Interconnection arrangements for IP-enabled
NGNs - Discussion in Germany
Dr. Cara Schwarz-Schilling
Bundesnetzagentur
ITU Workshop: What rules for IP-enabled NGN‘s
Geneva, March 23-24, 2006
The opinion expressed in this presentation are the personal view of the author and do not
prejudge any official position or decision that BNetzA might issue.
1
Definition of NGN
No generic definition of the term, but a general
understanding:
 A broadband network that will be packet switched and
IP based
 Access, transport, control and services will be
separate layers
 Many separate networks converge to form a core NGN
supporting a multitude of services
 There will be open, standardised interfaces between
the different layers
2
Agenda
 NGN
–
–
–
–
–
Definition
Economic consequences
Strategies of operators
Network Structure
Cost drivers
 IP Interconnection Regime – Food for thought
– Billing systems at the wholesale level: Bill &Keep
– Relationsship between wholesale and retail pricing
– Advisory Group on Framework Conditions for IP-Based
Network Interconnection”
3
NGN: Economic consequences?
 Service-related functions and intelligence can be provided
independently of the underlying transport technology
 Traditional switch is split into media gateway to ensure transport and
the softswitch for call control
 Cost optimisation and deployment of new services
 This will allow for more fine grained division of labour and faster
provision of new services and greater opportunity for innovation
 Different providers will be able to create value at the separate
functional levels of access, transport, control and services
 Customers will decide on the provision of services along the value
chain: in a more decentralised manner using specialized services or
via vertically integrated providers offering bundles of services
4
NGN strategies (1)
 PSTN operators prefer managed IP networks using
centralized intelligence within a controlled platform
based on traditional standardisation processes of the
ITU and ETSI
 ISPs tend to rely on decentralized intelligence at the
periphery (distributed in the end-user equipment)
based on IETF standardization
 The question to be answered is: which model will
prevail – a centralized approach (control by network
design) or a decentralized approach with open access
allowing more service providers to offer services?
5
NGN strategies (2)
 Operators might follow different migration strategies
– Substitution of PSTN by IP network, starting at the
core moving to the enduser migrating all services to
IP
– Overlay approach involving parallel running of
PSTN and IP network
 NGN strategies and different migration paths will
impact on the nature of interconnection between the
networks.
6
NGN: Network structure
Switching to NGNs may imply
– changes in the number of network hierarchy levels
– rearrangement of core network nodes,
– therefore a geographic rearrangement of points of
interconnect.
– likely that the number of interconnection points at
the lowest network level could be reduced
“Leaner” NGN structures may imply problems
of sunk costs / stranded investments for both
incumbents and competitors – how will this be
dealt with?
7
NGN: Cost drivers
How does the cost structure of IPnetworks differ from cost structure of
PSTN?
What are the relevant cost drivers?
– Volume?
– Service characteristics?
– Network topology (Router/infrastructure)?
– Router hops?
8
IP-Interconnection Regime (1)
Cost determination according to LRIC
determined by “efficient” network
– Has the IP network to be considered the
“efficient” network?
– This implies that cost of IP networks might
already be relevant for PSTN
interconnection today
Migration phase – unified concept of cost
of efficient service provision?
9
IP-Interconnection Regime (2)
Differentiated according to
– Service (e.g. voice, data etc.)?
– Quality of Service class (best effort, priority,
guaranteed)?
– PSTN vs. IP?
– Core level vs. access level?
10
Billing systems at the wholesale level
Advent of Voice over IP leads to a clash of
billing systems for voice services at the
wholesale level
– PSTN: Calling Party’s Network Pays
– IP-network: Bill &Keep including Receiving Party
paying for termination through the internet access
charge
– Arbitrage?
11
Bill&Keep Interconnection
Regime (1)
 No payment of origination and termination charges to
other networks
– Does not mean “Interconnection at zero price”
– Barter between participating networks
– Requires agreement on
topology of PoI → Emphasis on network planning of
participating networks
depth of networks
– Possibly transit payments in the core network, B&K in
the access network only
– Transition toward Bill&Keep?
12
Bill&Keep Interconnection
Regime (2)
 Advantages
– No transactions costs for wholesale pricing and billing, no need
for price regulation
– No inevitable termination monopoly
– No tariff arbitration
– Internalization of (positive) network externalities
– Very flexible end-user pricing, no price squeezes
 Drawbacks
– Topology of PoI and required network depth could increase
market concentration.
– Potentially inefficient investments in parallel networks
– Tradeoff between hot potato problem and too many PoI
13
Relationship between wholesale
and retail pricing
Does Bill&Keep necessarily lead to RPP at
the retail level?
– Depends on whether traffic is balanced and how
strongly incoming and outgoing traffic are
correlated
– Tendency toward flat rates and buckets likely
14
“Advisory Group on Framework
Conditions for IP-Based
Network Interconnection”
BNetzA has been setting up a small Advisory
Group
Experts with long standing experience of the
market appointed by BNetzA
Purely advisory function
Work was taken up in August 2005
Final report approximately after 1 year
15
Dr. Cara Schwarz-Schilling
Head of Section Internet Economics,
Federal Network Agency
P.O. Box 8001, 53105 Bonn
Tel+49(0)228 14-1190, Fax +49 (0) 1805 734870-1435
cara.schwarz-schilling@bnetza.de
http://www.bnetza.de
16