©Ofcom NGN-based competition: An Ofcom perspective Dr Stephen Unger Director of Telecoms Technology 24 March 2005

©Ofcom1 What is a Next Generation Network ? Today’s Telecom Networks Next Generation Networks PDHSDHATMIP… PSTNxDSL Copper Fibre Wireless BB Leased Line Mobile PSTNSDHATMIP… Access Metro Core Aggregation IP core Copper Fibre Access Metro & Core PSTNxDSL Wireless BB Leased Line Mobile Ethernet backhaul – Multiple service-specific access nodes – Multiple service-specific core networks – Converged access nodes aggregate traffic from multiple access services – A converged IP-based core network carries this traffic – Service intelligence is decoupled from network transmission

©Ofcom2 Contrast with Next Generation Access Next Generation Core Network The deployment of Next Generation Core Networks is driven by potential efficiencies in the supply of existing services. The ability to deliver new services is also important, but is a potential upside, rather than core to the business case Continuity of existing services is key. Existing PSTN services emulated by NGN. Investment risk is mainly associated with implementation, supplier management Next generation access network Next generation core network Next Generation Access Network Next Generation Access would provide much higher bandwidths to consumers This would enable the supply of rich (but currently unspecified) multimedia content Disruptive change to existing services and existing business models Investment risk driven by uncertainty as to consumers’ willingness to pay

©Ofcom3 A case study – BTs ’21 st Century Network’ Core nodes provide a resilient national transmission backbone Metro nodes define the service edge of the network Multi-service access nodes (MSANs) aggregate customer traffic

©Ofcom4 Ofcom’s approach to NGN regulation Consultation on principles and process (June 2005) ‘NGN UK’ now established to develop commercial vision And ensure detailed regulation follows rather than leads the market But within a clear regulatory framework (i.e. not forbearance) Continued support for technical work of NICC on interoperability BT Undertakings to protect against foreclosure (Sept 2005) We now need to apply the ex ante competition framework to NGNs Market review programme published (March 2006) – Converged backhaul – IP-based voice origination / conveyance – Converged copper-based access Additional study on charging structures (Dotecon - end March 2006) Co-regulatory solutions preferred Review of general conditions of entitlement (end 2006) Competition framework Consumer protection Industry interaction

©Ofcom5 BT Undertakings regarding NGN deployment No foreclosure of network access – BT to provide unbundled network access in SMP markets – In a manner that permits competition with downstream end-to-end services – Full consultation before any network design decisions which might prevent this – Efficient design to deliver these requirements, or BT pays the costs of retro-fitting Equivalence of Inputs (EoI) – EoI means that BT and altnets buy exactly the same SMP products – Using exactly the same systems and processes (subject only to agreed exemptions) – BT will design 21CN to support EoI where SMP may ‘reasonably be expected’ – Subject to the condition that provision of EoI is ‘reasonably practical’ Availability of network access – Network access to be made available in advance of any new downstream service – Lead time must be sufficient to permit simultaneous launch of competing products

©Ofcom6 NGN UK The creation of NGN UK – NGN UK will be operational from the beginning of April – Eight companies have committed to joining the NGN UK executive: BT Group plc; Cable & Wireless; Easynet; Kingston Communications; NTL; Thus; Vodafone; Wanadoo UK. A number of other companies have expressed interest in participating in the work programme. – Ofcom has observer status on the NGN UK executive committee Priorities for the NGN UK work programme – IP interconnect architecture. A reference architecture for IP interconnection, covering such matters as service characteristics and interoperability standards. – IP interconnect commercial model. Commercial principles in relation to charging (e.g. distance dependence, definition of grades of services) and contractual terms and conditions. Actual charges are out of scope for this body. – Network intelligence interoperability. There is a need to understand the types of network intelligence which need to be exchanged between NGNs, the commercial basis for such exchange, and technical interoperability issues.

©Ofcom7 Application of the ex ante competition framework Residential voice Residential broadband Business services Convergence of retail markets depends on purchasing behaviour, bundling, etc. These may be affected by changes in the underlying network, but not necessarily Retail markets Wholesale markets Service specific retail markets Service specific access markets Service specific network intelligence PSTN xDSL SDH Ethernet Ethernet / WDM Converged backhaul conveyance markets Converged core conveyance markets Session control Bandwidth control Authentication Authorisation Accounting MSAN Metro node

©Ofcom8 Investment and innovation Forbearance vs Certainty – We believe that the appropriate means for regulators to encourage investment and innovation is by minimising regulatory risk. We need to achieve this for both incumbents and altnets. This is not achieved through ‘regulatory holidays’. Minimising regulatory risk for incumbents – Delivery of efficiency savings: The NGN business case depends on the ability to deliver efficiency savings, so anything which prevents this (e.g. a regulatory requirement to maintain legacy services) puts the business case at risk. – Recognition of investment risk: Incumbents require certainty that any efficiency savings that are delivered are not treated as some form of risk-free windfall. Minimising regulatory risk for altnets – Efficient access and interconnection: Altnets investing in NGNs will be dependent on access to economic bottenecks controlled by incumbents. They therefore need certainty that efficient access and interconnection arrangements will be provided, so that they can compete with services provided end-to-end over incumbents NGNs. “The national regulatory authorities shall promote competition by … encouraging efficient investment in infrastructure, and promoting innovation (Art 8(2c), Framework Directive)”

©Ofcom9 Protecting consumers The deployment of NGNs raises a variety of consumer protection issues, for example: – Potential service disruption during network migration – Management of end-to-end QOS over interconnected NGNs – Network resilience for lifeline services – Provision of emergency call location data – Numbering transparency – Number portability – New forms of abuse (SPIT, identity theft…) Which of these can be left to operators to resolve, and which require formal regulatory intervention ?

©Ofcom10 Questions ?