1. Regulatory Trends: New Enabling Environment International Telecommunication Union Workshop on ‘Future of Voice’ Geneva January 15-16, 2007 Gary Madden Joachim Tan Aniruddha Banerjee CEEM

2. 2 What the Workshop Established --- Markets  “Voice market” is more complicated than “voice”  Voice revenues are important but declining  Mobile is major source of revenue growth  Broadband revenue is smaller but growing rapidly  DSL and cable modem dominate broadband access  Mobile, fibre, and satellite access solutions evolving

3. CEEM 3 What the Workshop Forecast --- Market Structures  Structural separation of networks, services, and applications  Possible consequences Network access bottleneck avoided by inter-modal competition Strategic positioning of firm in single or multiple markets New business models required to identify and maintain revenue sources

4. CEEM 4 What the Workshop Forecast --- Network Intelligence  Intelligence moves to the network’s edge  Possible consequences Consumer is sovereign --- determines access, service and application bundle Service provider/application developer can reach targeted consumer Innovations in applications stimulated

5. CEEM 5 What the Workshop Established --- Broadband  Broadband technology is scalable  Possible consequences Barriers to entry attenuated Aggregated demand for under-serviced markets VoIP market growth Other applications stimulated

6. CEEM 6 What the Workshop Established --- Convergence  Convergence Networks / platforms Terminals / devices Markets / services  Possible consequences Competition at all “levels” Innovation at all “levels”

7. CEEM 7 An Economist’s Spin on the Forecasts  Suggest effective competition can occur “naturally” Access markets --- inter-modal competition Structural separation --- makes maintenance of vertically integrated markets more difficult Scalable technology --- encourages strategic entry More competitive access markets Easier entry with less vertical structure creates  Price competition (static)  Innovation in all markets (dynamic)

8. CEEM 8 Market Structure and Regulatory Policy Dynamic Competition and Efficiency Technology-driven and disruptive Price-incremental cost disequilibria Long run resource allocation Innovation, short-term rents, first- mover advantages Standards and Multi-Sided Markets Direct and indirect network effects Large installed bases Sunk and switching costs Geography Co-evolution/co-existence if interconnection Market Structure/Policy Competition among few, but effective Proportional to Scalability Control within/edges of access network Resist reflexive (especially ex ante ) regulation or mandating single standard Maintain interconnection