The state of NGN interconnect regulation

01 January 2009 |

As next-generation networks (NGNs) become more common the issue of regulation is becoming increasingly pertinent.

All over Europe, fixed-line incumbents are investing in NGNs as they watch niche players disrupt the traditional model. At present, the European Union (EU) is currently discussing the possibility of regulating this area. Proponents believe that it is necessary in order to promote competition and encourage investment. Opponents believe that it will stifle innovation. What is clear is that uncertainties surrounding any possible regulation may have an impact on potential growth in some markets.

Regulatory issues

One benefit of NGNs is that they enable separate operator networks to interconnect directly via IP to each other and their customers, thereby decoupling the predominantly de facto position that operators must go through the regional incumbent using costly TDM switches. Consequently, connection between alternate carriers becomes more competitive and encourages the incumbent to reposition itself to offer something unique.

The capital investment required to implement NGN infrastructure needs to be budgeted for by operators and as such pricing regulations have been mooted to encourage adoption. Rewarding risk can become even more important to secure investment in a time of financial uncertainty. Policy which promotes both service and infrastructure competition also has been suggested, although much will depend on a correct wholesale price being established to allow a fair return. Opening up networks to the wholesale market is another way of freeing up competition where smaller players lack the resources to lay their own infrastructure.

What is the EU doing?

At present the EU is in discussions with various industry bodies and key players to gain a comprehensive view of what is happening, and what regulation, if any, is required to ensure that this technology is well placed to weather any economic slowdown. It is likely that regulations to harmonise NGNs across Europe, stimulate competition and encourage investment will be introduced, though currently there is no roadmap to indicate when this might be.

What does it mean for telecoms companies?

Telecoms companies will be anxious to clarify what regulations, if any, will be implemented. In September the policy department of economic and scientific policy published a report that raised two distinct issues for consideration: could next-generation networks lead to monopolies and how should they be regulated? These are still being discussed but sensible recommendations have been made – such as to ensure through spectrum liberalisation that the wireless broadband challenge is strong. Mobile broadband will play an important role in future, delivering broadband to remote areas and facilitating investment in urban areas. Whilst regulation is uncertain, investors will be cautious about funding networks which could undergo significant change. Giving mobile broadband due regard could go some way to encourage competition within a minimal regulatory framework.

Carriers may be apprehensive about the proposed regulatory changes, because any such movement in the market opens it up to increased competition. But that is not to say that they are automatically opposed. Standardisation will aid consistency and remove geographic boundaries, which in turn could normalise costs. Current tariffs are built around the existing infrastructure so any regulatory moves must consider this and approach the issues sensitively.

Why is it important now?

On 15 July 2008 the Industry Research and Energy Committee held a workshop on the subject to stimulate discussion of the regulatory issues surrounding the transition towards NGNs. The points discussed included the current status of NGN roll-out strategies across a range of investment and deployment scenarios and the remaining market entry barriers that may prevent or hinder competition. Also in July the European Competitive Telecommunication Association produced a research paper that said it would support endeavours by the EU to harmonise quality and technical parameters to a certain degree in order to facilitate the creation of a genuine single market in telecommunications. As discussions around these issues gain momentum the likelihood of some form of regulation seems more likely.

What the future holds

Future regulation at an EU level seems inevitable. It could accelerate the growth of companies that are able to change the market dynamics by utilising this new technology. The increased number of deployed NGN platforms provides opportunity for appropriate regulation to really accelerate the breadth of services options by carriers who can adopt the flexibility of NGN solutions.

Tony Morrish

Vice President and General Manager, Sonus Networks EMEA