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Toward Next Generation Network
-From PSTN to new IP-based network-
SEKI Keiichiro
Director, International Economic Affairs
Ministry of Internal Affairs and Communications
(MIC)
0
1. Introduction
1
Development of NGN and Change of Market Environment
Ｃｈａｎｇｅ Ⅰ
Structural change
in communication networks
Rapid progress in
development of NGN
Ｃｈａｎｇｅ Ⅱ
Progress of intermodal competition
Change Ⅲ
Diversity of business models
All copyrights reserved (MIC)
2
Change Ⅰ： Structural Change in Communication Networks
８０s
９０s～present
1985Start of competition in
the long-distance
market
Telephone
service
Fixed
networks
00～
2001Full-scale
competition in the
local market
Broadband service
2004-
(integration of voice, data and video)
Full-scale
competition in
basic charges
2000ADSL
FTTH
PSTN
present～
Progressive transition to IP based
networks
ＰＳＴＮ
（
3G
→
Wireless
networks
Access
networks
ＰＨＳ
4G
Mobile
networks
analogue
digital(２Ｇ→３Ｇ)
）
Other new access technology
Wireless ＬＡＮ
Wireless access(WiMAX etc)
optical fiber
Mobile phone
metal
Fiber networks
Metal
networks
Seamless networks
All copyrights reserved (MIC)
3
Change Ⅱ： Progress of Intermodal competition
Transition from PSTN to IP Networks
(The age of “Everything over IP”)
Drastic Change of Market Structure (Paradigm Shift）
Integrated Services
voice
data
mobile
fixed
regional
video
Long distance
international
“packet based”
“ubiquitous”
“communication”
Horizontal integration
From “intramodal” competition to “intermodal” Competition
All copyrights reserved (MIC)
4
Change Ⅲ : Diversity of New Business Models
Telephone age
IP age
A variety of content
and applications
Digitization of content
(voice + data + video)
Platform layer
Integrated
services by a
single
independent
company
Telecom Service
layer
Physical Network
layer
Entry into broadband
(high speed, high volume)
All copyrights reserved (MIC)
Vertical integration
Content and
applications
layer
over
Integrated Services
“packet based”
“ubiquitous”
“communication”
Horizontal integration
5
What is NGN ?
Core Networks
The Core network of the public switched telephone network
(PSTN) is now being replaced by packet (mainly IP) based
data network providing multiple services.
Access Networks
Access loops will be upgraded from copper to advanced loops
such as fiber optics (FTTH/P) and/or innovated wireless
technologies to realize the full potential of NGN core networks.
All copyrights reserved (MIC)
6
Newly raised Concerns related to NGN
Core Networks
Access Networks
(1) Threat of unilateral technological
arrangement of interfaces by incumbents
(2) Installation of new nodes may result in
changes for locations where competitors
interconnect their networks.
(3) New Nodes with ‘soft switch’ enable
incumbents to offer their new services without
added construction.
(4) New regulatory regime for interconnection
including VoIP services will be required.
(5) Threat of bundling and discounted services
in fixed and mobile converged core network by
incumbents.
(6) Adverse effects posed by changes in
operation supporting system, function of
intelligences and so on.
All copyrights reserved (MIC)
(1) Replacement of copper local loops
will foreclose customers of competitors
who rely on existing copper loops to
provide their DSL products.
(2) Incumbents are insisting on a
‘regulatory moratorium’ to upgrade
loops as an incentive for new
investment.
(3) Incumbents’ advantage as they can
more easily transfer existing telephone
customers to their new loops.
(4) Competitors insist on equal
treatment in deploying their own FTTH
by removing ‘historical advantage’ of
incumbents related to right of way.
New policies are required
7
2. Service and facility-based competition
8
Change of Telecom Policy Goals
We have to ensure sustainable investment while maintaining
fair and effective competition.
1985 ~
~1978
Earlier construction
of nation wide
PSTN
Under Public
corporation / national
monopoly
All copyrights reserved (MIC)
late 1990’s
Competition to
promote cheaper
prices and more
choice
• Privatization of NTT
• Asymmetric regulation
• Facility based
competition mainly in
backbone
NGN
construction
•To shorten
inefficient transition
period
•Encouragement of
facility-based
competition in local
loops
9
From service-based to deeper facility-based competition
Competition at deeper level of infrastructure
Local Loop
Self-deploy
full unbundling
shared access
Backbone
Backhaul
DSLAM
wholesale
DSLAM
ISP
ISP
Interne
t
ISP
MDF･
Splitter
DSLAM
ATM
IP
■：Incumbent’s facility
All copyrights reserved (MIC)
ISP
■：Competitor's facility
10
Two Types of Revenue Models of Telecommunications
Two types of telecommunications revenue models
1. Facility-based business
Installing a telecommunications circuit network and recovering network investment over the long term (15-20years)
2. Service-based business
Providing services as a result of the installation of network equipment (e.g. router, server) and lease of telecommunications
circuit networks from other carriers and recovering investment over the short term (2-3years)
Facility-based business
Service-based business
Accumulated sales amount
Excess profits
 Next generation R&D, etc.
Accumulated sales amount
Excess profits
 Next business investment
Accumulated costs
Accumulated costs
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
0
Initial Investment
Initial Investment
15
years
1
2
3
4
5
years
Depreciation cost of initial investment
Depreciation cost of initial investment
Payment of interest on loans
In the case of facility-based competition
- Huge initial investment in telecommunications circuit network
- Existence of economy of scale and ‘natural monopoly’ characteristics
All copyrights reserved (MIC)
Expense such as charges for facilities
(including compensation paid to entities
owning infrastructure)
In the case of service-based competition
- Small initial investment burden
- Greater flexibility regarding market entry, expansion and withdrawal
11
Drivers for Network Development
Start from Services-based Competition
Supply
Demand
Improvement of Network
To create new applications
Expansion of Application
To promote sophistication
and diversification of network
Transition to Facilities-based Competition
Development of Ubiquitous Network Society
Led by a Virtuous Cycle of Supply and Demand
All copyrights reserved (MIC)
12
Growing Pains of Network Paradigm Shift
Demand is a function of “price”. Demand and Supply has two balanced points in the network industry.
Each point of balance represents an entirely different market situation. Our policy target is to avoid
remaining at “A” and to shorten the transition period from “A” to “B”.
Price
p1
Price: High, Demand: Low
- No increase in demand due
A high price
to excessively
- No increase in supply as
cost exceeds price beyond A
Measures to reduce price level to
average cost for demand stimulation
Ａ
MR
Price: Low, Demand: High
- Increase in demand due to
decrease in price (q1q2)
- Increase in supply as cost
is below price beyond B
(Marginal Revenue)
MC=MR
MC
(Marginal Cost)
p2
The policy is required
to shorten this period
q1
B
D
AC（Average cost)
q2
Quantity of Demand
Cost calculation methodology for interconnection charges on dark fiber by forward-looking cost is considered
appropriate in terms of shortening the transition period and encouraging rollout of broadband network.
All copyrights reserved (MIC)
13
3. Withering PSTN and Emerging NGN
14
Withering PSTN
- Traffic Reduction in the Traditional PSTN –
(1)
(2)
(3)
Diffusion of Broadband Services (Transition from Dial-up
Access to Broadband)
Transition from Fixed to Mobile Communications, including
so-called “FMC” service.
Appearance and Dramatic Diffusion of VoIP
All copyrights reserved (MIC)
Entering into the transition period
15
Trend of Telecommunication Traffic
 Fixed-line traffic volume has been declining by around 15% a year after the peak of FY2000.
 Access charge will inevitably increase if the traffic continuously decrease.
【Number of communications】
(bn times)
160
140
7.0
120
6.0
100
5.0
80
4.0
60
3.0
From IP Phone
From PHS
From Mobile
From Fixed
40
20
【Communication time】
(bn hours)
8.0
From IP Phone
From PHS
2.0
From Mobile
From Fixed
1.0
Via NTT's switch
Via NTT's switch
0.0
0
1994
1995
1996
1997
1998
All copyrights reserved (MIC)
1999
2000
2001
2002
2003
2004
1994
1995
1996
Source：Ministry of Internal Affairs and Communications
1997
1998
1999
2000
2001
2002
2003
2004
16
Number of VoIP Subscribers
(Telephone number users only)
(10 thousand users)
IP telephony using 050 numbers
12000
○Minimum communication quality
0AB～J　Number
050 Number
10000
852
510
○Non-duty to provide emergency calls
323
○Mainly provided as an additional
ADSL service
187
8000
6000
IP telephony using 0AB～J numbers
4000
8118
7830
9751
9254
8690
7025
○Same communication quality as fixed
telephony
○Securing geographical identification
6037
5276
2000
○Location-free
○Duty to provide emergency calls
4331
○Reliability same
telephones
0
De c .,2 0 0 3
Mar .,2 0 0 4
Ju n .,2 0 0 4
S e p.,2 0 0 4
De c .,2 0 0 4
Mar .,2 0 0 5
Ju n .,2 0 0 5
S e p.,2 0 0 5
De c .,2 0 0 5
Division
End of Dec,
2003
End of Mar,
2004
End of Jun,
2004
End of Sep,
2004
End of Dec,
2004
End of Mar,
2005
End of Jun,
2005
End of Sep,
2005
End of Dec,
2005
ＩＰ Phone
４３３１
５２７６
６０３７
７０２５
７８２９
８３０５
９０１４
９７６7
10604
Compared
with last year
－
２１．８％
１４．４％
１６．４％
１１．４％
６．１％
８．５％
８．4％
８．6％
as
for
fixed
○Mainly provided as an additional
FTTH service
Different number types are
intended to show the differences
of service level to consumers.
※ Source: MIC
All copyrights reserved (MIC)
17
Encouragement of NGN transition from PSTN
Facilitation of VoIP diffusion by allocating
telephone numbers
Increase of interconnection charge
by traffic reduction has resulted in
facilitating full unbundling products
and competitors’ FTTH deployment
Japan’s leading model – VoIP Specific numbers
starting from “050” since Sep 2002
In some OECD countries, regulators are trying to ensure that VoIP service
providers have special telephone numbers which differ from those of the PSTN.
In Japan, for example, the popularity of VoIP services and interconnection
requirements of the PSTN and VoIP services led the government to take a
unique regulatory approach to the numbering plan for IP terminal devices.
While traditional circuit-switched telephone numbers start from 0XX in Japan,
IP telephone numbers are principally distinguished from them by starting from
050.
DSTI-ICCP-TISP-RD(2004)1 “The Telecommunication Policy and Regulatory Impact of
VoIP : An Issues Paper”
(Issued by OECD :25 May2004)
10
〔Yen/3min〕 GC (local switch) Rate
【Before reviewing】
9
Local Call (NTT, NCC; PSTN) （around 8.5 yen / 3 min)
8
VoIP→PSTN（around 8 yen / 3 min)
7
６．４７
6
Korea
Specific numbers starting from “070” since May 2004
5
５．０５
【Interconnection charge】
4
UK
Specific numbers starting from “056” since Sep 2004
Germany
Specific numbers starting from “032” since Nov 2004
【After reviewing】
3
2
1
Ireland
Specific numbers starting from “076” since Jan 2005
All copyrights reserved (MIC)
0
1999
H11
2000
H12
2001
H13
2002
H14
2003
H15
2004
H16
2005
H17
2006
H18
2007
H19
2008
H20
2009
H21
18
[Ref] Framework of Universal Service
Background and objectives
◆ Following the privatization of the old NTT Corporation and introduction of competition in the telecommunications marketplace in 1985, the newly
privatized NTT East and NTT West and associated holding companies were obliged under the NTT Law to provide universal service in the form of
telephone services on a nationwide basis.
◆ Competition flourished in regional communications markets, particularly the profitable major city regions. In 2001, it was recognized that universal
service should be achieved not only via complementary internal arrangements between NTT East and West, but also by seeking contributions from
other operators. The Telecommunications Business Law was amended to this end, although the basic obligations under the NTT Law remained.
◆ The amendments set out an obligation to provide universal service in the form of telecommunications services throughout the nation for the benefit of
all citizens
◆ The cost to NTT East and West of the complementary internal arrangements designed to provide universal service was calculated on the basis of
objective standards, and other telecommunications operators benefiting from the use of facilities and connection services associated with universal
service provision were asked to make contributions commensurate with their benefits (user-pays principle)
Changes to the system
Scope
◆ Scope of universal service
Subscriber lines, public telephones, emergency communications
◆ Mobile telephone and broadband services are still in a growth phase
and are excluded from the scope of universal service at this point in
time (Telecommunications Council, October 2005
Mobile telephone services
- Network infrastructure development through competition among
operators
- Unlikely to replace fixed telephone services since charges are
roughly double
- Considerable investment required to provide coverage in
remaining unserviced areas
Broadband services
- Network infrastructure development through competition among
operators
- Service availability rising steadily, but take-up still in a growth
phase (penetration = 37%)
Revenue-cost formula (offset model)
Benchmark formula
Formalized under amendments to the NTT Business Law (enacted June 2002).
事業法改正により制度化（平成１４年６月施行）。
(Has not been enforced to date since deficit has not arisen)
Introduced
from FY2006
平成１８年度から適用。
(To be reviewed three years after implementation)
（赤字が発生しなかったことから、これまで稼働せず。）
（新制度適用後３年を目途として見直しを行う）
Contribution varies in proportion to
numbers used
Contribution varies in
proportion to revenue
↑
NTT
East/West
revenue/cost
per line
↑
NTT
East/West
revenue/cos
t per line
Compensation for
costs incurred in
high-cost regions
Compensation when offset
results in deficit
Deficit
Revenue
Average cost
Cost
Profit
Cost
Number of subscriber lines →
Number of subscriber lines →
4.9 ％
All copyrights reserved (MIC)
19
Severe competition in Japan has led to NTT East and West’s
lost of majority share in DSL market
16,000,000
NTT East & West
Others
About 62.5%
14,000,000
12,000,000
About 37.5%
DSL
【End-Dec. 04】
10,000,000
Autumn 2000
8,000,000
0
6,000,000
Establishment of interconnection rules such as
collocation and unbundling rules for access
7 8
networks of NTT East and NTT West
Cable Modem
4,000,000
2,000,000
0
99-3 99-6 99-9 99-12 00-3 00-6 00-9 00-12 01-3 01-6 01-9 01-12 02-3 02-6 02-9 02-12 03-3 03-6 03-9 03-12 04-3 04-6 04-9 04-12 05-3 05-6 05-9 05-12
All copyrights reserved (MIC)
20
Policy and Regulation to promote competition of DSL in Japan
• Japan’s success in broadband is brought about by LLU-based competition, where operators can pursue differentiation
through speedup of their DSL access services (“competition at deeper levels of infrastructure”) .
• In the case of competition based on resale/bitstream access, speed competition cannot be expected because competitors
rely mostly or entirely on the network of incumbents.
• Japan’s MIC (Ministry of Internal Affairs and Communications) has been implementing following measures.
I. Regulations on Prices of Line Sharing
• The MIC has been regulating the prices of line sharing at a level of around 1€/month (¥120 in the case of NTT East).
• The calculation of these prices is based on the idea that subscriber-line costs are already recouped through telephone basic charges and
that costs incurred by shared access are only those brought by its additional function.
II. Development of Co-location Rules
• Although there were disputes among operators related to co-location at the early stage of DSL rollout, rules for realization of timely and
appropriate co-location have been developed through dispute resolution by the Telecommunications Business Dispute Settlement
Commission, among others.
III. Unbundling of Dark Fiber for Interoffice Transport
• In Japan, dark fiber for interoffice transmission is required to be unbundled and its prices are subject to approval by the MIC.
• DSL access providers thus can adopt the latest technology by using dark fiber, instead of leased lines, at reasonable prices.
IV. Line of Business Restriction on Incumbent Operators
• NTT East & West, incumbent regional operators, are prohibited from engaging in the ISP business directly by themselves.
• This line of business restriction leads to razor-sharp competition at the retail (or ISP) level, which eventually brings about competition at the
wholesale (or DSL access) level where NTT East & West hold only a 37% market share.
All copyrights reserved (MIC)
21
Dark-Fiber Use for Competitors
Competitor
Building
NTT Building
Competitor Basic Network
(Competitor Cable & local loop Dark Fiber)
NTT Building
NTT Building
Metro Ring
Competitor
Building
Core Ring
Competitor
Building
Competitor
Building
NTT Building
Metro Ring
NTT Building
NTT Building
NTT Building
NTT Building
NTT Building
For companies
(Ether-Access)
NTT Building
Metro Ring
Local loop Dark Fiber
FTTH
Interoffice Transmission Dark Fiber
ADSL
NTT Building
Interoffice dark fiber access charges
NTT Building
Approved the access charges calculated under the actual accounting performance of each fiscal year since FY01.
(based on the historical cost method under ministerial instructions.)
[Access charges]
NTT East: \1.917 (monthly fee per meter)
NTT West: \1.920 (monthly fee per meter)
(NB)NTT East/West have independent access charges from FY02.
Therefore the cost price and income from the access fees should balance out.
All copyrights reserved (MIC)
22
Competitive pressure has led more investment to FTTH in Japan’s case
DSL market competition
Importance to deepen competition in
DSL market for higher speed access
(1) Users familiar with broadband
discover new ways of usage and tend
to seek higher speed access. To say,
they are ready to use FTTH.
(2) NTT East and West which have lost
majority share in DSL market will
want to recapture lost customers and
transfer their existing telephone
users by the provision of FTTH
services.
(3) Increasing DSL user number encourages
operators to provide triple play
services.
(4) Content and application providers try
to offer more and more audiovisual
rich services to attract end users.
All copyrights reserved (MIC)
FTTH market competition
Investment to FTTH under competition
(1) Increasing number of potential
FTTH users enable operators to
reduce price per customer and
make intentional deployment plan.
(2) Competitors such as electric
affiliates and cable operators
aim at the first mover to deploy
FTTH who will grab a lion’s share
of customers.
(3) Operators including NTT East and
West increase their investment to
FTTH under the recognition very
difficult for rivals to recapture
customers from the first mover.
(4) NTT East and West hope to
accelerate FTTH deployment to
shorten inefficient co-existing
period of both PSTN and NGN.
23
Transition of subscribers in broadband access services in Japan
•Broadband subscribers have rapidly increased recent years. (The total has exceeded 20.6M)
•The world’s first optical access service for ordinary families was introduced in Japan in March, 2001.
•DSL is still more subscribed than FTTH in total; however, FTTH shows faster increase in net subscription increase.
The number of subscribers
The number of net increase for half year
3000000
16000000
FTTH
DSL
CATV
FTTH
14000000
DSL
2500000
CATV
12000000
2000000
10000000
1500000
8000000
6000000
1000000
4000000
500000
2000000
0
05
cDe
05
nJu
04
cDe
04
nJu
03
cDe
03
nJu
02
cDe
02
nJu
01
cDe
01
nJu
c
De
5
-0
4
-0
05
n-
Ju
c
De
3
-0
04
n-
Ju
c
De
2
-0
03
n-
Ju
c
De
1
-0
02
n-
Ju
c
De
0
-0
01
n-
Ju
c
De
All copyrights reserved (MIC)
00
cDe
0
24
FTTH Service Market Shares
As of Dec. 31, 2004
Single residences/businesses
(1.382 million subscribers)
Other
Companies
Power
1.2%
Utilities
19.2%
Other
Companies
30.9%
USEN
1.8%
NTT
East/West
77.8%
Barriers may exist for competitors
other than power utilities.
All copyrights reserved (MIC)
Multiple residences
(Condominium/Apartment Type)
(1.050 million subscribers)
Fiber-bit
7.2% Power
Utilities
8.3%
NTT
East/West
33.9%
USEN
19.7%
NTT East/West have lost majority.
25
FTTH : Demand Stimulation by Forward-looking Cost Method
• This method uses average charges calculated with the predicted cost and demand for the next
several years.
• The cost price and the access charge should balance out during the said period.
• This method is especially desirable for NGN because it allows NTT East/West to collect full
investment in fibre.
• At the same time, we can suppress the level of charges though the cost per line is very high
because of the small demand at the beginning.
Fiber local loop access charge
Access charges were approved in August 2001
for 7 years from 2001 to 2007.
[AC: \5,074 €35.73/month]
Cost per
line
Access fee
\5,074
[Ref] 'The alternative, and more nuanced, policy
which we have identified is to have a time
varying schedule of access prices – more
precisely for access prices to rise over time
relative to incremental costs. This régime
gives entrants benefits at the start of their operation,
when they have replicated only a few of the
incumbent’s assets, and an incentive progressively
to extend their own infrastructure.'
Balance
2001
2002
2003
All copyrights reserved (MIC)
2004
2005
2006
2007
(From ‘The Relationship between Access Pricing Regulation and Infrastructure
Competition’ (2001) by Professor Cave, Majumdar, Rood, Valletti and Vogelsang)
26
NTT East/West’s deployment of Fiber Local Loops
１）The amount of NTT E/W’s investment in optical fiber has been increasing steadily even after FY
2001 when fiber local loops were unbundled.
２） In FY 2003 especially, the actual ratio of investment in fiber local loops was much higher than that based
on the plan.
３）Actual costs higher than forecast in FY2001 - FY2004. On the other hand, NTT released medium-term strategy
including plan to provide optic fiber services to 30 million households by the end of FY2010.
【NTT’s investment in fiber local loops &
total investment in equipment】
(\bn)
1200
Subscriber
Subscriber optic
optic fiber
fiber access
access charges
charges and
and demand
demand forecasts
forecasts
total
investment：
1,097.7
20000
¥19,585
●
¥19,421
1000
100%
total
investment：
766.2
800
total
total
total
investment：investment： 780
investment：
796.9
775.4
80%
ratio of fiber
local loops
(result)
60%
42%
36%
34%
40%
Optic fiber cables
required for 30 million
subscribers
Forecast (cost per wire)
16000
¥13,841
¥13,791
●
14000
43%
400
●¥17,193
21%
200
14%
12000
6000
¥9,827
5,494
10000
5000
4,592
Forecast (demand)
¥6,986
8000
4000
Current access charge ¥5,074
3,228
30%
32%
3000
1,921
35%
20%
2000
1,193
2000
0%
fiber local
loops ：149
fiber local
loops ：164
fiber local
loops：237
fiber local
loops：333
fiber local
loops：280
fiber local
loops：327
FY2000
FY2001
FY2002
FY2003
FY2004
FY2005
（Planned）
¥4,514
4000
● 1,170
783
19%
All copyrights reserved (MIC)
8000
7000
6000
18%
9000
Number of cables (x 1,000)
ratio of fiber local
loops
(planned)
Actual (cost per wire)
18000
Cost per wire (¥/month)
600
total
investment：
696.6
10000
●¥19, 050
0
¥3,226
518
●
352
●
406
2001
2002
●
730
2003
1000
¥2,647
Actual (demand)
2004
2005
2006
2007
2008
2009
2010
0
Dotted lines indicate scenario for 30 million households by end FY2010
27
Open access regulation and sustainable investment to FTTx
1 Issues do not exist in unbundling itself, but its price level.
•
•
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.
•
•
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.
•
•
Service-based competition is different from “parasitism”.
Pricing is important again from the viewpoint of avoiding continuous parasites.
All copyrights reserved (MIC)
28
The importance of “Equal treatment” in deploying local loops
1
The essence resides in the difficulty to replicate local loops
(economic bottleneck) .
2
The difficulty is not always derived from the ‘high cost’ of
deployment.
a.
b.
c.
3
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.
Competitors should be encouraged by removing invisible barriers
and inequalities and ensuring equivalence in construction.
a.
b.
c.
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, 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.
All copyrights reserved (MIC)
29
The Necessity to focus on “Economic Bottleneck” (Facilities)
- Rough Image Case A: No obligation
*Reseller may survive
as sales channels
Incumbents
Triple Play Users
Current Structure
Competitors
ADSL Users
Incumbents
Copper Loops
All copyrights reserved (MIC)
Incumbents
Fiber Loops
Case B: Unbundling Obligation
Incumbents
Telephone Users
ADSL Users
*Incumbents can easily
transfer existing market
power on copper lines
onto fiber loops．
Incumbents
Triple Play Users
Competitors
Incumbents
Fiber Loops
Case C: Unbundling + Proper Pricing for Incentives +
Equal Treatment on Construction
Incumbents
Triple Play Users
Competitors
Incumbents
Competitors
Fiber Loops
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Recent Regulatory Trend to Focus on “Economic Bottleneck”
BT
NTT East/West
End Users
End Users
BT Retail
Competitors
Equivalent condition
Bottleneck
facilities user
unit
Competitors
Competitors
Equivalent condition
Wholesale
Unit
BTWS
Equivalent condition
End Users
Retail Unit
BT Wholesale
BTS
Telstra
Equivalent condition
Access Service Division
(For competitions and BT’s other
Division)
All copyrights reserved (MIC)
Bottleneck facilities
management unit
Network Unit
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4. NGN deployment plan and Triple play service
32
Outline of “NTT Group’s Mid-Term Management Strategy”
“NTT Group’s Mid-Term Management Strategy” （November, 2004)
(1) Establishment of Next-Generation Networks (full IP networks from terminal equipments to network facilities)
(2) Establishment of NGNs for the common basis for provision of services, including FMC (Fixed-Mobile Convergence).
(3) 30 million customers (out of 60 million customers) will shift to fiber access and NGNs in 2010.
(4) Increase revenues from next-generation networks solutions and non-traffic businesses to 500 billion yen by 2010.
(5) Maintain the same equipment investment level as before, a cumulative total of 5 trillion yen.
(6) Reduce operating costs for fixed communications businesses by 800 billion yen by 2010.
“Promotion of NTT Groups’ Mid-Term Management Strategy” （November, 2005)
(1) Establishment of NGNs with optical/wireless access networks which enable the provision of seamless IP-based
services between inner/inter-prefectures, west and east, fixed and wireless.
(2) NTT East, NTT West and NTT Docomo will establish NGNs.
(3) The field trials of NGNs will start in the latter half of 2006, and the provision of NGNs based services will start in the
latter half of 2007.
(4) Integration of upper layer services, such as ISP and portal service, into NTT Communications.
(5) To strengthen fixed-mobile total solution, NTT Communications will deal with business customers unitedly.
(6) Expansion of contents distribution business responding to the convergence of broadcasting and telecommunication.
(7) Provision of “One-stop” service for application and billing through the cooperation of group companies.
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33
Outline of KDDI's IP Migration of PSTN Network
(released September 15, 2004)
１ Past Efforts (Introduction of New Services)
○ KDDI launched “KDDI Hikari Plus” which provides triple play service,
including Video, high-speed Internet and high-quality IP phone, by
optical fiber in October of 2003.
○ KDDI also launched “KDDI Metal Plus” which connect subscriber phone
line (Dry copper) directly to KDDI’s IP network (without using NTT’s
Switch) in February of 2005
２ Schedule for IP Migration of PSTN Network
○ KDDI intends to finish fixed IP migration ahead of others in the world
and to provide inexpensive services using IP technology even to
customers who do not subscribe to broadband.
○ Initiating fixed IP migration in FY2005 and finishing substitution of softswitches by the end of FY2007
○ Establishment of an environment where introduction of new IP-based
services is possible with ease through IP migration
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All copyrights reserved by MIC
34
“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
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35
Competition in communication markets
■ Competition in the domestic long-distance communications market originally revolved around NTT, KDDI and Japan Telecom.
With the advent of broadband services, the main players are now NTT, KDDI, SoftBank, the power companies and CATV.
Increasing competition is also expected in the mobile telephone market as new entrants emerge.
Produced by MIC from information available on websites
Group
Own subscriber
lines
Long distance, international
and corporate
communication
Broadband
services
Broadcasting and video
distribution services
Mobile telephony
NTT
NTT
East/West
NTT com
NTT East/West
NTT com
Plala Networks
４ｔｈＭＥＤＩＡ
NTT DoCoMo
KDDI
KDDI
Hikari Plus TV
KDDI
KDDI
JCN Group
＋
TEPCO
TEPCO
TEPCO
casTY
K-Opti.com
K-Opti.com
K-Opti.com
K-CAT
SoftBank
Japan Telecom
SoftBank BB
BBTV
TV Bank
Vodafone
In future:
Vodafone
eAccess
eAccess
Willcom
Willcom
In future:
Willcom
J:COM
J:COM
USEN
Yuzu Communications
All copyrights reserved (MIC)
J:COM
Media
USEN
J:COM
Gyao Show time
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5. Other Issues
37
NGN Standardization Trend at the global level
○ ITU started standardizing NGN which began replacing existing PSTN in 2003.
⇒The architecture (1 st version) will be determined in early 2006.
○ In Japan, the Information and Communications Council is considering this matter in cooperation
with the Telecommunication Technology Committee.
[Main characteristics of NGN]
Independency of service-related functions from underlying transport-related technologies
• transport-related technologies designed basically based on IP protocol
•service-related functions do not rely on network infrastructure and provide service-related functions including the basic
and added functions of telephony, video phone and distribution of contents
⇒enable development and deployment of equipment with high flexibility, approach to the latest element
technologies and diverse e of business
Application, server etc.
Application function
Video
phone
Platform/service infrastructure
(service related functions)
Session
control
Distribution
of contents
････
Authentication,Management of
security
charge fee
Core node
Core
Network
network
infrastructure
(transport-related Access
technologies)
network
All copyrights reserved (MIC)
Global
Standardization
by ITU
Domestic
Standardization
by TTC etc.
Edge node
xDSL
Optical
access
Wireless
LAN
Other
accesses
Fixed line, PC, consumer electronics, mobile phone
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Current Status of Efforts Related to the Improper Use of Telecommunications Services
Points for Discussion
[1. Spam mails]
Advertisement emails are sent to mobile phones or computers
one-sidedly and in large volumes
<Related laws: Law on Specified Electronic Mail, etc.>
Efforts of the MIC
 Amendment of the Law on Specified Electronic Mail (enforced in November 2005)
 Establishment of new rules for criminal punishment for faking information on the sender, etc.
 “Spam Blocking Support Project” under collaboration of the government and the private sector
(February 2005 - )
 Promote the suspension of lines, etc. by telecommunications carriers
 Legal organization of the exchange of spam sender information (black lists)
 Amendment of the guidelines for the protection of personal information (October 2005)
 Promotion of international cooperation (Agreed on memorandum of understanding with Asian
countries in April 2005)
[2. Phishing]
Damage from "phishing" - the fraudulent acquisition of personal
information over the Internet through emails disguised as coming from
banks or other companies - has been seen also in Japan
<Related laws: Criminal law (fraud charges), Unauthorized Computer
Access Law, etc.>
 Regular meetings of a "Liaison Group for the Promotion of Phishing Countermeasures“
(January 2005)
 Aim to share information among industry associations, etc., and study into effective
countermeasures such as the introduction of sender domain authentication technology
(Published interim report in August 2005)
[3. Billing fraud]
Prepaid-type mobile phones, etc., which have a high degree of anonymity,
are used for crimes such as "Ore ore sagi" ("It's me, it's me!"-fraud; fraudulent
crank calls where the caller pretends to be a member of the family needing
help), or billing fraud
<Related laws: Law to Prevent the Illegal Use of Mobile Phones, etc.>
[4. Illegal and harmful content on the Internet]
Illegal or harmful information is posted on electronic bulletin
boards, etc. on the Internet
<Related laws: Provider Liability Limitation Law, etc.>
 Establishment of the "Law to Prevent the Illegal Use of Mobile Phones“ (Partial enforcement in
May 2005, full enforcement planned for April 2006) -> obligation to confirm identity, etc. when
signing a contract for or transferring ownership a mobile phone
 Confirmation and registration of all contract owners for prepaid-type mobile phones
 Suspension of use of confirmation is impossible (measure in the terms of contract, until March
2006)
 Enforcement of the "Provider Liability Limitation Law" and related guidelines (May 2002 - )
 Regulations for standards on exemptions from liability for the deletion of information by providers,
etc.
 Promoting "R&D for mobile filtering technology" (fiscal 2004 - 2005)
 Support for the establishment of industry guidelines related to the response to suicide
announcements（October 2005）
 Organization of a "Study Group on the Response to Illegal and Harmful Information on the Internet"
(August 2005 - , published interim report in January 2006)
[5. Protection of personal information]
Personal information is frequently leaking out
<Related laws: Law Concerning the Protection of Personal
Information, etc.>
All copyrights reserved (MIC)
Wide-ranging amendment of the guidelines for the protection of personal information on the
basis of the discussions in the "Study Group Concerning Information Privacy in the
Telecommunications Business Field" (chaired by Prof. HORIBE Masao, Chuo University)
(August 2004)
 Implementation of strict guidance, etc. for businesses leaking personal information on the
basis of the Law Concerning the Protection of Personal Information and the amended
guidelines
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6. Conclusion
40
New Policies in Ubiquitous Network Society – OutlineTransition of Competition Structure
Fixed Telephony
Dependence on
Incumbents’ Networks
Separately Providing
Fixed/Mobile Services
Diffusion of Cellular Phone
and IP Telephony
Bypassing
Incumbents’ Networks
Fixed and Mobile
Convergence (FMC)
Reconstruction of Competition Policy
Continuing Competition
Dynamism
Stability and Reliability
of Networks
Ensuring
Universal Service
Redefinition of
Bottlenecks
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Ensuring
Investment Incentives
Elimination of Digital Divide
Reviewing Dominant
Regulations
Ensuring Interconnectivity
and Interoperability
Anti-Spam
Consumer Protection
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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
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
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42
New Challenges with NGN (Cont.)
3.
4.
5.
6.
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
Interconnectivity and Interoperability
 Standardization is under discussion.
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.
Universal ‘Access’ instead of scope of ‘services’
 ‘Physical access’ in rural areas to convey every service
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43
[Ref] Study for Competition Rules to Address Progress in the Move to IP
MIC set up ”Study Group on a Framework for Competition Rules to Address Progress in the Move to IP”
(chaired by Professor HAYASHI Toshihiko, the University of the Air and the Director of the Stanford
Japan Center) (from Oct. 2005 to Sep. 2006).
1. Outline
For the advent of full-scale IP age,
lay out basic principles on a framework
for competition rules applicable
clarify specific directions concerning
interconnection and tariff policies and a
roadmap for future considerations
Promote sophistication and
diversification of business models in
the broadband market by enhancing the
foreseeability of competition policy
2. Major topics for consideration (Draft)
Basic principles concerning competition policy to address the progress in the move to IP
•
The migration process relating to an IP-based network deployment
•
The relationship between service-based competition and facility-based competition
•
A framework for ensuring “competitive neutrality” and “technological neutrality”
•
A framework for ensuring fair competition that addresses vertically-integrated business models
Framework for future interconnection policy
•
A framework of designated telecommunications facilities
•
A framework for calculating interconnection charges
•
Responding to the diversification of interconnection forms
Framework for future tariff policy
•
Responding to the diversification of business models
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44
Thank you!
Keiichiro Seki
[email protected]
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