NGN-based competition: An Ofcom perspective

1. NGN-based competition:An Ofcom perspective Dr Stephen Unger Director of Telecoms Technology 24 March 2005

2. IP core What is a Next Generation Network ? Core PSTN SDH ATM IP … • Multiple service-specific access nodes • Multiple service-specific core networks Metro & Core Ethernet backhaul Metro PDH SDH ATM IP … Aggregation Access Copper Copper Fibre WirelessBB PSTN xDSL LeasedLine Mobile Access Fibre Copper Copper WirelessBB Next Generation Networks PSTN xDSL LeasedLine Mobile • Converged access nodes aggregate traffic from multiple access services • A converged IP-based core network carries this traffic • Service intelligence is decoupled from network transmission Today’s Telecom Networks

3. Contrast with Next Generation Access Next generation access network Next generation core network Next Generation Core Network • The deployment of Next Generation Core Networks is driven by potential efficiencies in the supply of existing services. • The ability to deliver new services is also important, but is a potential upside, rather than core to the business case • Continuity of existing services is key. Existing PSTN services emulated by NGN. • Investment risk is mainly associated with implementation, supplier management Next Generation Access Network • Next Generation Access would provide much higher bandwidths to consumers • This would enable the supply of rich (but currently unspecified) multimedia content • Disruptive change to existing services and existing business models • Investment risk driven by uncertainty as to consumers’ willingness to pay

4. A case study – BTs ’21st Century Network’ Core nodes provide a resilient national transmission backbone Metro nodes define the service edge of the network Multi-service access nodes (MSANs) aggregate customer traffic

5. Ofcom’s approach to NGN regulation Industry interaction • Consultation on principles and process (June 2005) • ‘NGN UK’ now established to develop commercial vision • And ensure detailed regulation follows rather than leads the market • But within a clear regulatory framework (i.e. not forbearance) • Continued support for technical work of NICC on interoperability • BT Undertakings to protect against foreclosure (Sept 2005) • We now need to apply the ex ante competition framework to NGNs • Market review programme published (March 2006) • Converged backhaul • IP-based voice origination / conveyance • Converged copper-based access • Additional study on charging structures (Dotecon - end March 2006) • Co-regulatory solutions preferred • Review of general conditions of entitlement (end 2006) Competition framework Consumer protection

6. BT Undertakings regarding NGN deployment • No foreclosure of network access • BT to provide unbundled network access in SMP markets • In a manner that permits competition with downstream end-to-end services • Full consultation before any network design decisions which might prevent this • Efficient design to deliver these requirements, or BT pays the costs of retro-fitting • Equivalence of Inputs (EoI) • EoI means that BT and altnets buy exactly the same SMP products • Using exactly the same systems and processes (subject only to agreed exemptions) • BT will design 21CN to support EoI where SMP may ‘reasonably be expected’ • Subject to the condition that provision of EoI is ‘reasonably practical’ • Availability of network access • Network access to be made available in advance of any new downstream service • Lead time must be sufficient to permit simultaneous launch of competing products

7. NGN UK • The creation of NGN UK • NGN UK will be operational from the beginning of April • Eight companies have committed to joining the NGN UK executive: BT Group plc; Cable & Wireless; Easynet; Kingston Communications; NTL; Thus; Vodafone; Wanadoo UK. A number of other companies have expressed interest in participating in the work programme. • Ofcom has observer status on the NGN UK executive committee • Priorities for the NGN UK work programme • IP interconnect architecture. A reference architecture for IP interconnection, covering such matters as service characteristics and interoperability standards. • IP interconnect commercial model. Commercial principles in relation to charging (e.g. distance dependence, definition of grades of services) and contractual terms and conditions. Actual charges are out of scope for this body. • Network intelligence interoperability. There is a need to understand the types of network intelligence which need to be exchanged between NGNs, the commercial basis for such exchange, and technical interoperability issues.

8. Ethernet PSTN SDH xDSL Application of the ex ante competition framework Service specific retail markets Retail markets Convergence of retail markets depends on purchasing behaviour, bundling, etc. These may be affected by changes in the underlying network, but not necessarily Business services Residential broadband Residential voice Authentication Authorisation Accounting Ethernet / WDM Session control Wholesale markets Metro node Bandwidth control MSAN Converged backhaul conveyance markets Converged core conveyance markets Service specific access markets Service specific network intelligence

9. Investment and innovation “The national regulatory authorities shall promote competition by … encouraging efficient investment in infrastructure, and promoting innovation (Art 8(2c), Framework Directive)” • Forbearance vs Certainty • We believe that the appropriate means for regulators to encourage investment and innovation is by minimising regulatory risk. We need to achieve this for both incumbents and altnets. This is not achieved through ‘regulatory holidays’. • Minimising regulatory risk for incumbents • Delivery of efficiency savings: The NGN business case depends on the ability to deliver efficiency savings, so anything which prevents this (e.g. a regulatory requirement to maintain legacy services) puts the business case at risk. • Recognition of investment risk: Incumbents require certainty that any efficiency savings that are delivered are not treated as some form of risk-free windfall. • Minimising regulatory risk for altnets • Efficient access and interconnection: Altnets investing in NGNs will be dependent on access to economic bottenecks controlled by incumbents. They therefore need certainty that efficient access and interconnection arrangements will be provided, so that they can compete with services provided end-to-end over incumbents NGNs.

10. Protecting consumers • The deployment of NGNs raises a variety of consumer protection issues, for example: • Potential service disruption during network migration • Management of end-to-end QOS over interconnected NGNs • Network resilience for lifeline services • Provision of emergency call location data • Numbering transparency • Number portability • New forms of abuse (SPIT, identity theft…) • Which of these can be left to operators to resolve, and which require formal regulatory intervention ?

11. Questions ? Steve.Unger@ofcom.org.uk