ACCC 2004 Regulation Conference 29-30 July, 2004 Competition in a - - PowerPoint PPT Presentation

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Nov 15, 2022 10 likes •141 views

ACCC 2004 Regulation Conference 29-30 July, 2004 Competition in a IP World Martin Cave Warwick Business School martin.cave@wbs.ac.uk mec1128 mec1128 1 1 The question: What is the scope for competition in a post- PSTN/first generation

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ACCC 2004 Regulation Conference 29-30 July, 2004 Competition in a IP World Martin Cave Warwick Business School martin.cave@wbs.ac.uk

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The question: What is the scope for competition in a post- PSTN/first generation broadband world? The (UK) starting point: Dominant PSTN operator extending dominance into burgeoning broadband markets (subject to cable modem competition); little or no access competition; limited unbundling; rival networks principally serving business data needs.

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Issues in voice What is the degree of fixed (mobile subscription)?

Fixed and mobile found to be in different markets in Europe Transition to VoIP technologies in both will affect this. How does VoIP operate?

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PSTN – traditional circuit-switched voice

Customer Premises Equipment (CPE) Customer Premises Equipment (CPE) Access Access Transit Transit

Core Core

Access Access Transit Transit Customer Premises Equipment (CPE) Customer Premises Equipment (CPE)

Digital Main Switching Unit Digital Main Switching Unit DMSU DMSU Digital Local Exchange Digital Local Exchange DLE DLE

Narrowband Narrowband

Circuit

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PC-to-PC VoIP

Access Access Transit Transit

Core Core

Access Access Transit Transit CPE CPE

Router Router

Narrowband Narrowband

Internet DLE DLE

CPE CPE

Modem Modem

ISP ISP ISP ISP

Packets

Broadband

DSLAM DSLAM

DSL or cable modem DSL or cable modem

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Phone-to-phone VoIP

Access Access Transit Transit

Core Core

Access Access Transit Transit CPE CPE

Broadband Broadband

CPE CPE

DSL or Cable Modem DSL or Cable Modem VSP VSP ATA ATA

Circuit Packets

PSTN Gateway PSTN Gateway

Narrowband

Internet VSP VSP VoIP user PSTN user Router Router

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VoIP in the PSTN

Access Access Transit Transit

Core Core

Access Access Transit Transit

Digital Local Exchange Digital Local Exchange DLE DLE

Narrowband Narrowband

CPE CPE CPE CPE Circuit Packets

Incumbent-owned private IP network Incumbent-owned private IP network

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VoIP in the corporate network

Desks

Voice Data

Office LAN

Circuit Packets Voice over LAN

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Implications for competitive process Existing operators can migrate their customers to VoIP at will; they may not notice. Winning new customers to be achieved by selling broadband access and offering VoIP as an additional service

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Importance of promoting ADSL competition Sought via ‘ladder theory of investment’

First make intermediate wholesale broadband access – bitstream - available Then increase price of / withdraw WBA and lower price of (high frequency) unbundled loops Apply severe margin squeeze tests ex ante to prevent deterrent to further investment

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The cost structure of PSTN and of IP There is evidence that

Minimum efficient scale of IP network much smaller percentage of market than mes of PSTN as percentage of (declining) fixed voice market This creates scope for competition – in core networks

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However, the scope for competition is backhaul is limited, especially is less densely populated geographies this creates an argument for geographically differentiated markets – again directed at encouraging investment

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Access Competition No apparent silver bullet providing country-wide competition to incumbent’s copper wire Instead likely to be a patchwork quilt of (primarily) wireless technologies, UMTS, WiMax etc.