1. Breaking the Ice Kevin Werbach The Wharton School werbach@wharton.upenn.edu February 2005

2. The Layered Model Kevin Werbach The Wharton School werbach@wharton.upenn.edu February 2005 Jockeying for Position, or getting Butchered?

3. Kevin Werbach Washington, We Have a Problem Digital convergence is transforming telecom  Significant economic dislocation  Traditional divisions go away New kinds of market participants  Skype  Xbox Live Thorny legal issues  Broadband classification, open access and net neutrality  Broadcast flag  CALEA

4. Kevin Werbach Legacy Silo Legal Structure Data Telephony (Title II) Cable (Title VI) Broadcast (Title III)

5. Kevin Werbach Data Voice Emerging Reality Web Email Video File Transfer Content Cable Wireless Satellite Fiber Devices Apps Users

6. Kevin Werbach Layered Telecom Policy Model Physical Logical Application Content Protocols

7. Kevin Werbach Benefits of Layered Thinking Modularity  Specialization allows exploitation of the full value of real options (Clark and Baldwin)  In regulatory terms, more granularity Corresponds to engineering practice  Shouldn’t law governing networks reflect the way those networks actually work? Focuses attention on the key issues

8. Kevin Werbach Revised 3+2 Layer Model Logical Application Content Physical Interface Where? Who? Why? How? What?

9. Kevin Werbach Two Kinds of Layers CONNECTIVE FUNCTIONAL CONNECTIVE

10. Kevin Werbach The Connective Layers Historically ignored  Assumed to be internal elements of the carrier Critical leverage points  Gateways to markets in applications and content  Site of key emerging issues (e.g. broadcast flag, Net neutrality, and CALEA) Opportunities for regulatory innovation  E.g., tie universal service to phone numbers

11. Kevin Werbach What the Layered Model Is Not An engineering specification  Not all technical interfaces must be published A prohibition on multi-layer businesses A prohibition on layer crossing  Legitimate economies of scope exist Purely a way to address market power issues A blueprint solely for regulators  Some oversight may be through self-regulatory organizations or ex post antitrust review