Regulatory Challenges in

Next Generation Networks

Module Id: MTMGTNGR00

1
 Presentation Outline

• Traditional NW v/s NGN NW

• NGN Value Chain.
• Regulatory issues in NGN.
• Interconnection in NGN environment.
• Billing in NGN.
• Regulatory Challenge- Net Neutrality
 Traditional Telecom World
Services
• Separate services
separate Network
Voice services Data services Wireless Video services
• New overlay
and and services and and network Required
application application application application
for offering new
services
• Services are
Voice services Wireless Video services
duplicated in
control Data services
control
services control different network.
control

Transport Transport
hardware Transport Transport
hardware
hardware hardware

Circuit
switched Data services Wireless Video services
network network services network
network

Physical network
 NGN Layered Architecture

Video Services (TV, movie, etc)

Data Services (WWW, e-mail, etc)
Telephone Services (wireless/wireline)

Services
Point to point, Point to multipoint, Multipoint to multipoint

Transport
Point to point, Point to multipoint, Multipoint to multipoint
 NGN Layered Architecture
Applications

Access

Services Voice Media

Edge Content Interactive
Switching Policy Multimedia

Security

Services
Service Control
Mobility

QoS

IP VPN

Transport
Packet-Optical Core
LAN Subscriber
Control
 Future Telecom World (NGN)

Services
Users

• Decoupling of
services from
telecom network
Packet
Network

Users Services
 Is there Need for NGN?

• Next Generation Network talked about is not about

providing next generation services. NGN is a radical
change in the network design & topology.
• Therefore, there is general view that if a provider is
able to provide a service at some incremental cost,
why there is need for NGN requiring very high
capital investment.
Need for NGN
 Need for NGN (Contd.)

• Network intelligence shifting from core to periphery

of the network. i.e using CPE’s/software innovative
services can be provided.
• Providers reduced to being pipe provider which has
become a commodity business with very low
margins.
• Increasing service requirements from end users calls
for innovative applications/ multimedia services,
High flexibility of service access, high QOS etc.
 Need for NGN (Contd.)

• For being competitive- Operators should find ways

to add value to their network and meet the
subscribers service demands.
• NGN allows operators to expand their horizon and
help is providing new and advance services.
• New services can be brought to market faster and at
lower cost. 'Low time to market’
 Need for NGN (Contd.)

• Obsolesce of exiting PSTN – Existing PSTN

equipment reaching end of its economical life with
maintenance support becoming difficult and costly.
• Multiple overlay network for providing different
services will not be cost effective in long run- NGN
provides substantial cost savings due to economies of
scope.
• Initial CAPEX may be higher but OPEX will be
much less.
 Migration to NGN

• Migration to NGN is capital intensive.

• Operators already have substantial investment in
existing network.
• Today’s mix of technologies has produced different
life span and thus amortization times for different
parts of the networks are different.
 Migration to NGN

• Complete replacement of the legacy networks to

NGN is difficult.
• Phased approach needs to be considered with NGN
introduced in part of network then to complete core
and then to access.
– Greenfield operators starting with NGN core.
– Fixed incumbents looking initially towards NGN core with
different migration strategies.
 Migration Strategies

• Full steam ahead- complete change and timeline

for PSTN switch off – e.g. BT, NTT, KPN.
• Gradual :- limited step towards core NGN upgrade
with deployment of IP for transport in core PSTN-
e.g Telecom Italia, TeliaSonera.
• Wait and watch :- No action, wait for results from
other operator and if results encouraging and
standards stabilized then decide.
 Migration to NGN

• Transition to NGN Access

– Migration to NGN in access will be much later as
access migration is very capital intensive.
– Requirement for mass market IP terminals to replace
existing POT’s and CPE’s.
 Example- BT 21CN

• 21CN (21st Century Network) is a NGN being deployed by

British Telecom.
• The following are some of the key changes by 21CN in BT
network
– The national PSTN phone network progressively moved on
to a digital IP network.
– The phasing-out of 16 existing legacy networks and the
introduction of a single "multi-service" network
– The national roll-out of ADSL2+, offering services at up to
24Mbps.
– A complete overhaul of the broadband services offered. A
range of configurable QoS (Quality of Service) products
made available.

16
BT was targeting
providing ‘BB
dial tone’ &
PSTN switch-
switch-off
by 2009
 Changing Value Chains
in Next Generation Networks

18
 The Value Chain

• A model that considers how supply chain activities

can add value to products and services to be
delivered to the customer
• Value chain is a systematic way of examining all the
activities a firm performs and how the activities
interact with each other.
 The Value Chain

• The main questions that the value chain framework

seeks to address are:
– what activities should a firm perform, and how?
– what is the configuration of the firm’s activities that would
enable it to add value to the product and to compete in its
industry?
• Benefits for customers are created by reducing costs
and adding value to customers within each element of
the value chain and at the interface between elements
of the value chain
Traditional Value Chain

21
Evolving Value Chains
 Changing Value Chain

• There is convergence of the access technology,

information technology, internet and media
industries.
• In this changed situation there is unbundling of
formally industry specific value chains where the
core strengths of individual chains are extracted
and rebundled to a new value chain within the
market that results from this convergence
 Changing Value Chain(Contd.)

• Reconfiguration of original value chains -> evolves

and takes a new form. “firms in merging sub-sectors
breaking up their value chains and reuniting the
individual value added strengths”
• The reconfiguration helps in combining the
complementary value added elements, and transfers
the core competencies of both information and
communication providers to the new value chain
 Changing Value Chain (Contd.)

• The reconfiguration helps in strengthening the firm’s

position in the original market and also helps it to
have a strategic position in the new market
• The reconfiguration also allows the traditional players
of the old value chain to reap benefits of the
opportunities in the new value chain
 NGN Value Chain

• The technological changes create new sources of

value that can be exploited by new players as well as
the traditional players.
• How the operators and different players position
themselves in the value chain will determine the
telecommunication industry structure
• The success of next generation service will largely
depend on how well the different players interact with
each other and what kind of relationship is
established with other players
 NGN- Value Network

• Effective synchronization of value chain and properly

managing the relationships with different players is essential
for the success of the services.
• Further the linear firm specific value chain model is getting
altered and taking a shape of a ‘value network’ where
different firms assess their strengths and competencies, form
strong web of partners and realign their strategies with the aim
of delivering value to the users.
• In the network of firms, the value added strengths of different
firms are combined so that collectively a better service is
provided to the end users.
 Scale of Operation in Value Chain

Strategic & Operator additionally acts as Content provider

Dynamic & Intermediary and Trusted Third Party, Open
API interface, App store environment
Operator provides
Broadband, Video Portal/IP TV
services
Operator as Application
Role of Service provider Alignment of core
Network competencies
Opeator
Operator Provides required
Both Core and access

Operator Just
Simple & provide NGN Pipe
Passive

Degree of involvement of the Operator in

LOW the NGN value chain HIGH
Regulation in NGN
 NGN Regulation

• Present regulation is sector specific

– Telecommunication regulation
– Internet regulation (almost unregulated)
– Broadcasting regulation
– Content regulation etc.

• With convergence of network and services the

dilemma is how to regulate?
 NGN Regulation (Contd-)

• Regulatory culture:
– Internet model not similar to Telco model.
– Limited content/media regulation culture in majority
of telecom Regulators.
• Stickiness of regulation.
• Technical complexity (layers, protocols, blurring of
access/core borders, different & non typical
firms/players in value chain, billing complexity
 NGN Regulation (contd-)

• Market evolution:
– cable operators becoming Telco’s,
– Telco’s becoming media companies.
– Fixed mobile convergence leading to blurring of
boundaries between mobile and fixed operator.
• Growing importance of P2P (peer-to-peer) networks
(estimated that 60%-80% of ISP traffic is P2P, in
2001 it was 20-30% only)
 Economic Regulation

• Technologies for NGNs have matured and

available but business models aren’t keeping pace.
• Today‘s markets regulation is connected to legacy
infrastructure and services.
• Not evident whether NGNs will fit into existing
markets or will generate new unregulated markets.
 Economic Regulation

• NGN itself is not a market. NGNs lead to new

markets and changing market structures.
• Is Ex-Post regulation sufficient i.e can general
country specific competition laws be sufficient to
deal with NGNs, instead of sector specific Ex-
Ante regulation?
 Regulatory implication for NGN

• New technologies raise policy issues

– NGN moves the competition from lower layers to
service layers which leads to new sources of possible
market power, bottlenecks.
• Transition to NGN leading to complete shift in the
business model
– Telecom industry moving away from well established
practice of charging by time and distance to charging
by capacity and quality of service.
– Third party service providers providing services
without much revenue flowing to telecom operator. Eg-
Skype, WhatsApp,
 NGN Regulatory Contradiction

• Opportunity to setup policies before transition.

(telecom world view- Ex-Ante Regulation)
V/s
• Regulation may stifle innovation and can be
detrimental for growth of NGN services. (internet
world view- Largely unregulated)
 NGN Regulatory Contradiction

• Investment in NGN is risky- clear regulatory policy

can help operators to reduce risk. (Ofcom UK, IDA
Singapore)
V/s
• Regulation will make sense only when network plans
and strategies are in place. (FCC- USA)
 NGN Regulatory Contradiction

• Regulators should get involved in defining technical

specification for NGN
V/s
• Regulators should have complete technological
neutral approach. Technical specification should be
left to standardization bodies, industry groups. ‘Let
best technology prevail’.
 NGN Regulatory Contradiction

• Telecom community may loose to IT community e.g

voice services losing to VOIP providers.
V/s
• Incumbents may reap most benefits from NGN,
marginalizing small and niche operators.
 Truth is

• What technology provides cannot be restricted by

regulation for long.
• Full opening of IP telephony will surely happen as
it provides low cost calling and ubiquity. Many
countries allowing IP Telephony providers.
• Further as broadband penetration increases voice
traffic is increasingly moving from telco to
internet world.
• PSTN providers needs to gear up to challenges of
loss of revenue due to migration of voice traffic to
alternative networks.
 Implications

• For developed countries with nearly 100% or more

teledensity its matter of consumers choice.
• However in developing/under developed economies
regulators worried that transition to IP telephony will
hurt incumbent voice revenues, wherever USO
obligation is large and rural telecommunication is
primarily provided by incumbents, rural teledensity
will be affected.
 NGN Regulatory Guidance

• Regulation Should allow for innovation and investment

– Favourable regulatory environment for investment and innovation
in Next Generation Networks which promotes an open and
competitive digital economy and emphasises ICT as a driver for
economic growth.
• Regulation with hands-off or light touch approach.
– Regulation to focus on main principles and leave specific
compliance to ‘ex-post’ activities and general law relevant to the
sector

Source: www.etp-online.org
 NGN Regulatory Guidance

• should focus on services not on technology

– Technology decisions should be left to the market. Regulators
should not interfere by promoting one or the other technology. It is
therefore necessary to define the boundary between technology and
service. The Next Generation Core itself falls out of the regulatory
scope. It is the services that are subject to possible regulation.
• economic regulation (if required) should focus on
enduring bottlenecks
– Although it would be desirable eventually to base economic
regulation entirely on competition law, it might be necessary to deal
with network bottlenecks especially in the access network.

Source: www.etp-online.org
 NGN Regulatory Guidance

• should avoid fragmentation of markets

– A common market allows the competitive provision of services and
products. NGN interconnection will be based on standards voluntarily
agreed upon by industry in standards bodies. That does not imply that
standards need to be imposed.
• should balance harmonisation and innovation
– Harmonisation is certainly necessary to avoid fragmentation and to
allow for interoperability of services. It has however to be recognized
that harmonisation in an early stage could stifle innovation by
favouring a possibly suboptimal solution. Priority should be given to
market forces which will lead to harmonised solutions at the right time.
This is probably different for different layers. Innovation at service
level is much more important.

Source: www.etp-online.org
 NGN Regulatory Guidance.

• should address the question of cross-border services

– In a next generation network the possibility for cross-border services
exists. It has to be assured that national operators are no worse off than
competitors from abroad. NGN has a global focus and should not be
viewed in isolation.

Source: www.etp-online.org
 Regulatory Concern.

• New technological possibilities lead to additional

privacy concerns.
• Provision to emergency access.
• Additional network security issue.
• Management of IPR
• Digital rights management.
• Consumer protection.
• Interconnection In NGN
 NGN Interconnection

• Interconnection in TDM networks

has historically been through 3rd Party
PDH/SDH interfaces, or with ATM Carrier 3rd Party
in core. Core Carrier
• logical form of interconnection in Core
NGN is direct IP access
– Avoid interface conversion. IP
Carrier IP
– Enable multimedia calls to be Core
seamlessly passed from one
service provider to another.
– Ability to provide point-to-point
and any-to-any connections.
– support virtual connections/
VPN’s. Enterprise

Residence
Source: Helgrave Intellect CPC
 Signaling in NGN

• In TDM domain SS7 prominent signalling.

• Equivalent inter-server signalling in NGNs SIP
based on SIP or SIP with encapsulated
ISUP (SIP-I)
• TDM networks uses DTMF access
signalling from analogue terminals, and Communications
Servers
ISDN access signalling from digital
terminals IP Network
• SIP is the preferred basis for access
signalling for customers with IP terminals H.248 H.248 SIP SIP SIP
and IP connectivity Trunk Line
Media Media
• Where a customer continues to use a Gateway Gateway
legacy terminal Line Media Gateway IAD
required. A device control protocol such
IP
as H.248 to provide the link between that TDM Lines
Gateway and an appropriate NGN server ISUP Client
Trunks POTS Integrated
xDSL Access
Source: Helgrave Intellect CPC
 NGN Interconnect with Legacy Network

• Interconnection between STP

NGNs and legacy TDM PSTN ISUP/

MTP
ISUP/
MTP
PSTN

networks uses SS7

signalling and TDM ISUP/
MTP

transport via an Signalling

Gateway
appropriate Trunk Media Trunk ISUP/
Sigtran
Trunk
Party A Gateway Gateway
Gateway
H.248 H.248 Party B

Communication
Server Signaling path
Bearer path

Source: Helgrave Intellect CPC

 Interface for Application layer

• Provision of ‘open’ Application Programming

Interfaces (APIs) to provide ‘Network hooks’
into NGN network so that any service
provider can connect their server and start
offering services.
• A key issue is establishment of APIs that do
not compromise the network security.
 Interconnection issues in NGN

• Present well established interconnection principles

for legacy networks not suitable for NGN
environment.
• Level of interconnection:- NGNs have far less
geographic dependence than legacy networks.
– NGNs enable end users to connect to servers located
geographically anywhere.
– Such servers can be in portions of a network owned by
either a carrier or a firm/enterprise or a small service
provider.
 Interconnection issues in NGN

• Freedom of ‘who does what’ and ‘where’ inherent in

NGN architectures
– Can’t restrict service functionality within national
borders. Regardless of who provides a service, the
server hosting it can be located in the same or another
country.
• Service level interconnect:- There may not be
network level interconnection but service level
interconnection using API’s.
 Interconnection issues in NGN

• Interconnect Pricing: – moving away from time &

distance based pricing to capacity, QOS, class of
service based pricing.

• Interconnect cost:- Normally regulators mandate cost

based interconnect charges. Should cost of setting up
NGN network used for fixing interconnect charges?
 Interconnection issues in NGN

• Availability of legacy interconnection:- Once

operator switches over to NGN for how long it be
mandatory to still offer legacy interconnection
products.
– The continued provision of legacy forms of interconnection might be
costly.
– A balance required between too fast transition to new arrangements,
balancing the investments made in existing network and too slow a
transition, that requires the NGN operator to continue with legacy
arrangements that prevent a fair return on investment.
 Security in NGN

• Network resilience extremely important.

• IP based network highly susceptible to malicious
attack, worm, hacking etc.
• Border Control functions, including packet
filtering, firewall, intrusion detection and
prevention, and signaling authentication, is a pre-
requisite to ensuring secure carrier grade IP
interconnection between NGNs
 Economic Interconnection model

• IP based NGN interconnection closer to internet

interconnection principles.

• Internet interconnection normally follows ‘Peering

and Transit’ arrangement.
 Peering

• Peering is an agreement between ISPs to carry traffic for

each other and for their respective customers. Peering
does not include the obligation to carry traffic to third
parties.
• Peering is usually a bilateral business and technical
arrangement, where two providers agree to accept traffic
from one another, and from one another’s customers.
• Peering arrangements are generally unpaid i.e settlement-
free. but there is a trend toward paid peering also.

Source FCC
 Transit

• Transit is an agreement where an ISP agrees to carry traffic

on behalf of another ISP or end user.
• Transit normally include an obligation to carry traffic to
third parties.
• In most cases, the transit provider carries traffic to and from
its other customers, and to and from every destination on
the Internet, as part of the transit arrangement.
• In a transit agreement, the ISP often may also provides
ancillary services, such as Service Level Agreements,
installation support, local telecom provisioning, and
Network Operations Center (NOC) support.

Source FCC
 Peering and Transit

Transit
Larger ISP or Connection
Regional This peering connection
Backbone or Local ISP
Will exist only if
the cost of the connection
to each ISP is less than
the money each saves due
Transit
to reduced transit traffic.
Larger ISP or Connection Regional
Backbone or Local ISP

Payment involved
 Peering V/s Transit

• Peering offers a provider access only to a single

provider’s customers. Transit, by contrast, usually
provides access at a predictable price to the entire
Internet.
• Peering is a sort of barter relationship and each party
benefit from connectivity and normally there is
symmetric traffic flow. There is bill-and-keep
arrangement without cash payments.
• Transit is commercial agreement on payment basis to
carry traffic of other ISP.

Source FCC
 Customer Pricing.
• Calling party pays (CPP): the party that initiates the call pays
for the call, usually based on the duration of the call
• Receiving party pays (RPP): the originating and terminating
parties each pay a share for the call. Earlier used in India.
mobile receiving parties paid but fixed receiving parties did
not. Presently used in roaming scenario.
• The “buckets of minutes” plan: the consumer pays a fixed
(monthly) fee for some number of minutes of domestic calls,
but pays a per-minute fee for minutes in excess of those in the
“bucket”.
• Flat rate Plan: the consumer pays a fixed (monthly) fee for
unlimited domestic calls.
 Pricing economics.

• Interconnection charges at the wholesale level

effects the retail pricing arrangements.
– The interconnection charges generally sets a floor on the
retail price.
– Where interconnection charges high, they generally
prevent flat rate or “buckets” plans from emerging.
– If an operator chooses to ignore this wholesale cost in the
hope that the payments will balance, that operator risks
attracting customers who place disproportionately many
calls to customers of other providers.
 Pricing Economies

• Normally in CPP regime the originating operator

pays the terminating operator at wholesale level .
• Originating network normally have no control on the
termination rates. Bigger operator normally have
better bargaining power in deciding the termination
rates.
• There can be ‘Bill and Keep’ arrangement however
this has problem if there are traffic asymmetries.
 Pricing economics.

• Bill and keep arrangement is more convenient and suitable

for IP NGN based interconnection. In the U.S., the FCC
has been attempting for years to migrate their
interconnection arrangements to a Bill and Keep basis for
all services.
 Billing and Accounting Challenges

• In an NGN world, the network service provider (or the ISP)

will not necessarily be the application service provider. A
VoIP service or an IPTV provider will not necessarily be a
network provider.
• The network provider will have only limited visibility into
third party applications running over its network (and the
user could further reduce visibility by encrypting the data).
• The application provider may have extensive visibility into
the application that it provides, but only limited visibility
into the use of network resources.
• Usage-based billing will be possible only to the extent that
the usage can be rigorously and unambiguously measured.
 Billing and Accounting Challenges

• How will providers and customers ensure that service

commitments are met?
• Competitive providers are reluctant to share information about
their respective networks with one another, and peering
agreements typically restrict the ability of the providers to
disclose information about one another‘s networks to third
parties.
• If the quality of service is not met which provider is
responsible ?

Source WIK Consultants

 Billing and Accounting Challenges

• How will responsibility be allocated if a customer’s traffic

fails to achieve its committed service level specification? Who
& how will the customer get the issues resolved.
• Will it be possible to impose any payments penalties
rigorously and fairly?
• How can providers prevent fraud? How can they distinguish
between fraud and legitimate use?

Source WIK Consultants

• Important Regulatory Debate

– Net Neutrality Issue in US.

 Network Neutrality.

• Net neutrality is the principle that permits any

consumer to visit any Web site, attach any device,
and access any content over the Internet. It also
ensures that any application, content, or service
provider can reach any consumer without blocking,
degradation, or impairment.
 Network Neutrality Issue

• Internet traffic streams typically are asymmetrical, i.e.,

a small upstream request triggers a large downstream
traffic.
• The popularity of P2P network is congesting the
network of the service provider/ISP.
 Network Neutrality Issue

• Google, Facebook, Yahoo!, eBay, etc. have become

bigger than ISP’s and service providers.
• With carriers migrating to IP based network and
providing their own VOIP, video, IPTV, triple play
services, carriers want that their own backbone
network should have dedicated bandwidth allocated
for their own service so that in the event of network
congestion their service will have priority.
 Network Neutrality Issue

• Some carriers are seeking permission to create two

separate IP networks: one for the public Internet and
one for a privately-managed, proprietary service.
• Service providers contention is they should have
sufficient return on their NGN investment. Why a
VOIP service like say ‘Skype’ who just owns a
cluster of servers should have equal treatment to their
own similar service.
 Network Neutrality Issue

• CEO of AT&T (formerly SBC) famously told

Business Week magazine: “Now what they [Google,
et. al.] would like to do is use my pipes free, but I
ain’t going to let them do that because we have spent
this capital and we have to have a return on it. So
there’s going to have to be some mechanism for these
people who use these pipes to pay for the portion
they’re using. Why should they be allowed to use my
pipes?”
Source: BCR weekly
 Network Neutrality Issue

• Internet has been widely successful because of few simple

network principles – end-to-end design, layered architecture,
and open standards which together give consumers choice
and control over their online activities.
• “Neutral” network has supported an explosion of innovation
at the edges of the network, and the growth of companies like
Google, Facebook, Yahoo, eBay, Amazon, and many others.
• Neutral network ensures that, the creators of new Internet
content and services need not seek permission from carriers
or pay special fees to be seen online.
 Network Neutrality Issue.

Contrast to existing open network and unregulated

approach followed in Internet world the regulatory
concerns are:-
– The possibility that an service provider might offer better
performance to some Internet sites than to others;
– The possibility that an service provider might assess a
surcharge where a customer wants better-than-standard
performance to certain Internet sites;
– The fear that the service provider might permit access only
to affiliated sites, and block access to unaffiliated sites;
 Network Neutrality Issue.

• The fear that the service provider might assess surcharges for
the use of certain applications, or of certain devices
• The fear that the service provider might disallow outright the
use of certain applications, or of certain devices, especially
where those applications or devices compete with services that
the service provider offers and for which it charges
• The fear that the service provider might erect “tollgates” in
order to collect unwarranted charges from unaffiliated content
providers who need to reach the integrated ISP’s customers.
 Net Neutrality Rules

• In US FCC open internet rules required the telecom

companies, cable providers and ISP’s to treat all
traffic equally and prohibited them from blocking or
prioritizing Web Traffic.
• In Jan 2014 the US court of appeal has ruled in case
of Verizon Communications Inc V.s FCC striking
down net neutrality. The court order ruled that FCC
does not have the power to enforce ISP’s to treat all
traffic equally. With this the carriers can now make
some traffic run faster and even block certain traffic.
The End

Thank
You