Telco 2.0: An Era of Regulatory, Business and Technology Convergence

Steve A. DayActing Director of Powercast and Founder of Malabar Technologies, Inc

Telco 2.0

• Regulatory: Promotion of competition, but …• Technology: Connectionless with open access to

service• Business: Competitive environment with open

access to all service portals▫ Where does regulation lead us too?▫ How do we make money?▫ What technology will drive us?

World Wide Profile

Source: ITU World Telecommunication/ICT Indicators Database and ITUWorld Telecommunication Regulatory Database

Regulatory Emphasis

• Regulation does not always mean greater orientation towards monopolistic or government based oversight

Regulatory LandscapeC

onso

lidat

ion

Com

petit

ion

Time1950 1980 1990 1995 2000 2010

Pending:Open AccessIssue

FCC:2002 UNERelief

FCC:1996 TelecomBill UNE AccessFCC:1992 Telecom

Act - Competition1983/4: Divestiture

1984 NationalCable Act

Key Observations:•Regulation is promoting competition over time•Regulatory cycles are speeding up

Regulatory HistoryD

egre

e of

Com

petit

ion

1934 1978 1984 1992 1996 2003 2005

+

-

Key years of new regulatory actions

2.1

Communications Act of 1934•Based on predecessor Interstate Commerce Act, and concept of natural, regulated monopoly

•Key goal: universal service

•Keep local rates low

•Interpreted as authorizing subsidies

•Long distance to local

•Urban to rural

•Business to residence

1984 National Cable Television Act•Local Telephone barred from CATV cross-ownership

•Municipal regulation restricted due to Greenmail

•Rate regulation lifted

US v. Western Electric 1956 Consent Decree•AT&T restricted to tariff (regulated) business. Mandatory patent licensing

•Hush-a-phone (attachments)

•Above 890 MHz. decision (competitive private microwave facilities)

•Carter Phone (terminal equipment)

•MCI v. AT&T 708 F.2d, 1081, 1132, 1133 (7th Cir. 1982), cert. denied, 464 U.S. 891 (1983). •Long distance became more competitive and prices declined, initially

•AT&T market share declined

•Eventually, non-dominant status

•Local prices increased

•Access charges

•Replacement of long distance subsidy

•Major source of local exchange carrier (LEC) revenue

1992 Telecommunications Act•CATV rates re-regulated

•Telco’s allowed back into CATV

•LD allowed int CATV and local telecom

•CATV allowed into local telephone

1996 Telecommunications Bill•Transition to full competition

•Covers resale, unbundling and interconnection

•National regulatory framework with significant state input

•All telecommunications carriers must interconnect with other telecommunications carriers

•Requires the Federal Communications Commission (FCC) to engage in eighty-three separate rulemaking proceedings

Interconnection Duties – Section 251•Permit resale at wholesale rates

•Provide number portability

•Provide dialing parity; access to numbers, operator services, directory assistance, and directory listings

•Provide access to rights-of-way

•Allow competitor collocation

Interconnection Pricing – Section 252•Interconnection pricing standards to be based on network elements

•Based on cost

•A reasonable profit is to be allowed

•Traffic termination

•Provide for mutual and reciprocal recovery of costs

•Must be determined on basis of reasonable approximation of additional costs of terminating calls

Competitive Checklist –Section 271•Number portability (interim until regulation issued)

•Access to reciprocal compensation

•Wholesale rates offered for resale of telecommunications services

•Unbundled local loops, transport, and switching

•Access to white page directory listings

•Non-discriminatory access to network elements, poles, conduit, etc.

•Non-discriminatory access to:

•Emergency numbers

•Directory assistance services

•Operator services

•services/information necessary to allow local dialing parity

•telephone numbers

•databases and signaling necessary for call routing and completion

2003 UNE-P Ruling•Timetable placed on UNE-P unbundled network elements guidelines

•State Regulators have more power over competition

•Competition is encouraged to build networks

•RBOC’s broadband networks protected from competition

Telecommunications Regulation

• So why do we need more regulatory bodies, IF competition is prevailing▫ Protectionism▫ Service Assurance▫ Interoperability▫ And ….

0

20

40

60

80

100

120

140

160

1990 1995 1998 2000 2002 2004 2007

Nu

mb

er o

f WW

Age

nci

es

Number of Regulatory Agencies

76.0%

74.0%

56.0%

53.0%

48.0%

0.0% 20.0% 40.0% 60.0% 80.0%

Europe

Americas

Africa

Asia-Pacific

Arab States

Geographic Dispersion of Regulation

Regulatory OutcomeC

onso

lidat

ion

Com

petit

ion

Time1950 1980 1990 1995 2000 2010

Key Observations:•250 MSO operators prior to 1984, 2 years later 80•After 2002, each RBOC promoting proprietary FTTH•High competition in LD and wireless reflect rate drops•Verizon, AT&T dominate US in cellular, “can you hear me now?”

•New businesses•Contraction of Incumbents•Emerging of Service Technology•Parasitical Relationships•Lower rates

•Corporate consolidation•Legacy Service Assurance•Development of proprietary technology•Emerging systems and automation•Higher service standards

What is regulatory agenda, now?

• Trend towards competition resulted in▫ Broadband connectivity assurance in “last mile”▫ Wireless competition promotion through

specturm allocation▫ Continuing a free Internet via open access model▫ Promoting convergence of voice, video and data▫ National protection of key telecommunication

“utilities”▫ Promotion of universal “access”

Impact on TelecommunicationsYesterday

Applications•Voice, Video and Data•Subscription, Leased Access

Operating Systems•Addressable, Database, Accounting

Intelligent Network•MUX, Switch, Router

Infrastructure•Physical, Cable, Power

Focus

Effort

Impact on TelecommunicationsToday

Applications•Voice, Video and Data•Subscription, Leased Access

Operating Systems•Addressable, Database, Accounting

Intelligent Network•MUX, Switch, Router

Infrastructure•Physical, Cable, Power

Focu

s

Effort

Regulatory Gap

Technology Convergence

• VoIP, IP Services• Video, Games, Ringtones

Connectionless Services

• Internet “Hands Off”• Open AccessRegulatory Gap

• Virtual Private NetworksVirtual Services

• Frame Relay, ATM, Metro Ethernet• DSL, Cable Modem Shared Service

• Voice Line ILEC• Cellular, Wireless• Video Service CATV

Physical Service

Telco 2.0: Where’s the Killer App?

13

TM forum

NGN initiativesMobiles

TeleManagement

ConvergenceMulti-stakeholder

Operator InitiativesOSS/JeTOMSID

IPIIPX

21CN A-IMS

Web 2.0: Where’s the network?

14

Retail

CollaborationSocial Networking

GamingContent

Banking

How do these worlds Reconcile?15

Premium Experiences…

TM forum

IPIIPX

plusPremium Network

Features…

21CNA-IMS

Reg

ulat

ory

Gap

Oh, by the way …

ServiceDigital Rights Management

ServiceVideo

Conferencing

ServiceCRM

Regulatory Gap

End result of Regulation

• Reorient Telcom from network and connectivity to service and connectionless applications

• Regulatory protection of the Internet has made the ownership and value elusive

• Where are the killer applications?• And how do I supply and deliver them …

Globally?• Oh Yeah, my business model sucks!!!

Telecom Business Implication

Declining Revenues• Voice, VoIP• Declining ARPU

Increased Competition• Cable, Bottom

Feeders• New Entrants,

Google, MSN

Legacy Baggage• Unions,

Organization• Vertical Service

Integration

Convergence• Fixed versus

Mobile• IMS NG Service

Applications• Who Cares dude?

Business Convergence

Service Providers

Regulatory Gap

Application Providers

Application Providers Application

Providers

Application Providers

Application Providers

Billions of Applications

Service Providers

Service Providers Service

Providers

Service Providers Leveraged

Assets

Technology Gap SOA

Services &Applications

Networks &Resources

Rul

es &

Pol

icy

Bus

ines

s P

ract

ices

Gap Engineering: Service Oriented ArchitecturesHTML – Hypertext Markup Language

NetworkRequest

Send Page

Request

Send Page

XML – Extensible Markup Language & SOA

NetworkRequest

XML

XML

Structure

Rules

Data

• SOA is the end vision• SOA is not equal to Web

Services• SOA Can be implemented with

Web Services• Deliver application

functionality as services to end to end applications or to build other services

• A “service” is the atomic unit of an SOA that encapsulate a business process

• SOA presents the big picture of what you can do with web services

• Service Provider▫ Provides a stateless, location

transparent business service• Service Registry

▫ Allows service consumers to locate service providers that meet required criteria

• Service Consumer▫ Uses service providers to

complete business processes

ServiceRequestor

ServiceProvider

ServiceRegistry

Find

Bind

Publish

Service Oriented Architectures

Telecommunications SOA

I want to sell my application!! I want to buy

an application!!

WWW based web

service

Web Browser

Web Server Credit

Card

AYORS&P

Network based SOA

XML SOA Framewor

k

Service Tag – Java

Service Assurance

SP Admin & Billing

SP Service Library

SP QoS

XML SOA Client

I want to enablemy network user to use your application

OR

Everything is free, man … but I need your credit card

SERVICE DELIVERY PLATFORM

The heart of the Telecom SOA: SDP’s

Resourcedeployment

Security

Partnermanagement

Servicemanagement

Contentproviders

Developercommunities

Accesscontrol

Network control (e.g., Parlay, SS7 gateways)

Contentmanagement Scheduling Device

management BSS/OSSinterface

Service execution

Third-partyportal

Serviceenablers

Contentregistration

creationService

Mobileapplications

Parlay/OSAapplications

Web/SOAapplications IMS applications

Wireline Wireless IPNETWORK

BSS/OSS

Mediation

Rating

Billing

CRM

Provisioning

Source: Forester Research, 2005

December 2006, Best Practices “Strategies For Vendors To Own The Service Delivery Platform Market”

Service providers are implementing a variety of SDP initiatives

December 2006, Best Practices “Strategies For Vendors To Own The Service Delivery Platform Market”

Vendors leverage core competencies to succeed in the SDP arena

December 2006, Best Practices “Strategies For Vendors To Own The Service Delivery Platform Market”

Telco 2.0 Architecture

26

Converged Wireline & Wireless Network

Voice ServiceMusic

Service

TVService

EmailServiceIM

Service

Service Delivery Platform

Service Network

OSS

/BSS

and

Cus

tom

er C

are

Web Services Web Services

TV Screen PC Screen Mobile Screen

Enabling Telco 2.0

27

Converged Wireline & Wireless Network

Service Network

OSS

/BSS

and

Cus

tom

er C

are

A long and winding “tail”• Final thoughts▫ Always measure the regulatory tail that wags the dog▫ Understand that our technology and business focus

begins there• SOA and SDP’s will be the next big area in Telecom

OSS and administrative system▫ Pay attention to who wins upstream (MSVS or

JAVA/AJAX/ADOBE)• What is the next big regulatory outcome?▫ Who owns applications? … DRM▫ Who pays for my network use … user or application

• PS: Don’t discount the network just yet …

What am I doing these days?• Powercast Corporation▫ Start-up founded at University of Pittsburgh

Harvesting RF energy into useable, low power electricityTransmitting RF energy …Networking RF energy …

▫ Key successes• Malabar Technology, Inc.▫ Looking at starting up business models that apply

social networking towards the greater goodChatterCateCoSystem marketing programs