company, approved principle to distribute income for starting international call from mobile operator, setting highest limit of postage service tariff of Mongol Post state-owned company and about special permission was reviewed and approved by resolution No. 10. According to CRC resolution No. 3 of 2012, it’s decided to approve price and tariff of radio and telecommunication equipments type approval service by following categories: The CRC is required under the Communications Law and relevant procedures to assess all service providers’ tariff filings for precision and detail, and to assess dominant’s tariffs for discrimina- tion and anti-competitive impact. Non-dominant tariffs must be reviewed within 14-21 business days and contentious dominant tariffs reviewed within 14-21 business days respectively. The CRC approved the minimum rates of external billings for international incoming calls and termination rates of international calls at mobile, wireless and fixed networks. “Cost allocation methodology” for services was adopted in order to settle long-lasting disputes on discharged local long distance transmission for local and long distance calls between MTC and mobile telephony service providers. The CRC also adopted a cost accounting model by investigating economic efficiencies of a service cost and service packages on the basis of service costs of Mongol Post Company. Under the policy to allow postal operators to distribute and sell definitive stamps, the CRC has cooper- ated with the Road, Transportation and Tourist Ministry and developed relevant proposals for approval. In according to resolution of CRC meeting, non-discriminatory interconnection price regardless of location has been introduced since 1st February, 2010 and principle of interconnection

31. 30 - 31 Radio communication Equipment: • Public Radio communication & Private Land Mobile Radio communication Equipment • Digital radio communication equipment • Short Range Devices Telecommunication Equipment: • Consumer broadband access equipment • Multi line Equipment • Single line Equipment RADIO SPECTRUM PRICING AND CHARGES The CRC is responsible for setting fees in accordance with the Methodology of Spectrum Pricing, which was approved by the Minister for Infrastructure in October, 2003. Fees were determined in November, 2003 and application and compliance with spectrum fees have been implemented since 1 January, 2004 and procedure was modified in 2010 and 2012 year. Fees for frequencies that have high demands and efficiencies (mobile, WLL, Wi-Fi, WiMax etc) are higher than frequencies for lower demands and usages (rural television and radio etc). NUMBERING CHARGES AND PRICING The CRC commenced a collection of numbering charges in March, 2003. Prefix codes of international numbers were charged at 50 million tugrugs in the first year as regulatory fees. Regu- latory fees are compared in the following table. NUMBERING TYPES Regulatory fees per year /in thousand tug/ A. SPECIAL NUMBERS 1. Numbers to be used for emergency purposes such as ambu- lance calls, fire alerts and enforcement agencies for social order or crimes Free of charge 2. Numbers for the purposes of technical monitoring of networks or technical maintenance 50,0 per number 3. Business and information directory services 500,0 per number 4. Internet service purposed 200,0 per number B. ACCESS CODES 1. Access codes for independent gateways of /001, 002, 003, 004 / international call 3000,0 2. Area codes for domestic long distance calling 100,0 per number C. NETWORK NUMBERING 1 Serial (10,000 ) 600.0 1 Serial (100,000) 6,000.0 1 Serial (1,000,000) 120,000.0 Regulatoryfeestonumbering

32. Regulation of Tariff and Pricing PROMOTING COMPETITION The CRC of Mongolia has always endeavoured to encourage greater competition in the ICT, telecommunications and postal sectors in order to meet the objectives of “e-Mongolia national program up to 2012” and “Government Action plan 2008-2012”. Because on the introduction of 3G mobile technology in Mongolia through the policies and ap- proaches of the CRC, the activities surrounding the bidding and selection processes have been arranged, and approval has been given to the bidding winners. In November 2009, the CRC issued two IP television (IPTV) and two Mobile TV licenses in Ulaanbaatar, the capital city. This is an important step to introduce IP services and new mobile applications, as well as the resulting content, to Mongolian people. According to the CRC license agreement, Univision LLC will be started the first IPTV services in Ulaanbaatar in first quarter of 2011. In 2010-2011, Mobile 3G licensee holders undertook modernization of their networks and introduced 3G services in more than 90 sites including Ulaanbaatar. Since February 2011, CRC has responsibility the regulation of content issues due to the new law approved by the Parliament. Due to expanded foreign relations, international investment and growth in Mongolian markets, the number of citizens living outside Mongolia is increasing; therefore, enlarging the scope of the international parcel post service and increasing the number of postal operators for courier service is under consideration.

33. 32- 33 Names 2006 2007 2008 2009 2010 2011 2012 Ìîbicom Corporation LLC 79,24% 61,88% 53,39% 45,65% 44,23% 42,92% 37,96% Skytel LLC 15,87% 20,52% 21,62% 22,25% 21,92% 19,66% 17,24% Unitel LLC 4,89% 16,12% 19,64% 18,03% 18,50% 21,21% 31,35% G Mobile LLC 1,48% 5,35% 14,07% 15,35% 16,21% 13,45% Total 100% 100% 100% 100% 100% 100% 100% Names 2007 2008 2009 2010 2011 2012 GSM 931,839 1,287,656 1,363,485 1,429,627 1,616,691 2,362,736 CDMA 262,744 475,522 816,945 926,799 1,041,340 1,046,269 Total 1,194,583 1,763,178 2,249,023 2,510,470 2,942,313 3,409,005 3G 68,593 154,044 284,282 500,366 THE NUMBER OF MOBILE SUBSCRIBERS BY TECHNOLOGY | 2007-2012 1,194,583 2007 2008 2009 2010 2011 2012 1,763,178 2,249,023 2,510,470 2,942,313 3,409,005 3,500,000 2,500,000 2,000,000 3,000,000 1,500,000 1,000,000 THE NUMBER OF MOBILE SUBSCRIBERS MARKET SHARE OF THE MOBILE SUBSCRIBERS 47.6% 27.5% 11.6% 17.2% 18.6% KEY STATISTICS - 2012 This information, which is for users and costumers, is to provide clients with an overview of the communications sector and consist of the following components. These include; 1. Mobile and fixed network 2. Internet 3. CATV and IPTV 4. Economic factors 5. Human resources Mongolian national mobile market in 2012 reached 3,409,005 and the number of active users rose by 18.6 percent compared with the same period of the previous year. Throught to the development of information technology, communications, global trends, it is certain this number will continue to increase.

34. THE NUMBER OF FIXED TELEPHONE SUBSCRIBERS | 2008-2012 Names 2008 2009 2010 2011 2012 Mongolia Telecom joint stock company 89,10% 86,11% 86,3% 82,3% 74,48% Ulaanbaatar Railway shareholding company 6,9% 7,08% 6,2% 7,4% 6,35% Government Cyber security office 2,03% 2,2% 2,2% 2,19% Univision LLC 1,36% 2,3% 5,2% 13,32% Skymedia LLC 4,0% 3,42% 3,0% 3.1% 3,66% Total 100% 100% 100% 100% 100% www.crc.gov.mn Names 2007 2008 2009 2010 2011 2012 Postpaid 8,10% 10,35% 10,33% 11,04% 11,50% 11,99% Propaid 91,90% 89,65% 89,67% 88,96% 88,50% 88,01% Total 100% 100% 100% 100% 100% 100% MARKET SHARE BY TERMS OF CUSTOMER PAYMENT | 2007-2012 For the structure of mobile users, there are total of 88,01 percent prepaid, 11,99 percent postpaid customers. Also the number of 3G service users in 2010 was 154,044 and in 2012 this number The number of fixed telephone users in 2011 was 187.561 decreased to 151.945 in 2012, which shows users trend has changed. Global fixed 2008 176,000 178,000 180,000 182,000 184,000 186,000 188,000 190,000 192,000 194,000 196,000 2009 2010 2011 2012 Fixed telephone subscribers 184,813 188,875 193,239 187,561 151,945 telephone use dropped sharply in recent years and is expected to continue and this situation is likely to continue. has increased to 500,366 with the 69 percent by compared to the previous year. This shows that Internet and information technology has become as an integral part of our life.

35. 34- 35 In our country, the number of total mobile users reached 3,4 million in 2012 and the density of center of telephones per 100 inhabitants has become 116,4, which is more than 32 points higher 5,46 2012 2011 2010 2009 2008 2007 0 20 40 60 80 100 120 16 116,4 80,5 103,8 6,6 16,5 79 6,9 17,2 90 76,2 6,8 17,8 82,2 67 6,8 18,5 67,7 59,7 6,5 19 45,3 50,2 MOBILE AND FIXED TELEPHONE SUBSCRIBERS | 2007-2012 Per 100 inhabitant Fixed Telephone /Worldwide/ Fixed Telephone /Мongolia/ Mobile /Worldwide/ Mobile /Мongolia/ than the global average. For the fixed telephone users, density of center of telephones per 100 inhabitants became 6,2, which means more than 10 points below the average of the world.

36. USAGE OF TELECOMMUNICATION SERVICES | 2007-2012 Per minute The number of fixed telephone users decreased, while the number of mobile phone users is increasing every year. Call tariffs to increase the number of user and service package options for Names 2007 2008 2009 2010 2011 2012 Mobile network 63,27% 83,22% 90,41% 93,82% 96,78% 97,78% Fixed network 36,73% 16,78% 9,59% 6,18% 3,22% 2,22% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Total Mobile network Fixed network 2012 2011 2010 2009 2008 2007 9,172,050,136 8,985,524,984 186,525,152 6,819,364,799 6,606,810,893 212,553,906 4,463,730,900 4,187,794,673 275,936,227 2,979,369,546 285,725,858 2,693,643,688 463,629,890 2,300,119,094 1,975,918,172 1,250,158,839 725,759,333 2,000,000,000 4,000,000,000 6,000,000,000 8,000,000,000 10,000,000,000 2,763,748,984 choosing the users need, depending on the mobile phone operator. This increasing use of telecommunications services has become one of the main reasons.

37. 36- 37 CHANGES OF THE AVERAGE MOBILE PHONE CALL TARIFF | 1996-2012 By tugrug Year Network in the average rate of speech Percentage of decrease of tariff Average tariff to talk to other networks Percentage of decrease of tariff Postpaid Prepaid Postpaid Prepaid Postpaid Prepaid Postpaid Prepaid 1 1996 425 390 2 1999 132 350 -321.0 -110.4 220 310 3 2006 89 110 -377.5% -254.5% 113 112 -94.7% -176.8% 4 2007 53 63 -701.9% -455.6% 70 73 -214.3% -324.7% 5 2011 52.4 54 -711.1% -622.2% 62 64.6 -254.8% -379.9% 6 2012 49 51 -722.5% -652.6% 62 62 -258.2% -404.6% 1996 1996 1999 1999 2006 2006 2007 2007 2012 2012 250 250 200 200 150 150 450 100 100 400 50 50 350 350 0 0 300 300 ON NET TARIFF OFF NET TARIFF Postpaid Postpaid Prepaid Prepaid 1,1 times 3,2 times 3,5 times 4,8 times 1,3 times 2,1 times 2,9 times 2,4 times 3,6 times 2,0 times 6,2 times 8,0 times 7,2 times 8,2 times

38. BACKBONE NETWORK Currently, there are 5 service providers who established bisinesses in the telecommunication market by creating fiber optic transmission network. These include: NAMES OF COMPANIES LENGTH OF FIBER OPTIC Information Communication Network 7876 km Mobicom Corporation LLC 5062,8 km Railcom center 1405,5 km Gemnet LLC 1199 km Skynetworks LLC 2800 km Total 18123.8 km 0.0 0.0 8,9 4,0 8,4 16,0 12,3 18,7 13,3 18,7 13,3 18,7 20.0 20.040.0 40.060.0 60.080.0 96,7 90,0 70,0 56,7 53,3 50,0 50,0 50,0 56,7 53,3 100.0 2008 2008 2009 2009 2010 20102011 20112012 2012 Between cities To mobile subscribers Calls on net | 1 min Calls off net in the city | 1 min In the cities To fixed subscribers AVERAGE URBAN TELEPHONE CALL TARIFF ON FIXED TELEPHONE CALL As of 2012, the Communications Regulatory Commission has issued licenses of wholesale In- ternet services to Information Communications Network company, Mobicom Corporation LLC, Railcom center and Gemnet LLC. These four service providers relate to the international gate- way with the Russian (Transtelecom) and China (China Telecom, China Unicom).

39. 38- 39 Since the first use of Internet services in 1995, internet has become use of every sectors of the country and daily use for the people as well. Since 2009, the number of Internet subscribers have increased dramatically in the Internet service market and this started open and free competition in service market. In addition to 2007 2008 2009 2010 2011 2012 1000000 17329 41835 106048 199849 457642 657009 2000000 3000000 4000000 5000000 6000000 7000000 0 TOTAL NUMBER OF INTERNET SUBSCRIBERS | 2007-20012 Costumers made contract TYPES OF INTERNET CONNECTIVITY | 2007-20012 Costumers made contract Number of internet subscribers Year Di- al-up xDSI Fiber Optic Co- axial cable GPRS ED GE, 3G, E VDO Wi-Fi WiMax VSAT VPN Total 2009 2,166 19,159 24,439 949 54,740 184 3,142 195 1,074 106,048 2010 1,447 25,276 37,274 1,123 128,479 432 4,428 185 1,205 199,849 2011 24 27,964 51,073 9 354,760 3,325 18,554 175 1,758 457,642 2012 33 36,695 65,256 9 520,012 5,281 24,587 174 1,962 654,009 that decision of the Communications Regulatory Commission to introduce 3rd generation technology has impacted positively. At the end of 2012, Internet service 65 licenses and the number of contract customers reached 657,009, which means increased by 6,17 times compared to 2009.

40. INTERNET TRAFFIC BETWEEN COUNTRIES (Mbit/s) 0 5000 10000 15000 20000 25000 30000 35000 40000 2009 2010 2011 2012 2008 1,248 8,112 17,188 30,004 36,600 Internet traffic between countries has increased by 22 percent compared to the same period of 2011. Due to the population and housing census which was done in 2010 by the National Statis- tical Office, 30,6 percent of the population of age 6 and older use the Internet. For instance, 49,3 percent of the population in Ulaanbaatar, 22,6 percent of the population in central region provinces, 11,0 percent of the population in the western region, 13.8 percent of the population in the eastern region and 14,4 percent of the population in mountainous region use the Inter- net services. By gender, 46 percent of Internet users, or 325,3 thousands are male and 54% or 384,2 thousands are female. By the end of 2012, there are three wholesale internet servise providers. /Mobicom corporation LLC, Gemnet LLC, Ulaanbaatar Railway-Railway center/ Above mentioned servise providers rent internet traffic from the Transtelecom, Russia and China Unicom, China

41. 40- 41 2008 2005 2009 2006 2010 2007 2011 2012 50.0000 72,700 66,000 6,700 6,792 7,032 15,703 27,923 3,000 71,989 65,197 88,253 81,221 103,190 87,487 136,219 105,296 210,883 113,108 39,425 58,349 294,492 119,427 61,993 113,072 450,110 138,220 86,835 225,055 100.000 150.000 200.000 250.000 300.000 350.000 400.000 450.000 500.000 Total MMDS Satellite CATV NUMBER OF TV BROADCASTING PROVIDERS | 2007-2012 MMDS 19% Satellite 50% CATV 31% Analogy 31.98% Digital 68.02%

42. NUMBER OF SUBSCRIBERS OF IPTV | 2012 Univision LLC and Skymedia LLC were created technical abilities to provide IPTV services for more than 148.000 households in Ulaanbaatar. IPTV subscribers TOTAL 31,238 Only IPTV subscribers 3,522 Dual service IPTV+VoIP 208 Number of triple service subscribers 27,508 Univision LLC has started to provide IPTV+In- ternet+Fixed telephone triple service first time in Mongolia. Afterwards, since Skymedia also Types 2005 2006 2007 2008 2009 2010 2011 2012 Cable 66,000 65,197 81,221 87,487 105,296 113,108 119,427 138,220 Satellite 3,000 58,349 113,072 225,055 MMDS 6,700 6,792 7,032 15,703 27,923 39,425 61,993 86,835 Total 72,700 71,989 88,253 103,190 136,219 210,883 294,492 450,110 Types 2005 2006 2007 2008 2009 2010 2011 2012 Cable 91% 91% 81% 87,4 69,1% 54% 41% 31% Satellite 3% 27,6% 38% 50% MMDS 9% 9% 10% 12,6% 27,9% 18,4% 21% 19% Total 100% 100% 100% 100% 100% 100% 100% 100% NUMBER OF SUBSCRIBERS | 2007-2012 MARKET SHARE OF SUBSCRIBERS | 2007-2012 Univision LLC has started to provide IPTV+Internet+Fixed telephone triple service first time in Mongolia. Afterwards, Skymedia also started to provide same triple service in 2012, which made this service more selectable and better. started to provide same triple service in 2012, this service has become more selectable and better.

43. Information and communication sector has been increasing every year, and con- sidering the total revenue by the type of services, the mobile phone service is leading in the market by its revenue. Mobile service revenue growth is related to the increasing number of users and the scope of services in rural areas. 65,33% MARKET SHARE BY SUB SECTOR OF TOTAL REVENUE Mobile operators Fixed telephone operators CATV International calling Free to air TV Internet Postal service Satellite Revenue of IPTV Revenue of internet wholesale service Other 8,68% 1,82% 1,11% 6,79% 6,72% 2,08% 3,56% 1,64% 1,29% 0,98% 2011 2012 2010 2009 2008 2007 283,5 365,2 449,2 470,9 649,7 0 100 200 300 400 500 600 28,8% 23% 4,8% 14,4% 20,5% 538,9 30,7% 42% 34% 12% 18% 11% TAX CONTRIBUTION OF ICT SECTOR TO THE STATE BUDGET & GROWTH RATE (billion. tug) | 2006-2012 2011 2012 2010 2009 2008 2006 0.0 20.0 40.0 38,0 54,0 70,6 73,0 81,8 96,5 107,2 60.0 80.0 100.0 120.0 2007 42- 43 TOTAL REVENUE OF ICT SECTOR (billion.tug) | 2007-2012

44. 74,45% 6,65% 6,60% 4,64% 2,40% 2,94% 1,39% 0,93% Average salary in ICT sector State owned companies Mobile operators Mobile operators Free to air TV Fixed telephone operators Internet Satellite CATV Postal service Other THE SHARE OF TOTAL REVENUE IN TO THE STATE BUDGET NUMBER OF EMPLOYEES IN ICT SECTOR AVERAGE SALARY (thousand.tug) 2011 2011 2012 2012 427,4 780,9 630,0 415,6 578,0 750,8 390,9 465,0 712,8 360,2 450,0 700.4 350,8 360,0 650,4 2010 2010 2009 2009 2008 2008 2007 6,950 7,000 7,150 7,260 7,650 8,023 6.000 0 200 400 600 800 10006.500 7.000 7.500 8.000 By the end of 2012, in the information and communications sector of Mongolia, there are 8023 employees. Besides that in the sector there are 20,000 people have permanent jobs for service providers, 29,7% 23,5% -4,8% 19,8% 0,3% contractors, vendors, trade, fixed and mobile end-user device etc., In addition to that for maintenance and construction work, such as the cable construction work, such as the cable construction works there are about 1000 people have supplied seasonal work.

45. 108 107,7 108,7 89,9 94,4 76,4 Mobile operators Revenue of IPTV Internet Fixed telephone operators CATV Free to air TV Other PERCENTAGE OF THE TOTAL INVESTMENT 2011 2012 2010 2009 2008 2007 0 100 200 300 400 500 -29,7% 23,5% -4,8% 19,8% 0,3% THE TOTAL INVESTMENT IN THE INFORMATION AND COMMUNICATION SECTOR, GROWTH REDUCTION RATE (billion.tug) 70,56% 8,8% 6,2% 5,74% 2,45% 4,37% 1,88% 44- 45

46. REGULATION OF POSTAL SECTOR In the Mongolian postal service market, there are currently 66 licensed postal operators running postal service business. There is one state owned company (designated operator) Mongol Post LLC and other 60 private companies. Following the existing Postal Laws and Regulations, the CRC issued thirteen new “B” class license for postal services in 2012, and 9 license issued and 1 license were terminated. CRC also amended 6 “B” class licenses. 1. Building postal network and use of it “A” class 2. Postal service provider “B” class 3. Building across the country network and use of it “A” class 4. Procedures on registration of postal service between the countries 1 2 2 4 5 6 25 International Parcel Service by directed route Express Mail Service (EMS) Domestic mail Ordered and additional service International Parcel Establish postal network and utilization International mail logistics service 1. Under license “Law on licensing of business operation” in re- lation to changes in communications classes to update the license to engage in the types of postal services, license conditions and revised. Related that “Law on licensing of business operation” has amended, some changes has done in classifications and revised the licenses engaged in the types of postal services and conditions.

47. 46- 47 A1. LISTS OF REGULATIONS AND PROCEDURES List of procedures and regulations, terms and reguirement apporoved by the CRC meeting for a period from July 2002 to December 2012 Name of Procedures and Regulations Approved/Amendments/Modifications (CRC Resolution number and Date) 2012 1 License classifications to run communications public services Res.- 3, 05.11.2002 Annex 1, Res.-7, 31.03.2004 Res.-38, 10.12.2004 By meeting .12.2005 2 Terms and requirements of licenses to run communications public services Res.- 3, 05.11.2002 3 Procedure to issue, prolong and cancel licenses and certificates and enforcement Res.- 4, 05.11.2002 Res.-39, 26.12.2003 Annex 1, Res.-36, 25.11.2004 By meeting April. 2008 ATTACHMENTS 2. On zip code: Ministry of Road and Transportation, Infor- mation, Post, Communications and Technology Authority, Communications Regulatory Commis- sion, Geodesy and Cartography Authority, Urban development and planning agencies and other administrative organizations has been working for last 5 years with Mongolian Post Agency on implementing zip code project. Relating to this project these agencies published updated hand- book on zip code in 2012 and this time the book was published including statistics and results of Population census made in 2010. Besides that the CRC is using www.zipcode.mn for providing related informations. 3. Withing standards, new services and education: Information, post and telecommunications mobile sector MNS 6356: 2012 standard was approved, and this raised the first step in the introduction of one-stop services in postal and telecommunications sector. With the participation of custom inspectors, CRC experts organized training, seminars by each license holder and for each type of services 4 times at the workplace and build successful discussions and meetings. As a result of training, we created opportunity for the costumers to have choice to take services cargo-freight or mail services by differen- tiating technological and tariffs served.

48. 4 Procedure to issue, prolong and terminate licenses or certificates to utilize radio frequency and monitor compliance Res.- 4, 05.11.2002 Res.-39, 26.12.2003 Annex 2, Res.-36 25.11.2004 Res-58, 14.12.2009 5 Procedure on competitive award/tendering/ of licenses for radio frequency utilization Res. -6 23.12.2002 Res.-33 17.10.2003 Res.-16 12.05.2004 6 Procedure on numbering telecommunications networks Res.-7 28.02.2003 Res.- 21 02.06.2003 Res.- 5 09.03.2005 By meeting Feb. 2006 By meeting Feb. 2008 7 Procedure to determine regulatory service fees to licensees Res.- 12 28.02.2003 Annex 2, Res.-7 31.03.200 Res.- 01 04.01.2006 8 Procedure on monitoring communications service quality Res.-19 02.06.2003 9 Procedure on Complaints and Disputes Res.- 25 30.06.2003 Res.06 20.01.2012 Amend- ment 10 Methodologies to define communications service tariff Res.- 27 30.06.2003 11 Procedure on determining and controlling dominants in ICT markets Res.- 30 09.09.2003 In respect with establishment of UCRA, the procedure was invalidated. 12 Radio frequency utilization and service fees ** Res.- 36 17.11.2003 By meeting of May 2006 13 General procedure on telecommunications network access and interconnection Res.- 37 26.12.2003 Res.- 19 08.06.2004 By meeting of Feb. 2006 Res-46, 06.11.2009 14 Procedure on unbundling Res.- 08 31.03.2004 By meeting of Feb. 2006 15 Procedure on reviewing backgrounds of communications services Res.- 09 31.03.2004 16 Procedure on post network access and interconnection Res.- 20 08.06.2004 17 Procedure on frequency utilization for amateur radio stations in the terri- tory of Mongolia Res. 22 08.06.2004

49. 48- 49 18 Special terms and conditions to licenses for cable line installation, assembly and maintenance Res.- 29 09.07.2004 19 Procedure on telecommunications network access and interconnection charges Res.- 37 30.12.2004 Integrated to “General procedure on telecommunications network access and interconnection” in 2006 20 Procedure on controlling international call tariff compliance By meeting of Sep. 2006 21 Procedure on defining regulatory fee Res.-12 15.03.2003 Res.-48, 06.11.2009 22 Special terms and conditions to provide multimedia services Res.-47, 06.11.2009 23 Terms and conditions to local and domestic telephony services Annex-2, Res.-26, 08.07.2009 24 Terms and requirements of licenses to provide international telephony services Annex-3, Res.-26, 08.07.2009 25 Methodologies to define radio frequency fee and tariff Res.-5, 18.03.2009 26 Procedure of tariff regulation the ICNC Res.-01, 12.01.2010 27 Procedure of Content Regulation Res.-09, 22.02.2010 28 Procedure on monitoring the USOF quality requirement Res.-18, 28.04.2010 29 General Procedure on Type approval Res.-39, 30.09.2010 30 Amendment of Postal license classification Res.-01, 20.10.2010 31 Regulation of website business by using communication network Res.-46, 14/11/2010 32 Terms and General Requirements of Radio, Television Broadcasting Regulation Res.-07, 17.02.2011

50. 38 Amendment of Regula- tion guidelines of VoIP services Res.03 20/01/2012 (Revised .25.2007) 39 Amendment of special requirement of ISP Res.25 26.04.2012 40 Special requirements of two A-type licensee holders in postal sector Res.26 26.04.2012 Ammend- ment-1 and 2 41 Regulation guidelines of Wi-Fi system implementation Res.27 04.05.2012 42 Additional requirement for TV broadcasting services Res.35 10.05.2012 43 Code of conducts and ethics for CRC staffs Res.60 28.09.2012 44 Methodology for defining of monopoly and dominant operators in communications market Res.74 27.12.2012 45 Requirements for operators and license holders in the border zones and border special areas Res.75 27.12.2012 * “ Procedure on telecommunications network numbering” which was approved by Res.07, 28/02/ 2003 was invalidated and revised by Res.-05, 09/03/2005 ** “Procedure on radio frequency utilization and service fees” was approved by Decree#216 of the Minister for Infra- structure in 2003 and subject to this procedure the CRC has determined “ Radio frequency utilization and service fees”. 33 General Requirements of Digital Content Ser- vice Regulation Res.-08, 24/02/2011 Res.18, 23/03/2012 Amendment Res.41, 25.05.2012 Amendment 34 Classification of Licenses in ICT Res.-13, 18.03.2011 35 Terms and Require- ments on Postal Service License Res.-14, 18.03.2011 36 Terms and Require- ments on content Aggregator Res.-42, 27.06.2011 37 Price lists of type approval the communications equipment Res.03 20.01.2012

51. 50 - 51 CLASSIFICATIONS OF LICENSES TO RUN COMMUNICATIONS PUBLIC SERVICES (Appendix to the 13-th Resolution of 2011, CRC meeting) A2. CLASSIFICATION OF COMMUNICATION’S LICENSING One. “A“ class: COMMUNICATIONS NETWORK AND INFRASTRUCTURE Category Type Coverage 1 Establishing, owning and operating communications network and infrastructure 1. ICT backbone network and infrastructure International National / Regional Local 2. ICT access network and infrastructure 3. Radio and television terrestrial (repeater) network and infrastructure 4. Satellite network 5. Post network 6. Data hosting and storage infrastructure Two. “B“ class: COMMUNICATIONS SERVICE Category Type Coverage 1 Voice International Local and long distance 2 Internet, data 1. Internet According to service coverage2. Data 3 Radio and television multichannel 1. Cable TV According to service coverage 2. Satellite TV 3. IPTV 4. Mobile TV 4 Post 1. Main service According to service coverage 2. Logistic 3. Courier post 4. International parcel 5. Direct route international parcel 5 Communications cable network and infrastructure installation and maintenance service 1. PBX installation and maintenance According to service coverage 2. Outside cable network installation and maintenance 3. Cable network installation and maintenance inside building 4. Equipment installation and maintenance on tower 5. Network operation and maintenance 6 Retailer /Distributor/ and other services • Satellite mobile service (Iridium, Inmarsat ãì) • Public services through PBX • Establishing telecommunication or post service branches contractual basis with main licensee According to service coverage

52. Three. “C“ class: CONTENT SERVICE Category Type Coverage 1 Television broadcasting According to service coverage 2 Radio broadcasting 3 Television channel 4 Toll free and premium rate service 5 Content aggregator 1. Online 2. Mobile Four. REGISTRATION Category Coverage 1 Web site Should be registered if average user access is exceeding 3000 in one month.

53. 52- 53 AUDITED FINANCIAL REPORT OF COMMUNICATIONS REGULATORY COMMISSION OF MONGOLIA: 2011 Mongolian national audit office Date: 19 March 2013 Ref.No.2/423 To: Mr. B.BALGANSUREN Chairman and CEO, Communications Regulatory Commission of Mongolia CERTIFICATION AUDITING Scope. According to the section 15.1 of Law on Audit and section 8.9.8 of Law on State Treasury and Finance, Mongolian National Audit Office has been audited the financial statements of the Communi- cations Regulatory Commission of Mongolia (CRC) for the year ended 31 December 2012. Management responsibilities on financial statement. Management of the CRC is responsible for preparing financial statements that give a true and fair presentation of the financial position and performance of the Communications Regulatory Commission. Auditor’s responsibility. Our responsibility is to prepare independent audit report based on our audited financial statements. We have audited in accordance with the International Audit standards and Law on Audit, Law on State Treasury and Finance of Mongolia. The audit has been conducted in accordance with international standards, in order to provide reasonable assurance as to whether the financial statements are free of material misstatement. Audit procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. Audit opinion. In our opinion, CRC’s statements of the year 2012 are true and fair in all financial aspects and gave a true and fair view of the CRC’s financial position as at 31 December 2012 and of its performance and cash flows for the year the ended in accordance with international accounting standards. S.ENKHZAYA Director General Department of Financial Audit A3. Letter of Report

54. ASSETS in thousand tugrugs CURRENT ASSETS Cash and equivalent 2375237,7 Receivables 710492,3 Prepaid expenses 58691,2 Goods 2112,0 Total current assets 3146533,2 NON-CURRENT ASSETS Physical assets 3593114,2 Non-physical assets 50894,8 Total non-current assets 3640090,0 TOTAL ASSETS 6790542,2 LIABILITIES Other liabilities 380052,7 Unearned Income Total liabilities 380052,7 EQUITY Government fund 1169840,3 Total accumulation 5126017,4 Retained surpluses 114631,8 Total equities 6410489,5 TOTAL LIABILITIES AND EQUITYIES 6790542,2 ITEMS in thousand tugrugs OPERATION REVENUE Basic operation revenue 2973648,5 Non-Basic operation revenue 229046,4 TOTAL OPERATION REVENUE 3202694,9 OPERATION EXPENCES Employee related costs 1419650,8 Remuneration 1278501,4 Social and health insurance 141149,4 Good and service expenses 1249981,9 Levy funding 435823,9 TOTAL OPERATION EXPENSES 3105456,6 OPERATION PERFORMANCE Non operation revenue 20000 Non operation cost 483064,0 TOTAL NON OPERATION PERFORMANCE 483044,0 PERFORMANCE 385805,7 BALANCE SHEET as of 31 December 2011

55. “CRC ANNUAL BOOK-2012” PREPARED BY: T.NARANMANDAKH (WG Leader) naran@crc.gov.mn, TS.MUNKHZUL munhzul@crc.gov.mn B.MUNKHBAT A.LUVSAN-OCHIR CH.OYUNGEREL B.ANKHBAATAR Communications Regulatory Commission of Mongolia Metro business center, 5th floor, Sukhbaatar district, Sukhbaatar street-13 Ulaanbaatar 14201, Mongolia Tel: Fax: Email: 976-11-304257 976-11-366040 info@crc.gov.mn, foreignrelations@crc.gov.mn Designed by NOMUN YERUUL LLC

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