Open regulatory issues and challenges due to next generation networks

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Open regulatory issues and challenges due to next generation networks Ioannis Zacharopoulos, Ph. D. Senior Telecom Engineer Telecommunications Directorate Hellenic Telecommunications & Post Commission (ΕΕΤΤ)

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Open regulatory issues and challenges due to next generation networks. Ioannis Zacharopoulos, Ph. D. Senior Telecom Engineer Telecommunications Directorate Hellenic Telecommunications & Post Commission ( ΕΕΤΤ ). Outline. Facts in Europe regarding NGA variations & economics of NGA - PowerPoint PPT Presentation

Transcript of Open regulatory issues and challenges due to next generation networks

Page 1: Open regulatory issues and challenges due to next generation networks

Open regulatory issues and challenges due to next generation networks

Ioannis Zacharopoulos, Ph. D. Senior Telecom EngineerTelecommunications DirectorateHellenic Telecommunications & Post Commission (ΕΕΤΤ)

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Outline

Facts in Europe regarding NGA variations & economics of NGA

The European Commission view The new (draft) recommendation on regulated access to Next

Generation Access Networks (NGA) In case of NGA based on incumbent’s initiative

Regulators’ view

Benchmark on European countries

Regulatory Issues of Next Generation (core) Networks (NGN)

Conclusions

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NGA variations

Fiber To The Home (FTTH) Point-To-Point (P2P)1 fiber pair per household up-to aggregation point

Fiber To The Home (FTTH) Point-To-Multi-Point (PMP) orGigabit Passive Optical Network (GPON)1 fiber pair shared over a number of households

Fiber To The Cabinet (FTTCab) or Fiber To The Node (FTTN)1 fiber pair per neighborhood (partial copper replacement)

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Economics of NGA (1)

Vary with technology/mode of deployment but…

… in any case there is high CAPEX per connected customer …

High CAPEX can be reduced by coordinated strategy on reduction of construction costs and…

…in high density (urban) areas…

… and this leads to high total costs and makes NGA infrastructure a really non-replicable asset. (First mover advantage)

The Economics of Next Generation Access, Study for the European Competitive Telecommunication Association (ECTA), WIK-Consult

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Economics of NGA (2)

NGA “Pareto Law”: The main fraction (>65%) of NGA CAPEX per customer is due to civil works

Of this CAPEX, the intra-cable CAPEX (in case of FTTH deployment) is almost the same weighty as the distribution-network CAPEX

The rest of the CAPEX is due to CPE, CO Opto-electronic equipment, etc.

Dr. Kátrin Schweren, EU Affairs Delegate, Swisscom "Swiss Fibre Optics or Fibre Suisse: Multiple Fiber Multiply Innovation" FTTH Europe Conference, Copenhagen, 11-12/02/2009

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Commission view: new (draft) recommendation on regulated access to

NGAs (1) The proposal refers to the case that there is NGA

deployment after initiative of incumbent In Greece: announcements for NGA partially funded by the State

(Public-Private-Partnership (PPP) form)

How NGA impacts the defined wholesale markets Wholesale Physical Access (Market #4)

Wholesale Broadband Access (Market #5))

Possible Wholesale products needed for competitors

Some critical details like pricing etc.

The proposal seems to be too prescriptive to be generic enough to cover the various cases/countries throughout Europe

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Commission view (2)

Remedies imposed to operators having SMP as a result of market analysis when planned or ongoing NGA deployment

Geographical market considered Fibre roll-out probably limited geographic coverage (short & medium term)

Transparency: reference offer for all relevant wholesale products conditions for access to ducts, other civil engineering works etc. information regarding duct location, capacity etc.

FTTH case Duct access: mandatory Physical access to dark fiber (LLU-fiber): Conditional

If access to ducts, etc. services technically impossible or not economically viable Intra-building wiring: NRAs facilitate cooperation on roll-out & sharing infrastructure…

enable end-users to have competitive choice avoid duplication of infrastructure

…but perhaps more and tailored-made initiatives could be envisaged in order to promote it

Fiber sub-loop unbundling: mandatory

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Commission view (3)

FTTN/FTTCab case If partial replacement of existing copper access with fibre: Obligation

on determining deadline, appropriate migration path from the current access products to new access products (timing, technical functionalities etc.)

Obligations: Reference offer for sub-loop unbundling Access to ducts, street cabinets Co-location: either at the street cabinet itself or near it Co-location facilities: power supply etc. Ex ante price control on all wholesale products: ducts, etc. Supplementary, appropriate backhaul wholesale products

Pre-determination of details by NRA: size of street cabinets, cost-sharing arrangements, etc.

Access products: flexible enough to facilitate migration from FTTN to FTTH

Wholesale Broadband Access As in case of existing services (both for FTTH, FTTN)

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Commission view (4)

Principle of geographic averaging: Not necessary use if substantial cost differences among various areas

Pricing of existing assets (including ancillary services): Cost-orientation: Methodology same as today

Pricing of new assets (including ancillary services) and dark fiber (up to a concentrating point) Cost-orientation: but with a project-specific risk premium to be included

in the costs of capital for the investment risk.

Risk premium calculated by regulator after justified arguments of incumbent about the investment risk incurred by the incumbent

Focus on striking balance between effective competition and encouraging investment towards better evolution of the whole investment

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Commission view (5)

Other issues FTTH-PMP (GPON) seems like cable network (!?) Gradation of remedies:

If passive remedies not active remedies Reciprocal regulation (sharing):

NRAs may or not impose if commercial contracts initiatives NRAs could allow SMP operators to refuse sharing new investments

with alternative operators who, do not agree to reciprocal sharing of their assets

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Regulators’ view (1)

Agreeing with the general context and goals but …

..seems to be over-prescriptive on implementation of remedies and pricing remedies.

Passive remedies and especially duct access do not necessarily suffice, neither are the “ultimate” treatment

Pricing

Vague methodology for risk premium calculation

Not geographical averaging approach:

unrealistic

variant from the current Commission approach (used for existing assets, well accepted, applied regulatory practice)

Opinion that “GPON seems like cable” might give incentive to incumbents to deploy GPON expecting regulatory holiday

There is no “one-size-fits-all”: Every country should be in position to select remedies according to its market status

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Regulators’ view (2)

Active remedies might be a good alternative especially in case of FTTN/FTTCab scenario and at least for the first period

Advanced-enhanced WBA might keep service competition in case of FTTN scenario Quality parameters (for example low jitter for high video quality)

Ethernet backhauling

Different levels of IP hierarchy/nodes (e.g. Main Distribution Frame, MDF)

Support of multicasting (for high video quality)

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Benchmark on European countries

Most operators are in early announcements, trials etc.

In general, incumbents prefer FTTN (FTTCab/VDSL) or GPON or Hybrid-Fiber-Coaxial (if they have access to cable) Except France where FT applies FTTH as well

In general, alternatives/utilities prefer FTTH (P2P or GPON)

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Issues regarding Next Generation (Core) Networks (NGN)

NGN: single packet switched network transporting multiple services (audio, video, data, both fixed & mobile)

Decouples the service and transport provision.

(Potential) innovation opportunities at both service, infrastructure level.

(Potential) increased economies of scope and thus cost savings

Impact market structure, interconnection regimes, interoperability and regulation

ERG opinion: separation between transport and service layer will in practice be blurred by the implementation of services by means of a centralised platform. This impacts the ability of independent services providers to integrate their services into the NGN platform.

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Regulatory issues of NGNs (2)

Points of interconnection (POIs) Due to centralisation of the control function, POIs for transport and for service will

likely be different. Transport interconnection could take place at a greater number of locations than

service interconnection (e.g. transport interconnection at any network node, but service interconnection only at centralised platform location).

Quality of Service (QoS) New dimension of interconnection agreements, It could be exploited by SMPs for new forms of discrimination (SMP arm,

competitors) NRAs should have the possibility to impose minimum QoS levels.

Costing/pricing Single network to deliver multiple services (economies of scope) In other words: costs will be mainly fixed and common; incremental costs for each

service will be relatively low. Change of cost standard?

Bill & Keep (B&K) wholesale billing regime

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Conclusions – Open issues Cost sharing and procedures’ facilitation makes NGA

deployment easier

Duct access do not necessarily suffice, neither is the “ultimate” treatment

FTTN/FTTCab mode Collocation at street cabinets is expensive for OLOs and might multiply today’s

procedures thus delaying roll-out Incumbents (except for France) in Europe definitely prefer FTTN/FTTCab mode WBA might be more important for OLOs, especially if enhanced

FTTH-P2P mode Main barrier: Intra-building wiring (Costs and roll-out complexities)

NGN might impact to a number of critical regulatory issues (POIs, QOS, wholesale interconnection billing scheme)

In Greece: depending on evolution of the State subsidized plan, there are additional issues that are expected to handle by the Regulator

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www.eett.grwww.broadband.gr

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Supplementary slides

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Commission view (6) Risk premium

estimated by regulatory precedent/benchmark or direct statistical, financial comparator methods like equity beta with

benchmarks from other sectors but providing comparable services (e.g. media). Include project-specific capital employed, labour costs, building costs, efficiency

gains, assets’ terminal value (rec. 20 Access Dir.) Risk premium not applied for fibre backhaul from the street cabinets to the MDF

Principle of equivalence: avoid discrimination in favor of SMP’s retail arm Equivalence on asset information

Infra availability (location of ducts, street cabinets, manholes, availability, etc.)

Access points: network topography, location of concentration points and list of connected buildings.

Equivalence on provisioning times: through platform/tool Equivalence on service management & SLA

QOS indicators & pre-defined target service levels (time limits for replying to requests for information, etc. )

Regular reporting

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Regulatory issues of NGNs (3) Bill & Keep (B&K) wholesale billing regime

Each network bears the costs of terminating traffic coming from other carriers Not receive payments at the wholesale level for termination. Recovers its costs (termination and any payments for upstream connectivity)

in other ways, e.g. by billing them to its end customers. B&K can be considered by NRAs Where B&K applies, it is unlikely to have SMP in the termination market. “Silent requirement”: sufficient competition at the retail level Concept of termination charge will not disappear at all. Traffic from outside

the B&K area needs to be treated in such a way as to prevent extensive arbitrage (tromboning, call-back etc.).

Billing migration to B&K Not full migration to all-IP: keep existing regime Requirements: clear distinction between different services & use of services

measurable Possibility for price differentiation based on QoS classes migration to B&K is easier:

the lower the absolute level of interconnection rates; the smaller the relative difference between interconnection rates of

different networks the higher the proportion of flat rate tariff packages at the retail level.