Itu Trends In Telecommunications 2007 Summary

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Itu Trends In Telecommunications 2007 Summary

  1. 1. I n t e r n a t i o n a l Te l e c o m m u n i c a t i o n U n i o n ECELR ONMMDUNSICAITINON TTE r eform 2007 E R O ARDATTIOON TH E N E X T- G E N WORKS NET N ) (NG ry Summa
  2. 2. ALSO AVAILABLE FROM ITUPUBLICATIONSTrends in Telecommunication Reform 2007: The Road to Next-Generation Networks (NGN), 2007 (8th Edition).......100 CHFTrends in Telecommunication Reform: Regulating in the broadband world, 2006 (7th Edition).....................................95 CHFTrends in Telecommunication Reform: Licensing in an Era of Convergence, 2004/05 (6th Edition) ..............................95 CHFTrends in Telecommunication Reform: Promoting Universal Access to ICTs, 2003 (5th Edition) ..................................90 CHFTrends in Telecommunication Reform: Effective Regulation, 2002 (4th Edition) ...........................................................90 CHFTrends in Telecommunication Reform: Interconnection Regulation, 2000-2001 (3rd Edition) .......................................90 CHFTrends in Telecommunication Reform: Convergence and Regulation, 1999 (2nd Edition) .............................................75 CHFGeneral Trends in Telecommunication Reform 1998: World Volume I...........................................................................75 CHFGeneral Trends in Telecommunication Reform 1998: Africa Volume II ..........................................................................65 CHFGeneral Trends in Telecommunication Reform 1998: Americas Volume III ...................................................................55 CHFGeneral Trends in Telecommunication Reform 1998: Arab States Volume IV ...............................................................45 CHFGeneral Trends in Telecommunication Reform 1998: Asia Pacific Volume V.................................................................60 CHFGeneral Trends in Telecommunication Reform 1998: Europe Volume VI .......................................................................72 CHFCollection of five Regional reports (Volumes II-VI) ......................................................................................................297 CHFCollection of Regional and World reports (Volumes I-VI).............................................................................................372 CHFThe Arab Book: Telecommunication Policies for the Arab Region, 2002.......................................................................50 CHFThe Blue Book: Telecommunication Policies for the Americas, 2000 (2nd Edition) ......................................................50 CHFPlease contact the ITU Sales Service: Tel.: +41 22 730 5111 Fax: +41 22 730 5194 E-mail: sales@itu.int Website: www.itu.int Note: Discounts are available for all ITU Member States, Sector Members and Least Developed Countries.
  3. 3. I n t e r n a t i o n a l T e l e c o m m u n i c a t i o n U n i o n TRENDS IN TELECOMMUNICATION REFORM 2007 The road to Next-Generation Networks (NGN) Summary September 2007
  4. 4. Table of Contents Page1 Introduction.......................................................................................... 52 Market and regulatory trends ............................................................... 83 Selected regulatory developments ..................................................... 174 What is NGN?.................................................................................... 215 Interconnection in an NGN environment........................................... 226 Universal access and NGN ................................................................ 247 Consumer protection and quality of service in NGN......................... 258 Creating an enabling environment for NGN...................................... 289 Conclusion ......................................................................................... 30
  5. 5. Trends in Telecommunication Reform 2007 – Summary TRENDS IN TELECOMMUNICATION REFORM 2007 The road to Next-Generation Networks (NGN) Summary1 INTRODUCTION ITU/BDT is pleased to present the eighth edition of Trends inTelecommunication Reform, a continuing part of our dialogue with theworld’s information and communication technology (ICT) policy-makersand regulators. This year’s edition focuses on the move to next-generation networks (NGN), which has captured the attention of theinformation and communication technology (ICT) sector in 2007. Thesector has already seen the year of “convergence”, followed by the yearwhere “broadband” was on everyone’s lips, along with the more recentfascination with “Voice over Internet Protocol” (VoIP) and “fixed-mobile convergence” (FMC). Each of these recent buzz words representspart of the same evolutionary path in which individual service-specificnetworks are developing into advanced IP-based networks capable ofproviding a full range of services and applications accessible from awide range of devices that can function from any location. Although the sector has faced many so-called “revolutions”, theconsensus, with regard to NGN, is that the move will be more of anevolution than a revolution. Many observers expect that NGN and theInternet will co-exist for some time – although most would agree that themove to all IP-based networks is unstoppable. Even where NGN isdeployed, it is also likely to include many variants as market playersleverage their investments in today’s technology. In Europe, Japan,North America and the Republic of Korea, many equate NGN with fibre(FTTx) deployments coupled with a move to more ubiquitous and robustwireless coverage. Indeed in wealthier countries, fixed-line operators are 5
  6. 6. Trends in Telecommunication Reform 2007 – Summarydeploying fibre closer and closer to the end-user, while mobile operatorsare investing in third, and even fourth-generation mobile networks aswell as broadband wireless access (BWA). Both fixed and mobilenetworks are being upgraded to offer ever higher-speed broadband. At first glance, it looks like the digital divide storm clouds arebrewing. European countries talk about tens of billions of euros ofinvestments needed to achieve NGN, sums that would go begging in thedeveloping world. But there is a silver lining. There is a growing rangeof wireless technologies that offers ever-increasing broadbandcapabilities. And national fibre backbone deployments are now withinfinancial reach of developing countries. Today’s fibre backbonescoupled with wireless access technologies offer developing countries afar richer diet of ICT services than legacy Public Switched TelephoneNetwork (PSTN) and 2G mobile networks ever could and at lower cost.Some developing countries, such as Argentina, Bangladesh, Bulgaria andPakistan are already experiencing NGN migration by focusing on cost-effective solutions to enable affordable access to the widest base of end-users possible. Technology alone, however, is not the solution. Policy-makersrecognize the need to abandon regulatory practices designed for anearlier era that today stifle innovation and investment and lead toarbitrage opportunities. Those countries that are witnessing the greatestexplosion of ICT growth and investment have designed regulatoryframeworks that enable and promote ICT development. The emerging NGN environment poses significant challenges to allmarket players who are developing new business models, as well as togovernments and regulators intent on creating future-proof regulatoryframeworks. This year’s Trends in Telecommunication Reform containsten chapters addressing each of the NGN-related challenges andopportunities to enable regulators to harness the potential of NGN tobuild an Information Society for all: • Chapter One provides an ICT market and regulatory overview to set the stage for the following chapters; • Chapter Two provides an NGN overview to introduce the discussion in the later chapters;6
  7. 7. Trends in Telecommunication Reform 2007 – Summary• Chapter Three focuses on NGN technology in an effort to demystify the plethora of NGN terms under discussion;• Chapter Four looks at fixed-mobile convergence as one of the trends leading to NGN deployments (the other major trend, VoIP, was explored in the 2006 edition of Trends);• Chapter Five examines interconnection and access in an NGN environment;• Chapter Six looks at international Internet interconnection, which will take on increased importance as international networks become increasingly IP-based;• Chapter Seven examines universal access and NGN;• Chapter Eight addresses Quality of Service (QoS), consumer protection and cybersecurity in an NGN environment;• Chapter Nine provides discussion on an Enabling Environment for NGN; and• Chapter Ten provides a conclusion and a look ahead. 7
  8. 8. Trends in Telecommunication Reform 2007 – Summary2 MARKET AND REGULATORY TRENDSBuoyant ICT growth In order to understand the likely migration paths toward IP-enabledand next-generation networks, it is essential to evaluate the current stateof ICT infrastructure deployment. Developed countries, which have themajority of the world’s fixed and broadband lines, are more likely tomigrate to fixed rather than wireless NGN access networks as theyupgrade their existing fixed-line telephone and cable TV infrastructure.Wireless access will still play a key role in developed economies whereusers seek seamless or ubiquitous coverage, and are likely to use fixedlines while in a set location (home or work) and mobile while on the go. Figure 1.1 – Growth in fixed lines, mobile cellular subscribers and Internet users, in billions, world (1996-2006) 6.0 5.0 4.0 Internet users billions 3.0 Mobile subscribers Fixed lines 2.0 1.0 0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: ITU World Telecommunication/ICT Indicators Database.8
  9. 9. Trends in Telecommunication Reform 2007 – Summary Figure 1.1 shows the buoyant growth in the ICT sector over the pastdecade, demonstrating the spectacular success of the mobile sector inparticular. By the end of 2006, there were a total of nearly 4 billion mobile andfixed-line subscribers and over 1 billion Internet users. This includes1.27 billion fixed-line subscribers and 2.68 billion mobile subscribers(61 per cent of which are located in developing countries) as well assome 1.13 billion Internet users.Broadband on the rise While access to ICT continues to grow, countries are increasinglyfocusing on improving broadband use, in particular. Broadband isnecessary in order to achieve the Information Society. Broadband-enabled services have the potential to create economic and empowermentopportunities and improve lives. Indeed, some of the applications that arehaving the greatest impact on people and businesses are closely linked tobroadband uptake. This is also reflected by the fact that since 2005 therewere more fixed broadband subscribers than dialup Internet subscribersworldwide. Today, however, broadband penetration is dominated by thewealthy countries. Some 70 per cent, or nearly three-quarters, ofbroadband subscribers worldwide in 2006, were located in high-incomecountries which accounted for just 16 per cent of world population.Furthermore, two economies – India and Vietnam – accounted for morethan 95 per cent of all broadband subscribers in low-income countries,while a single economy – China – accounted for 94 per cent ofbroadband subscribers in the lower-middle income group (Figure 1.2).The good news is that a number of developing countries are experiencingbroadband growth. In Peru, for example, the number of broadbandsubscribers has grown by close to 80 per cent annually between 2001 and2006, from 22’779 in 2001 to 484’899 at the end of 2006. In Europe,over half the Estonian population uses the Internet and the country hasthe highest penetration of both Internet and broadband in Central andEastern Europe. But in Least Developed Countries (LDCs), there weremerely 46’000 broadband subscribers in the 22 out of 50 LDCs withbroadband service in 2006. 9
  10. 10. Trends in Telecommunication Reform 2007 – Summary Figure 1.2 – Broadband worldwide Number of countries with broadband 180 commercially available 166 170 160 145 140 133 120 113 100 81 80 60 40 20 0 2002 2003 2004 2005 2006 start 2007 Top 25 broadband economies by total number of subscribers, 2006 70 millions 60 50 40 30 20 10 0 Russia Hong Kong, Kingdom (Rep.) China Italy Australia Turkey India United Spain Poland Brazil Belgium States Germany Korea France Netherlands Denmark Argentina Japan Mexico Canada Sweden Switzerland Taiwan, China United China Source: ITU World Telecommunication/ICT Indicators Database. In the area of broadband infrastructure, developed markets areintent on bringing fibre closer to the end user either as FTT Home(FTTH), where the fibre reaches the end-user’s premises, FTT Building(FTTB), where the fibre stops at the building; FTT Curb (FTTC) or FTTKerb (FTTK), where fibre stops at a curb near a building or group ofbuildings; and FTT Node (FTTN) or FTT Cabinet (FTTCab), wherefibre stops at a cabinet with telecommunication equipment that serves aneighbourhood. Collectively, these variants are termed FTTx. The Asia-Pacific region today has more FTTx services than anyother part of the world. Japan was the first country to introduce a FTTHnetwork in 1999. In 2005, the number of Japanese subscribers to FTTHservices increased 88 per cent to surpass the 5 million mark (Figure 1.3).10
  11. 11. Trends in Telecommunication Reform 2007 – SummaryA positive trend in FTTx deployment worldwide is the increasingnumber of developing countries launching FTTx networks. In Asia,UTStarcom in India, and in Latin America, Telesp (the Brazilian fixed-line unit of Telefónica) are planning FTTx deployments for 2007. Figure 1.3 – FTTH homes connected, Japan, 2000-2005 16000000 FTTH 14000000 DSL CATV 12000000 10000000 8000000 6000000 4000000 2000000 0 De Ju De Ju De Ju De Ju De Ju De n- n- n- n- n- c- c- c- c- c- c- 01 02 03 04 05 00 01 02 03 04 05 Source: MIC Japan. In developing countries, the meteoric rise of mobile services hasbeen fuelled by improved affordability, increased network coverage, andnew service options. The same factors can promote wireless broadbandInternet access in developing countries, even in countries with poorlydeveloped fixed-line infrastructure, as mobile handsets that support bothvoice and Internet applications become more affordable (Box 1.1). InKenya, for example, one ISP has announced that it will provide Internetaccess, instant messaging, and push e-mail and attachment support tomobile users through a handheld device, in conjunction with its partner,a mobile operator. Nearby in Zambia, a mobile operator is introducingthe country’s first mobile Internet access facility to provide customerswith quick access through their mobile handsets or laptops. Still, because 11
  12. 12. Trends in Telecommunication Reform 2007 – Summaryof high prices, these services remain beyond the reach of most customersin developing countries and are targeted to high-end and businesscustomers. It is hoped that operators will eventually find pricing plansthat make these services more affordable to a full range of users. (SeeFigure 1.4 showing deployments of mobile technologies). Figure 1.4 – Map of mobile technologies worldwide, May 2007 Note: The map shows networks commercially launched as of May 2007. For some countries where more than one technology has been commercially deployed, the most advanced technology is represented. Legend: 2G = Second-generation wireless telephone technology CDMA2000 1x = Code Division Multiple Access CDMA2000 1x EV-DO = Code Division Multiple Access Evolution- Data Optimized WCDMA = Wideband Code Division Multiple Access HSDPA = High-Speed Downlink Packet Access Disclaimer: The designations employed and the presentation of material in this map do not imply any opinion whatsoever on the part of ITU concerning the legal or other status of any country, territory or area or any endorsement or acceptance of any boundary. Source: ITU, based on data adapted from 3Gtoday12
  13. 13. Trends in Telecommunication Reform 2007 – Summary Box 1.1: Mobile broadband for developing countries The demand for affordable IMT-2000 services is rising in developing countries. One opportunity for developing nations, particularly those with large rural populations, is the commercialization of low- frequency mobile technologies. These enable wider coverage with fewer base stations, and hence reduce the cost of mobile infrastruc- ture significantly. CDMA450 is a 3G solution combining next-gene- ration CDMA2000 wireless communication services with wide network coverage using the 450-MHz frequency band. Its wide adoption throughout the developing world is indicative of the benefits it can bring in low-cost connectivity. In a number of countries, services licensed in the 450 MHz frequency are used for delivering mobile or fixed wireless access to remote rural areas, helping to bridge the rural-urban digital divide (e.g. in Argentina, Belize, Benin, China, the Czech Republic, Estonia, Indonesia, Libya, Mexico, Peru, Russia and Venezuela). Source: ITU, adapted from Telegeography, Global Insight and operators’ reports.Privatization and competition trends Despite the general slow-down in the sale of state-ownedincumbent operators, privatization remains a priority for most countriesthat have not yet fully or partially privatized their incumbent operator.The objectives of privatization are to improve efficiency, productivity,and service quality, as well as to raise capital, improve managementexpertise and further develop the network. In addition, many countrieshave found that competition is often more fair when the state avoidsbeing both a market player (as owner or part-owner of the incumbent)and a referee at the same time. Privatization sends the signal that policydecisions and regulations will be fair to all players. Between 1990 and2006, some USD 83 billion was raised through privatizations ofincumbent public telecommunication operators in developing countries. By the middle of 2007, 123 ITU member countries had a private orprivatized national fixed-line incumbent (Figure 1.5). Several othercountries have announced their intention to privatize. The government ofthe Ukraine has the green light to move on its plans to sell Ukrtelecom.The Kyrgyz government also plans to further privatize the fixed-line 13
  14. 14. Trends in Telecommunication Reform 2007 – Summaryincumbent, Kyrgyztelecom, and Slovenia’s Finance Ministry hasannounced the international tender for the further sale of a minority stakein Telekom Slovenije by the end of August 2007. Figure 1.5 – Public/private ownership of national fixed-line incumbents, 1991-2007, World As of 1 June 2007 Countries 160 Private State-owned 140 120 100 80 60 40 20 0 1991 1993 1995 1999 2001 2005 2007 Source: ITU World Telecommunication Regulatory Database. During the same period, the opening of markets to competition hasremained steady. Mobile and Internet services continue to be the mostcompetitive markets, while fixed-line services are also becomingincreasingly competitive (see Figure 1.6). In the first part of 2007, the Gulf countries among the Arab Stateswere very active in opening both their mobile and fixed markets. Forexample, in April 2007 the Supreme Council of Information andCommunication Technology (ictQATAR) launched a formal selectionprocess for the award of a mobile licence to a new entrant in the State ofQatar. The Telecommunication Regulatory Authority of Oman alsoannounced its intention to license a second national operator. The second14
  15. 15. Trends in Telecommunication Reform 2007 – Summaryoperator will compete with Omantel which is currently the monopolyprovider of fixed-line services. Figure 1.6 – Growth of competition in basic services and cellular mobile services worldwide, 1995-2006, and competition in selected service areas, 2006 Grow th of competition, 1995 to 2006 Countries Basic services Mobile 160 140 120 100 80 60 40 20 0 1995 1997 2000 2001 2002 2003 2004 2005 2006 Monopoly Competition 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Basic Leased Mobile Internet Wireless VSAT Cable TV DSL 3G services lines cellular services local loop (2G) Source: ITU World Telecommunication Regulatory Database.A growing community of regulators The establishment of a separate regulator is one of the most visiblesigns of sector reform. Separate regulatory agencies lay the groundworkfor a favourable investment climate and the promotion of market 15
  16. 16. Trends in Telecommunication Reform 2007 – Summaryopportunities. Increasingly regulators seek to be ICT enablers and agentsof change. This is usually best achieved where ICT regulators have acertain degree of autonomy from government and industry pressures. The world now has 148 national ICT-sector regulators (Figure 1.7).Over 75 per cent of ITU Member States have established a separateregulator, although differences remain between regions. Africa countsthe highest percentage of countries with a separate sector regulator(91 per cent), followed by the Americas (89 per cent), and Europe (80per cent). The Arab States and Asia-Pacific number 62 and 58 percent,respectively. Growth in the number of regulators is set to continue withmore than five countries having indicated their intention to establish anICT regulatory body in the near future. Figure 1.7 – Growth of regulators worldwide, 1990 - mid-2007 Regulatory agencies, world (cumulative) 148 137 124 106 86 43 14 1990 1995 1998 2000 2002 2004 2007 Source: ITU World Telecommunication Regulatory Database.16
  17. 17. Trends in Telecommunication Reform 2007 – Summary3 SELECTED REGULATORY DEVELOPMENTSInternational mobile roaming The issue of mobile roaming charges is on the agenda of regulatoryauthorities and regional regulator associations worldwide, in an attemptto find solutions for the high international roaming charges paid byconsumers using their mobile phones while travelling abroad. To date,most regional groups have taken a “soft-regulation” approach tointernational mobile roaming, focusing on publishing roaming rates. TheEuropean Commission, however, in a watershed measure, has decided toregulate roaming charges in the 27-country European Union block. Thismove may embolden other regional groups to take firmer action to cutmobile roaming charges.Regulating local loop unbundling and infrastructure sharing Local loop unbundling (LLU) has generated a lot of debateworldwide, with countries and regions taking a variety of approaches.The different approaches taken to unbundling often reflect the balancecountries seek to strike between addressing competitive bottlenecks andencouraging investment in infrastructure. Countries like the UnitedStates, with inter-modal broadband competition between cable TV andADSL broadband providers, may place less emphasis on local loopunbundling, and even view unbundling as a barrier to innovation and thedevelopment of infrastructure. Countries with limited inter-modalcompetition, such as many European countries, have found it necessaryto embrace local loop unbundling to encourage ADSL provision and arenow planning to extend LLU to FTTx deployments. Regulators inEurope have vigorously enforced LLU regulation as a means of boostingbroadband deployment, and the number of unbundled lines currentlyavailable in Europe has risen dramatically, by nearly 80 per cent from2005 to 2006. Many developing countries, in initial stages of sectorreform, have focused primarily on increasing the number of voice users,and have principally concentrated on raising the number of voicesubscribers on mobile networks. They also had far fewer fixed localloops to unbundle. 17
  18. 18. Trends in Telecommunication Reform 2007 – Summary In addition to LLU, other regulatory measures are being developedto ensure smooth competition and market access for new entrants such asmandatory passive infrastructure sharing and in-site sharing. Accordingto ITU World Telecommunication Regulatory Database, a majority ofcountries who completed the 2006 survey indicated that infrastructuresharing is required while nearly half indicated that in-site sharing ismandatory. This is the case for example in Bulgaria, Colombia, Jordan,Madagascar, Mali, Morocco, Poland and Turkey.Interconnection A clear and transparent interconnection regulatory framework iskey to a sustained competitive environment. Providing public access toreference interconnection offers, agreements, and prices is one toolregulators can use to promote transparency, raise competitor awarenessand ensure a level playing field among competitors. Worldwide trends show that only 32 per cent of countries requirethe publication of interconnection agreements. In contrast, interconnec-tion pricing information is made publicly available in 59 per cent ofcountries around the world. Europe is taking the lead with 72 per cent ofcountries requiring interconnection prices to be made public, while in theAmericas, only 46 per cent of countries require operators to publish thisinformation (Figure 1.8). The Arab States have the highest percentage ofcountries mandating operators to publish reference interconnectionoffers, followed by Europe and the Asia-Pacific regions. The require-ment to publish reference interconnection offers is mainly imposed onthe incumbent operator or operators with significant market power.18
  19. 19. Trends in Telecommunication Reform 2007 – Summary Figure 1.8 – What interconnection information is made publicly available? Interconnection prices RIO Interconnection agreements 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Africa Americas Arab States Asia-Pacific Europe Note: RIO refers to reference interconnection offer. The percentages shown in the figure are based on the number of countries that answered positively to the relevant questions in the 2005 and 2006 annual telecommunication regulatory surveys. Source: ITU World Telecommunication Regulatory Database.VoIP regulation Voice over Internet Protocol (VoIP) subscribers continue to grow,fuelled primarily by the demand for lower cost services as well as thefact that VoIP is being integrated into a number of new services offeredon IP networks. Despite obvious benefits, VoIP also challengestraditional telecommunication business models, leading some countriesto try to ban or limit VoIP. In many countries, incumbents have resistedoffering VoIP services to protect their lucrative long-distance andinternational call revenues. In the process they have tried to convinceregulators and policy-makers to ban or restrict other service providersfrom doing so. Today, however, the number of countries in which VoIPhas been legalized is greater than the number of countries where it isbanned. 19
  20. 20. Trends in Telecommunication Reform 2007 – Summary Indeed the state of VoIP regulation is changing so quickly it isalmost impossible to keep pace. Until recently, for example, VoIP wasbanned in many African and Arab State countries. Today, a growingnumber of countries have or are about to legalize VoIP, including,Algeria, Ghana, Kenya, Mauritius, Nigeria, Somalia, South Africa,Tanzania and Uganda (Figure 1.9). Figure 1.9 – The spectrum of regulatory treatment of VoIP, 2006 Source: ITU World Telecommunication Regulatory Database and ITU, The state of VoIP worldwide 200620
  21. 21. Trends in Telecommunication Reform 2007 – Summary4 WHAT IS NGN? There are numerous views of what constitutes NGN. Differentoperators that have begun the process of NGN migration refer to theirnext-generation networks differently. For some, NGN simply meansmigration from a PSTN to an IP-based network. For others, it is a morespecific reference to advances such as international call IP trunking andIP in the local loop. From a technology perspective, NGN is based on a new architecturethat modifies both the core and access parts of a telecommunicationnetwork, changing the way it delivers services to end-users (Box 1.2). At the network core level, the major innovation associated withNGN is the introduction of a packet-based transport level that is separatefrom the network control layer. This packet-based transport is generallybased on Internet Protocol, which is the current universal transporttechnology capable of handling any type of service. However, thistransport is enriched with Multi Protocol Label Switching (MPLS) toensure Quality of Service (QoS). At the end-user NGN access level,access is provided through packet-based broadband capable of handlingthe provision of voice, data, and other content-based services. Broadbandaccess can be either delivered through fixed-line technology such asDigital Subscriber Line (DSL), fibre-optic and cable TV, or wirelesstechnology such as broadband wireless access (BWA). Box 1.2: ITU definition of NGN A Next Generation Network is defined by ITU as “a packet-based network able to provide 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 enables unfettered access for users to networks and to competing service providers and/or services of their choice. It supports generalized mobility that will allow consistent and ubiquitous provision of services to users.” Source: ITU-T Recommendation Y.2001 21
  22. 22. Trends in Telecommunication Reform 2007 – Summary5 INTERCONNECTION IN AN NGN ENVIRONMENTDomestic interconnection Regulation is frequently needed in support of access andinterconnection. A key question that is considered in this eighth editionof Trends in Telecommunication Reform is the degree to whichregulation of access and interconnection will be necessary in theemerging world of NGN and in particular how the emergence of NGNalters market power and market entry. In particular, the relative merits of different wholesale inter-connection charging arrangements are explored in the NGN context.Most of the world uses a system known as Calling Party’s Network Pays(CPNP); however, a less widely used system known as Bill and Keepoffers a number of advantages, particularly for countries where adoptionof ICT services is already well advanced. Migration to an NGN environ-ment is a natural time for a country to consider whether wholesaleinterconnection arrangements could profitably evolve.International interconnection On an international level, the subject of interconnection has beendominated for some time by issues related to the accounting rate systemand the cost of international Internet connectivity. While these issueshave been with us for some time, a greater sense of urgency to resolvethem has been brought about by the transition to NGN. This transition isexpected to lead to further declines in the amount of PSTN traffic thatgoes through the accounting rate system, in turn reducing the amounts offoreign exchange developing countries receive through settlementpayments. At the same time, this transition is also expected to place agreater burden on developing countries in the form of costs related tointernational Internet connectivity. For a variety of reasons, developingcountries have had to bear high costs for international connectivity to theInternet. This burden is expected to increase as more traffic migrates toNGN.22
  23. 23. Trends in Telecommunication Reform 2007 – Summary While the decline of the accounting rate system appearsunstoppable, developing countries are taking a multi-pronged approachto ensure that access to ICT services becomes more affordable andavailable. This includes deploying international fibre cable networks, tolower costs for international Internet connectivity and concerteddomestic sector reform such as liberalizing the international gateway andpromoting competition in international leased lines. At the same time,local and regional traffic aggregation and exchange initiatives areattracting increased support. 23
  24. 24. Trends in Telecommunication Reform 2007 – Summary6 UNIVERSAL ACCESS AND NGN On the one hand, NGN promises to benefit universal access effortsby expanding the range of services that can be made available through asingle network. On the other, NGN also brings along with it a number ofsignificant challenges that include the erosion of traditional revenuebases used to fund universal access programmes and the possibility of aneven widening digital divide stemming from an uneven distribution ofNGN-related benefits. In all cases, it is necessary for sufficient importance to be given tosector reform in expanding ICT access. A systematic review of acountry’s universal access policies should first and foremost include arevision of its sector policies and regulations concerning licensing,spectrum management, interconnection, VoIP and price regulation with aview towards lowering barriers to market entry in rural and remote areas. In the event that universal access funding becomes necessary, thefollowing issues are raised in an NGN environment: • How should the scope of universal access be defined? Should broadband be included? Should it apply only to transport or to services? • How should funds used to support universal access be collected given the decline in incumbent voice revenues? • How should funds for universal access be distributed to take advantage of new technologies that allow economies of scale to be more easily attained? In deciding between the different options available for regulatorsand policy-makers, it should be recalled that the transition to NGN isongoing with markets still adjusting to changes. With futuredevelopments being hard to predict, greater reliance in general must beplaced on market forces in the provision of universal access.24
  25. 25. Trends in Telecommunication Reform 2007 – Summary7 CONSUMER PROTECTION AND QUALITY OF SERVICE IN NGN NGN offers the possibility of delivering real benefits to citizens andconsumers in terms of innovative new services and greater choice.However, the convergence of different services onto a single networkraises important issues concerning quality of service, consumerawareness and consumer protection. For example, although consumersmay perceive new voice services like VoIP to be identical to traditionalvoice services, they may not be able to deliver traditional features suchas access to emergency services. The level of regulatory intervention required to protect consumerswill depend in part on the structure of the market concerned and thecommercial incentives for service providers. Where there are effectivecompetition and commercial incentives for service providers the focus islikely to remain on consumer empowerment, which can be enforcedwhere necessary through transparency requirements. Where competitionor commercial incentives are weak, regulators may need to take a moreinterventionist approach such as the setting and monitoring of minimumQoS standards that are appropriate to the NGN environment. Today, QoS monitoring is mandatory in a vast majority ofcountries. Regulators can be mandated to address a range of activitiesfrom defining and setting QoS measurements, to monitoring andenforcing QoS. Sometimes these duties are also shared with the sectorministry, consumer protection associations, and national standardizationagencies (Figure 1.10). The migration to NGN has also led to a growing debate concerning“net neutrality”. The expression ‘net neutrality’ usually refers to thedebate around whether there should be an overarching principle of non-discrimination regarding different forms of Internet traffic carried acrossnetworks. The debate is most controversial where it relates todifferentiation between application providers. For example, networkoperators in the United States have argued that they need to be able tocharge application providers for high priority traffic in order to supportthe business case for investment in higher capacity networks that suchapplications require. The counter argument by those who favour net 25
  26. 26. Trends in Telecommunication Reform 2007 – Summaryneutrality is that end users have already paid the operators for access andthat prioritization by ISPs effectively constitutes charging twice for thesame network. Figure 1.10 – Who sets the standards? Who monitors service quality? Entities responsible for setting quality of service standards by percentage Setting QoS Other Operators Standards 7% 8% Sector Ministry 21% Regulator 64% Entities responsible for service quality monitoring by percentage Monitoring Other Service Quality 5% Operators 17% Regulator Sector 64% Ministry 14% Note: In some countries, more than one entity can be responsible for setting and monitoring QoS standards. Source: ITU World Telecommunication Regulatory Database26
  27. 27. Trends in Telecommunication Reform 2007 – Summary In essence the issue of net neutrality is all about the future ofcommercial relationships, payment flows and access to markets.Concerns about net neutrality are greatest where an operator withsignificant market power (SMP) in the relevant market undertakes toprioritize delivery of its own services over those of its competitors foranti-competitive purposes. 27
  28. 28. Trends in Telecommunication Reform 2007 – Summary8 CREATING AN ENABLING ENVIRONMENT FOR NGN The transition to NGN has demonstrated the importance ofregulatory clarity when dealing with essential facilities controlled by theincumbent. Without clarity, current and future investment by competitiveproviders may be disrupted, as their investment decisions are highlydependent on the incumbent’s future plans. In the Netherlands, forexample, the Dutch regulator OPTA has identified the lack of clarity andcertainty regarding access alternatives in the wake of incumbent KPN’sNGN migration, as a factor leading to low levels of investment in DigitalSubscriber Line (DSL) networks by competitive providers during thefirst semester of 2006. In general, regulators are mindful of the risks associated with NGNdeployment so as not to stifle innovation. They seek to balance this goalwith that of fostering robust, competitive markets. Although it is notnecessarily the role of the regulator to protect investments made bycompetitive providers against market risks, it is still important toconsider their interests in terms of ensuring the continued availability ofcurrent wholesale inputs to their products during the lifetime of theassets in which they have invested. Similarly, suitable migration pathsfor existing infrastructure investments following the deployment of newtechnologies must be ensured. In order to arrive at the best result, it is important for governmentsto build in mechanisms for collaboration among regulators, policymakers and industry, as they grapple with the issue of how best toaddress the transition to an NGN environment. Regulators in Costa Rica,Lithuania and the United Kingdom, for example, have acknowledgedthat they should play a supervisory role rather than attempt to managethe migration to NGN, recognizing that industry stakeholders, who betterunderstand the requirements and potential of NGN, are more likely todevelop effective solutions than regulators. The involvement ofstakeholders in the regulatory process can take a number of forms,including a consultative process, hearings, seminars, forums, communitymeetings, as well as establishing technology expert groups and industry-led groups. The goal of such collaboration is to ensure that the regulatoryframework does not become so restrictive that it thwarts investment in28
  29. 29. Trends in Telecommunication Reform 2007 – SummaryNGN and, at the same time, it does not act too late to encouragecompetition. These objectives, designed to facilitate the migration to NGN areenshrined in the best practice guidelines agreed by regulatory authoritiesfrom around the world that participated in the 2007 ITU GlobalSymposium for Regulators (GSR). The 38-point roadmap is designed toencourage regulatory frameworks that foster innovation, investment andaffordable access to NGN. The 2007 GSR Best Practice Guidelinesunderscore the importance of embracing the principles of a clear andtransparent regulatory process, including the adoption and enforcementof rules; technology-neutral and competitive network provision under acoherent approach, that address the issues raised by convergence. Theguidelines also call on regulators to adopt forward-looking regimessubjected to regular reassessments to ensure that undue regulatorybarriers to competition and innovation are removed. This on-goingmonitoring would also ensure that users and providers are able tomigrate to future networks whenever market conditions are met. The fulltext of the 2007 GSR Best Practice Guidelines is available atwww.itu.int/ITU-D/treg/Events/Seminars/GSR/GSR07/consultation.html 29
  30. 30. Trends in Telecommunication Reform 2007 – Summary9 CONCLUSION While it is simply too early to determine the precise regulations toapply in an NGN environment, it is nevertheless certain that thetransition to NGN is underway and that it promises to fundamentallyalter the ICT landscape. It will bring opportunities for operators andbenefits for consumers, while at the same time posing challenges forregulators and policy-makers. Regulation in this regard is a true work inprogress. There is much to be learned from those countries that havegone further down the road of technological development and policyanalysis. As is the case in all ICT developments, there will be worldleaders in NGN development and regulation. Those countries that are atless developed stages will have the opportunity to benefit from theexperiences, mistakes and successes experienced by those leadingcountries. At a minimum, there is clear guiding value in the establishedprinciples of regulation that seek to foster competition and investment. Inmost cases, there is yet to be a convincing case to depart from these triedand tested principles. Where necessary, departure from these principlesshould be capable of justification and be modelled to promotecompetition, investment certainty and consumer welfare.30
  31. 31. Trends in Telecommunication Reform 2007 – Summary Regulatory information is available on the ITU’s online ICT Eye portalThe world’s unique one-stop-shop for Telecom/ICT data collection and dissemination! www.itu.int/ITU-D/icteye/ 31
  32. 32. Trends in Telecommunication Reform 2007 – SummaryFor more information on this report and other ITU regulatoryactivities, consult www.itu.int/ITU-D/treg/ For ordering information, contact: International Telecommunication Union Sales and Marketing Division Place des Nations – 1211 GENEVA 20 – Switzerland Fax: +41 22 730 5194 E-mail: sales@itu.int32
  33. 33. Printed in Switzerland Geneva, 2007

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