Next-gens old-gen challenge

29 May 2006

For all its technical promise, there's an old school flavor about next-gen networking. Most notably, NGN will be as heavily regulated as the old TDM networks, if not more.

To those of us who have been exposed to vendor proselytizing about IP, that may sound counter-intuitive. Isn't IP supposed to be a whole lot simpler‾

From a technical viewpoint, yes, says Ovum senior consultant Craig Skinner. Next-gen networks are easier to open up and yes, they reduce the barriers to competitive entry, but commercially they will be more complex.

Telecom regulation is all about access to network infrastructure, and access is all about interconnection settings. Today's rules on interconnection are focused almost entirely on voice.

Thanks to Hong Kong Broadband, Skype and others, VoIP regulation is something regulators have already grappled with, but that's not the whole problem.

Unlike the closely-supervised TDM voice world, IP now is barely regulated at all. Access arrangements are done on a peering basis for large IP carriers,

and on a commercial basis between larger and smaller providers.

Regulators are worried that the high cost of NGN will deliver economies of scale to the very large providers but will be prohibitive to smaller players. In other words, NGN's great irony is that it could lead us back to the era of one giant converged carrier dictating to the rest.

NGN regulation begins well before networks are actually built. In advanced markets much of the groundwork has already been laid in order to provide some investment certainty for carriers.

The UK environment will be the one to watch. BT has announced the world's most aggressive NGN upgrade, planning to junk its existing network in favor of a full IP replacement by 2010.

The UK regulator, Ofcom, also has gone the furthest, with an exhaustive 18-month review of the industry and BT's role in it. The upshot, after a long negotiation with the incumbent, was an agreement on structural separation of BT's retail and wholesale arms.

The Australian regulator has imposed a similar kind of operational separation on Telstra, driven also by the incumbent's privatization. Telstra has announced its NGN vendors, but complains bitterly that the industry needs new rules for the Internet age.

Around the rest of the region, regulators are pursuing different strategies. Japan is seeking to guide the world into global NGN standards in order to drive business for its domestic firms. While its carriers roll out NGN fiber networks to the home, it is pushing the ITU to set NGN standards.

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