Network Paradigm Shift (2) -New Communications Policy in Ubiquitous Network Society-

Transcription

1 0 Network Paradigm Shift (2) -New Communications Policy in Ubiquitous Network Society- SEKI Keiichiro Director, International Economic Affairs Ministry of Internal Affairs and Communications (MIC)

2 1. Introduction 1

3 Again we are on the Stage of New Network Construction. Our Goal: To ensure sustainable investments while maintaining fair and effective competition 1952 Establishment of Nippon Telegraph and Telephone Public Corporation (former organization of current NTT) -Separation of operator from government Main goals Earlier construction of nationwide PSTN by introduction of private-sector management methods 1978 Telephone waiting list completely eliminated (Completion of Nationwide PSTN) 1985 Establishment of Nippon Telegraph and Telephone Corporation -Privatization of NTT and abolishment of national monopoly Enforcement of Telecommunication Business Law -General deregulation of the telecommunication market 1997 Introduction of Accounting Separation and Interconnection Rules for Incumbent 1999 Reorganization of NTT Late 1990 s Diffusion of Internet Introduction of competition to a technologically innovated market for consumers more choice -from market for long-distance calls Improvement in competitive environment Improvement in competitive environment in the era of broadband 2000 Setting rules for unbundling of network elements 2001 Expansion of asymmetric regulations Since around 2002 Expansion of VoIP -KDDI and Yahoo-BB introduce telephone service using fully unbundled lines -NTT s mid-term plan sets a goal of disseminating optical fibers to 30 million households by 2010 All copyrights reserved (MIC) Transition from PSTN age to IP/Ultrahigh-speed Network age Construction of New Network 2

4 Vision for Upgrading of Communications Infrastructure Before liberalization (Public Corporation) After liberalization Future picture Telephone service - long-distance -local - basic charges PSTN Copper Wireless network Monopoly ll copyrights reserved (MIC) Liberalization of telecommunications market and privatization of NTT Fixed Network Wireless Network Analogue ADSL FTTH PSTN Copper Start of competition in the long-distance market Full-scale competition in the local market Full-scale competition in basic charges Development of interconnection rules Optical Fiber Digital 2G Frequency Open Policy 3G Wireless LAN VoIP Optical Fiber Broadband service Access infrastructure - Video phone - Content distribution - Digital broadcasting etc. IP Network Mobile ( 3 G/ 4 G) High-speed Wireless LAN 3

5 Impact on Competition and Business caused by Move to IP Characteristics of IP Technology Everything on IP Various contents and applications are developed on IP IP on Everything Various infrastructure is deployed based on IP Distributed, not centralized, network architecture and multi-proliferation Great Impact on the State of Competition and Businesses Positive Impact Inexpensive network facilities compared with PSTN and Market entry without huge capital Cheaper/Flat fees Expanded business opportunities by advanced services utilizing IP Negative Impact Dramatic decline in sales and traffic of traditional fixed telephone service Difficult maintenance of PSTN and crisis in ensuring universal service Unstable quality and reliability Vulnerable security New ICT Policy is necessary to respond to new situation affected by the move to IP. All copyrights reserved (MIC) 4

6 All copyrights reserved (MIC) 5 Innovation of Competition Structure ⑴ ⑵ ⑶ ⑷ ⑸ Monopolized by NTT Public Corporation Starting up competition Starting up DSL services A period of transition to NGN Complete shift to IP telephony

7 Shift of network structure (1) (1)Starting Startingup upcompetition competition (2) (2)Starting Startingup updsl DSLservices services ＮＴＴnetwork Internet <best effort> T ransm ission N etw ork Localnetw ork Localnetw ork ＮＣＣTransmission Networks Zone C enter ZC ) T ransm ission netw orks Local Network (NTT East and West) ZC Local Network (NTT East and West) ZC ZC C ircuit-sw itched netw orks In addition to NTT, New common carriers (NCC) such as DDI, JAPAN TELECOM competitively deployed G roup C enter GC) GC Router GC PSD N MDF MDF Subscriber Line M SC M SC PSD N MDF MDF Subscriber Line 8 (3) (3)AAperiod periodof oftransition transitionto toip IPtelephony telephony Internet <best effort> Router GC DSL access Subscriber Line Radio access network Radio access network Subscriber Line DSL access 9 (4) (4)Complete Completeshift shiftto toip IPtelephony telephony IP Networks IP telephone networks <guaranteed quality> Local Network (NTT East and West) Local Network (NTT East and West) T ransm ission netw orks ZC Router ZC C ircuit-sw itched netw orks GC Router Local Network (NTT East and West) Local Network (NTT East and West) GC PSD N M SC M SC Router Router Router IP IP NCC All copyrights reserved (MIC) IP IP MDF/CTF Radio access network Subscriber Line Router PSD N MDF/CTF IP telephone Router Router Radio access network Radio access network Subscriber Line IP telephone 10 NTT Radio access network NTT NCC ２6 11

8 2. Concerns and Recognition 7

9 NGN Introduced by Incumbent and Recently Raised Concerns in Competition Policy from Competitors New investment and network upgrade is really welcome but 1. The Replacement to FTTx from Copper Local Loops on which competitors rely using dry or shared access products Welcome to deploy FTTH but Incumbent may take back rivals subscribers using market power in telephone services. 2. New Nodes to use soft switches where Incumbents can change their functions without physical treatment Ex. MSANs (Multi Service Access Nodes) enable Incumbent to provide DSL services with no physical construction. 3. The Change of Nodes Location where competitors have points of interconnections at present Who will pay the cost to move these interconnection points? 4. VoIP Networks require different ways for interconnection How to share the burden of new interconnection arrangement 5. Others ll copyrights reserved (MIC) Changes of Operation Supporting System, Function of Intelligences and so on 8

10 ll copyrights reserved (MIC) Common Recognition Regarding Facility-based Competition and Service-based Competition? 9 1. The Paradigm Shift from PSTN to New IP-based Network will be inevitable. 2. Economically efficient investment in infrastructure is indispensable and essential for future development. 3. Facility (Infrastructure)-based competition will lead to the most sustainable development of telecommunications services. 4. Too much emphasis on the policy to encourage servicebased competition may impede the deployment of new infrastructure. 5. Also true is that Service-based competition has the great role to generate more facility-based competition from our historical experience.

11 ll copyrights reserved (MIC) Structural Changes in the Market and a Review of Telephone-oriented Competition Policy 10 Competition policy needs to accommodate structural changes in the market as a result of a move to IP If the specifics of structural changes become clear, they will contribute to discussions on restructuring of competition policy. Shift from public switched telephone networks to IP The distinction among international, networks long distance, local calls and basic fees has become unclear. The PSTN, which underpins current interconnection rules, is withering (Example) Restructuring of competition policy reflecting changes Definition and maintenance of fair competition in the new market structure Indispensability with respect to the openingup of bottleneck facilities (equal access) Restructuring of regulation on market power (Example) Consensus building and realization of social optimum Maintenance of universal service Encourage improvements to infrastructure over a medium and long term

12 11 3. New Policies (1)Other Countries Policy (2) Focus on Economic Bottleneck (3)Hot issues: Regulation on FTTH/FTTP (4)Necessity of Cross Layered Policy (5)Conclusion: New Challenges with NGN (6)Competitive situation in communication industry in the future What is our goal?

13 ll copyrights reserved (MIC) 12 New Policies in Ubiquitous Network Society Outline- Transition of Competition Structure Fixed Telephony Diffusion of Cellular Phone and IP Telephony Dependence on Incumbents Networks Bypassing Incumbents Networks Separately Providing Fixed/Mobile Services Fixed and Mobile Convergence (FMC) Reconstruction of Competition Policy Continuing Competition Dynamism Stability and Reliability of Networks Ensuring Investment Incentives Ensuring Universal Service Elimination of Digital Divide Anti-Spam Redefinition of Bottlenecks Reviewing Dominant Regulations Ensuring Interconnectivity and Interoperability Consumer Protection

14 US: Network Neutrality (Regulatory unbalances between Cables and ILECs) Each country has its own market situation and adequate policy. Cable modem services have greater percentage of share than Common carrier s broadband services. Deregulation for Common Carriers (ILECs) DSL 13,817 (37%) Broadband Market Others 2,715 (7%) Total 37,890 Cables 21,357 (57%) Regulatory unbalances examples (former regulation) Network unbundling Cable services No obligation Common Carriers (ILECs) Obligation to provide nondiscriminatory access to Unbundled Network Elements Voice Non-regulated VoIP Regulated Telephony Universal service No obligation (VoIP: regulated or not regulated according to form of VoIP ) Obligation contribution to USF Internet access Vertical Integration Non-discriminatory provision to affiliate and non-affiliate ISPs As of Dec., 2004 Unit: thousand subscribers Source: FCC ll copyrights reserved (MIC) Video programs Need to obtain franchise from local authority (Already obtained) Need to obtain franchise from local authority 13

15 UK: Competition at the Deepest Level of Infrastructure Each country has its own market situation and adequate policy BT s share in DSL market is 99.35% on unbundled basis, while BT has 32.13% on resale and Bitstream basis. 100% 90% 80% 70% % 50% % 30% 20% % 0% Unbundled Resale Basis BT Bitstream access&resale Full ULL&Shared access Source: Broadband Lines Retail Market.1 January 2005 (EUROPEAN COMMISSION) ll copyrights reserved (MIC) BT may want to sell more resale products (including IPstream and Datastream) to its rivals than unbundled products. Such resale-based competition will not lead to less expensive pricing and higher speed because rivals can only use the same products as BT retail uses. Shared access or full unbundling, that is to say, a deeper level of infrastructure will enable competitors to provide better services using their own equipment. [Equivalence of Inputs] To avoid non-price discrimination Competition at the deepest level of infrastructure BT s undertakings (Access Service, etc.) NGNco: Industry cooperation 14

16 Japan Regulation focused on Economic Bottleneck (Ex1) (Organizationally regulated) NTT (Holding company) (Organizationally regulated) NTT East (regional company) Bottleneck facilities user unit Bottleneck facilities management unit UK Regulation focused on Economic Bottleneck (Ex2) BT Group plc (Organizationally regulated) Divestiture in November 2001 mmo2 plc (mobile) British Telecommunications plc (Fix, ISP, MVNO, etc.) (Organizationally regulated) NTT West (regional company) Bottleneck facilities users unit Bottleneck facilities management unit BT Retail (Fixed retail, ISP, MVNO) BT Wholesale BT Exact BT Global Services NTT Communications (long distance) BTS BTWS Quasi-structural separation NTT DoCoMo (mobile) Access Service Division NTT Data (system solutions) Others All copyrights reserved (MIC) (For competitions and BT s s other Division) Others 15

17 All copyrights reserved (MIC) 16 Internal Structure of NTT East and West End Uses (business/ individuals) Payment Service Payment Service Competitors Bottleneck facilities user unit Wholesale Interconnection charge Equivalent conditions Inner trade Bottleneck facilities management unit NTT East/West

18 Australia Telstra (Organizationally regulated) Retail Unit Regulation focused on Economic Bottleneck (Ex3) USA Verizon Communications Inc. 12 Regional Companies 4 Long Distance Companies Verizon International Holdings Ltd. Wholesale Unit Verizon Wireless (Others) (45% Vodafone) Competitors SBC Communications Inc. Network Unit Operational Separation (Between structural separation and accounting separation?) All copyrights reserved (MIC) 13 Regional Companies SBC Long Distance, Inc. SBC International, Inc. Cingular Wireless, LLC (Others) Recently merged with AT&T (40% BellSouth) 17

19 All copyrights reserved (MIC) 18 France Germany france telecom France Telecom SA (Holding, Fix, ISP) (Wanadoo has been consolidated) Equant NV (for business users) Orange SA (mobile) Deutsche Telekom AG (Holding, Fix) T-Online International AG (ISP) T-Mobile International Holding GmbH (mobile) T-Systems International GmbH (system solution) (Others) (Others)

20 All copyrights reserved (MIC) 19 Hot Issues: Regulations on FTTH/FTTP Our first concern is Price Level of Unbundling/Interconnection. 1. Issues do not exist in unbundling itself but its price level. 1 2 Every operator might be required to make faithful negotiation on interconnection with others. Without unbundling products, Incumbents can not only transfer their existing market power on copper lines onto new FTTx, but also can get back competitors DSL customers depending on copper lines. 2. Price setting is more important to give network investment incentives Prices to be calculated based on historical cost, not LRIC. Incumbents to be allowed to include risk premium in the price. Pricing to shorten transition period considering future demand increase. 3. Parasites to Incumbents should not be allowed. 1 2 Service-based competition is different from parasitism. Pricing is important again from the viewpoint of avoiding continuous parasites.

21 Our second concern is Equal treatment in deploying new networks. 1. The essence resides in the difficulty to replicate local loop and backhaul network (economic bottleneck). 2. The difficulty is not always derived from the high cost of deployment Construction cost is expensive. But maintenance of copper lines is more expensive compared with FTTx. Optical fiber in itself is much cheaper than copper. Someday existing copper lines shall be replaced into an upgraded network after depreciation in the case of Incumbents. 3. Competitors should be encouraged by removing invisible barriers and inequalities and ensuring equivalence in construction All copyrights reserved (MIC) From the viewpoint of facility-based competition, it is more critical to enable competitors to deploy their own FTTx on an equivalent basis in road digging, access to conduits, ducts and poles, etc. Incumbents may be reluctant to open their property for competitors FTTx for many excuses and receive favorable treatment by electric companies, road administrators etc, through long-time relations. Competition will also lead to the increase of incumbents investment. 20

22 All copyrights reserved (MIC) 21 Our third concern is Demand Stimulation looking at upper layers such as platform and Content/Application (ex. IP-TV) 1. Broadband inevitably to be interested in upper layers seeking new demand 2. IP-TV: a typical example likely to hold appeal to prospective customers 3. Resolution of anxieties from new interested parties such as broadcasters and rights holders (1) Rebuilding of broadcasters business model (2) Threat of piracy (3) Revenue Distribution Mechanism to content holders (4) New business model for platform/aggregation layer

23 The Necessity to focus on Economic Bottleneck (Facilities) Current Structure Incumbents Telephone Users ADSL Users Incumbents Copper Loops Competitors ADSL Users Case A: No Obligation? Incumbents Triple Play Users Incumbents Fiber Loops Case B: Unbundling Obligation? Case C: Incumbents Triple Play Users Incumbents Fiber Loops *Resellers may survive as sales channels. *Incumbents can easily transfer existing market power on copper lines onto fiber loops. Competitors Unbundling + Proper Pricing for Incentives + Equal Treatment on Construction? Incumbents Triple Play Users Competitors ll copyrights reserved (MIC) Incumbents Fiber Loops Competitors 22

24 ll copyrights reserved (MIC) 23 The Necessity of Cross-Layered and Comprehensive Policy Development - Layer Unbundling or Vertical Integrations - Upper Layer Content/ Applications Portal (Entrance for services) Content aggregations/retrieval VoIP Broadcasters (IP-TV/on demand), Content Providers On-line banking/securities/bookstores/ Tickets/ Travel, Net-auction/ e-learning Platform Services Billing/charging, Customer management, DRM, etc. Terminals Communications Service Broadband/Internet access, etc. Network Infrastructure Lower Layer Copper Optical Fiber Mobile/Wireless

25 All copyrights reserved (MIC) 24 New Challenges with NGN 1. Cross-Layered and Comprehensive Approaches -Everything on IP network and layer-based activities- (1) Modulization from Network layer to Application layer (2) Trend of Convergence: Vertical and horizontal integration or alliance for FMC, Communications and Broadcasting Convergence, and triple play (3) To encourage users convenience through convergence (4) Necessity to watch all layers and comprehensive policy over layers

26 All copyrights reserved (MIC) 25 New Challenges with NGN (Cont.) 2. Emerging concerns about competition policy (1) Monitoring the abuse of market power over layers/vertical integration 1 To ensure fair competition among wire and wireless operators 2 Securing of impartial access to bottleneck facilities for rival competitors 3 Provision of opportunities for equal access to Content/Application for end users (2) To avoid anti-competitive effects of NGN deployment by Incumbents 1 Concerns to transfer Incumbents existing market power to NGN 2 Necessity of open cooperation in construction of NGN between Incumbents and Competitors

27 All copyrights reserved (MIC) 26 New Challenges with NGN (Cont.) 3. Incentives for NGN construction and to shorten inefficient transition period (1) Pricing policy for further investment and to avoid lasting parasites (2) Encouraging Competitive Deployment of NGN (3) Shortening Inefficient concomitance of PSTN and NGN 4. Interconnectivity and Interoperability Standardization is under discussion. 5. Stability, Reliance, Safety and Security Anti-vulnerability, QoS, cyber attack, virus, etc. Upper layers may generate social problems such as privacy, SPAM, Phishing and pornography. 6. Universal Access instead of scope of services Physical access in rural areas to convey every service

28 Competitive situation in communication industry in the future: What is our goal? ll copyrights reserved (MIC) 27 How will competitive situation become in the future? What restriction will be imposed on incumbent operators? Case A Case B Case C An An incumbent holds a market incumbent holds a market An incumbent holds a market share share of less than 50% in both of 80-90% both in the share of 80-90% in the infrastructure infrastructure market but less the infrastructure and services and services markets. than 50% in the services markets. market. An incumbent is subject to both bottleneck facility regulation and services regulation. 0% 50% 100% An incumbent is subject to bottleneck facility regulation but progress in the opening of the network make for freedom in the services market. Progress in opening the facilitybased market to competition provides an incumbent with the freedom of its competitors in both the leasing of infrastructure and provision of services. 0% 50% 100% 0% 50% 100% Market share in services market Market share in services market Market share in services market Market share in infrastructure market Market share in infrastructure market Market share in infrastructure market

29 Global cooperation and exchange of best practices Thank you very much for your kind attention! SEKI Keiichiro 28