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.     

Network modeling approaches for calculating wholesale NGA prices: A full comparison based on the Greek fixed broadband market

According to the European Commission Recommendation for setting copper and fiber wholesale prices where cost orientation is imposed as a remedy, National Regulatory Authorities (NRAs) should adopt a Bottom-UP Long-Run Incremental Cost Plus (BU LRIC+) costing methodology that estimates the current cost that a hypothetical efficient operator would incur to build a modern efficient Next Generation Access (NGA) network. The starting point of modeling an efficient operator investing in NGA networks is the network modeling approach. In this paper, we compare the most widely adopted network modeling approaches in terms of wholesale fiber-to-the-home (FTTH) prices. In particular, the modified scorched node approach is compared to the extreme cases of the scorched node and the scorched earth approaches. The comparison between the aforementioned scenarios sheds light on the impact of each approach on the wholesale FTTH prices. The main finding of this paper is that the scorched earth approach leads to a maximum of 10% reduction in the short-term access prices compared to the most inefficient scorched node approach, whereas further extending its optimizations by optimizing the number of central offices, both the short-term and long-term wholesale price reductions are quite significant (more than 20%) regardless of service speeds. Consequently, NRAs should consider a geographically differentiated modeling approach when regulating the wholesale market by adjusting the level of scorching in each area and network segment according to the investment plans of telecom operators. An appropriate variation of the modeled network operator's efficiency is expected to more accurately represent the costs of a reasonably efficient operator based on the real market conditions and a forward-looking perspective. These findings provide valuable information to both network operators and telecom regulators.     

Asymmetric Network Interconnection

We develop a model of competition between interconnected networks,that allows for carriers to differ in size. Under two-partpricing, we show that because of asymmetry the larger network willalways prefer a reciprocal interconnection charge be set at cost.For sufficiently large asymmetry the smaller network will have thesame preference. Under the assumptions of our model a particularly simple regulation is optimal – if carriers cannot agree on the terms of interconnection, the larger carrier is entitled to select the access price which is then applied reciprocally.     

Access regulation, competition, and broadband penetration: An international study

The evolution of broadband penetration has shown substantial differences between OECD countries. This paper empirically investigates to what extent different forms of regulated competition explain these international differences. It distinguishes three modes of competition between broadband internet access providers that result from regulatory policies: (1) inter-platform competition; (2) facilities-based intra-platform competition; and (3) service-based intra-platform competition. In most countries these forms of competition co-exist although their intensity varies from country to country. Intra-platform competition may differ among countries depending on the degree of mandatory access obligations imposed by the regulator on the dominant network firm. Based on a sample of OECD countries, the analysis finds that inter-platform competition has been a main driver of broadband penetration. The two types of intra-platform competition have a considerably smaller effect on the broadband penetration. Linking these findings back to access regulation suggests that the “stepping stone” or “ladder of investment” theories might not provide the justification to impose extensive mandatory access obligations on DSL incumbents.     

An assessment of the equality of access and no-regulation approaches to next generation networks

The European Commission believes that for the regulation of next generation fixed telecommunications networks the continuity approach is preferable to the equality of access approach and the no-regulation approach. According to the European Commission, (i) functional separation eliminates discrimination and promotes competition, but should only be used as a measure of last resort because it involves various complex trade-offs, whereas (ii) the no-regulation approach fosters investment, at the cost of sacrificing competition. The article agrees that functional separation involves complex trade-offs but disputes the assertion that functional separation necessarily eliminates discrimination and promotes competition. In addition, the article also establishes conditions under which the no-regulation approach does not reduce competition.     

Unbundling and infrastructure competition for broadband adoption: Implications for NGA regulation

The common idea of open access policy is that it refers to the sharing of particular elements, such as wholesale access networks, backhaul, under-sea cable and internet exchange points in fixed and mobile networks. In broadband networks, the use of open access policy usually refers to the infrastructure parts, which are considered a bottleneck. Many regulators have generally focused open access policy on fixed broadband networks, especially digital subscriber line (DSL) technology, in the last decade. Local loop unbundling (LLU) regulation is one of the main strategies for the regulator to open access to an incumbent’s bottleneck network in order to soften its monopoly power and encourage competition in the DSL broadband market. The OECD countries have different strategies regarding unbundling local loop and infrastructure competition, as the characteristics and infrastructure networks of countries vary. There are currently more choices of next generation network (NGN) technologies to develop. While local loop unbundling may not be applied fully to NGN development (the cost is not sunk, more technologies are available to implement, incentive of investment by operator), it can indicate benefits and drawbacks of open access policy in the past decade that can be adapted to NGN.The empirical results of this study show that during 2002–2008, LLU regulation was one of the strategies used to increase broadband adoption in countries that had difficulty encouraging infrastructure competition. Unbundling regulation can therefore be implemented carefully and differently in each country that has inefficiency that is harmful to consumers in its market from a monopoly incumbent. Infrastructure competition, on the other hand, is introduced as another strategy to increase broadband adoption. The empirical results of this study indicate that infrastructure competition can be used as a strategy when there are already enough infrastructures in the area or country. These results support the idea of using open access and infrastructure competition policy depending on the existing competition of broadband infrastructure in each country.     

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.     

Access regulation,entry and investments in telecommunications

This paper presents a model of competition between an incumbent and an entrant firm in telecommunications. The entrant has the option to enter the market with or without having preliminary invested in its own infrastructure; in case of facility based entry, the entrant has also the option to invest in the provision of enhanced services. In the case of resale based entry the entrant needs access to the incumbent network. Unlike the rival, the incumbent has always the option to upgrade the existing network to provide advanced services. We study the impact of access regulation on the type of entry and on firms’ investments. We find that without regulation the incumbent sets the access charge to prevent resale based entry and this generates a social inefficient level of facility based entry. Access regulation may discourage welfare enhancing investments, thus also inducing a socially inefficient outcome. We extend the model to account for negotiated interconnection in the case of facilities based entry.     

Regulation and the promotion of investment in next generation networks—A European dilemma

The paper discusses the dilemmas facing European regulators (the European Commission and the national regulatory authorities) over the promotion of investment in Next Generation Access Networks (NGANs). Whereas the US has adopted a deregulatory approach and parts of Asia takes an approach linked to industrial policy considerations, the EU has largely left the process to operators working subject to a framework of regulation of access. While this may be enough to elicit investment where there is competition among networks, the incentives to invest are weaker where there is only one fixed network, as is the case in most of the territory of the EU. In reaching this view, the paper examines the prospects for competition from both wireless and municipal networks. It recommends that steps be taken fully to mobilise incentives to invest in NGANs where there is competition. Elsewhere, it may be necessary to consider a broader range of policies to create conditions for investment.     

Any Willing Provider and Negotiated Retail Pharmaceutical Prices*

Any Willing Provider (AWP) regulations require insurers to allow health care providers network membership, eliminating an insurer’s ability to commit to a limited network of providers. We study the effect of AWP on prices negotiated between insurers and providers by exploiting the introduction of a regulation targeting retail pharmacies in the state of Maine. Using insurance claim level data and across state variation in exposure to the regulation, we estimate increases in negotiated pharmaceutical prices. Our results are consistent with AWP regulations’ reducing competition by inhibiting the ability of insurers to move demand across competing pharmacies.     

The Implications of the Value Chain and Financial Institutions for Work and Employment: Insights from the Video Game Industry in Poland,Sweden and Germany

What are the reasons for national differences of international market access in high‐risk software development and what is the role of employment regulation? This analysis elucidates this question based on national sector studies of the video games industry with particular focus on financial systems, skill formation as well as work and employment systems in Sweden, Germany and Poland. National financial architectures and education are a decisive factor. However, the results also suggest that the ‘varieties‐of‐capitalism’ (VoC) approach underestimates industry divergence within and across supposedly homogeneous national models, especially in the field of labour regulation. The author proposes to link VoC theory to a transnational perspective, which complementarily takes into account firm embeddedness in industry‐specific value chains.     

Local competition for telephone services

A policy discussion and overview of the development and scope of local exchange competition in U.S. Telecommunications markets is presented. The primary focus is on access and cable competition. In the future, we will see policies which encourage cable to enter telephone services, telephone companies to develop a video dialtone, and transportation networks which allow interexchange carriers to bypass the access charges of the local network. Regulatory policy needs to manage these competitive changes so that there is parity between the various service providers.     

Standards, trade and competition in the emerging global information infrastructure environment

Decentralized construction of the Global Information Infrastructure (GII) is substituting market-driven, ‘de facto’ standards and voluntary agreements on standards for technical compatibility, in place of the engineering decisions once made by public (and quasi-public) telecommunications network operators. Due to strategic economic behaviours on the part of private businesses and national governments, the goal of a fully interoperable GII remains elusive. The Internet does not offer an entirely credible alternative model, as the standards that have facilitated its explosive growth also are contributing to serious congestion problems, and the solutions proposed point to the Internet's re-integration into the public switched telecommunications network. Technical standards will shape the GII's implications for international trade and competition, and thus raise important, but inadequately recognized issues for regulation, competition and trade policy.     

Access regulation and the incumbent investment in quality-upgrades and in cost-reduction

This papers studies if access price regulation has an impact on incumbents’ incentives to invest in their network that might differ according to the nature of investments, that is, quality-upgrading and cost-reducing. It is shown that if the marginal cost of quality-upgrading is very low both types of investment are increasing in the access price. If the marginal cost of cost-reducing is very low, both investments decrease after an increase in the access price. Otherwise, a high access price increases the incentives for quality-upgrading and reduces the incentives for cost-reducing. Therefore, regulators should set a higher access price the lower is the marginal cost of quality-upgrading as compared to the marginal cost of cost-reducing.     

The Market Structure of Broadband Telecommunications

The recent growth of the Internet is creating markets for broadband telecommunications networks. In the past, virtually all such 'infrastructure' networks have been subject to government regulation. Two reasons advanced for this market intervention are (i) such networks constitute a natural monopoly, and (ii) to achieve 'universal service', in which all citizens have access to services. In this paper, we develop a model and estimate it using engineering data which tests if these two hypotheses are likely to obtain for broadband networks. We find that oligopolistic competition is likely to emerge for demand levels approaching that of today's cable television.     

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.     

Municipal electric utilities’ role in telecommunications services

Municipal electric utilities (MEUs) are increasingly expanding into telecommunications services. Such entry is interesting in several respects. First, MEUs marry two potential pathways for the growth of telecommunications access infrastructure and services: public ownership of last-mile facilities and electric power company expansion into telecommunications. Second, municipalities are key early adopters of next generation access technology in the form of both fiber-to-the-home (FTTH) and broadband wireless (e.g., WiMax) systems. Third, MEUs are at the nexus of the debate over the proper role for local government in promoting broadband Internet access. Most homes in the United States are served by investor-owned local telephone and cable television providers, using company-owned wireline infrastructure. These providers have generally opposed municipal entry, arguing that it will crowd out private investment and represents an unfair and less efficient form of competition. A number of states have acted to limit—or in some cases—to promote such entry. Before engaging in this debate, it is necessary to have a clearer picture of the current state of municipal entry and the local demographic, cost, industry, and policy factors that influence its evolution. To address this need, this paper reports the results of an empirical analysis of MEUs that provide communications services to the public. This analysis shows that MEUs are more likely to offer such services if they also provide internal communication services to support their electric utility operations (scope economies); are relatively close to metropolitan areas (lower backhaul costs); are in markets with fewer competitive alternatives (cable modem and DSL service availability limited); and which are less encumbered by regulatory barriers to entry (in communities in states which do not restrict municipal entry into telecommunication services). Of these results, the competitive impacts are the least straight-forward to interpret, suggesting richer dynamics and avenues for further research.     

Cellular clouds

This paper progresses an analysis of what it means to be a cellular network operator and what form the ownership and control of future cellular networks may take. Alternative modes of ownership may allow for the creation of more flexible cellular networking environments in which competition for packages of resources, that is, the licenced spectrum, the RAN and core network, ensures that the most efficient and innovative architectures, services and applications are delivered to the consumer. This paper develops the concept of the Cellular Network Cloud and Utility Cellular Networking as a means to explore the possibilities for such revolution in the way in which cellular networks are owned and operated. Changes to current industry practices which would help to meet the objectives of more flexible and competitive network ownership and control are proposed.     

Access regulation and infrastructure investment in the mobile telecommunications industry

While mobile virtual network operators (MVNOs) increase competition in the mobile telecommunications industry, granting market access to MVNOs may have unwanted consequences. In particular, infrastructure investment by incumbent mobile network operators (MNOs) may be smaller. This paper examines the effects of MVNO entry and access regulation on the investment behavior of MNOs. It uses firm-level data for 58 MNOs in 21 OECD countries during 2000–2008. The results suggest that mandated provision of access is related to lower investment intensity of MNOs, while voluntary access provision has no effect. Although reduced investment incentives do not necessarily correspond to under-investment, this underscores the need for those countries where MVNOs are provided access to address the issue of investment incentives.