Regulatory Policies for Broadband Development

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Regulatory Policies for Broadband Development

• Peter Smith
• The World Bank Group
• APT ASIA PACIFIC FORUM ON
• TELECOMMUNICATIONS POLICY AND REGULATION
• Universal Service through Broadband
• Bandar Seri Begawan, Brunei Darussalam
• May 17-20, 2004

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Contents
1. Introduction
2. Broadband Deployment
3. Regulatory Policy Issues
4. Conclusions
3
Scope of presentationBroadband Access Network
Regulatory Issues
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Introduction

• Definitions of broadband
• Broadband technologies and speeds
• Economics
• Broadband for development

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Definitions of broadband

• No agreed definition, but commonly identified
  with higher transmission speeds and always-on
  connectivity.
• ITU Transmission capacity that permits combined
  provision of voice, data and video, with no lower
  limit. (Birth of Broadband, ITU)
• OECD Transmission speeds equal or greater than
  256 kbit/s. (OECD)

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Broadband technologies (1)

• Wire line technologies
• xDSL Uses the standard telephone line
• Cable TV Modem Uses upgraded cable TV networks
• Leased lines (fiber optic or co-axial cable)
• Others power line communications

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Broadband technologies (2)

• Radio-based technologies
• Cellular mobile (GPRS/EDGE, CDMA, 3G)
• Fixed wireless (WiFi, WiMAX, MMDS, LMDS)
• Satellite to the home
• VSAT

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Broadband technologies (3)
Narrowband Broadband
Dial-Up UMTS DSL Big Broadband
?GPRS/EDGE CDMA?
CATV FTTH ?WiFi/WiMAX?
33-56 kbps 256 kbps 1-3 Mbps
10 100 Mbps
Speed
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Economics of broadband

• Derived demand largely based on demand for
  Internet connectivity
• Economies of scale and scope
• Disruptive technology disrupts existing
  business model and pricing strategies (e.g. VoIP)

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Broadband Derived demand
Broadband applications
Email/web-browsing
Intelligent Appliances
Telemedicine
Client-server applications
Audio streaming
Video
Narrowband Broadband
Speed
Dial-Up DSL Big Broadband
?CDMA? CATV
FTTH
33-56 kbps 256 kbps 1-3 Mbps
10 100 Mbps
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Broadband for development

• Broadband connectivity provides the
  infrastructure for the knowledge economy and
  information society.
• Information and communication technologies (ICT)
  based on broadband connectivity are key drivers
  for productivity and contribute to economic
  growth.
• Enables e-commerce and allows small enterprises
  to access new market opportunities
• Broadband provides the means for enhanced
  inclusion of rural and isolated areas into
  economy.

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Contents
1. Introduction
2. Broadband Deployment
3. Regulatory Policy Issues
4. Conclusions
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Deployment of broadband technologies

• Globally DSL and Cable TV modem dominate
• Dominant technology specific to different markets
• Germany 96 DSL (cross-ownership of Cable TV and
  Local Loop)
• US 57 Cable TV (ample coverage of Cable TV
  network)
• Future?
• More fiber-optic
• More radio
• More hybrid

Subscribers global(est. )
Others
Cable
DSL
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59
Source ITU
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Broadband penetration by country
Broadband subscribers per 1000 inhabitants, 2002
Developing countries in Asia
Source ITU (2003)
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Broadband penetration by income
Subscriber per 100 inhabitants, 2002
Income per capita (US), 2002
Source ITU, WDI (2003)
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Unaffordable for most consumers
Broadband monthly cost as of monthly income
(GNI, 2003), 2002
Asia
Source ITU (2003)
US
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In some developing countries

• Low demand for broadband
• High prices relative to income levels for
  access and computers.
• Lack of local and native language content.
• Limited access to broadband infrastructure
• Deployment of broadband infrastructure is lagging
  huge investment required
• Regulatory framework does not promote competition
• Much infrastructure is owned by incumbents --
  sometimes poor-performing state-owned
  monopolists.
• Rapid growth of cellular as substitute for fixed
• Limits potential for large-scale roll-out of DSL

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Contents
1. Introduction
2. Broadband Deployment
3. Regulatory Policy Issues
4. Conclusions
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Regulatory policy issues

• Competition
• Other
• Support for legacy networks vs. incentives for
  Big Broadband
• Broadband as a disruptive technology regulation
  of VoIP and pricing
• Radio-licensing

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Competition

• Network infrastructure competition
• Cable TV/DSL/Satellite/Terrestrial Radio
• Infrastructure competition vs. demand
  aggregation
• Resale
• local loop unbundling
• Cable TV modem

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Infrastructure competition promotes
growthcross-ownership deters broadband growth
Cable modem - Countries where incumbent
telecommunication carrier owns cable network or
share of cable network
2.5
DSL - Countries where incumbent telecommunication
carrier owns cable network or share of cable
network
2.0
Cross ownership and broadband penetration,
subscribers per 100 inhabitants
DSL - Countries where incumbent telecommunication
carrier does not own cable
Cable modem - Countries where telecommunication
carrier does not own cable
1.5
and slow to grow
Cross ownership economies are late to launch
1.0
0.5
0
2001
2000
1999
Source Birth of Broadband (ITU) and adapted from
OECD Broadband Access for Business 2002
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Infrastructure competition vs aggregation of
demand

• Both approaches have a strong rationale
• Reconciliation of these approaches not clear
• There will be a mixture of approaches Horses
  for courses

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Resale local loop unbundling (1)

• Rationale
• Promote re-sale competition where infrastructure
  competition is limited.
• Advantages
• Encourages competition by reducing economic
  barriers for new entrants.
• Avoids unnecessary duplication of facilities
• Disadvantages
• Reduces incentives for infrastructure investment.
• Requires operational coordination between
  incumbent and competitor.

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Resale local loop unbundling (2)

• Experiences
• In most markets with LLU, such as in EU,
  incumbents still dominate broadband but Japan
  and Korea have had better results.
• Limited experiences in developing countries

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Resale local loop unbundling (3)

• Various options for unbundling
• Full unbundling (or access to raw copper)
• Line sharing or shared access.
• Difficulties in defining segment resale rate
• Difficulties in enforcing resale requirement
• FCC no longer requires incumbents to offer the
  high-speed last-mile access to competitors. (Feb.
  2003)

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Resale Cable TV modem (1)

• Rationale for regulation
• Clash between regulatory approach for
  telecommunications (common carriers) vs. cable TV
  systems (broadcasting undertakings)
• symmetric regulatory approach for broadband
  provision
• Advantages
• Promotes competition by allowing ISPs to use
  existing network facilities
• Disadvantages
• Reduces incentives for facilities owner to expand
  network.

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Resale Cable TV modem (2)

• Experiences
• In July 1999, the Canadian Radio and Television
  Commission (CRTC) issued Telecom Decision CRTC
  99-8
• ordered the country's four largest Cable TV
  operators to file tariffs to enable competitive
  ISPs to purchase wholesale access to cable
  facilities.
• The goal was to create regulatory parity between
  broadband cable and ADSL access networks.
• Case of ATT vs. Portland (USA)

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Regulatory lag and Legacy networks

• Regulations tend to lag behind technological
  developments
• Legacy networks typically refer to incumbent
  telco networks
• Many countries have subsidy mechanisms (e.g.
  regulated access charges) to subsidize these
  legacy networks
• Do these approaches favor DSL and delay
  investment in big broadband?

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Broadband as a disruptive technology

• Changes business models, e.g. Internet telephony
• Internet telephony renders traditional charging
  for voice telephony obsolete
• Some jurisdictions have attempted to ban VoIP
• Good for customers??
• Good for incentives for broadband investment??

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Radio-licensing policy

• Absence of fixed wire networks hinders the
  transition to broadband, and emphasizes potential
  of radio.
• Radio networks will offer important competition
  to wireline-based broadband.
• Especially important for broadband connectivity
  in rural areas
• Need to ensure responsiveness of radio licensing
  for rural broadband access

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Contents
1. Introduction
2. Broadband Deployment
3. Regulatory Policy Issues
4. Conclusions
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Conclusions

• Its mainly about incentives for investment
• Competition
• Primary role of private sector
• Technological neutrality
• Co-existence of policies on competition and
  demand aggregation need further review
• Value of mandatory resale is uncertain
• Regulation tends to lag technology
• A main purpose of regulation is to facilitate
  delivery of technology benefits to customers
• Broadband emphasizes convergence