The first experience of broadband by commercial and personal users was a telecommunications standard Integrated Services Digital Network-Broadband or simply ISDN-B. The standard was adopted by the CCITT (International Telegraph and Telephone Consultative Committee) of the ITU in 1988 for the transmission of voice, video, data and other network services at speeds up of 144Kbps. The peak sub-broadband speed of ISDN was 128Kbps. As mentioned in chapter one “the term broadband is generally understood to mean a dedicated or “always-on” connection to the Internet with speeds faster than dial-up.”

ISDN-B offered a digital subscriber line (DSL) service over the top of a baseband analogue signal, but from the late 1980s onwards higher speed DSL communication technologies became available. Asymmetric DSL (ADSL) seen as ideal for residential customers who were assumed to need more bandwidth for Internet download than upload, whereas Symmetric Digital Subscriber Line (SDSL) was seen as more suited to the symmetrical needs of large companies sending and receiving files a regular basis between their various office locations. By the late 1990s in some markets, personal telephone connections into the home using the digital subscriber line (DSL) standard had already reached 1.5Mbps, something that only a few years earlier had not been available outside of commercial enterprise markets such as the banking and financial sectors. (See Module 5.7.1 Wireline Access Technologies for a broader discussion)

By 2008 the ITU-R (International Telecommunications Union-Radio communications sector) had endorsed the 4G LTE (Long Term Evolution) mobile cellular standard named IMT-Advanced (International Mobile Telecommunications Advanced) with potential peak download speeds of 1Gbps for pedestrian usage and 100Mbps for use in moving vehicles. Using fibre-to-the-home 1Gbps is already available to households in numerous markets around the world.

NGN Broadband

The most advanced networks have already reached the next generation network (NGN) phase, meaning they are end-to-end IP high-speed broadband networks. Compared with 144Kbps the technology and the markets for broadband have changed beyond all recognition. Yet in the 1990s and 2000s there were very mixed views from within the industry to these developments. The first was a disbelief that anyone could want or need high-speed broadband at all. As speeds increased so did the upper limit of what many observers thought was necessary to download Internet TV programmes (IPTV), movies, upload videos and photographs, etc. As it turned out, markets proved the doubters wrong: Internet users who moved to higher speeds never went back.  The idea that the demand for speed was dependent upon, or derived from, the demand for content and applications was not quite right. Users wanted speed for its own sake, just as users want access to telephones even if they do not always use them. It shows that while technological advances can drive markets, so markets can drive technological advances. What economists call latent demand is often untapped and unrealized in markets where there is little competition because monopolists and dominant incumbent service providers have little incentive to invest in more modern technologies. This is a key issue for regulators wanting to see more broadband roll-out in developing economies.

The second reaction came from the more traditional telecommunications community who doubted that Internet protocol, or simply IP, would ever be able to deliver the ‘carrier grade’ quality of service that was expected and demanded of telecoms companies. The digital workhorse of the 1990s was the ATM (Asymmetric Transfer Mode) switch which could easily handle digitalized traffic using many different packet-switched protocols, such as Frame Relay for commercial data users and X.25 for email users, over traditional telephone circuits. The reality turned out to be different. New releases of IP routing algorithms became more reliable and routing equipment better able to handle higher capacity traffic. This allowed new entrants into telecoms markets the option of adopting next generation network (NGN) architectures and technologies giving them much lower operating costs than incumbents. For example, in the US incumbent telecoms providers were forced into accelerating the depreciation of their ATMs and associated network equipment. For policy makers and regulators this has opened up an entirely new era of issues, because they have to decide upon whether and how to license these ‘disruptive’ new entrants — disruptive in the sense they are employing technologies that change the face of telecoms services and service delivery. This underscores the importance of the interconnectedness of technologies with markets and with policy/regulation.

Image
FIGURE 3.1
Critical Success Factors From a Virtuous Loop

Source: Author

Interconnectedness

Equally important is the interconnectedness of networks, and probably of greater importance than the more familiar concept of convergence. Ever since the digitalization of telecoms the issue of convergence has arisen because different traffic streams, such as voice, video and data can be transmitted down the same transmission networks, known as multiplexing. However, when networks deployed IP, it meant that different traffic streams could cross between networks and that is fundamentally important from a commercial perspective because it gives rise to the possibility of by-pass. By-pass was a rising phenomenon in international telecommunications in the early 1990s as international carriers, striving to become more competitive, re-routed their overseas traffic from high-cost routes to lower-cost routes to arbitrage international accounting and settlement rates. Call-back was a related form of by-pass, again substituting or ‘arbitraging’ lower for higher cost routes. With the spread of the Internet and applications such as Skype, Yahoo Messenger, WhatsApp and many others, users can place phone calls, video calls, text messages and by-pass the incumbent carriers.  These were the forerunners of Over-the-Top (OTT) applications, such as downloading content from third party access providers, for example TV shows over YouTube or movies from Bit Torrent.

Interconnectedness of networks raises new challenges for policy-makers and regulators because it means a proliferation of the means of access to networks. In principle, any user can access any network from any other, but local carrier and content licensing conditions that were introduced many years ago may not be consistent with this growing reality. Often carriers which were granted exclusive licences to provide access or content services now find themselves by-passed. Their options are to adapt to the new market realities and compete aggressively or to partner with overseas service providers and provide the localization of content and distribution channels. Alternatively, they may decide to lobby for restrictions on these new entrants and if they are partly owned by government they may have powerful political support. For policy-makers there may be legal obligations involved and in some cases the best way forward may be to compensate a carrier for giving up its exclusive rights, for example over international telephony. Policymakers and regulators should always keep in mind the ultimate purpose of licensing and regulation: If policies and regulations encourage innovation and diversity of service options for users, the overall value of the market is likely to grow even if some segments, such as voice revenues, decline. A more competitive and diverse market is attractive to other sectors of the economy, such as new media, advertising, online retail, mobile payments and banking services, not to mention the market for user access devices such as smartphones and tablets.

For many years the industry has talked of convergence to describe the above as information services (data), communication services (telecoms) and technologies (IT) come closer together as ICTs. However, it remains the case that just because these services can be delivered (multiplexed) down the same pipes does not necessarily imply there is commercial synergy between them as businesses. The skills required to run a telecoms network are vastly different from those needed to create a successful TV station, and the financial profiles are totally different. Investment in telecoms is lumpy over time with long periods of revenue growth to be accumulated for the next round of investment. A TV station lives or dies by how fresh its programming is on a daily basis and the purchase of new content from the studios is a continuous process. Carriers will look to complement different services, such as telecoms and IPTV, and will leverage their subscriber and billing base to market these complementary services, but they are equally likely to run up against the problem of cannibalization. This arises when the marketing of one product or service comes at the expense of another. For example, rolling out broadband may cannibalize the leased line business, and offering bundled Internet services may cannibalize voice revenues. These are essentially commercial decisions for the carriers, not for the regulator, but often permission to do any of this requires new licences or regulatory approvals. It is the interconnectedness of networks that creates the competitive impetus for all of this.

About this Module

Interconnectedness is throwing up a number of issues that were previously beyond the domain of a telecoms regulator. Issues such as data privacy and cyber security, for example, have become concerns for policy-makers and often require coordinated approaches across different regulatory bodies. Where this includes telecoms and broadcasting a number of jurisdictions, including the UK, Hong Kong, Nigeria and Thailand have decided to merge the regulators. Whether convergence of technologies leads naturally to the convergence of regulation is a question to be examined further below. So this module deals not only with issues the telecoms regulator traditionally has to deal with, such as licensing and spectrum management, but also with related issues that arise due to the interconnectedness of networks.