Pedestrian Crossings and Superhighw ay Robbery: Sources of Market - PowerPoint PPT Presentation

Pedestrian Crossings and Superhighw ay Robbery: Sources of Market Pow er in Broadband ACCC conference 2008 Rob Nicholls Consultant 24 July 2008

Agenda • Introduction • The need for speed • The real competition – services and applications • The importance of capital • Contended issues – wireline and wireless • Unlearning regulatory lessons – the absence of a magic bullet • Competition in the NGN access network • Conclusions 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 2

Introduction • Technology oriented view of next generation network world • Interaction with NBN • Three key messages: – Speed is key – Wireline is the delivery technology – Excessive regulatory intervention will render the question of broadband market power moot 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 3

The need for speed • Australia does not have the policy concept of the “information society” • An information society perspective requires access to low- cost ubiquitous broadband • A world without SMS and email is unfathomable • This will expand to encompass rich media delivery on a personalised basis – independent of location and time • Key characteristics (EU) – interoperability and speed • The interoperability issue has been addressed by engineers 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 4

Need for speed – An Australian user perspective Dial-up and IS DN 256 kbps to less than 512 kbps 512 kbps to less than 1.5 Mbps 1.5 Mbps to less than 8 Mbps 8 Mbps to less than 24 Mbps 24 Mbps or greater Source: ABS 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 5

The real competition – services and applications • In the old PSTN world a voice service is just a voice service • In the NGN world, voice is an application which can be acquired independently of carriage • The application need not be in the same country as the network • Cloud compute space already developing • Quality of Service (QoS) determined on an application by application basis – by either the end user, the supplier or both 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 6

The importance of capital • The deployment of part state funded, fibre based broadband networks is a regional trend: – Australia – $4.7 billion as part funding of NBN – Malaysia – more than $US4 billion to TM in PPP – Singapore – separate core network and access networks – Pakistan – least cost subsidy auction using USF money to add broadband to USO • Pure private investments by Verizon (FiOS – FTTP) and AT&T (U-verse – FTTN) as well as France Telecom and Deutsche Telekom 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 7

The importance of capital • Viviane Reding recognises the need for regulatory certainty: we want to encourage investment into next generation access networks by a stable and predictable regulatory environment. We are still discussing the final details of this in the Commission, but I believe that the best way for encouraging long-term investment is to establish a priori a number of principles that national regulators should take into account when regulating access prices with regard to next generation access networks. In my personal view, these should include a risk premium of around 15 % 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 8

Contended issues – w ireline and w ireless • Mobile voice is a substitute or complement to PSTN voice • Little difference in the user experience (price and portability) • Wireless and wireline IP data are significantly different • Number of cells would require to rise significantly in order to offer reasonable contention (both HSPA and LTE) • Contention in wireline networks (or passive optical networks) is well characterised • Concurrent downloads (P2P or IPTV) demonstrate the contention issue 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 9

Unlearning regulatory lessons – the absence of a magic bullet • Globally, regulators are struggling with the new paradigm that NGN provides: – ERG with ladder of investment – Separation as a magic bullet • NBN regulatory submissions call for structural separation – with little definition (BT uses the European “functional separation”) • Academic literature does not support the concept and its implementation in telecommunications has been limited (UK, NZ, Sweden (in a fashion) and Denmark by outsourcing) 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 10

Unlearning regulatory lessons – the absence of a magic bullet • Larouche argues that separation has two consequences: – loss of control over operation decisions (mission paradox) – cost of regulation not being taken into account (regulatory externality) structural solutions – essentially separation of vertically- integrated companies – are put forward, but they are perhaps too drastic and they evidence a deep involvement of regulatory authorities with the operation of firms 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 11

Unlearning regulatory lessons – the absence of a magic bullet • Nor is there an uncontended view on separation in Europe as EU Parliament shows: Functional separation, due to its far-reaching character, is subject to a special treatment whereby the Commission and BERT have to agree that it is the only effective remedy in order for the concerned NRA to be able to impose it • It is also not quite clear what the problem is (rather than what it might be) as vertical integration is both efficient and encourages both investment and innovation 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 12

Competition in the NGN access netw ork – core Service Secure QoS Customer Location Au Filtering Set up Plane I D Tunnel Tunnel Control Plane I MS Core Fixed Mobile Mobile Packet Packet PSTN CS core core Access Plane Wireline Wireless Wireline Wireless circuit switched circuit switched packet switched packet switched 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 13

Competition in the NGN access netw ork 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 14

Competition in the NGN access netw ork • Key issue is QoS! • NGA interconnection permits managed QoS between both networks (any-to-any). Innovative applications and services can be provided at the applications plane of either NGN1 or NGN2. • Access seeker chooses both QoS and bandwidth and can self provision QoS parameters on an application by application basis • Even the retail broadband service has the potential for significant innovation simply because the QoS parameters are selected by the access seeker 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 15

Conclusions • Speed is key • Wireline is the delivery technology • Excessive regulatory intervention will render the question of broadband market power moot: – Functional separation is not a magic bullet – Acceptable undertakings are likely to be the only practical answer in Australia – Unbundling needs to be unlearned – Facilitating interconnection at the access network may be all the intervention that is required 1897459_1.PPT | Sources of Market Power in Broadband | July 2008 page | 16

Pedestrian Crossings and Superhighw ay Robbery: Sources of Market Pow er in Broadband ACCC conference 2008 Rob Nicholls Consultant 24 July 2008