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
RTTELEECONMMDUNSICAITINON
er form
02 07
TO
D
A
O
R
E
H
T E N E R AT I O N
N E X T- G
S
K
R
O
W
T
NE
)
N
G
N
(
Summa
Printed in Switzerland
Geneva, 2007
ry
ALSO AVAILABLE FROM ITU
PUBLICATIONS
Trends in Telecommunication Reform 2007: The Road to Next-Generation Networks (NGN), 2007 (8th Edition).......100 CHF
Trends in Telecommunication Reform: Regulating in the broadband world, 2006 (7th Edition).....................................95 CHF
Trends in Telecommunication Reform: Licensing in an Era of Convergence, 2004/05 (6th Edition) ..............................95 CHF
Trends in Telecommunication Reform: Promoting Universal Access to ICTs, 2003 (5th Edition) ..................................90 CHF
Trends in Telecommunication Reform: Effective Regulation, 2002 (4th Edition) ...........................................................90 CHF
Trends in Telecommunication Reform: Interconnection Regulation, 2000-2001 (3rd Edition) .......................................90 CHF
Trends in Telecommunication Reform: Convergence and Regulation, 1999 (2nd Edition) .............................................75 CHF
General Trends in Telecommunication Reform 1998: World Volume I...........................................................................75 CHF
General Trends in Telecommunication Reform 1998: Africa Volume II ..........................................................................65 CHF
General Trends in Telecommunication Reform 1998: Americas Volume III ...................................................................55 CHF
General Trends in Telecommunication Reform 1998: Arab States Volume IV ...............................................................45 CHF
General Trends in Telecommunication Reform 1998: Asia Pacific Volume V.................................................................60 CHF
General Trends in Telecommunication Reform 1998: Europe Volume VI .......................................................................72 CHF
Collection of five Regional reports (Volumes II-VI) ......................................................................................................297 CHF
Collection of Regional and World reports (Volumes I-VI).............................................................................................372 CHF
The Arab Book: Telecommunication Policies for the Arab Region, 2002.......................................................................50 CHF
The Blue Book: Telecommunication Policies for the Americas, 2000 (2nd Edition) ......................................................50 CHF
Please 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.
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
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
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 nextgeneration 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 “fixedmobile 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
5
Trends in Telecommunication Reform 2007 – Summary
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 costeffective solutions to enable affordable access to the widest base of endusers 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:
•
•
6
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;
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
Trends in Telecommunication Reform 2007 – Summary
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)
6.0
5.0
billions
4.0
Internet users
3.0
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
Mobile subscribers
Trends in Telecommunication Reform 2007 – Summary
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. Broadbandenabled 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.
9
Trends in Telecommunication Reform 2007 – Summary
Figure 1.2 – Broadband worldwide
Number of countries with broadband
166
commercially available
180
160
170
145
133
140
113
120
100
81
80
60
40
20
0
2002
2003
2004
2005
2006
start
2007
millions
Top 25 broadband economies by total number of subscribers, 2006
70
60
50
40
30
20
10
Denmark
Argentina
Hong Kong,
China
India
Switzerland
Sweden
Poland
Belgium
Russia
Turkey
Mexico
Taiwan,
China
Australia
Brazil
Netherlands
Spain
Italy
Canada
France
Korea
(Rep.)
United
Kingdom
Germany
China
Japan
United
States
0
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).
10
Trends in Telecommunication Reform 2007 – Summary
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 fixedline 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
05
cDe
05
nJu
04
cDe
04
nJu
03
cDe
03
nJu
02
cDe
02
nJu
01
cDe
01
nJu
00
cDe
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
11
Trends in Telecommunication Reform 2007 – Summary
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 EvolutionData 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
12
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 lowfrequency mobile technologies. These enable wider coverage with
fewer base stations, and hence reduce the cost of mobile infrastructure significantly. CDMA450 is a 3G solution combining next-generation 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
13
Trends in Telecommunication Reform 2007 – Summary
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
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 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
14
Trends in Telecommunication Reform 2007 – Summary
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
Grow th of competition, 1995 to 2006
Countries
Basic services
160
Mobile
140
120
100
80
60
40
20
0
1995
1997
2000
2001
2002
Monopoly
2003
2004
2005
2006
Competition
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Basic
services
Leased
lines
Mobile
cellular
(2G)
Internet
services
Wireless
local loop
VSAT
Cable TV
DSL
3G
Source: ITU World Telecommunication Regulatory Database.
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
15
Trends in Telecommunication Reform 2007 – Summary
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
Regulatory agencies,
world (cumulative)
148
137
124
106
86
43
14
1990
1995
1998
2000
2002
2004
Source: ITU World Telecommunication Regulatory Database.
16
2007
Trends in Telecommunication Reform 2007 – Summary
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.
17
Trends in Telecommunication Reform 2007 – Summary
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, interconnection 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 requirement to publish reference interconnection offers is mainly imposed on
the incumbent operator or operators with significant market power.
18
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 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.
19
Trends in Telecommunication Reform 2007 – Summary
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
20
Trends in Telecommunication Reform 2007 – Summary
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
21
Trends in Telecommunication Reform 2007 – Summary
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 interconnection 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 environment 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.
22
Trends in Telecommunication Reform 2007 – Summary
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.
23
Trends in Telecommunication Reform 2007 – Summary
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.
24
Trends in Telecommunication Reform 2007 – Summary
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 nondiscrimination 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
25
Trends in Telecommunication Reform 2007 – Summary
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
Operators
8%
Other
7%
Sector
Ministry
21%
Setting QoS
Standards
Regulator
64%
Entities responsible for service quality monitoring by percentage
Other
5%
Monitoring
Service Quality
Operators
17%
Sector
Ministry
14%
Regulator
64%
Note: In some countries, more than one entity can be responsible for setting and
monitoring QoS standards.
Source: ITU World Telecommunication Regulatory Database
26
Trends in Telecommunication Reform 2007 – Summary
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.
27
Trends in Telecommunication Reform 2007 – Summary
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 industryled groups. The goal of such collaboration is to ensure that the regulatory
framework does not become so restrictive that it thwarts investment in
28
Trends in Telecommunication Reform 2007 – Summary
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
29
Trends in Telecommunication Reform 2007 – Summary
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.
30
Trends in Telecommunication Reform 2007 – Summary
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/
31
Trends in Telecommunication Reform 2007 – Summary
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: sales@itu.int
32
ALSO AVAILABLE FROM ITU
PUBLICATIONS
Trends in Telecommunication Reform 2007: The Road to Next-Generation Networks (NGN), 2007 (8th Edition).......100 CHF
Trends in Telecommunication Reform: Regulating in the broadband world, 2006 (7th Edition).....................................95 CHF
Trends in Telecommunication Reform: Licensing in an Era of Convergence, 2004/05 (6th Edition) ..............................95 CHF
Trends in Telecommunication Reform: Promoting Universal Access to ICTs, 2003 (5th Edition) ..................................90 CHF
Trends in Telecommunication Reform: Effective Regulation, 2002 (4th Edition) ...........................................................90 CHF
Trends in Telecommunication Reform: Interconnection Regulation, 2000-2001 (3rd Edition) .......................................90 CHF
Trends in Telecommunication Reform: Convergence and Regulation, 1999 (2nd Edition) .............................................75 CHF
General Trends in Telecommunication Reform 1998: World Volume I...........................................................................75 CHF
General Trends in Telecommunication Reform 1998: Africa Volume II ..........................................................................65 CHF
General Trends in Telecommunication Reform 1998: Americas Volume III ...................................................................55 CHF
General Trends in Telecommunication Reform 1998: Arab States Volume IV ...............................................................45 CHF
General Trends in Telecommunication Reform 1998: Asia Pacific Volume V.................................................................60 CHF
General Trends in Telecommunication Reform 1998: Europe Volume VI .......................................................................72 CHF
Collection of five Regional reports (Volumes II-VI) ......................................................................................................297 CHF
Collection of Regional and World reports (Volumes I-VI).............................................................................................372 CHF
The Arab Book: Telecommunication Policies for the Arab Region, 2002.......................................................................50 CHF
The Blue Book: Telecommunication Policies for the Americas, 2000 (2nd Edition) ......................................................50 CHF
Please 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.
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
RTTELEECONMMDUNSICAITINON
er form
02 07
TO
D
A
O
R
E
H
T E N E R AT I O N
N E X T- G
S
K
R
O
W
T
NE
)
N
G
N
(
Summa
Printed in Switzerland
Geneva, 2007
ry