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The Technology Neutrality Concept Used
to Perpetuate Regulation into NGN
ITU NGN-Workshop
Geneva, 23-24 March 2006
Hasan Alkas
Deutsche Telekom AG
Deutsche
Telekom
Agenda
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Deutsche
Telekom

Brief Notes on Deutsche Telekom

Industry and Technology Dynamics

NGN Migration Perspectives

Approaches to NGN-Interconnection
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The Technology Neutrality Concept

Legacy versus New Infrastructure

Incentives for Infrastructure Investment

Potential Regulatory Issues of NGN
Page 1
An integrated company
Top positions in important markets
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Broadband/Fixed Network, Business Customers and
Mobile Communications: these are the three essential
growth areas of the international telecommunications
markets. As an integrated TC company, Deutsche Telekom
focuses on these three strategic business areas, thus
enhancing its previous four-pillar strategy.
These three business areas will be maintained by five
business units in the future: T-Com, T-Online, T-Systems
Business Services, T-Systems Enterprise Services and TMobile
Deutsche
Telekom
Page 2
Realignment to three business areas
The future course is set
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Deutsche
Telekom
T-Systems
Enterprise Services
Business
Customers
T-Systems
Business Services
T-Online
T-Com
Broadband/
Fixed Network
Mobile
Communications
T-Mobile
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Deutsche
Telekom
Page 3
Industry and Technology Dynamics
Beside regulatory and industrial policy conditions market and technological
drivers influences the industry structure and speed towards NGN
Central
Functions
CentralFunctions
Massive growth
of data traffic
Flat growth of
voice traffic
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Transport
Transport
Transport
Narrowband
Maturity of IP
technology
Open standards
and architectures
Services
Services
Services
Control
Control
Control
Outcome
interdependent layers
Network transformation
Central Functions
Driver
Application Plane
Control Plane
Transport Plane
Broadband
Architectural change from a circuit-switched, network optimized
for voice to a packet-switched network for various traffic types
(voice, data, video and multimedia) over broadband access
Access
competition
New service
opportunities
New competitive
environment
New network
architecture
New flexibility
and operations
New access
possibilities
Changing regulatory environment
Deutsche
Telekom
Industrial Policy setting
Page 4
NGN Migration Perspectives
Based on different starting points a variety of approaches (overlay or
replacement) are attractive, here the overlay is explained in detail
Overlay Approach
Circuit Switched Network
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Different Approaches
Approach I. Overlay Consumer
—
Other
PSTN /
PLMN
Digital
Transport
Local
Transit
Exchanges Exchanges
—
Existing
Traditional
Network
VoIP
Overlay
Network
V
A
S
—
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Approach II. Overlay Business
—
IMS
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IP
Phone
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Deutsche
Telekom
Broadband
Access Server
—
Router
Packet Switched Domain
A national or international overlay NGN can be
deployed to serve large enterprises and multi
national businesses with IP based voice services
Approach III. Digitization
—
IP
From operation and maintenance point of view no
need to phase out circuit switched network
From Total-Cost-of-ownership point of view no need
to phase out circuit switched network due to already
optimized investments and optimisation efforts from
the past
Implementation of a market driven NGN overlay
network for the generation of first new voice/data
integrated services
—
Cases where network is not totally digitalized yet
Competitive environment in voice and data area
requiring to launch new innovative products
Migrate the remaining part of the analogue voice
network directly to an NGN structure rather than to
continue investing in circuit-switched technology
Page 5
Approaches for NGN Interconnection
Several fundamental approaches for NGN Interconnection have to be considered
NGN -Interconnection Networks
Service aware= differentiated Network
Service unaware = pure Transport Network
 QoS connected to NGN
 Relevance for network efficiency
 Cost orientated price differentiation
 Best effort only
 Functional Internet quality questionable
Potential issues
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NGN-Interconnection will be based on standards voluntarily agreed.
Services will be highly competitive, which will put pressure on infrastructure providers itself
to interconnect voluntarily.
The migration from PSTN towards IP-Networks may bring new charging models based on
different business models.
Deutsche
Telekom
Page 6
Technology Neutrality Concept
The danger of using technology neutrality to perpetuate regulation into new
segments
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As an result of convergence the technology neutrality concept is in general appropriate.
However, the concept is mainly inequitably used to leverage regulation from traditional
telecommunications markets into newly emerging markets such as, to
— Mobile or
— VDSL in mass market
The technology neutrality concept needs to be redefined for more deregulation, in
order to provide incentives for infrastructure investments
— at market definition level
— at remedies level.
The technology neutrality concept must ensure adequate and fair
— safeguards for investments and
— focus on infrastructure based competition.
Deutsche
Telekom
Page 7
Legacy versus New Infrastructure
The history of infrastructure matters
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The evolution of network development must play an essential role, when it comes to
regulatory assessments.
Legacy networks, developed in a monopolistic environment need certain different
treatment
However, with growing diversity of access forms it is questionable whether the local
loop is still a fixed access “bottleneck”?
Technologies enabling multi-access to the end-user increase competition intensity
by offering by-pass possibilities and thereby reduces market entry barriers.
Networks evolved in a completely competitive environment opens same
opportunities to all market players in similar manner and therefore does not need to
be regulated.
Deutsche
Telekom
Page 8
Incentives for New Infrastructure Investment
There is a need for a favourable regulatory environment for investment and
innovation in NGN
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The main incentive to foster NGN-investment is to avoid regulation, as it is a nascent
market (characterised by innovation, rapid market growth, volatile market shares)
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The substitution-criteria seems to be key to differentiate between NGN-based
services and current services
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In addition, the difference between new and old infrastructure is essential
In theory, three regulatory instruments, which provides incentives for own
Infrastructure investments, are possible
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Access Holidays
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Provides the right signal to make risky investments, especially if it is
combined with the anticipation, that after the “holiday” there will be
effective competition and no need for ex ante regulation any more…
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Sunset Clauses
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Provides the competitor the right signal not to rely on regulation for ever.. .
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Real Options
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Integrate real options into cost calculation (as risk adjustment factor) for
access prices, to provide the right signal for make-or-buy decisions…
Deutsche
Telekom
Page 9
Potential Regulatory Issues on NGN
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Status Quo in Germany
 IP-Interconnection is currently not regulated, nor it is part of the 18 rel. markets of EU-COM,
but
 VoIP regulation is likely to appear soon, as it is already classified as PSTN voice,
 The BNetzA is already discussing with telcos possible regimes of future IPinterconnection.
Future asymmetrical regulation
 It is a common misconception that one of the main features of NGN would be that service
related functions become completely independent from transport.
A divested approach appears not to be reasonable since many services will have a
complementary character.
NGN might require special treatment of specific services (such as Voice, TV). Thus
services are unlikely to be completely independent from transport.
 The implementation of service classes as a means of differentiation seems to be appropriate.
QoS seems to be the key parameter.
 Whether network operators choose transit, peering, or a form of Requesting Network Pays
should be the outcome of the market and not of regulation.
Future symmetrical regulation
 Symmetric regulation will remain in force and apply (in the long run) to all network and/or
service providers regardless of their market power, i.e. emergency calls, intercept, data
retention, consumer protection etc.
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Deutsche
Telekom
Page 10