ComReg: Future Technology Developments

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Q.2 Do you agree that these represent developments that will impact on the telecommunications sector in the period under review? Are there others? If so, what will they be and what would you expect to be their impacts?

Identifying and understanding the impact that a range of new and emerging technologies, networks, products and services will bring is key to defining what if any the regulatory response should be. Examples of the types of different developments considered are set out below. There is a range of issues and developments which may impact on the appropriate regulatory approach in the period to 2010. These include structural issues in the market, lack of infrastructural competition, the role of eircom as a wholesale provider, fixed/mobile service providers, etc. These issues are discussed in more detail in Section 3. There are also a range of technical, product and application developments that are likely to take place which may also require addressing in terms of formulating the appropriate regulatory approach going forward.

These would include:

1. Ubiquitous Broadband and new broadband based applications

The provision of a competitively priced broadband service to all businesses and the vast majority of the population, which is capable of supporting a range of new applications is a key ingredient to ensuring Ireland’s continued competitiveness. It also contributes to ensuring that we remain an attractive location for new investment from both domestic and overseas sources. Growth in the use of bandwidth intensive applications by businesses and consumers is increasingly putting pressure on existing infrastructure and will act as the catalyst for the deployment of Next Generation Networks. The eEurope Expert Advisory Group in a recent review of progress against the Lisbon Agenda recommended that, to support both current and emerging applications, a minimum bit rate of 2Mbps be in place by 2008.

• Among the types of applications for which consumers are increasingly likely to use broadband are always-on services such as Video-on-Demand (VOD), teleworking, ehealthcare, monitoring and provisioning of services, life-long educational programming, Television over Broadband, as well as Voice over Internet Protocol (VoIP) services.
  
• For Business users, the applications are likely to include the delivery of integrated and enhanced eservices such as procurement, CRM, design, marketing, managing outsourced activities, managing multi-site communications, VPNs, logistics, supply chain management etc.

These services are generally delivered today through a range of different platforms including Digital Subscriber Line (DSL), leased lines, Fixed Wireless Access (FWA) and third-generation mobile networks (3G). The future demands for speed, bandwidth, and competitive prices will change the delivery options going forward. The constraints created with the deployment of rate adaptive ADSL will increasingly give way in urban areas and for higher-end users to ADSL 2 or ADSL 2+/VDSL. In turn, consideration will also need to be given to utilising fibre to the cabinet/neighbourhood to support demands for greater bit rates. Fibre to the home may also become more prevalent where new construction is taking place. However, where a copper access network exists, the cost of installing fibre to the home (which, incidentally, is estimated in a US context to average over $2000 per home) would seem to make such investment unlikely during the period under review. Ethernet and alternative wireless technologies such as Wi-Fi or WiMax as well as 3G will also have a role to play in the creation of a competitive Broadband Environment. The changing approaches to enabling access, the convergence of content, networks, back-office activities, etc also potentially raise issues for regulators

2. Voice over Broadband/VoIP

One of the early ‘killer’ applications that Broadband can provide is VoIP. There will be many models of this, ranging from the downloadable type such as that provided by Skype to the indirect variety such as that provided by Blueface in Ireland or Vonage in the US. Incumbent operators such as eircom, unbundled local loop operators and/or cable operators will be able to provide PSTN replacement services. Large corporates through VPNs have been the leading drivers of VoIP deployment to date. Currently, however, the main cost savings apply for long distance, high call volume users and those using corporate networks where VoIP can be aggregated as part of an overall service Broader impact of VoIP on the present business model may arise when:

• Overall broadband penetration levels considerably exceed those enjoyed across Europe today or
• Innovative new product offerings including access, Broadband and calls bundles become more pervasive forcing incumbents and other operators to react.

The success of VoIP will however bring new challenges for regulators. It may pose significant access cost increases for consumers in countries where full rebalancing is not yet in place or when call volumes drop-offs to a degree which may impact on the current costs associated with interconnection. In many markets such as Ireland’s, low interconnection costs have been one of the primary tools in place to support a competitive marketplace. Significant and short term changes to this could have material consequences. Another additional consideration is that as VoIP may not mirror exactly all of the associated features of traditional PSTN services, innovative solutions may need to be developed to address any identified deficits.

3. Convergence

This is often considered in the context of mobile/fixed convergence. However in future real convergence will relate to the aggregation of content and services over a range of different platforms which will provide for access both at given locations such as at home and the office but will also provide for mobility/nomadic services. These changes coupled with increased movement to platforms such as IP may also facilitate entry to a range of new and different service providers, such as system integrators, who would be able to provide business solutions to their customers utilising some elements only of existing network infrastructure. These developments may in turn create new challenges for regulators, combining, for instance, mobile and fixed services, regulated and unregulated products and services.

4. The development of Next Generation Networks

A converged world with significant growth in products and services in areas such as entertainment, healthcare, educational, enterprise, sales and customer management will need an underlying infrastructure to deliver and support it. One such approach is the provision of Next Generation Networks [NGNs] NGNs are packet-based networks which are able to provide communications services, able to make use of multiple broadband, QoS enabled transport technologies and in which service-related functions are independent from underlying transport-related technologies. They will offer unrestricted access by users to a range of different service and content providers. They will also support generalised mobility which in turn will enable consistent and ubiquitous provision of services to users. They will support a wide range of products, applications and services including real time, streaming, non real time and multimedia services. NGNs when deployed will radically change the communications sector. Apart from enabling the provision of new products and services, they will also be considerably more efficient and have the potential to render the range of regulatory tools currently in place irrelevant. However a range of regulatory challenges will exist particularly in determining the appropriate interfaces with existing legacy networks, exposure to extra costs for new entrants, impact on competition, etc. Currently in Europe BT would seem to be the most advanced. Possible concerns going forward maybe that NGNs may not in reality be multiple entities. The BT yardstick would seem to indicate an investment requirement in a market the size of Ireland of between €800m and €1.1bn and NGNs may well become the new ‘bottlenecks’ of the future.

5. Broadband Mobile Access Technologies

Again there has been significant development and investment in this area over the past few years. Changes underway may materially change the challenges ‘access’ poses today. They also enhance the pace and degree of mobile/fixed convergence. This issue will be covered more extensively in our current consultation on Spectrum policy. Developments may again require changes to any regulatory approach.