Issues Relating To Telecoms IT Convergence Jaroslaw K

Issues Relating To Telecoms & IT Convergence Jaroslaw K. Ponder Strategy and Policy Unit International Telecommunication Union NGN Asia 2006 18 -19 May 2006, Bangkok, Thailand (http: //www. ibc-asia. com/ngnasia 2006. htm) Note: The views expressed in this presentation are those of the author and do not necessarily reflect K. Ponder can be contacted at Jaroslaw. Ponder@itu. int 18 May 2006 the opinions of the ITU. Jaroslaw. Ponder@itu. int

Agenda • • • Trends in communication sector IP-Enabled NGNs Multi-layered convergence process N-play economics New Challenges § Telco operators § Policy makers § Customers 18 May 2006 Jaroslaw. Ponder@itu. int 2

Trends: Communication Sector • Fixed telecommunications Regulatory reform Liberalization Privatization Pro-competitive policy Emerging competition Infrastructure development Modernization: Automatization digitalization co-existence with IP networks transition to IP-based NGNs 18 May Jaroslaw. Ponder@itu. int 2006 Next Generation Access Networks 3 § § § §

Trends: Communication Sector • Fixed telecom operators… § Restructurization q Employment… q Reduction of OPEX q Outsourcing § § § Stabilization of financial position Repayment of the debts New search for new solutions Horizontal integration Consolidation 18 May 2006 Jaroslaw. Ponder@itu. int 4

Trends: Communication Sector • Mobile telecommunications § From analog, through digital to IP § New worldwide standards for 2 G, 3 G, 4 G § Rapid popularization: 2006 more than 2 billion users worldwide § Substitute or complement: Changes in course of the time • Fixed-mobile telecommunications § Efficient way to bridge digital divide • Wireless technologies § Wi. Fi, Wi. MAX… 18 May 2006 Jaroslaw. Ponder@itu. int 5

Trends: Communication Sector Interconnection 18 May 2006 Nomadic/Local Area Access Systems Jaroslaw. Ponder@itu. int Digital Broadcast System 6

Trends: Communication Sector • Impact of the Internet § Internet Protocol § Open, borderless and service provider friendly environment § Pro-competitive policy towards ISPs § Favorable public policy orientation § New forms of communication q New demand requirements: Vo. IP, Vo. B, IPTV § New network access requirements q From dial-up, through x. DSL, to FTTx § Mobility: Ubiquitous Network Societies, 18 May 2006 Internet of Things Jaroslaw. Ponder@itu. int 7 the

Trends: Communication Sector • Information Technologies § High R&D expenditures in IT sector § High innovation dynamics q Moore's law: Computing power doubles roughly every 18 months q New compression techniques q Progressing miniaturization q Falling prices for hardware equipment § Enabling technologies q RFID, sensors, smart technologies nanotechnologies 18 May 2006 Jaroslaw. Ponder@itu. int 8

Trends: Communication Sector Mobile Telecom. Wireless Technologies Information Technologies 18 May 2006 The Internet Convergence Fixed Telecom. Broadcasters Cable TV Others Jaroslaw. Ponder@itu. int 9

Tele-Communication Sector in Transition • Migration to the IP-environment § Fixed telecommunications Incumbents: British Telecom, DT AG, KPN q Newcomers: Dialog, Metropolitan Networks Multi-facility competition q § Wireless communications Mobile telecommunications: from 2 G to 4 G q Wi. Fi, Mi. Max q § Cable TV § Broadcasting § Service and content providers Service compet. • Strengthened process of convergence § Technology § Market § Services § 18 May Institutional 2006 Regulatory Implications Jaroslaw. Ponder@itu. int FMC? 10

IP-enabled NGNs A global issue ITU-T SG 13: Rec. Y. 2001 Europe Africa ITU NGN America Asia Challenges § Multimedia § Generalized mobility § Convergence § Integrity § Multi-layer orientation § Open character 18 May 2006 A NGN is a packet-based network able to provide telecommunication services and able to make use of multiple broadband, Qo. S-enabled broadband transport technologies and in which service-related functions are independent from underlying transport-related technologies. It technologies enables unfettered access for users to networks and to competing service providers and/or services of their choice. It supports generalized mobility which will allow consistent and ubiquitous provision of services to users. FG NGN Jaroslaw. Ponder@itu. int SG: 11, 13, 19, 2, 16, 17 11

IP-enabled NGNs A global issue Regulatory considerations • Three background papers § Rulling new and emerging marekts § Interconnection in an IP-enabled NGN Environment § Universal Service in an IP-enabled NGN Environment Europe Africa ITU NGN • Regulatory proceedings § National, Regional, International level Americas Study Group 1 Asia • Tariff policies, tariff models and methods of determining the costs of services on national telecommunication networks, including nextgeneration networks • Regulatory impact of next generation networks on interconnection http: //www. itu. int/osg/spu/ngn Jaroslaw. Ponder@itu. int 12 / 18 May 2006

Multi-layered convergence process • Customer Convenience § From generalized to personalized communication manners • Device convergence: § Universality • Networks convergence § Interconnection and interoperability • Service convergence § New sell and price strategies • Sector and market convergence • Converged institutional bases 18 May 2006 Jaroslaw. Ponder@itu. int 13

New Challenges Telco Operators • Convergence § Service convergence q N-play services / N-play economics q Extends demand for broadband access § Market structure q Strategic alliances (Content, Media, etc. ) q Mergers and acquisitions q Consolidation § New business models q Falling costs of traditional communication q Merger of customer base q Lower margins / New value-added services… 18 May 2006 Jaroslaw. Ponder@itu. int 14 q Costly investment programmes

N-play economics… • NGNs facilitate product differentiation and bundling strategies • To be considered by service providers § first, find out which products are proper to be bundled and therefore answer the question if the bundled goods should be complementary, substitutive or neutral; § second, set the price for the new package taking into consideration the reservation prices for each product separately and package § third, decide if the introduction of bundle excludes the possibility of obtaining the bundled products separately i. e. pure versus mixed bundling strategy. 18 May 2006 Jaroslaw. Ponder@itu. int 15

N-play economics… Demand side related conditions • Products Complementarity §Bundling complementary goods - Reservation prices for such package become much more higher then for the separated products. In this way the willingness to pay increases and the company is able to benefit from this behavior (e. g. mobile telephone together with provision of mobile telecommunications services). §Reservation prices for the bundle products are negatively correlated - Putting together fixed access with mobile telephone contracts for young people demonstrating the highest inclination to substitute this two communication technologies - is good example §The more products are combined into the package, the smaller is the probability, that the individual estimations of the value of the bundle will differ from the mean value. Through such reduction of the heterogeneity of customers the enterprise is able to sell more as in case of separated offerings. 18 May 2006 Jaroslaw. Ponder@itu. int 16

N-play economics… Supply side related conditions • Exclusion of rivals § The bundling strategy can be competition diminishing. In case the monopolistic company bundles the monopoly product with the product that is sold in the competitive markets the transfer of the market power from one market to the other occurs. • Cross-Selling § The putting different products into one packet allows the companies to sell under the new label also the products which did not found the interest of the customers. In this way the enterprises using out the existing differences in reference prices for the products A and B. Putting together product A and B and selling them in packages it becomes possible to transfer the possessing surplus from product B to A. • Product differentiation § Through applying of price bungling the enterprise differentiate its products in comparison to the rivals on the same market. The price can be maintained in a higher level than in case of the single products what can cause that the competitor will behave less aggressively. 18 May 2006 Jaroslaw. Ponder@itu. int 17

N-play economics… Supply side related conditions • Market barriers § Implementation of the bundling strategy can become one of the effective measures in creation of the market entrance barriers. From the perspective of competitors it can be quite complicated in financial, market power as well as first mover advantage terms to enter the market and to be able to compete with the similar offer. Especially in case of the strong asymmetric market structure, high vertical and horizontal integration as well as with significant market power the market (see ex-monopolistic telcom operators) the entrance of the newcomers can be out of the question. • Market Structure § From the strategic point of view tendency to use price bundling encourages the process of horizontal and vertical integration. It stimulates the market players to narrow cooperation or merging. Because of bundling the increase of mergers and acquisitions on the market is more often to expect. From the perspective of the sector of information and communication technologies the bundling strategy will encourage the process of convergence. 18 May 2006 Jaroslaw. Ponder@itu. int 18

N-play economics… • NGNs leads to n-play services § There is only one step from n-play to use of the bundling strategies • Bundling § § § reduces the costs increases demand locks in customers improves product performance differentiates the product offerings • What with regulation. . . 18 May 2006 Jaroslaw. Ponder@itu. int 19

New Challenges Regulators and Policy Makers • Pro-competitive policy in new converged ICT environment • New and emerging markets § Static versus dynamic efficiencies § Relevant markets / SMPs § Bundled offerings • Interconnection arrangements • Universal Service/Access • Customer protection 18 May 2006 Jaroslaw. Ponder@itu. int 20

New Challenges Customers • Innovation absorption capacity • Customer care / Transparency • Consumer emergency calls (E 112/E 911) • Unsolicited messaging: SPAM, SPIM • Quality of services • Authenticated caller or sender identification • Disability assistance • Data protection and privacy issues 18 May 2006 Jaroslaw. Ponder@itu. int 21 • Cybersecurity issues

Thank you very much for your attention! Jaroslaw K. Ponder International Telecommunication Union Strategy and Policy Unit E-mail: Jaroslaw. Ponder@itu. int http: //www. itu. int/spu Tel: 00 41 22 730 60 65 We all build the global knowledgebased information society! 18 May 2006 Jaroslaw. Ponder@itu. int 22

Resources • Up-dated version of this presentation and others focusing on convergence: www. itu. int/osg/spu/presentations/ • NGN regulatory and policy resources: http: //www. itu. int/osg/spu/ngn/ ngn-policy-regulatory-resources. html • ITU activities on NGN: www. itu. int/spu/ngn 18 May 2006 Jaroslaw. Ponder@itu. int 23

International Telecommunication Union 18 May 2006 We all build the Information Society together Jaroslaw. Ponder@itu. int 24 !

ITU - International Telecommunication Union • The oldest specialized UN agency with more than 140 years of experience in communication sector • Headquarters in Geneva plus regional offices • ITU staff: more than 750 from more than 80 countries • 189 member states, more than 640 sector members • ITU Agenda for Change • Structure of the ITU § ITU-T – Telecom Standardization § ITU-R – Radio-communications § ITU-D – Development Bureau 18 May 2006 Jaroslaw. Ponder@itu. int 25

ITU – International Telecommunication Union 18 May 2006 Jaroslaw. Ponder@itu. int 26

ITU’s Strategy and Policy Unit (SPU) • New Initiatives Programme Digital Bridges (2005) Ubiquitous Network Societies (2005) Today’s Networks Tomorrow (2005) What Rules for IP-enabled NGNs? (2006) Digital Transformations in the Information Society (2006) § Regulatory Environment for Future Mobile Multimedia Services (2006) § Future of Voice (2007) • Many other activities… § § § 18 May 2006 http: // www. itu. int/spu Jaroslaw. Ponder@itu. int 27