Transcript Διαφάνεια 1

Open regulatory issues and challenges due
to next generation networks
Ioannis Zacharopoulos, Ph. D.
Senior Telecom Engineer
Telecommunications Directorate
Hellenic Telecommunications & Post Commission (ΕΕΤΤ)
Outline
 Facts in Europe regarding NGA
 variations & economics of NGA
 The European Commission view
 The new (draft) recommendation on regulated access to Next Generation
Access Networks (NGA)
 In case of NGA based on incumbent’s initiative
 Regulators’ view
 Benchmark on European countries
 Regulatory Issues of Next Generation (core) Networks (NGN)
 Conclusions
NGA variations
Fiber To The Home (FTTH) Point-To-Point (P2P)
1 fiber pair per household up-to aggregation point
Fiber To The Home (FTTH) Point-To-Multi-Point (PMP) or
Gigabit Passive Optical Network (GPON)
1 fiber pair shared over a number of households
Fiber To The Cabinet (FTTCab) or
Fiber To The Node (FTTN)
1 fiber pair per neighborhood (partial copper
replacement)
Economics of NGA (1)

Vary with technology/mode
of deployment but…

… in any case there is high
CAPEX per connected
customer …

High CAPEX can be
reduced by coordinated
strategy on reduction of
construction costs and…

…in high density (urban)
areas…

… and this leads to high
total costs and makes NGA
infrastructure a really
non-replicable asset.
(First mover advantage)
The Economics of Next Generation Access, Study for the European
Competitive Telecommunication Association (ECTA), WIK-Consult
Economics of NGA (2)

NGA “Pareto Law”: The
main fraction (>65%) of
NGA CAPEX per customer
is due to civil works

Of this CAPEX, the intracable CAPEX (in case of
FTTH deployment) is
almost the same weighty
as the distributionnetwork CAPEX

The rest of the CAPEX is
due to CPE, CO Optoelectronic equipment,
etc.
Dr. Kátrin Schweren, EU Affairs Delegate, Swisscom "Swiss Fibre Optics or Fibre Suisse:
Multiple Fiber Multiply Innovation"
FTTH Europe Conference, Copenhagen, 11-12/02/2009
Commission view: new (draft)
recommendation on regulated access to NGAs (1)
 The proposal refers to the case that there is NGA deployment after
initiative of incumbent
 In Greece: announcements for NGA partially funded by the State (Public-PrivatePartnership (PPP) form)
 How NGA impacts the defined wholesale markets
 Wholesale Physical Access (Market #4)
 Wholesale Broadband Access (Market #5))
 Possible Wholesale products needed for competitors
 Some critical details like pricing etc.
 The proposal seems to be too prescriptive to be generic enough to
cover the various cases/countries throughout Europe
Commission view (2)
 Remedies imposed to operators having SMP as a result of market
analysis
 when planned or ongoing NGA deployment
 Geographical market considered
 Fibre roll-out probably limited geographic coverage (short & medium term)
 Transparency: reference offer for all relevant wholesale products
 conditions for access to ducts, other civil engineering works etc.
 information regarding duct location, capacity etc.
 FTTH case
 Duct access: mandatory
 Physical access to dark fiber (LLU-fiber): Conditional
 If access to ducts, etc. services technically impossible or not economically viable
 Intra-building wiring: NRAs facilitate cooperation on roll-out & sharing infrastructure…
 enable end-users to have competitive choice
 avoid duplication of infrastructure
 …but perhaps more and tailored-made initiatives could be envisaged in order to promote it
 Fiber sub-loop unbundling: mandatory
Commission view (3)
 FTTN/FTTCab case
 If partial replacement of existing copper access with fibre: Obligation on
determining deadline, appropriate migration path from the current access
products to new access products (timing, technical functionalities etc.)
 Obligations:
 Reference offer for sub-loop unbundling
 Access to ducts, street cabinets
 Co-location: either at the street cabinet itself or near it
 Co-location facilities: power supply etc.
 Ex ante price control on all wholesale products: ducts, etc.
 Supplementary, appropriate backhaul wholesale products
 Pre-determination of details by NRA: size of street cabinets, cost-sharing
arrangements, etc.
 Access products: flexible enough to facilitate migration from FTTN to FTTH
 Wholesale Broadband Access
 As in case of existing services (both for FTTH, FTTN)
Commission view (4)
 Principle of geographic averaging:
 Not necessary use if substantial cost differences among various areas
 Pricing of existing assets (including ancillary services):
 Cost-orientation: Methodology same as today
 Pricing of new assets (including ancillary services) and dark fiber (up
to a concentrating point)
 Cost-orientation: but with a project-specific risk premium to be included in the
costs of capital for the investment risk.
 Risk premium calculated by regulator after justified arguments of incumbent
about the investment risk incurred by the incumbent
 Focus on striking balance between effective competition and encouraging
investment towards better evolution of the whole investment
Commission view (5)
 Other issues
 FTTH-PMP (GPON) seems like cable network (!?)
 Gradation of remedies:
 If passive remedies not active remedies
 Reciprocal regulation (sharing):
 NRAs may or not impose if commercial contracts initiatives
 NRAs could allow SMP operators to refuse sharing new investments with
alternative operators who, do not agree to reciprocal sharing of their assets
Regulators’ view (1)

Agreeing with the general context and goals but …

..seems to be over-prescriptive on implementation of remedies and pricing remedies.

Passive remedies and especially duct access do not necessarily suffice, neither are
the “ultimate” treatment

Pricing
 Vague methodology for risk premium calculation
 Not geographical averaging approach:
 unrealistic
 variant from the current Commission approach (used for existing assets, well accepted,
applied regulatory practice)

Opinion that “GPON seems like cable” might give incentive to incumbents to deploy
GPON expecting regulatory holiday

There is no “one-size-fits-all”: Every country should be in position to select remedies
according to its market status
Regulators’ view (2)
 Active remedies might be a good alternative especially in case of
FTTN/FTTCab scenario and at least for the first period
 Advanced-enhanced WBA might keep service competition in case of
FTTN scenario
 Quality parameters (for example low jitter for high video quality)
 Ethernet backhauling
 Different levels of IP hierarchy/nodes (e.g. Main Distribution Frame, MDF)
 Support of multicasting (for high video quality)
Benchmark on European countries
 Most operators are in early announcements, trials etc.
 In general, incumbents prefer FTTN (FTTCab/VDSL) or GPON or
Hybrid-Fiber-Coaxial (if they have access to cable)
 Except France where FT applies FTTH as well
 In general, alternatives/utilities prefer FTTH (P2P or GPON)
Issues regarding Next Generation (Core)
Networks (NGN)

NGN: single packet switched network transporting multiple
services (audio, video, data, both fixed & mobile)

Decouples the service and transport provision.

(Potential) innovation opportunities at both service,
infrastructure level.

(Potential) increased economies of scope and thus cost savings

Impact market structure, interconnection regimes,
interoperability and regulation

ERG opinion: separation between transport and service layer
will in practice be blurred by the implementation of services by
means of a centralised platform. This impacts the ability of
independent services providers to integrate their services into
the NGN platform.
Regulatory issues of NGNs (2)
 Points of interconnection (POIs)
 Due to centralisation of the control function, POIs for transport and for service will likely be
different.
 Transport interconnection could take place at a greater number of locations than service
interconnection (e.g. transport interconnection at any network node, but service
interconnection only at centralised platform location).
 Quality of Service (QoS)
 New dimension of interconnection agreements,
 It could be exploited by SMPs for new forms of discrimination (SMP arm, competitors)
 NRAs should have the possibility to impose minimum QoS levels.
 Costing/pricing
 Single network to deliver multiple services (economies of scope)
 In other words: costs will be mainly fixed and common; incremental costs for each service will
be relatively low.
 Change of cost standard?
 Bill & Keep (B&K) wholesale billing regime
Conclusions – Open issues
 Cost sharing and procedures’ facilitation makes NGA deployment
easier
 Duct access do not necessarily suffice, neither is the “ultimate”
treatment
 FTTN/FTTCab mode
 Collocation at street cabinets is expensive for OLOs and might multiply today’s procedures
thus delaying roll-out
 Incumbents (except for France) in Europe definitely prefer FTTN/FTTCab mode
 WBA might be more important for OLOs, especially if enhanced
 FTTH-P2P mode
 Main barrier: Intra-building wiring (Costs and roll-out complexities)
 NGN might impact to a number of critical regulatory issues (POIs,
QOS, wholesale interconnection billing scheme)
 In Greece: depending on evolution of the State subsidized plan,
there are additional issues that are expected to handle by the
Regulator
www.eett.gr
www.broadband.gr
Supplementary slides
Commission view (6)
 Risk premium
 estimated by regulatory precedent/benchmark or
 direct statistical, financial comparator methods like equity beta with benchmarks from
other sectors but providing comparable services (e.g. media).
 Include project-specific capital employed, labour costs, building costs, efficiency
gains, assets’ terminal value (rec. 20 Access Dir.)
 Risk premium not applied for fibre backhaul from the street cabinets to the MDF
 Principle of equivalence: avoid discrimination in favor of SMP’s retail
arm
 Equivalence on asset information
 Infra availability (location of ducts, street cabinets, manholes, availability, etc.)
 Access points: network topography, location of concentration points and list of
connected buildings.
 Equivalence on provisioning times: through platform/tool
 Equivalence on service management & SLA
 QOS indicators & pre-defined target service levels (time limits for replying to
requests for information, etc. )
 Regular reporting
Regulatory issues of NGNs (3)
 Bill & Keep (B&K) wholesale billing regime
 Each network bears the costs of terminating traffic coming from other carriers
 Not receive payments at the wholesale level for termination.
 Recovers its costs (termination and any payments for upstream connectivity) in other
ways, e.g. by billing them to its end customers.
 B&K can be considered by NRAs
 Where B&K applies, it is unlikely to have SMP in the termination market.
 “Silent requirement”: sufficient competition at the retail level
 Concept of termination charge will not disappear at all. Traffic from outside the B&K
area needs to be treated in such a way as to prevent extensive arbitrage (tromboning,
call-back etc.).
 Billing migration to B&K




Not full migration to all-IP: keep existing regime
Requirements: clear distinction between different services & use of services measurable
Possibility for price differentiation based on QoS classes
migration to B&K is easier:
 the lower the absolute level of interconnection rates;
 the smaller the relative difference between interconnection rates of different
networks
 the higher the proportion of flat rate tariff packages at the retail level.