Issue: 36/08

INTUG Report - NGNs from a Business User Perspective

September 17, 2008

INTUG Report – NGNs from a Business User perspective.

INTUG is issuing a Draft Report among member associations for comments and feedback from members. The report will be finalised in coming weeks for use by members in discussions that are going on in a number of different countries as policy makers and regulators think through the issues for end users and industry players arising from the deployment of Next Generation Networks. The Report addresses a number of issues which are subject to European Union discussions as part of the Review of the policy Framework for Communications. Many of these issues are relevant to discussions in Australia about the need for a regulatory framework to support NBN developments and to reflect the convergence of carriage and content services and the emerging needs of end users, both commercial and residential.

Comments are welcome on the paper and should be addressed to:

ATUG – rosemary.sinclair@atug.org.au

INTUG - nick.white46@blueyonder.co.uk

The Report is available here

INTUG Explanatory Note:

The international Telecommunications Users Group (INTUG) identified NGNs as a strategic priority for its members, contacts and for business users globally. As a result, it commissioned a detailed paper by Stratix Consulting to analyse the issues from a business user perspective, recognising that the focus in regulatory debate until now had been directed towards the telecom operators’ perspectives.

The paper has highlighted some key issues that it is hoped will stimulate debate at national and international level, within INTUG member communities and elsewhere.

The timing is critical, since major investment decisions are being made by both the supply and demand side of the industry and improvements in growth productivity and jobs for the whole economy, not just the telecom sector, become of paramount importance during a period when the world’s economy is heading for recession.

NGNs represent an opportunity to improve the quality and cost effectiveness of services for business users and for domestic residential consumers, bringing greater harmonisation and consistency to network solutions internationally, more stimulation for innovation and investment, and a more vibrant environment for competition.

There are risks, however, associated with the way that NGNs and the associated Next Generation Access (NGA) products are implemented and regulated.

In the worst case scenario, they could be used to foreclose competition rather than to encourage it, to re-monopolise sections of the industry, and to increasingly fragment the patchwork of national networks which exist today.

Clearly, this must not be allowed to happen, and there are many initiatives such as the Framework review in Europe, the decisions to be made at ITU WTSA-08, and other regulatory developments throughout the world, which can ensure it does not.

The paper explains that financial investors in the telecommunications industry are influencing operator strategy by judging investment risk on a short equipment replacement cycle, whereas previously the investment cycle of an operator was measured in decades, rather like real estate.

This risk reward calculation has a time period similar to the market analysis cycle of National Regulatory Authorities (NRAs), leading to a short-term attitude to policy. The long-term damage to the industry and to business users of its products and services may be severe.

NGNs are actually an implementation of technologies well established in private networks and the Internet, and characterised by the so called “rise of the stupid network”, in which intelligence moves both to the centre and to end user devices.

However, there are signs of attempting to re-impose the philosophy of centralised control in order to preserve traditional operator business models, most notably in terms of vertical integration. Whilst not an undesirable option, businesses need both horizontal and vertical integration, and the option to change from one to the other.

The position paper explores the impact of topology rather than technology on future investment, innovation and competition, and concludes that regulation is needed to ensure that topology does not foreclose competition. This might occur for example, where Local Loop unbundling became non-viable for competitors when collocation options moved from exchange level to street cabinet level. In such circumstances, the non-discriminatory availability of equivalent wholesale inputs, notably Ethernet and Bitstream are essential. Where even this does not lead to effective competition, an exceptional remedy of functional separation may become necessary.

Fixed and wireless networks now complement each other and are used in some applications interchangeably. Regulatory and technical solutions must accommodate this reality. The artificial disparities in costs to end users between equivalent services depending on the underlying technology, when costs for operators are not dissimilar, must be eliminated, as must disproportionate charges for transiting more than one network of either type. The current debate on termination rates in the EU and elsewhere must resolve this.

The business user community has the potential to generate a step change in GDP in regions where NGNs are implemented in a way which:

- facilitates open international competition
- eliminates bottleneck facilities and resources
- encourages innovation and long term investment
- generates harmonised solutions between public and private networks
- enables both vertical and horizontal integration of business processes
- acknowledges the specific needs of business users

Comments are welcome on the paper and should be addressed to:

ATUG – rosemary.sinclair@atug.org.au

INTUG - nick.white46@blueyonder.co.uk