itu trends in telecommunications 2007 summary

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

reformTRENDS INTELECOMMUNICATION

2007THE ROAD TONEXT-GENERATION

N E T W O R K S

( N G N )

Summary

Printed in SwitzerlandGeneva, 2007

ALSO AVAILABLE FROM ITU

PUBLICATIONS

Trends 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 CHF

Please contact the ITU Sales Service:Tel.: +41 22 730 5111Fax: +41 22 730 5194E-mail: [email protected]: www.itu.int

Note: Discounts are available for all ITU Member States, Sector Members and Least Developed Countries.


TRENDS IN TELECOMMUNICATION REFORM 2007

The road to Next-Generation Networks (NGN)

Summary

September 2007

Table of Contents

Page

1 Introduction.......................................................................................... 5

2 Market and regulatory trends ............................................................... 8

3 Selected regulatory developments ..................................................... 17

4 What is NGN?.................................................................................... 21

5 Interconnection in an NGN environment........................................... 22

6 Universal access and NGN ................................................................ 24

7 Consumer protection and quality of service in NGN......................... 25

8 Creating an enabling environment for NGN...................................... 28

9 Conclusion ......................................................................................... 30

Trends in Telecommunication Reform 2007 – Summary

5

TRENDS IN TELECOMMUNICATION REFORM 2007

The road to Next-Generation Networks (NGN)

Summary

1 INTRODUCTION

ITU/BDT is pleased to present the eighth edition of Trends in Telecommunication Reform, a continuing part of our dialogue with the world’s information and communication technology (ICT) policy-makers and regulators. This year’s edition focuses on the move to next-generation networks (NGN), which has captured the attention of the information and communication technology (ICT) sector in 2007. The sector has already seen the year of “convergence”, followed by the year where “broadband” was on everyone’s lips, along with the more recent fascination with “Voice over Internet Protocol” (VoIP) and “fixed-mobile convergence” (FMC). Each of these recent buzz words represents part of the same evolutionary path in which individual service-specific networks are developing into advanced IP-based networks capable of providing a full range of services and applications accessible from a wide range of devices that can function from any location.

Although the sector has faced many so-called “revolutions”, the consensus, with regard to NGN, is that the move will be more of an evolution than a revolution. Many observers expect that NGN and the Internet will co-exist for some time – although most would agree that the move to all IP-based networks is unstoppable. Even where NGN is deployed, it is also likely to include many variants as market players leverage 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 robust wireless coverage. Indeed in wealthier countries, fixed-line operators are


6

deploying fibre closer and closer to the end-user, while mobile operators are investing in third, and even fourth-generation mobile networks as well as broadband wireless access (BWA). Both fixed and mobile networks are being upgraded to offer ever higher-speed broadband.

At first glance, it looks like the digital divide storm clouds are brewing. European countries talk about tens of billions of euros of investments needed to achieve NGN, sums that would go begging in the developing world. But there is a silver lining. There is a growing range of wireless technologies that offers ever-increasing broadband capabilities. And national fibre backbone deployments are now within financial reach of developing countries. Today’s fibre backbones coupled with wireless access technologies offer developing countries a far richer diet of ICT services than legacy Public Switched Telephone Network (PSTN) and 2G mobile networks ever could and at lower cost. Some developing countries, such as Argentina, Bangladesh, Bulgaria and Pakistan 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-makers recognize the need to abandon regulatory practices designed for an earlier era that today stifle innovation and investment and lead to arbitrage opportunities. Those countries that are witnessing the greatest explosion of ICT growth and investment have designed regulatory frameworks that enable and promote ICT development.

The emerging NGN environment poses significant challenges to all market players who are developing new business models, as well as to governments and regulators intent on creating future-proof regulatory frameworks. This year’s Trends in Telecommunication Reform contains ten chapters addressing each of the NGN-related challenges and opportunities to enable regulators to harness the potential of NGN to build 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;


7

• 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.


8

2 MARKET AND REGULATORY TRENDS

Buoyant ICT growth

In order to understand the likely migration paths toward IP-enabled and next-generation networks, it is essential to evaluate the current state of ICT infrastructure deployment. Developed countries, which have the majority of the world’s fixed and broadband lines, are more likely to migrate to fixed rather than wireless NGN access networks as they upgrade their existing fixed-line telephone and cable TV infrastructure. Wireless access will still play a key role in developed economies where users seek seamless or ubiquitous coverage, and are likely to use fixed lines 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)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

billi

ons Internet users

Mobile subscribersFixed lines

Source: ITU World Telecommunication/ICT Indicators Database.


9

Figure 1.1 shows the buoyant growth in the ICT sector over the past decade, demonstrating the spectacular success of the mobile sector in particular.

By the end of 2006, there were a total of nearly 4 billion mobile and fixed-line subscribers and over 1 billion Internet users. This includes 1.27 billion fixed-line subscribers and 2.68 billion mobile subscribers (61 per cent of which are located in developing countries) as well as some 1.13 billion Internet users.

Broadband on the rise

While access to ICT continues to grow, countries are increasingly focusing on improving broadband use, in particular. Broadband is necessary in order to achieve the Information Society. Broadband-enabled services have the potential to create economic and empowerment opportunities and improve lives. Indeed, some of the applications that are having the greatest impact on people and businesses are closely linked to broadband uptake. This is also reflected by the fact that since 2005 there were more fixed broadband subscribers than dialup Internet subscribers worldwide.

Today, however, broadband penetration is dominated by the wealthy countries. Some 70 per cent, or nearly three-quarters, of broadband subscribers worldwide in 2006, were located in high-income countries which accounted for just 16 per cent of world population. Furthermore, two economies – India and Vietnam – accounted for more than 95 per cent of all broadband subscribers in low-income countries, while a single economy – China – accounted for 94 per cent of broadband subscribers in the lower-middle income group (Figure 1.2). The good news is that a number of developing countries are experiencing broadband growth. In Peru, for example, the number of broadband subscribers has grown by close to 80 per cent annually between 2001 and 2006, 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 has the highest penetration of both Internet and broadband in Central and Eastern Europe. But in Least Developed Countries (LDCs), there were merely 46’000 broadband subscribers in the 22 out of 50 LDCs with broadband service in 2006.


10

Figure 1.2 – Broadband worldwide

Number of countries with broadband commercially available

81

113133

145

166 170

02040

6080

100120

140160180

2002 2003 2004 2005 2006 start2007

Top 25 broadband economies by total number of subscribers, 2006

0

10

20

30

40

50

60

70

Unite

dS

tate

s

Chi

na

Japa

n

Ger

man

y

Kore

a(R

ep.)

Unite

dKi

ngdo

m

Fran

ce

Italy

Cana

da

Spa

in

Bra

zil

Net

herla

nds

Taiw

an,

Chin

a

Aus

tral

ia

Mex

ico

Russ

ia

Turk

ey

Pol

and

Bel

gium

Swed

en

Indi

a

Sw

itzer

land

Hon

g K

ong,

Chin

a

Denm

ark

Arge

ntin

a

mill

ions

Source: ITU World Telecommunication/ICT Indicators Database.

In the area of broadband infrastructure, developed markets are intent 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 FTT Kerb (FTTK), where fibre stops at a curb near a building or group of buildings; and FTT Node (FTTN) or FTT Cabinet (FTTCab), where fibre stops at a cabinet with telecommunication equipment that serves a neighbourhood. Collectively, these variants are termed FTTx.

The Asia-Pacific region today has more FTTx services than any other part of the world. Japan was the first country to introduce a FTTH network in 1999. In 2005, the number of Japanese subscribers to FTTH services increased 88 per cent to surpass the 5 million mark (Figure 1.3).


11

A positive trend in FTTx deployment worldwide is the increasing number 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

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

Dec-00

Jun-01

Dec-01

Jun-02

Dec-02

Jun-03

Dec-03

Jun-04

Dec-04

Jun-05

Dec-05

FTTH

DSL

CATV

Source: MIC Japan.

In developing countries, the meteoric rise of mobile services has been fuelled by improved affordability, increased network coverage, and new service options. The same factors can promote wireless broadband Internet access in developing countries, even in countries with poorly developed fixed-line infrastructure, as mobile handsets that support both voice and Internet applications become more affordable (Box 1.1). In Kenya, for example, one ISP has announced that it will provide Internet access, instant messaging, and push e-mail and attachment support to mobile users through a handheld device, in conjunction with its partner, a mobile operator. Nearby in Zambia, a mobile operator is introducing the country’s first mobile Internet access facility to provide customers with quick access through their mobile handsets or laptops. Still, because


12

of high prices, these services remain beyond the reach of most customers in developing countries and are targeted to high-end and business customers. It is hoped that operators will eventually find pricing plans that make these services more affordable to a full range of users. (See Figure 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 3Gtoday


13

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-owned incumbent operators, privatization remains a priority for most countries that 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 management expertise and further develop the network. In addition, many countries have found that competition is often more fair when the state avoids being both a market player (as owner or part-owner of the incumbent) and a referee at the same time. Privatization sends the signal that policy decisions and regulations will be fair to all players. Between 1990 and 2006, some USD 83 billion was raised through privatizations of incumbent public telecommunication operators in developing countries.

By the middle of 2007, 123 ITU member countries had a private or privatized national fixed-line incumbent (Figure 1.5). Several other countries have announced their intention to privatize. The government of the Ukraine has the green light to move on its plans to sell Ukrtelecom. The Kyrgyz government also plans to further privatize the fixed-line


14

incumbent, Kyrgyztelecom, and Slovenia’s Finance Ministry has announced the international tender for the further sale of a minority stake in 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

0

2040

6080

100

120140

160

1991 1993 1995 1999 2001 2005 2007

Private State-owned

Countries

Source: ITU World Telecommunication Regulatory Database.

During the same period, the opening of markets to competition has remained steady. Mobile and Internet services continue to be the most competitive markets, while fixed-line services are also becoming increasingly competitive (see Figure 1.6).

In the first part of 2007, the Gulf countries among the Arab States were very active in opening both their mobile and fixed markets. For example, in April 2007 the Supreme Council of Information and Communication Technology (ictQATAR) launched a formal selection process for the award of a mobile licence to a new entrant in the State of Qatar. The Telecommunication Regulatory Authority of Oman also announced its intention to license a second national operator. The second


15

operator will compete with Omantel which is currently the monopoly provider 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

0

20

40

60

80

100

120

140

160

1995 1997 2000 2001 2002 2003 2004 2005 2006

Basic services MobileCountries

Grow th of competition, 1995 to 2006

0%10%20%30%40%50%60%70%80%90%

100%

Basicservices

Leasedlines

Mobilecellular

(2G)

Internetservices

Wirelesslocal loop

VSAT Cable TV DSL 3G

Monopoly Competition


A growing community of regulators

The establishment of a separate regulator is one of the most visible signs of sector reform. Separate regulatory agencies lay the groundwork for a favourable investment climate and the promotion of market


16

opportunities. Increasingly regulators seek to be ICT enablers and agents of change. This is usually best achieved where ICT regulators have a certain 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 separate regulator, although differences remain between regions. Africa counts the highest percentage of countries with a separate sector regulator (91 per cent), followed by the Americas (89 per cent), and Europe (80 per cent). The Arab States and Asia-Pacific number 62 and 58 percent, respectively. Growth in the number of regulators is set to continue with more than five countries having indicated their intention to establish an ICT regulatory body in the near future.

Figure 1.7 – Growth of regulators worldwide, 1990 - mid-2007

14

43

86

106

124137

148

1990 1995 1998 2000 2002 2004 2007

Regulatory agencies, world (cumulative)



17

3 SELECTED REGULATORY DEVELOPMENTS

International mobile roaming

The issue of mobile roaming charges is on the agenda of regulatory authorities and regional regulator associations worldwide, in an attempt to find solutions for the high international roaming charges paid by consumers using their mobile phones while travelling abroad. To date, most regional groups have taken a “soft-regulation” approach to international mobile roaming, focusing on publishing roaming rates. The European Commission, however, in a watershed measure, has decided to regulate roaming charges in the 27-country European Union block. This move may embolden other regional groups to take firmer action to cut mobile roaming charges.

Regulating local loop unbundling and infrastructure sharing

Local loop unbundling (LLU) has generated a lot of debate worldwide, with countries and regions taking a variety of approaches. The different approaches taken to unbundling often reflect the balance countries seek to strike between addressing competitive bottlenecks and encouraging investment in infrastructure. Countries like the United States, with inter-modal broadband competition between cable TV and ADSL broadband providers, may place less emphasis on local loop unbundling, and even view unbundling as a barrier to innovation and the development of infrastructure. Countries with limited inter-modal competition, such as many European countries, have found it necessary to embrace local loop unbundling to encourage ADSL provision and are now planning to extend LLU to FTTx deployments. Regulators in Europe have vigorously enforced LLU regulation as a means of boosting broadband deployment, and the number of unbundled lines currently available in Europe has risen dramatically, by nearly 80 per cent from 2005 to 2006. Many developing countries, in initial stages of sector reform, have focused primarily on increasing the number of voice users, and have principally concentrated on raising the number of voice subscribers on mobile networks. They also had far fewer fixed local loops to unbundle.


18

In addition to LLU, other regulatory measures are being developed to ensure smooth competition and market access for new entrants such as mandatory passive infrastructure sharing and in-site sharing. According to ITU World Telecommunication Regulatory Database, a majority of countries who completed the 2006 survey indicated that infrastructure sharing is required while nearly half indicated that in-site sharing is mandatory. This is the case for example in Bulgaria, Colombia, Jordan, Madagascar, Mali, Morocco, Poland and Turkey.

Interconnection

A clear and transparent interconnection regulatory framework is key to a sustained competitive environment. Providing public access to reference interconnection offers, agreements, and prices is one tool regulators can use to promote transparency, raise competitor awareness and ensure a level playing field among competitors.

Worldwide trends show that only 32 per cent of countries require the publication of interconnection agreements. In contrast, interconnec-tion pricing information is made publicly available in 59 per cent of countries around the world. Europe is taking the lead with 72 per cent of countries requiring interconnection prices to be made public, while in the Americas, only 46 per cent of countries require operators to publish this information (Figure 1.8). The Arab States have the highest percentage of countries mandating operators to publish reference interconnection offers, followed by Europe and the Asia-Pacific regions. The require-ment to publish reference interconnection offers is mainly imposed on the incumbent operator or operators with significant market power.


19

Figure 1.8 – What interconnection information is made publicly available?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Africa Americas Arab States Asia-Pacific Europe

Interconnection prices RIO Interconnection agreements

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.


VoIP regulation

Voice over Internet Protocol (VoIP) subscribers continue to grow, fuelled primarily by the demand for lower cost services as well as the fact that VoIP is being integrated into a number of new services offered on IP networks. Despite obvious benefits, VoIP also challenges traditional telecommunication business models, leading some countries to try to ban or limit VoIP. In many countries, incumbents have resisted offering VoIP services to protect their lucrative long-distance and international call revenues. In the process they have tried to convince regulators and policy-makers to ban or restrict other service providers from doing so. Today, however, the number of countries in which VoIP has been legalized is greater than the number of countries where it is banned.


20

Indeed the state of VoIP regulation is changing so quickly it is almost impossible to keep pace. Until recently, for example, VoIP was banned in many African and Arab State countries. Today, a growing number 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 2006


21

4 WHAT IS NGN?

There are numerous views of what constitutes NGN. Different operators that have begun the process of NGN migration refer to their next-generation networks differently. For some, NGN simply means migration from a PSTN to an IP-based network. For others, it is a more specific reference to advances such as international call IP trunking and IP in the local loop.

From a technology perspective, NGN is based on a new architecture that modifies both the core and access parts of a telecommunication network, changing the way it delivers services to end-users (Box 1.2).

At the network core level, the major innovation associated with NGN is the introduction of a packet-based transport level that is separate from the network control layer. This packet-based transport is generally based on Internet Protocol, which is the current universal transport technology capable of handling any type of service. However, this transport is enriched with Multi Protocol Label Switching (MPLS) to ensure Quality of Service (QoS). At the end-user NGN access level, access is provided through packet-based broadband capable of handling the provision of voice, data, and other content-based services. Broadband access can be either delivered through fixed-line technology such as Digital Subscriber Line (DSL), fibre-optic and cable TV, or wireless technology 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


22

5 INTERCONNECTION IN AN NGN ENVIRONMENT

Domestic interconnection

Regulation is frequently needed in support of access and interconnection. A key question that is considered in this eighth edition of Trends in Telecommunication Reform is the degree to which regulation of access and interconnection will be necessary in the emerging world of NGN and in particular how the emergence of NGN alters 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 Keep offers a number of advantages, particularly for countries where adoption of ICT services is already well advanced. Migration to an NGN environ-ment is a natural time for a country to consider whether wholesale interconnection arrangements could profitably evolve.

International interconnection

On an international level, the subject of interconnection has been dominated for some time by issues related to the accounting rate system and the cost of international Internet connectivity. While these issues have been with us for some time, a greater sense of urgency to resolve them has been brought about by the transition to NGN. This transition is expected to lead to further declines in the amount of PSTN traffic that goes through the accounting rate system, in turn reducing the amounts of foreign exchange developing countries receive through settlement payments. At the same time, this transition is also expected to place a greater burden on developing countries in the form of costs related to international Internet connectivity. For a variety of reasons, developing countries have had to bear high costs for international connectivity to the Internet. This burden is expected to increase as more traffic migrates to NGN.


23

While the decline of the accounting rate system appears unstoppable, developing countries are taking a multi-pronged approach to ensure that access to ICT services becomes more affordable and available. This includes deploying international fibre cable networks, to lower costs for international Internet connectivity and concerted domestic sector reform such as liberalizing the international gateway and promoting competition in international leased lines. At the same time, local and regional traffic aggregation and exchange initiatives are attracting increased support.


24

6 UNIVERSAL ACCESS AND NGN

On the one hand, NGN promises to benefit universal access efforts by expanding the range of services that can be made available through a single network. On the other, NGN also brings along with it a number of significant challenges that include the erosion of traditional revenue bases used to fund universal access programmes and the possibility of an even widening digital divide stemming from an uneven distribution of NGN-related benefits.

In all cases, it is necessary for sufficient importance to be given to sector reform in expanding ICT access. A systematic review of a country’s universal access policies should first and foremost include a revision of its sector policies and regulations concerning licensing, spectrum management, interconnection, VoIP and price regulation with a view towards lowering barriers to market entry in rural and remote areas.

In the event that universal access funding becomes necessary, the following 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 regulators

and policy-makers, it should be recalled that the transition to NGN is ongoing with markets still adjusting to changes. With future developments being hard to predict, greater reliance in general must be placed on market forces in the provision of universal access.


25

7 CONSUMER PROTECTION AND QUALITY OF SERVICE IN NGN

NGN offers the possibility of delivering real benefits to citizens and consumers in terms of innovative new services and greater choice. However, the convergence of different services onto a single network raises important issues concerning quality of service, consumer awareness and consumer protection. For example, although consumers may perceive new voice services like VoIP to be identical to traditional voice services, they may not be able to deliver traditional features such as access to emergency services.

The level of regulatory intervention required to protect consumers will depend in part on the structure of the market concerned and the commercial incentives for service providers. Where there are effective competition and commercial incentives for service providers the focus is likely to remain on consumer empowerment, which can be enforced where necessary through transparency requirements. Where competition or commercial incentives are weak, regulators may need to take a more interventionist approach such as the setting and monitoring of minimum QoS standards that are appropriate to the NGN environment.

Today, QoS monitoring is mandatory in a vast majority of countries. Regulators can be mandated to address a range of activities from defining and setting QoS measurements, to monitoring and enforcing QoS. Sometimes these duties are also shared with the sector ministry, consumer protection associations, and national standardization agencies (Figure 1.10).

The migration to NGN has also led to a growing debate concerning “net neutrality”. The expression ‘net neutrality’ usually refers to the debate around whether there should be an overarching principle of non-discrimination regarding different forms of Internet traffic carried across networks. The debate is most controversial where it relates to differentiation between application providers. For example, network operators in the United States have argued that they need to be able to charge application providers for high priority traffic in order to support the business case for investment in higher capacity networks that such applications require. The counter argument by those who favour net


26

neutrality is that end users have already paid the operators for access and that prioritization by ISPs effectively constitutes charging twice for the same network.

Figure 1.10 – Who sets the standards? Who monitors service quality? Entities responsible for setting quality of service standards by percentage

Sector Ministry

21%

Operators8%

Other 7%

Regulator64%

Setting QoS Standards

Entities responsible for service quality monitoring by percentage

Regulator64%Sector

Ministry14%

Operators17%

Other5%

Monitoring Service Quality

Note: In some countries, more than one entity can be responsible for setting and monitoring QoS standards.

Source: ITU World Telecommunication Regulatory Database


27

In essence the issue of net neutrality is all about the future of commercial relationships, payment flows and access to markets. Concerns about net neutrality are greatest where an operator with significant market power (SMP) in the relevant market undertakes to prioritize delivery of its own services over those of its competitors for anti-competitive purposes.


28

8 CREATING AN ENABLING ENVIRONMENT FOR NGN

The transition to NGN has demonstrated the importance of regulatory clarity when dealing with essential facilities controlled by the incumbent. Without clarity, current and future investment by competitive providers may be disrupted, as their investment decisions are highly dependent on the incumbent’s future plans. In the Netherlands, for example, the Dutch regulator OPTA has identified the lack of clarity and certainty regarding access alternatives in the wake of incumbent KPN’s NGN migration, as a factor leading to low levels of investment in Digital Subscriber Line (DSL) networks by competitive providers during the first semester of 2006.

In general, regulators are mindful of the risks associated with NGN deployment so as not to stifle innovation. They seek to balance this goal with that of fostering robust, competitive markets. Although it is not necessarily the role of the regulator to protect investments made by competitive providers against market risks, it is still important to consider their interests in terms of ensuring the continued availability of current wholesale inputs to their products during the lifetime of the assets in which they have invested. Similarly, suitable migration paths for existing infrastructure investments following the deployment of new technologies must be ensured.

In order to arrive at the best result, it is important for governments to build in mechanisms for collaboration among regulators, policy makers and industry, as they grapple with the issue of how best to address the transition to an NGN environment. Regulators in Costa Rica, Lithuania and the United Kingdom, for example, have acknowledged that they should play a supervisory role rather than attempt to manage the migration to NGN, recognizing that industry stakeholders, who better understand the requirements and potential of NGN, are more likely to develop effective solutions than regulators. The involvement of stakeholders in the regulatory process can take a number of forms, including a consultative process, hearings, seminars, forums, community meetings, as well as establishing technology expert groups and industry-led groups. The goal of such collaboration is to ensure that the regulatory framework does not become so restrictive that it thwarts investment in


29

NGN and, at the same time, it does not act too late to encourage competition.

These objectives, designed to facilitate the migration to NGN are enshrined in the best practice guidelines agreed by regulatory authorities from around the world that participated in the 2007 ITU Global Symposium for Regulators (GSR). The 38-point roadmap is designed to encourage regulatory frameworks that foster innovation, investment and affordable access to NGN. The 2007 GSR Best Practice Guidelines underscore the importance of embracing the principles of a clear and transparent regulatory process, including the adoption and enforcement of rules; technology-neutral and competitive network provision under a coherent approach, that address the issues raised by convergence. The guidelines also call on regulators to adopt forward-looking regimes subjected to regular reassessments to ensure that undue regulatory barriers to competition and innovation are removed. This on-going monitoring would also ensure that users and providers are able to migrate to future networks whenever market conditions are met. The full text of the 2007 GSR Best Practice Guidelines is available at www.itu.int/ITU-D/treg/Events/Seminars/GSR/GSR07/consultation.html


30

9 CONCLUSION

While it is simply too early to determine the precise regulations to apply in an NGN environment, it is nevertheless certain that the transition to NGN is underway and that it promises to fundamentally alter the ICT landscape. It will bring opportunities for operators and benefits for consumers, while at the same time posing challenges for regulators and policy-makers. Regulation in this regard is a true work in progress. There is much to be learned from those countries that have gone further down the road of technological development and policy analysis. As is the case in all ICT developments, there will be world leaders in NGN development and regulation. Those countries that are at less developed stages will have the opportunity to benefit from the experiences, mistakes and successes experienced by those leading countries. At a minimum, there is clear guiding value in the established principles of regulation that seek to foster competition and investment. In most cases, there is yet to be a convincing case to depart from these tried and tested principles. Where necessary, departure from these principles should be capable of justification and be modelled to promote competition, investment certainty and consumer welfare.


31

Regulatory information is available on the ITU’s online ICT Eye portal

The world’s unique one-stop-shop for Telecom/ICT data collection and dissemination!

www.itu.int/ITU-D/icteye/

www.itu.int/ITU-D/icteye/


32

For more information on this report and other ITU regulatory activities, 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: [email protected]

http://www.itu.int/ITU-D/treg/

ALSO AVAILABLE FROM ITU

PUBLICATIONS

Trends 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 CHF

Please contact the ITU Sales Service:Tel.: +41 22 730 5111Fax: +41 22 730 5194E-mail: [email protected]: www.itu.int

Note: Discounts are available for all ITU Member States, Sector Members and Least Developed Countries.


reformTRENDS INTELECOMMUNICATION

2007THE ROAD TONEXT-GENERATION

N E T W O R K S

( N G N )

Summary

Printed in SwitzerlandGeneva, 2007

itu trends in telecommunications 2007 summary

Documents

n t e r n

telecommunication policies

t i o n u n i o ntrends

u n i c

chfgeneral trends

th edition

regulatory trends

ngn environment