Regulation for IP-enabled NGNs: Approaching Evolution and Revolution

1. What rules for IP-enabled NGNs? ITU Geneva 23-24 March 2006 Regulation between Evolution and Revolution: approaching NGNs(davide.gallino@cec.eu.int)

2. Disclaimer • The views of the speaker do not represent those of the European Commission or of the ERG as such.

3. Outline of presentation • ERG and NGN • Regulatory challenges • Other elements in the NGN scenario • Conclusions

4. The European Regulators Group (ERG) was established in July 2002. Its members are the Heads of the National Regulatory Authorities (NRAs) for electronic communications and networks from thirty three European countries. These comprise the twenty five EU Member States, the four EFTA states (Switzerland, Norway, Iceland and Liechtenstein) and the four EU Accession/ Candidate States (Bulgaria,Romania, Turkey and Croatia). The European Commission attends and participates in meetings of the ERG. • The ERG was set up as a forum for advising and assisting the Commission in the electronic communications field. It allows cooperation between the NRAs and the Commission in a transparent manner and serves as a body for reflection, debate and advice on the implementation of the electronic communications framework as required by Article 7(2) of the Framework Directive (2002/21/EC).

5. NGN definition • As a working definition of Next Generation Networks, ERG takes the definition from ITU-T, i.e. : • NGN is a packet based architecture fostering the provisioning of existing and new/emerging services through a loosely coupled, open and converged communications infrastructure

6. ERG's activity on NGN • Work already undertaken in 2004-5 • Work Programme 2006: • Deliverable: ERG Common Position on principles for IP interconnection Deadline: Q4 2006 Public consultation • Deliverable: ERG Common Position on regulatory principles for NGN Deadline: Q4 2006 Public consultation • ERG Submission in response to the European Commission “Call for input”

7. NGN: evolution or revolution? • Mithology # 1: everything changes • Mithology # 2 : everything changes, very fast • Mithology # 3 : generalized cost reduction • Mithology # 4 : single IP platform = more interoperability • Mithology # 5 : NGN changes more significant than NGS(ervices) • Can we say that evolution wins over revolution?

8. Timeline for NGN in Europe • Telecom Italia currently most advanced operator in Europe in terms of core (transport) modernization • Significant developments in : • Belgium, France, Slovak Republic, Spain, Poland and others (GER) • UK – more ambitious changes will probably take place in the longer run 2009 2000 2002 2004 2006 Backbone completed in several countries Substantial development in access networks TI begins replacement core network Most EU incumbents will have core network replaced Development of backbones including MNOs

9. The three main regulatory challenges from NGN • I – Fitness of EC relevant markets list to deal with technological change and network / service convergence • II - Access remains crucial element in competition • III – Interoperability and internal market issues

10. Other factors adding to complexity • Regulatory culture: internet model ≠ telco model • Regulatory culture: limited “content/media regulation culture” in several “telecom” NRAs • Stickyness of regulation • Technical complexity (layers, protocols, blurring of access/core borders, different (=non typical) actors in value chain, billing) • Market evolution: cable operators and fixed incumbents buying MNOs; MNOs “voice minded” on data / roaming traffic • Growing importance of P2P (peer-to-peer) networks

11. Peer to peer (centralized/distributed) and transit Bundled offers (services + bandwidth + content + mobility) Price squeezes Nomadicity, unlicensed bands, spectrum trading Old word vs New world • Interconnection (transit/termination) • Cost orientation • Price caps • NRA discretionality on numbers, frequency use • Emergency services

12. Regulatory challenges /1 • Existing EC markets list still fit to cope with changes? • Ensure consistent market analysis_definition (VOB, VDSL, etc.) across MS • Need to understand how technological change affect CAPEX, OPEX in cost oriented or price control regulation • Need to evaluate if SMPs' operators cost reductions are to be passed on to altnets and end-users

13. The development of ADSL2+, satellite, VoB, Wimax might entail definitional problems in the Broadband market which could affect markets 11, 12, 16 and 18. All markets are potentially subject to change Relevant market list – possible changes?? • WHOLESALE: • The current list was based on the (PSTN) fixed network, not on the new technologies now being deployed. • RETAIL: • Markets 1-6 are based on PTN • EMERGING MARKETS CONCEPT: • Probably needs reworking

14. Regulatory challenges / 2 • Access (= copper, metallic line) remains key to competition in near future • ULL, Bitstream access, WIFI, WIBRO • ULL deployment largely depends on price (squeeze) AND SLAs, co-location (NGN further reduces need for physical space and number of co-location stations) • No access regulation holidays, but discussion on sunset clauses, risk adjustment (real option theory)

15. Regulatory challenges / 3 • Interoperability • Existing definition (FrameworkDirective) too flexible • Single market attribute should be reinforced • Recital 30 FD: “Standardisation should remain primarily a market-driven process. However there may still be situations where it is appropriate to require compliance with specified standards at Community level to ensure interoperability in the single market”. • Concrete risk of proliferation of walled gardens (some OEMs may favour open platforms, other will defend legacy and installed base; NOs will in general favour walled gardens)

16. Technology neutrality • Also spells “network neutrality” • Risks of walled garden at IMS (IP Multimedia Subsystem) level • USO directive to be adjusted in this regard (“fixed location”)

17. Conclusions (from the ERG submission to the EC) Communications markets are undergoing significant technological transition towards NGNs, converged and IP based services. In the near future IP services will be seamlessly provided through various networks. In addition, the bundling of services as well as the provision of cross-border services will increase. Technological developments will also dilute divisions between traditional platforms such as broadcasting and telecommunications where ‘triple’ and ‘quadruple’ play products are becoming increasingly prevalent. While these developments may undoubtedly give rise to new regulatory challenges, they may also fuel the expectation that lighter touch regulation will be possible in traditional areas of regulatory oversight. In recognition of these developments the Framework review needs to guarantee appropriate flexibility to enable regulators to address the issue of convergence particularly as such changes will not take place in all European markets at the same time. As convergence becomes a reality, the Recommendation on Relevant Markets and the Framework in general need to be technology neutral.