Download Next Generation Networks: Challenges for the Future

Multi-layered Convergence
Process in the ICT Sector:
Trends and Challenges
Jaroslaw K. Ponder
Strategy and Policy Unit
International Telecommunication Union
SPU Briefing
organized for the IMF University
29 May 2006, ITU Headquarters, Geneva, Switzerland
(http://www.itu.int/osg/spu/presentations)
Note: The views expressed in this presentation are those of the author and do not necessarily
reflect the opinions of the ITU. Jaroslaw K. Ponder can be contacted at [email protected]
Agenda
•
•
•
•
•
Trends in communication sector
IP-Enabled NGNs
Multi-layered convergence process
N-play economics
New Challenges
 Telco operators
 Policy makers
 Customers
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2
Trends: ICT Sector
• Progressing regulatory reform:
 Pro-competitive policy / Universal
service/access…
• Expansion of the Internet
• High innovation dynamics
• Falling prices of the ICTs:
 Hardware / Software / Services
• New requirements:




Bandwidth
Generalized mobility
Convergent solutions
Open character
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Trends: Communication Sector
• Fixed telecommunications
Regulatory reform
Liberalization
Privatization
Pro-competitive policy
Emerging competition
Infrastructure development
Modernization: Automatization 
digitalization  co-existence with IP
networks  transition to IP-based NGNs
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2006
Next Generation
Access Networks 4







Trends: Communication Sector
Number of countries with broadband
commercially available
160
Number of countries
133
113
120
Data
Both
180
145
140
100
Evolution in Pricing Strategy
166
81
80
60
40
20
160
Time
Flat-rate
133
140
166
143
120
100
68%
80
81%
75%
60
40
20
0
0
2002
2003
2004
2005
2006
2004
2005
2006
T
Speed (kbps)
Median price and speed, 2004-6
1'800
16
1'600
14
1'400
12
1'200
10
1'000
8
800
6
600
400
200
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0
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2004
2005
Median speed
4
Median Price in
USD/100 kbps
2
2006
0
Price (USD per 100 kbps)
180
5
Trends: Communication Sector
Table 1: Broadbandprices
prices for for
the cheapest
fifteen economies.
Broadband
the cheapest
fifteen economies
Speed
Price per
US$ per
Change
Economy
Company
kbit/s
month US$ 100 kbit/s 2005-06
Japan
Yahoo BB
51'200
14.2
0.07
-12.5%
Korea (Rep.)
Hanaro
51'200
40.59
0.08
-Netherlands
Internet Access Ned.
20'480
27.97
0.14
-81.3%
Taiwan, China
Chunghwa
12'288
22.67
0.18
-Sweden
Bredbandsbolaget
24'576
56.08
0.23
-6.5%
Singapore
StarHub
30'720
73.17
0.24
-85.0%
Italy
Libero
12'288
37.23
0.30
-73.8%
Finland
Elisa
24'576
85.64
0.36
-51.4%
France
Free
10'240
37.29
0.36
-90.1%
United States
Comcast
4'096
20.00
0.49
-Germany
Freenet.de
6'016
30.95
0.52
-United Kingdom Pipex
8'128
50.89
0.63
-53.6%
Hong Kong, China Netvigator
6'144
51.17
0.83
-0.1%
Portugal
Sapo
8'128
75.82
0.93
-0.8%
Canada
Bell
4'096
41.26
1.01
-3.93%
Average
18'278
44.33
0.43
-45.5%
Best
40'960
27.59
0.10
-46.9%
29 practice
May 2006(top 20%)
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6
International voice traffic
(in billions of minutes)
200
175
VoIP
150
PSTN
As % of total
125
100
13.1%
15.5%
75
11.8%
50
7.4%
25
0
Source: ITU.
0.2%
1998
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1.6%
1999
4.8%
2000
2001
2002
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2003
2004
Source: ITU7
Trends: Communication Sector
• Fixed telecom operators…
 Restructurization
 Employment…
 Reduction
of OPEX
 Outsourcing





Stabilization of financial position
Repayment of the debts
New search for new solutions
Horizontal integration
Consolidation
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Trends: Communication Sector
• Mobile telecommunications
 From analog, through digital to IP
 New worldwide standards for 2G, 3G, 4G
 Rapid popularization: 2006 more than 2
billion users worldwide
 Substitute or complement: Changes in
course of the time
• Fixed-mobile telecommunications
 Efficient way to bridge digital divide
• Wireless technologies
 WiFi, WiMAX…
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Trends: Communication Sector
Interconnection
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Nomadic/Local Area
Access Systems
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Digital Broadcast
System
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Trends: Communication Sector
• Information Technologies
 High R&D expenditures in IT sector
 High innovation dynamics
 Moore's
law: Computing power doubles
roughly every 18 months
 New compression techniques
 Progressing miniaturization
 Falling prices for hardware equipment
 Enabling technologies
 RFID,
sensors, smart technologies
nanotechnologies
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Trends: Communication Sector
• Impact of the Internet
 Internet Protocol
 Open, borderless and service provider
friendly environment
 Pro-competitive policy towards ISPs
 Favorable public policy orientation
 New forms of communication
 New
demand requirements: VoIP, VoB, IPTV
 New network access requirements

From dial-up, through xDSL, to FTTx
 Mobility: Ubiquitous Network Societies,
29 May
2006Internet of Things
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the
Trends: Communication Sector
The Internet
Mobile
Telecom.
Wireless
Technologies
Fixed
Telecom.
Convergence
Information
Technologies
Broadcasters
Cable TV
Others
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Tele-Communication Sector in
Transition
• Migration to the IP-environment
 Fixed telecommunications
Incumbents: British Telecom, DT AG, KPN
 Newcomers: Dialog, Metropolitan Networks
Multi-facility
competition

 Wireless communications
Mobile telecommunications: from 2G to 4G
 WiFi, MiMax

 Cable TV
 Broadcasting
 Service and content providers
Service
compet.
• Strengthened process of convergence
 Technology
 Market
 Services
29 May
Institutional
2006
Regulatory
Implications
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FMC?
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NGNs as a global issue
Technical aspects
ITU-T SG 13: Rec. Y.2001
Europe
Africa
ITU
NGN
America
Asia
Challenges
 Multimedia
 Generalized mobility
 Convergence
 Integrity
 Multi-layer orientation
 Open character
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A NGN is a packet-based network able
to
provide
telecommunication
services and able to make use of
multiple
broadband,
QoS-enabled
transport technologies and in which
service-related
functions
are
independent
from
underlying
transport-related technologies.
It
enables unfettered access for users to
networks and to competing service
providers and/or services of their
choice.
It
supports
generalized
mobility which will allow consistent
and ubiquitous provision of services
to users.
FG NGN
[email protected]
SG: 11, 13,
19, 2, 12, 16, 17
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IP-enabled NGNs
A global issue
Regulatory considerations
• Three background papers
 Rulling new and emerging marekts
 Interconnection in an IP-enabled NGN
Environment
 Universal Service in an IP-enabled NGN
Environment
Europe
Africa
ITU
NGN
• Regulatory proceedings
 National, Regional, International level
Americas
Study
Group 1
Asia
• Tariff policies, tariff models and methods of determining the costs of
services on national telecommunication networks, including nextgeneration networks
• Regulatory impact of next generation networks on interconnection
http://www.itu.int/osg/spu/ngn/
[email protected]
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29 May 2006
Multi-layered convergence
• Customer Convenience
 From generalized to personalized
communication manners
• Device convergence:
 Universality
• Networks convergence
 Interconnection and interoperability
• Service convergence
 New sell and price strategies
• Sector and market convergence
• Converged
institutional
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New Challenges
Telco Operators
• Convergence
 Service convergence
 N-play
services / N-play economics
 Extends demand for broadband access
 Market structure
 Strategic
alliances (Content, Media, etc.)
 Mergers and acquisitions
 Consolidation
 New business models
 Falling
costs of traditional communication
 Merger of customer base
 Lower margins / New value-added services…
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 Costly investment programmes
N-play economics…
• NGNs facilitate product differentiation
and bundling strategies
• To be considered by service providers
 first, find out which products are proper to be bundled
and therefore answer the question if the bundled goods
should be complementary, substitutive or neutral;
 second, set the price for the new package taking into
consideration the reservation prices for each product
separately and package
 third, decide if the introduction of bundle excludes the
possibility of obtaining the bundled products separately
i.e. pure versus mixed bundling strategy.
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N-play economics…
Demand side related conditions
•Products Complementarity
Bundling complementary goods - Reservation prices
for such package become much more higher then for
the separated products. In this way the willingness to
pay increases and the company is able to benefit from
this behavior (e.g. mobile telephone together with
provision of mobile telecommunications services).
Reservation prices for the bundle products are
negatively correlated - Putting together fixed access
with mobile telephone contracts for young people demonstrating the highest inclination to substitute this
two communication technologies - is good example
The more products are combined into the package, the
smaller is the probability, that the individual estimations
of the value of the bundle will differ from the from the
mean value. Through such reduction of the
heterogeneity of customers the enterprise is able to
sell more as in case of separated offerings.
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N-play economics…
Supply side related conditions
• Exclusion of rivals
 The bundling strategy can be competition diminishing. In
case the monopolistic company bundles the monopoly
product with the product that is sold in the competitive
markets the transfer of the market power from one market to
the other occurs.
• Cross-Selling
 The putting different products into one packet allows the
companies to sell under the new label also the products
which did not found the interest of the customers. In this
way the enterprises using out the existing differences in
reference prices for the products A and B. Putting together
product A and B and selling them in packages it becomes
possible to transfer the possessing surplus from product B to
A.
• Product differentiation
 Through applying of price bungling the enterprise
differentiate its products in comparison to the rivals on the
same market. The price can be maintained in a higher level
than
in case of the single
products what can cause that the
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competitor will behave less aggressively.
N-play economics…
Supply side related conditions
• Market barriers
 Implementation of the bundling strategy can become one
of the effective measures in creation of the market
entrance barriers. From the perspective of competitors it
can be quite complicated in financial, market power as well
as first mover advantage terms to enter the market and to
be able to compete with the similar offer. Especially in case
of the strong asymmetric market structure, high vertical
and horizontal integration as well as with significant
market power the market (see ex-monopolistic telcom
operators) the entrance of the newcomers can be out of
the question.
• Market Structure
 From the strategic point of view tendency to use price
bundling encourages the process of horizontal and vertical
integration. It stimulates the market players to narrow
cooperation or merging. Because of bundling the increase
of mergers and acquisitions on the market is more often to
expect. From the perspective of the sector of information
and communication technologies the bundling strategy will
encourage the process of convergence.
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N-play economics…
• NGNs leads to n-play services
 There is only one step from n-play to use of
the bundling strategies
• Bundling





reduces the costs
increases demand
locks in customers
improves product performance
differentiates the product offerings
• What with regulation...
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New Challenges
Regulators and Policy Makers
• Pro-competitive policy in new
converged ICT environment
• New and emerging markets
 Static versus dynamic efficiencies
 Relevant markets / SMPs
 Bundled offerings
• Interconnection arrangements
• Universal Service/Access
• Customer protection
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New Challenges
Customers
• Innovation absorption capacity
• Customer care / Transparency
• Consumer emergency calls
(E112/E911)
• Unsolicited messaging: SPAM, SPIM
• Quality of services
• Authenticated caller or sender
identification
• Disability assistance
• Data protection and privacy issues
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• Cybersecurity
issues
Thank you very much
for your attention!
Jaroslaw K. Ponder
International Telecommunication Union
Strategy and Policy Unit
E-mail: [email protected]
http://www.itu.int/spu
Tel: 00 41 22 730 60 65
We all build the global knowledgebased
information society!
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Resources
• Up-dated version of this presentation
and others focusing on convergence:
www.itu.int/osg/spu/presentations/
• NGN regulatory and policy resources:
http://www.itu.int/osg/spu/ngn/
ngn-policy-regulatory-resources.html
• ITU activities on NGN:
www.itu.int/spu/ngn
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