Transcript Regional infrastructure: technologies

Technological Evolution:
Regulatory and Policy
Implications for the Region
J. Scott Marcus
Caribbean Internet Forum V: St. Lucia
6 November 2007
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Technological Evolution:
Regulatory and Policy Implications for the Region
• Networks are evolving in complex ways that have
profound implications for policymakers.
• Developed countries will confront many of these
issues somewhat earlier than the Caribbean.
• Nonetheless, the transformation is global, and will be
strongly felt in the region.
• Caribbean policymakers can benefit from studying the
effects of policy responses – both what succeeds and
what fails – in developed countries (notably in the
European Union and the United States).
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Technological Evolution:
Regulatory and Policy Implications for the Region
• What’s happening? Disruptive technological evolution.
• Rationale for public policy intervention
• The move to IP-based NGNs
- NGN policy challenges
- NGN deployments around the world
- Regulatory responses to NGN in various countries
• … and now, the good news
• Conclusions
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Disruptive Technological Evolution
• Internet technology is no longer “just” about the
Internet; the same technologies are becoming
central to all networks.
• Broadband access is increasingly central to the
fixed network.
- Increasingly high speeds (copper to fiber).
- Increasingly, network access is IP access.
• Services (voice, video, data) can be delivered by;
- Any network operator (telco, cable, wireless(?)).
- Service providers who do not have a network.
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Disruptive Technological Evolution
• Price/performance continues to improve.
- Moore’s Law improvements in processing
speed and memory.
- Increased data transmission speed and
capacity (e.g. DWDM).
• Voice service will remain very important, but the
traditional voice network is of diminishing
importance.
- Voice traffic is a diminishing fraction of total
network traffic.
- All voice migrates to VoIP.
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Disruptive Technological Evolution
• Traffic continues to grow rapidly, but the rate of
growth is declining year over year.
• Voice traffic will continue to migrate from fixed to
mobile.
- High mobile penetration has been a boon to
developing countries.
- More mobile subscribers than fixed.
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Disruptive Technological Evolution
• Mobile is certainly being used for IP-based data
services, but it may have limited ability to
substitute for the fixed network for data.
- Inefficient wholesale and retail pricing
arrangements that (1) lead to high prices and
(2) discourage use.
- Limitations in overall capacity and scalability.
• Fixed wireless broadband is likely to be a good
solution in areas of low teledensity. Where
teledensity is higher, capacity and scalability will
probably not be adequate.
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Disruptive Technological Evolution
• In comparison to the fixed network, the mobile
network is likely to have:
- Similar technical evolution (NGN / IMS).
- Significantly different commercial evolution.
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Rationale for Policy Intervention
• Three primary reasons for regulation of electronic
communications, all related to market failure:
- Addressing distortions of competition, especially
those caused by some form of market power.
- Addressing social needs that the free market
might not, typically because the social value
exceeds the private value to parties that might
otherwise invest.
- Allocating scarce resources that are unique to
each country.
• Network evolution raises issues in all three areas.
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Rationale for Policy Intervention
• Market power
- NGN might introduce new forms of
competition, thereby mitigating market power.
- Other forms of market power (last mile,
termination monopoly) are likely to persist.
- NGN might introduce new bottlenecks in upper
layers of the networks.
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Rationale for Policy Intervention
• Public needs / public goods
- Access to emergency services
- Lawful intercept
- … and more
- These are largely the same issues raised by
the migration to converged IP-based networks.
• Numbering
- Geographic or non-geographic numbers?
- Far greater salience in Europe than in the US,
due to differences in charging arrangements.
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Rationale for Policy Intervention
• Encourage investment? Be careful!
• Policy intervention can make sense where:
- There is a “public goods” problem – the value to
society as a whole is greater than the private
value to the firms or to their customers.
- There is some other market failure, such as a
lack of economies of scale due to fragmentation
of regional markets.
• Otherwise, the policymaker should let the market
choose the winners.
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Rationale for Policy Intervention
• Substantial risk of distorting the market.
• Risk that the policymaker “bets on the wrong horse”.
- There have been brilliant successes, such as the
European choice of GSM.
- There have also been many failures – they are
not much talked about. “Success has many
fathers, but failure is an orphan.”
• Otherwise, policymakers should act with restraint,
seeking to avoid distortions to market evolution.
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Disruptive Technological Evolution: IP-based NGNs
• Many operators, especially incumbents, look to migrate
to IP-based NGNs.
- Enhance economies of scope and scale.
- Accelerate time-to-market for new IP-based services.
• The ITU provides a widely cited Definition of NGN:
- “A Next Generation Network (NGN) is a packet-based network able to
provide services including Telecommunication Services and able to
make use of multiple broadband, QoS-enabled transport technologies
and in which service-related functions are independent from underlying
transport-related technologies. It offers unrestricted access by users to
different service providers. It supports generalized mobility which will
allow consistent and ubiquitous provision of services to users.”
See http://www.itu.int/ITU-T/studygroups/com13/ngn2004/working_definition.html.
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Disruptive Technological Evolution: IP-based NGNs
NGN Core Network
NGN Concentration Network
NGN Access Network
Policy issues are different in the NGN core,
concentration, and access networks
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NGN in the UK
Comparison of existing BT voice and broadband networks with 21CN
Source: Ofcom (2005), Next Generation Networks
Future arrangements for access and interconnection; Figure 1, page 11
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NGN in the Netherlands
MA
Locations
(28k)
Customer
Locations
Metro
Locations
BB Locations
(2x14)
AURA
Locations
(2x2)
PtP/Ring ~ 70 km
PtP/Ring
PtP/Ring ~ 1000 m
~ 70 km Ring ~ 70 km
Ring ~ 80-120 km
Ring ~ 80-120 km
dsl access
dsl access
IMS
Me
tr o
Eth
ern
et
Internet
dsl access
BB MPLS
Metro mpls
dsl access
Metro Ethernet
VoD
ls
mp
o
tr
Me
TV
dsl access
Metro Ethernet
Fiber Access
Local Loop
Fiber Metro Network
Fiber Metro Network
Fiber Core Network
Metro Access
Metro Core
Backbone
IP Edge
Dienste
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Policy Challenges: IP-based NGNs
• The NGN core
- The migration to IP potentially enables new
forms of service competition.
- NGN/IMS could in principle either enable or
inhibit competition.
- Service providers with market power may be
motivated to inhibit competition.
- Smaller, competitive maverick operators may
have different motivations.
- How will this play out in the marketplace? It is
too soon to say.
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Policy Challenges: IP-based NGNs
• The broadband/fiber NGN access network
- If all voice migrates to IP, and the high speed
broadband access becomes the means to
reach those services, then the character of the
last mile bottleneck changes.
- Absent other changes, the last mile bottleneck
does not go away.
- Procompetitive regulations – notably loop
unbundling and line sharing – experience
significant challenge in a VDSL of FTTB/FTTH
environment (bitstream less so).
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Policy Challenges: IP-based NGNs
• Voice services in an IP-based NGN network
- The call termination monopoly results because
only a single service provider can, in general,
terminate calls to a single telephone number.
- Contrary to what some have claimed, the
migration to IP-based NGNs does not
significantly change the termination monopoly.
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Policy Challenges: IP-based NGNs
• Regulators might like to lay down their picks and
shovels, declare victory and retire. They cannot.
- Likely market power in the last mile.
- Likely market power for call termination.
- Possible new forms of market power at the
application services layer.
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NGN in the UK: Functional Separation
• Vertical separation of British Telecom
- Access services division: OpenReach
- Provides wholesale products to BT and to
competitors on a nondiscriminatory basis
(Equivalence of Input).
- Distinct branding, uniforms.
- Employee compensation reflects results of
OpenReach, not the results of BT.
- Separate board to monitor effectiveness of
Equivalence of Input.
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NGN in the UK: Functional Separation
• Promising approach reflects competition law,
not pursuant to the regulatory framework.
- Many claim that the system is working well,
including Martin Cave (Six Degrees of Separation)
- In reality, the measure is a bit extreme, and it is a
bit early to say whether it is effective.
• Much interest in this approach
- European Commission
- Italy
- Babcock and Brown / eircom
- Australia and New Zealand
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“NGN” access in the US
• Near-total and irrevocable elimination of regulation
of the last mile, ostensibly in order to encourage
investment.
• Has led the market to collapse to a series of
geographically specific telco-cable duopolies.
• This approach cannot make sense in the absence
of substantial modernized cable television plant.
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The Netherlands Broadband Market
The Netherlands Broadband Marketplace
2%
Incumbent
37%
45%
ULL
Shared Access
Bitstream
Resale
Cable
Other
0%
0%
11%
5%
Source: European Commission 12th Implementation Report (10/2006)
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The French Broadband Market
The French Broadband Marketplace
6%
0%
3%
14%
Incumbent
ULL
48%
Shared Access
Bitstream
Resale
Cable
Other
16%
13%
Source: European Commission 12th Implementation Report (10/2006)
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The duopolistic U.S. broadband market
US Broadband 12/2004
1,163,357 , 3%
14,134,865 , 37%
ILEC DSL / other telco
CLEC DSL / other telco
Cable modem
Other
21,319,224 , 57%
1,150,981 , 3%
Derived from data from FCC reports based on Form 477 carrier data
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U.S. – EU Comparison: DSL Lines
US 4%
European
Average
Source: European Commission 12th Implementation Report
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“NGN” access in the US
• The results are still unfolding, but the policy seems
to me to be a disaster.
• May have indeed spurred incumbent investment in
VDSL and FTTH, but at a cost!
- Slower adoption of broadband than would
otherwise be the case.
- No investment by competitors.
- High prices for relatively slow broadband.
- Less consumer choice.
- Threats to Network Neutrality.
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NGN access in Germany
• The German government has tried to provide
DeutscheTelekom with a “regulatory holiday” in
exchange for a commitment to deploy VDSL widely.
• Note that cable television in Germany is crippled by
inappropriate competition law remedies.
• The German regulator (BNetzA) seeks to open
ducts to competitors, potentially providing costeffective access to street cabinets.
• The European Commission has launched an
infringement proceeding to challenge the regulatory
holidays.
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NGN access in most of Europe
• Most European countries with NGN deployments –
notably including France, the Netherlands, and
Italy – are seeking to adjust and refine the
European regulatory framework.
- Maintain competition in the last mile.
- Avoid remonopolization of their networks.
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Other NGN challenges
• Interconnection challenges are emerging
everywhere, as the PSTN model collides with
Internet arrangements (and also with more
efficient arrangements used in the U.S. and
Canada).
• The migration of voice to IP implies challenges for:
- Access to emergency services
- Lawful intercept
- Access by those with disabilities
- Numbering plans
- And more …
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And now, the good news…
• Mobile services are already well advanced in bringing
voice service and some data service to large
numbers of residents of the region.
• Progressive improvements in price/performance will
make it easier to provide universal access, and
ultimately universal service, to all.
• The emergence of competitive undersea cable to the
region is an enormous boon.
• Third party service providers (Skype, Vonage,
SIPgate) provide valuable competition.
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Conclusions
• The transformation of the network is global, and
will ultimately be strongly felt in the region.
• Many aspects benefit residents of the region.
• Others pose new policy and regulatory challenges.
• Caribbean policymakers can benefit from studying
the effects of policy responses – both what
succeeds and what fails – in developed countries
(notably in the European Union and the United
States).
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