ComReg: Universal Service Obligation Questions

damien

Q.21 Do you have any comments on these developments considered by ComReg on universal service obligations (USO)?

Q.22 Do you expect these developments to lead to an increase or a decrease in retail obligations on operators with SMP in retail markets? How do you expect them to affect the level of retail obligations on all operators, including those without SMP?

11 Universal Service Obligation
11.1 Introduction Universal service in telecommunications is defined in the Universal Service Directive as “the provision of a defined minimum set of services to all end-users at an affordable price”. It includes the provision of access to the public telephone network at a fixed location, at an affordable price and is designed to ensure that all users are able to avail of telecommunications services, recognising their importance for participation in society. Some of the services included under USO are voice telephony, payphones, directory enquiry, and narrowband Internet access. In 2003 eircom was designated as the universal service provider (USP) in Ireland until July 2006. USO requirements are set out under the Universal Service Regulations.

The European Commission is expected to review the scope of universal service during 2005. ComReg recently published a consultation paper on the requirement to provide access to the network which readers should refer to for more information115. This document is concerned with future developments in the Irish telecoms sector over the next 5 years. Key developments in the areas of mobile communications and broadband have already and will continue to change the telecoms sector and the ways in which consumers utilise telecoms services. This also has potentially important implications for USO. Two potential scenarios for future USO requirements exist. One scenario is based on the possibily that there may in fact be no need for USOs, or a significant reduction in requirements, in a next
generation network converged environment where all users can gain access to the telecoms services they need. Conversely in the other scenario USO may in fact be increased to include provisions for broadband services.

11.2 Review of Universal Service Obligation
Government policy for social inclusion through telecoms and the information
society is an influential factor in the telecoms sector. From a regulatory perspective, ComReg must carry out the designation of universal service providers and ensure that the obligations are met. In some cases the benefits of the provision of universal service, such as marketing (i.e. the appearance of ubiquity) and the network effects (connecting a larger customer base), off-set any additional cost associated with providing services to less profitable areas or groups of customer’s. In Ireland USO is currently carried out by the USO operator eircom under their normal activities. Universal service is really all about social inclusion, allowing people in marginal areas or circumstances to avail of basic telecoms services that most of us take for granted. Traditionally this meant voice telephony and related services (e.g. fax), however as the Internet became socially important basic internet access was specified as part of USO. ComReg has identified 28.8kbit/s as a reasonable minimum narrowband data rate that users should expect117. In the future, as society becomes more reliant on high speed communications, it is possible that services requiring broadband Internet may be considered as socially important (e.g. educational, health, government services), possibly leading to a revised European directive requiring broadband availability to be made a USO.

Technological advances in delivering telecommunications access are likely over the period considered in this report, which have important implications for the delivery of USOs and more advanced services. Advancements in DSL technology that can increase its reach to customers currently located too far from their local exchange are likely. Fixed wireless access, cable and advanced mobile technologies could also be used to provide universal service in some areas.

11.3 Analysis of potential developments
In this section two scenarios for the future development of USO obligations are considered. First, the case where USOs are phased out in certain instances due to the increased availability of competitive equivalent services. The second case considered is where the scope of USO is broadened to include access to broadband services. The potential implications of next generation network technologies are also considered in this section.

11.3.1 Universal Service Obligations are reduced
USOs could become less important if sufficient access to communications services can be provided through normal market mechanisms. This scenario could result if many of the developments presented in this document come to pass.


11.3.2 Universal Service Obligations are broadened
The extension of USO to include a broader range of services, such as broadband, is a potential way of increasing broadband access and helping to meet social policy agendas (eSociety). On the other hand such intervention can be considered a distortion to natural market conditions, and could prevent the natural development of competitive services. The drivers for this type of increase could be:

• EU or government policy aimed at increasing access to broadband services.
• An increase in the number of public services requiring broadband for access to basic information (e.g. health, education, etc.).
• Fulfil broadband demand in the regions.
• Add to the utility of broadband connection by increasing the size of the community connected.
• Reduce urban congestion by facilitating greater participation in teleworking.

Some of the challenges for this scenario are:

• Providing access in all situations could be costly with implications for competition and funding.
• There could be implications for geographic averaging of pricing where different platforms are used to provide access.
• Penetration rates would have to be far higher before broadband could be considered important for social inclusion.

Any USO related to broadband would be likely to become outdated very quickly due to the speed at which the market and technology is developing (i.e. what passes for broadband today is likely to be far slower than a renewed definition in 2010).


11.3.3 The Effect of NGNs on USO
The impact of technological and market changes brought about by the migration to next generation networks, and changing needs in terms of basic communications services will alter the environment in which USOs are applied. Some aspects of USO are likely to become less important while others or new aspects are likely to emerge. As with other elements of the telecommunications sector, such changes will need to be monitored with respect to their effect on social needs. It is expected that the scope of USO will be reviewed at a European level on a regulatory basis.

The migration process to next generation networks will leave some areas still dependent on traditional networks during the transitional phase. With reduced numbers of customers but still high fixed costs these sections will become increasingly expensive to maintain, which could have implications for the implementation of USO. Operators may find it increasingly difficult to maintain certain products or functions where the majority of their customers are migrated to more advanced next generation equivalents. VoIP has important implications for USO in that although it may not meet all of the regulatory requirements to be classified as a Publicly Available Telecommunications Service (PATS) it may be broadly considered a substitute. It is possible that a scenario could emerge where VoIP could contribute to USO. There are also potentially positive implications to being designated with USO including the network effects of an increased number of customers (i.e. ‘network externalities’) and positive marketing in appearing to have greater coverage. For these reasons it is possible that multiple operators may apply for USO provider status leading the regulator to a selection process (e.g. beauty contest, auction, etc.).

11.4 Conclusion
Recent developments and trends in the area of voice communications are changing the environment that universal service obligations were initially set up to operate in. Mobile communications networks provide voice services with near ubiquity and lower priced alternative voice solutions are likely to become increasingly available as VoIP services emerge. The increasingly important role of broadband in meeting the needs of an eSociety and social inclusion brings some to believe that broadband service provision should be included under universal service obligations. Developments such as these call for a reassessment of universal service obligations.

Sponge Bob

damien.m wrote:

Q.21 Do you have any comments on these developments considered by ComReg on universal service obligations (USO)?

Q.22 Do you expect these developments to lead to an increase or a decrease in retail obligations on operators with SMP in retail markets? How do you expect them to affect the level of retail obligations on all operators, including those without SMP?

Proper Implementation of existing USO directives would be a start, instead of planning how to duck out of the next 2 or 3 of them in advance.