Comparing FTTH access networks based on P2P and PMP fibre topologies

There is an ongoing discussion in the market which Next Generation Access (NGA) architecture best suits future needs and which investment and cost differences exist. The discussion can be subsumed as P2P vs. GPON, which is somewhat misleading as this article reveals. The discussion is driven by the fact that the high capital cost and the long asset life time of fibre mean that the technology choices made today will dominate the opportunities for telecommunication business of all market players, incumbents, competitors, content providers and business and residential users for many years in the future.The paper analyzes the cost and other differences between Fibre-to-the-Home (FTTH) access network architectures and their related different wholesale approaches by using the well-known and understood steady state approach applied in other NGA analyses in the past. In addition to the steady state analysis a dynamic cost evaluation is included taking into account the different investment behaviour of the FTTH architectures over time. The results describe investment and cost differences between architectures, incumbents and wholesale based competitive operators. The analysis has been performed for different geotypes (clusters) of decreasing population density in a representative European settlement structure.     

Economic implications of a co-investment scheme for FTTH/PON architectures

Due to the high costs associated with the deployment of the passive infrastructure of FTTH networks, a few alternative operators have pondered the possibility of making co-investments based on a network sharing model. The purpose of this article is to explore economic aspects of a co-investment scheme for present and future FTTH/PON architectures. The article describes the cost reductions that can be achieved when a co-investment scheme is used, as well as the relationship between market shares and the cost per home connected. A cost model was employed to calculate the investment per home passed and the investment per home connected. The investment per home passed for an alternative operator indicates significant cost reductions when a co-investment scheme is used. On the other hand, the results show that when the incumbent's market share is equal or higher than the total market share of all the alternative operators that share the network infrastructure, the investment per home connected for an alternative operator is higher than that for the incumbent operator. Moreover, to be cost competitive with the incumbent operator, the necessary market share that each alternative operator should achieve is much lower than that of the incumbent operator.     

Do International Roaming Alliances Harm Consumers?

This paper develops a model of international roaming in which mobile network operators (MNO's) compete both on the wholesale market to sell roaming services to foreign operators and on the retail market for subscribers. To allow their subscribers to place or receive calls abroad, they have to buy roaming services provided by foreign MNO's. In the absence of international alliances, competition between foreign operators would drive wholesale unit prices down to marginal costs. However, international alliances are endogenously formed since they serve as a commitment device to soften competition on the retail market, leading to excessively high roaming per‐call prices.     

International roaming in the EU: Current overview,challenges, opportunities and solutions

As technology evolves and globalization continues, the need for reasonably priced roaming services has never been higher. In 2007, the European Commission (EC) introduced a first set of regulatory decisions to cap the maximal roaming fee end users have to pay for voice services. In the years after, additional price caps have been introduced for SMS and data, initially only for end users, in a later stage also for the wholesale tariff. The final step, Roaming Like at Home (RLAH), will start to take effect in June 2017; from then on end users will pay the same price (for voice, SMS and data) when roaming like in their domestic country.The effect of RLAH on the business case of each mobile operator is hard to predict, as the different national markets are extremely heterogeneous and operators face large discrepancies in terms of roaming usage and network costs due to different travelling patterns and various other reasons that cannot be harmonized (geography, economics, working force, usage history, etc.). Furthermore, competition in the telecom market will no longer be a purely national matter, as the decision to abolish roaming tariffs will fully open up cross-border competition.This paper aims at providing insights in the effect of RLAH for both the end user as well as the mobile operators. Following a literature survey approach, including an overview of the roaming regulation process from 2007 up to now, the paper discusses possible effects the RLAH initiative might trigger, going from lower wholesale prices for mobile operators to higher retail prices for end users. Additionally, as the European Commission strives for a digital single market, this paper presents a number of technical solutions (carrier portability, software-based SIMs, cross-border IMSI, Roaming like a Local, Wi-Fi offloading) that may pose a - partial or full - alternative for roaming and explains how these may impact cross-border competition both positively and negatively. The solutions are assessed against two axes: (1) generating the best possible outcome for the end customers (in all countries) and (2) ensuring the best level playing field for (virtual) mobile operators in Europe, which will of course involve trade-offs on different levels.     

A CDS approach to induce facilities-based competition over NGA networks

The current regulatory framework in the European NGA market provides the basic principles for the gradual migration from service-based competition over the legacy copper access networks to facilities-based competition over fiber-based Next Generation Access (NGA) networks. This paper initially reviews the related literature and shows that: (i) an unbundling policy that boosts entry by alternative operators promotes service-based competition but provides operators with disincentives to invest in network upgrade; (ii) there is no consensus about the optimal regulatory policy that promotes competition and encourages investments in NGA networks; and (iii) the reviewed research articles are not consistent with the current regulatory framework in the European NGA market in terms of both the evolution of the regulatory goals over time and the recommended regulatory settings. This paper aims to propose a novel approach in order to effectively meet the current regulatory goals using the recommended settings. It is shown that the proposed approach, which is based on the basic principles governing a Credit Default Swap (CDS), provides an effective migration path towards facilities-based competition over NGA networks.     

电信添翼

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Competition in wholesale markets: Do MNOs compete to host MVNOs?

This paper extends previous research examining wholesale market shares of mobile network operators (MNOs). This study demonstrates that wholesale market concentration has decreased over time because of the increase of competition of MNOs for hosting mobile virtual network operators (MVNOs). However, differences in wholesale market shares between MNOs have not disappeared. We propose that those operators that are late entrants in a market and belong to an international group with a proactive attitude towards hosting virtual operators positively influences wholesale market shares of MNOs. The empirical analysis is based on a panel data from 2000 to 2010 corresponding to MNOs and virtual operators in five European countries with high development of the virtual mobile industry. By closely examining KPN we show how being an international mobile group specialising in the wholesale market across Europe has enabled it to exploit complementarities that exist between traditional and virtual businesses.     

Private labels in marketplaces

Regulators are concerned that by introducing their own private labels, dominant online marketplace operators distort competition in their own favor. This paper addresses this concern by studying how online marketplaces differ from classic retailers with a wholesale arrangement. In online marketplaces individual sellers set their own consumer prices, while the marketplace operator collects fees from their sales. I show that when introducing a private label, the marketplace operator does not have an incentive to distort competition and foreclose the outside seller. On the contrary, when introducing a private label, there is an incentive to decrease the fee charged to the outside seller and to vertically differentiate its own product in order to protect the seller’s channel. However, relative to the wholesale model of classic retailers, online marketplace operators offer a lower quality with higher consumer prices, leading to less improvement in consumer surplus and potentially less harm to the outside seller.     

Diversification strategies in network-based services: The case of mobile virtual network operators

This paper aims at discussing the entry process and competitive strategies of MVNOs in Italy and France. It illustrates the features of competition in a sector – the mobile telecom service industry – which is characterized by market saturation and demand heterogeneity. In doing so, it looks at the characteristics of the two countries in terms of competition and entry of new operators, at the motivations behind the entry of MVNOs, and at the performance of different companies. Results show that the most successful MVNOs are those characterized by the ability to find a perfect match between their core competencies (large network management, strong brand reputation) and the needs of specific segments of demand that had not been previously fulfilled. In this context, companies with ICT network management skills, whether coming from the telecom sector or from other network-based service industries such as postal operators, have been particularly successful in the market. From a policy perspective, despite the failure of some MVNOs, customers have benefited from the increased competition between MNOs and MVNOs in terms of range of service offerings and prices.     

Ex ante regulation and co-investment in the transition to next generation access

Investments in next generation access networks (NGANs) ask for a new set of regulatory remedies. This paper contributes to this debate by focusing on three issues: the migration from the legacy copper network to the NGA infrastructure, and how wholesale pricing regulation might affect this process; the introduction of differentiated wholesale remedies according to geographical differences in NGAN deployment; the impact of co-investment decisions on market outcomes and their interplay with access regulation. Using the recent economic literature, arguments and possible guidelines are proposed, which might be useful to regulators and policy makers.     

Can evidence of pricing power help market power assessment? Broadband Internet in Ireland and the Netherlands

This article proposes a simple hedonic price test to assess whether firms may have pricing power. The test allows NRAs to compare prices of providers of differentiated products on a like-for-like basis. Testing for pricing power could be a useful complement to market share analysis. This is especially the case in market reviews periodically undertaken by European communications regulators. As an illustration the test was applied to broadband Internet access services in Ireland and the Netherlands. Results appear encouraging as they are broadly aligned to the decisions of the regulatory authorities in both countries that the incumbent DSL operators had market power at the time.     

Link between termination rates and retail prices in Namibia,Kenya and South Africa

This paper analyses the link between mobile termination rate reductions and retail prices. It draws on in-depth case studies of South Africa, Namibia and Kenya where regulators have reduced termination rates towards the cost of an efficient operator. To varying degrees these have all led to lower retail prices and significant market expansion. While retail prices in both Namibia and Kenya dropped following substantial termination rate reductions, the South African case demonstrates that termination rate reductions are not always passed on to consumers as is hoped by such regulatory interventions. In South Africa, it was only after the second reduction in March 2012 that smaller operators were able to reduce their off-net prices to a level that could tempt the subscribers to dominant operators to switch. All the case studies confirm nevertheless that retail prices do not go up in response to termination rates going down as contended by dominant mobile operators around the world. This is in contrast to a body of literature stating that termination rates and mobile retail prices constitute a two-sided market and that termination rate reductions will lead to a so-called “waterbed effect”.     

The impact of different fibre access network technologies on cost,competition and welfare

Using a novel approach to the evaluation of new network technologies that combines an engineering cost model with a differentiated multi-player oligopoly model with wholesale access regulation this article evaluates the choice among different Fibre-to-the-Home (FTTH) architectures. The cost modelling relies upon an engineering bottom-up approach that feeds into a competition model. For addressing competition the pyramid model was chosen, which is an extension of the Hotelling model to multiple firms/services. The paper solves for price setting Nash equilibria between an incumbent, wholesale-access-based entrants and cable as an additional fully integrated network competitor. Welfare tradeoffs are highlighted with respect to cost differences and QoS differences between the various FTTH architectures and between the modes of regulation. According to the analysis architectures that can be unbundled (and that allow for greater speeds) outperform, from a social welfare perspective, architectures that (realistically) allow only for bitstream access.     

Cost allocation of WCDMA and wholesale pricing for mVoIP and data services

This study estimates cost-based prices for wholesale voice and data services provided to 3G (WCDMA) MVNOs according to their distinct types. For estimation, 3G MVNOs are classified into different types, and the overall cost of WCDMA facilities are separated into voice and data components based on their subscriber rates, actual traffic rates, as well as efficiency consideration of traffic rates. The study then calculates cost-based wholesale prices of voice and data services for each of the 3G MVNO types. The result of this study shows that a cost-plus pricing scheme can help achieve the policy goals of the regulator, namely, lowering telecommunications tariffs and facilitating the introduction of new convergent-type services, far more effectively than the current retail-minus pricing scheme. The findings of this study may assist firms in developing business models based on 3G networks and telecom regulators in designing policies related to interconnection, mVoIP, prepaid calls, wholesale services, and network neutrality.     

Maximizing the adoption of fixed number portability within the EU: An empirical analysis

Number portability (NP) is considered by the European Commission as a key measure for promoting competition within the telecom sector especially regarding network access infrastructure. However, NP requires several modifications to the network architecture and to the business processes of each operator that, depending on network size, may result in a significant financial cost. This is true for fixed networks in particular. Given the requirement for such an investment, National Regulatory Authorities (NRAs) desire a clear picture on what to expect, in terms of progress in access competition, when introducing fixed NP in their respective markets. The paper approaches this question by correlating several fixed telephony market indices related to access competition to the degree of success of fixed NP. Relevant analysis based on European Union member states’ data indicates that fixed NP does not significantly contribute to local loop unbundling (LLU) adoption in markets where there are other access technologies available. In these markets, access competition via these other technologies and fixed NP initially achieve similar penetration rates. Consequently, when access competition exceeds a certain threshold and given a reasonable pricing regime then fixed NP is further boosted to include broadband connections based on several broadband technologies/methodologies such as LLU and cable as well as existing narrowband access technologies (e.g. narrowband cable connections). In markets where LLU is the only alternative for access then the rate of Fixed NP adoption is directly correlated with the success of LLU. Consequently, these conclusions are considered within a high-level stepwise approach for NP implementation, which is based on the experience acquired from the respective Greek national project.     

Structural separation versus vertical integration: Lessons for telecommunications from electricity reforms

Structural separation between network and retail functions is increasingly being mandated in the telecommunications sector to countervail the market power of incumbent operators. Experience of separation in the electricity sector offers insights for policy-makers considering telecommunications reforms. Despite apparent competitive benefits, the costs of contracting increase markedly when short-term focused electricity retail operations are separated from longer-term generation infrastructure investments (which require large up-front fixed and sunk cost components). The combination of mismatches in investment horizons, entry barriers, and risk preference and information asymmetries between generators and retailers leads to thin contract markets, increased hold-up risk, perverse wholesale risk management incentives, and bankruptcies. Direct parallels in the telecommunications sector indicate exposure to similar complications, intensifying many of the contractual risks arising from regulated access arrangements. Thus, as in electricity, competition between vertically integrated telecommunications providers would likely induce more efficient and sustainable investment and competition than would separation.     

Regulation of international roaming in the European Union—Lessons learned

This paper analyzes the evolution of prices and competition in intra-EU international roaming markets. It addresses three main research questions: (i) to what extent have market forces by themselves brought competition to retail roaming markets? (ii) Has the evolution of market dynamics in wholesale roaming improved competition? (iii) Is wholesale regulation sufficient to lead to a reduction in retail roaming prices? Data show that there has been little price-based competition both at wholesale and retail levels, despite prices being well above costs and the significant margins allowed by regulation. Available data from the period preceding the entry into force of the first EU roaming regulation also point to the same conclusion. Lack of competitive pressure in retail roaming markets and inelastic demand give little incentives for retail roaming service providers to lower prices. Wholesale international roaming markets have complex competition dynamics. They are characterized by the reciprocity of wholesale roaming agreements and traffic internalization inside transnational groups. These circumstances limit price competition at the wholesale level. The traditional regulatory approach applied to electronic communication markets has been primarily focused on wholesale regulation. However, empirical evidence shows that even if wholesale charges are reduced, retail roaming markets continue to operate at very high retail margins (for example, more than 200% retail mark-up over wholesale charges for data roaming services and incoming calls). This proves that in international roaming markets wholesale charge reductions are not necessarily passed on to retail prices. It can thus be inferred that wholesale price regulation alone is in most cases not sufficient to ensure that benefits are passed through to end users.     

MERCHANT TRANSMISSION INVESTMENT*

We examine the performance attributes of a merchant transmission investment framework that relies on ‘market driven’ investment to increase transmission network capacity needed to support competitive wholesale markets for electricity. Under a stringent set of assumptions, the merchant investment model has a remarkable set of attributes that appears to solve the natural monopoly problem and the associated need for regulating electric transmission companies. We expand the merchant model to incorporate several attributes of wholesale power markets and transmission networks that the merchant model ignores. These include market power in wholesale electricity markets, lumpiness in transmission investment opportunities, stochastic attributes of transmission networks and associated property rights definition issues, strategic behavior by potential merchant transmission investors and issues related to the coordination of transmission system operators and merchant transmission owners. Incorporating these more realistic attributes of transmission networks and the behavior of transmission owners and system operators leads to the conclusion that several potentially significant inefficiencies may result from reliance on the merchant transmission investment framework. Accordingly, it is inappropriate for policymakers to assume that they can avoid dealing with the many challenges associated with stimulating efficient levels of investment in electric transmission networks by adopting the merchant model.