TRENDS IN TELECOMMUNICATIONREFORM 2007
The road to Next-Generation Networks (NGN)
Summary
September 2007
Trends in Telecommunication Reform 2007 – Summary
Table of Contents
Page
1 Introduction...... 5
2...... Market and regulatory trends 8
3 Selected regulatory developments...... 17
4 What is NGN?...... 21
5 Interconnection in an NGN environment...... 22
6 Universal access and NGN...... 24
7 Consumer protection and quality of service in NGN...... 25
8 Creating an enabling environment for NGN...... 28
9 Conclusion...... 30
1
Trends in Telecommunication Reform 2007 – Summary
TRENDS IN TELECOMMUNICATIONREFORM 2007
The road to Next-Generation Networks (NGN)
Summary
1 Introduction
ITU/BDT is pleased to present the eighth edition of Trends in Telecommunication Reform, a continuing part of our dialogue with the world’s information and communication technology (ICT) policy-makers and regulators. This year’s edition focuses on the move to next-generation networks (NGN), which has captured the attention of the information and communication technology (ICT) sector in 2007. The sector has already seen the year of “convergence”, followed by the year where “broadband” was on everyone’s lips, along with the more recent fascination with “Voice over Internet Protocol” (VoIP) and “fixed-mobile convergence” (FMC). Each of these recent buzz words represents part of the same evolutionary path in which individual service-specific networks are developing into advanced IP-based networks capable of providing a full range of services and applications accessible from a wide range of devices that can function from any location.
Although the sector has faced many so-called “revolutions”, the consensus, with regard to NGN, is that the move will be more of an evolution than a revolution. Many observers expect that NGN and the Internet will co-exist for some time – although most would agree that the move to all IP-based networks is unstoppable. Even where NGN is deployed, it is also likely to include many variants as market players leverage their investments in today’s technology. In Europe, Japan, North America and the Republic of Korea, many equate NGN with fibre (FTTx) deployments coupled with a move to more ubiquitous and robust wireless coverage. Indeed in wealthier countries, fixed-line operators are
deploying fibre closer and closer to the end-user, while mobile operators are investing in third, and even fourth-generation mobile networks as well as broadband wireless access (BWA). Both fixed and mobile networks are being upgraded to offer ever higher-speed broadband.
At first glance, it looks like the digital divide storm clouds are brewing. European countries talk about tens of billions of euros of investments needed to achieve NGN, sums that would go begging in the developing world. But there is a silver lining. There is a growing range of wireless technologies that offers ever-increasing broadband capabilities. And national fibre backbone deployments are now within financial reach of developing countries. Today’s fibre backbones coupled with wireless access technologies offer developing countries a far richer diet of ICT services than legacy Public Switched Telephone Network (PSTN) and 2G mobile networks ever could and at lower cost. Some developing countries, such as Argentina, Bangladesh, Bulgaria and Pakistan are already experiencing NGN migration by focusing on cost-effective solutions to enable affordable access to the widest base of end-users possible.
Technology alone, however, is not the solution. Policy-makers recognize the need to abandon regulatory practices designed for an earlier era that today stifle innovation and investment and lead to arbitrage opportunities. Those countries that are witnessing the greatest explosion of ICT growth and investment have designed regulatory frameworks that enable and promote ICT development.
The emerging NGN environment poses significant challenges to all market players who are developing new business models, as well as to governments and regulators intent on creating future-proof regulatory frameworks. This year’s Trends in Telecommunication Reformcontains ten chapters addressing each of the NGN-related challenges and opportunities to enable regulators to harness the potential of NGN to build an Information Society for all:
Chapter One provides an ICT market and regulatory overview to set the stage for the following chapters;
Chapter Two provides an NGN overview to introduce the discussion in the later chapters;
Chapter Three focuses on NGN technology in an effort to demystify the plethora of NGN terms under discussion;
Chapter Four looks at fixed-mobile convergence as one of the trends leading to NGN deployments (the other major trend, VoIP, was explored in the 2006 edition of Trends);
Chapter Five examines interconnection and access in an NGN environment;
Chapter Six looks at international Internet interconnection, which will take on increased importance as international networks become increasingly IP-based;
Chapter Seven examines universal access and NGN;
Chapter Eight addresses Quality of Service (QoS), consumer protection and cybersecurity in an NGN environment;
Chapter Nine provides discussion on an Enabling Environment for NGN; and
Chapter Ten provides a conclusion and a look ahead.
2Market and Regulatory Trends
Buoyant ICT growth
In order to understand the likely migration paths toward IP-enabled and next-generation networks, it is essential to evaluate the current state of ICT infrastructure deployment. Developed countries, which have the majority of the world’s fixed and broadband lines, are more likely to migrate to fixed rather than wireless NGN access networks as they upgrade their existing fixed-line telephone and cable TV infrastructure. Wireless access will still play a key role in developed economies where users seek seamless or ubiquitous coverage, and are likely to use fixed lines while in a set location (home or work) and mobile while on the go.
Figure 1.1 – Growth in fixed lines, mobile cellular subscribers and Internet users,in billions, world (1996-2006)
Source:ITU World Telecommunication/ICT Indicators Database.
Figure 1.1 shows the buoyant growth in the ICT sector over the past decade, demonstrating the spectacular success of the mobile sector in particular.
By the end of 2006, there were a total of nearly 4 billion mobile and fixed-line subscribers and over 1 billion Internet users. This includes 1.27 billion fixed-line subscribers and 2.68 billion mobile subscribers (61 per cent of which are located in developing countries) as well as some 1.13 billion Internet users.
Broadband on the rise
While access to ICT continues to grow, countries are increasingly focusing on improving broadband use, in particular. Broadband is necessary in order to achieve the Information Society. Broadband-enabled services have the potential to create economic and empowerment opportunities and improve lives. Indeed, some of the applications that are having the greatest impact on people and businesses are closely linked to broadband uptake. This is also reflected by the fact that since 2005 there were more fixed broadband subscribers than dialup Internet subscribers worldwide.
Today, however, broadband penetration is dominated by the wealthy countries. Some 70 per cent, or nearly three-quarters, of broadband subscribers worldwide in 2006, were located in high-income countries which accounted for just 16 per cent of world population. Furthermore, two economies – India and Vietnam – accounted for more than 95 per cent of all broadband subscribers in low-income countries, while a single economy – China – accounted for 94 per cent of broadband subscribers in the lower-middle income group (Figure 1.2). The good news is that a number of developing countries are experiencing broadband growth. In Peru, for example, the number of broadband subscribers has grown by close to 80 per cent annually between 2001 and 2006, from 22’779 in 2001 to 484’899 at the end of 2006. In Europe, over half the Estonian population uses the Internet and the country has the highest penetration of both Internet and broadband in Central and Eastern Europe. But in Least Developed Countries (LDCs), there were merely 46’000 broadband subscribers in the 22 out of 50 LDCs with broadband service in 2006.
Figure 1.2 – Broadband worldwide
Source:ITU World Telecommunication/ICT Indicators Database.
In the area of broadband infrastructure, developed markets are intent on bringing fibre closer to the end user either as FTT Home (FTTH), where the fibre reaches the end-user’s premises, FTT Building (FTTB), where the fibre stops at the building; FTT Curb (FTTC) or FTT Kerb (FTTK), where fibre stops at a curb near a building or group of buildings; and FTT Node (FTTN) or FTT Cabinet (FTTCab), where fibre stops at a cabinet with telecommunication equipment that serves a neighbourhood. Collectively, these variants are termed FTTx.
The Asia-Pacific region today has more FTTx services than any other part of the world. Japan was the first country to introduce a FTTH network in 1999. In 2005, the number of Japanese subscribers to FTTH services increased 88 per cent to surpass the 5 million mark (Figure 1.3).
A positive trend in FTTx deployment worldwide is the increasing number of developing countries launching FTTx networks. In Asia, UTStarcom in India, and in Latin America, Telesp (the Brazilian fixed-line unit of Telefónica) are planning FTTx deployments for 2007.
Figure 1.3 – FTTH homes connected, Japan, 2000-2005
Source:MIC Japan.
In developing countries, the meteoric rise of mobile services has been fuelled by improved affordability, increased network coverage, and new service options. The same factors can promote wireless broadband Internet access in developing countries, even in countries with poorly developed fixed-line infrastructure, as mobile handsets that support both voice and Internet applications become more affordable (Box 1.1). In Kenya, for example, one ISP has announced that it will provide Internet access, instant messaging, and push e-mail and attachment support to mobile users through a handheld device, in conjunction with its partner, a mobile operator. Nearby in Zambia, a mobile operator is introducing the country’s first mobile Internet access facility to provide customers with quick access through their mobile handsets or laptops. Still, because of high prices, these services remain beyond the reach of most customers in developing countries and are targeted to high-end and business customers. It is hoped that operators will eventually find pricing plans that make these services more affordable to a full range of users. (See Figure 1.4 showing deployments of mobile technologies).
Figure 1.4 – Map of mobile technologies worldwide, May 2007
Note: The map shows networks commercially launched as of May 2007. For some countries where more than one technology has been commercially deployed, the most advanced technology is represented.
Legend:2G = Second-generation wireless telephone technology
CDMA2000 1x = Code Division Multiple Access
CDMA2000 1x EV-DO = Code Division Multiple Access Evolution- Data Optimized
WCDMA = Wideband Code Division Multiple Access
HSDPA = High-Speed Downlink Packet Access
Disclaimer: The designations employed and the presentation of material in this map do not imply any opinion whatsoever on the part of ITU concerning the legal or other status of any country, territory or area or any endorsement or acceptance of any boundary.
Source: ITU, based on data adapted from 3Gtoday
Box 1.1: Mobile broadband for developing countriesThe demand for affordable IMT-2000 services is rising in developing countries. One opportunity for developing nations, particularly those with large rural populations, is the commercialization of low-frequency mobile technologies. These enable wider coverage with fewer base stations, and hence reduce the cost of mobile infrastructure significantly. CDMA450 is a 3G solution combining next-generation CDMA2000 wireless communication services with wide network coverage using the 450-MHz frequency band. Its wide adoption throughout the developing world is indicative of the benefits it can bring in low-cost connectivity. In a number of countries, services licensed in the 450 MHz frequency are used for delivering mobile or fixed wireless access to remote rural areas, helping to bridge the rural-urban digital divide (e.g. in Argentina, Belize, Benin, China, the Czech Republic, Estonia, Indonesia, Libya, Mexico, Peru, Russia and Venezuela).
Source: ITU, adapted from Telegeography, Global Insight and operators’ reports.
Privatization and competition trends
Despite the general slow-down in the sale of state-owned incumbent operators, privatization remains a priority for most countries that have not yet fully or partially privatized their incumbent operator. The objectives of privatization are to improve efficiency, productivity, and service quality, as well as to raise capital, improve management expertise and further develop the network. In addition, many countries have found that competition is often more fair when the state avoids being both a market player (as owner or part-owner of the incumbent) and a referee at the same time. Privatization sends the signal that policy decisions and regulations will be fair to all players. Between 1990 and 2006, some USD 83 billion was raised through privatizations of incumbent public telecommunication operators in developing countries.
By the middle of 2007, 123 ITU member countries had a private or privatized national fixed-line incumbent (Figure 1.5). Several other countries have announced their intention to privatize. The government of the Ukraine has the green light to move on its plans to sell Ukrtelecom. The Kyrgyz government also plans to further privatize the fixed-line
incumbent, Kyrgyztelecom, and Slovenia’s Finance Ministry has announced the international tender for the further sale of a minority stake in Telekom Slovenije by the end of August 2007.
Figure 1.5 – Public/private ownership of national fixed-line incumbents, 1991-2007, World
As of 1 June 2007
Source:ITU World Telecommunication Regulatory Database.
During the same period, the opening of markets to competition has remained steady. Mobile and Internet services continue to be the most competitive markets, while fixed-line services are also becoming increasingly competitive (see Figure 1.6).
In the first part of 2007, the Gulf countries among the Arab States were very active in opening both their mobile and fixed markets. For example, in April 2007 the Supreme Council of Information and Communication Technology (ictQATAR) launched a formal selection process for the award of a mobile licence to a new entrant in the State of Qatar. The Telecommunication Regulatory Authority of Oman also announced its intention to license a second national operator. The second
operator will compete with Omantel which is currently the monopoly provider of fixed-line services.
Figure 1.6 – Growth of competition in basic services and cellular mobile services worldwide, 1995-2006, and competition in selected service areas, 2006
Source:ITU World Telecommunication Regulatory Database.
A growing community of regulators
The establishment of a separate regulator is one of the most visible signs of sector reform. Separate regulatory agencies lay the groundwork for a favourable investment climate and the promotion of market opportunities. Increasingly regulators seek to be ICT enablers and agents of change. This is usually best achieved where ICT regulators have a certain degree of autonomy from government and industry pressures.
The world now has 148 national ICT-sector regulators (Figure1.7). Over 75 per cent of ITU Member States have established a separate regulator, although differences remain between regions. Africa counts the highest percentage of countries with a separate sector regulator (91per cent), followed by the Americas (89 per cent), and Europe (80 per cent). The Arab States and Asia-Pacific number 62 and 58 percent, respectively. Growth in the number of regulators is set to continue with more than five countries having indicated their intention to establish an ICT regulatory body in the near future.
Figure 1.7 – Growth of regulators worldwide, 1990 - mid-2007
Source:ITU World Telecommunication Regulatory Database.
3Selected Regulatory Developments
International mobile roaming
The issue of mobile roaming charges is on the agenda of regulatory authorities and regional regulator associations worldwide, in an attempt to find solutions for the high international roaming charges paid by consumers using their mobile phones while travelling abroad. To date, most regional groups have taken a “soft-regulation” approach to international mobile roaming, focusing on publishing roaming rates. The European Commission, however, in a watershed measure, has decided to regulate roaming charges in the 27-country European Union block. This move may embolden other regional groups to take firmer action to cut mobile roaming charges.
Regulating local loop unbundling and infrastructure sharing
Local loop unbundling (LLU) has generated a lot of debate worldwide, with countries and regions taking a variety of approaches. The different approaches taken to unbundling often reflect the balance countries seek to strike between addressing competitive bottlenecks and encouraging investment in infrastructure. Countries like the United States, with inter-modal broadband competition between cable TV and ADSL broadband providers, may place less emphasis on local loop unbundling, and even view unbundling as a barrier to innovation and the development of infrastructure. Countries with limited inter-modal competition, such as many European countries, have found it necessary to embrace local loop unbundling to encourage ADSL provision and are now planning to extend LLU to FTTx deployments. Regulators in Europe have vigorously enforced LLU regulation as a means of boosting broadband deployment, and the number of unbundled lines currently available in Europe has risen dramatically, by nearly 80 per cent from 2005 to 2006. Many developing countries, in initial stages of sector reform, have focused primarily on increasing the number of voice users, and have principally concentrated on raising the number of voice subscribers on mobile networks. They also had far fewer fixed local loops to unbundle.