The mixed blessing of a deregulatory endpoint for the public switched telephone network

Receiving authority to dismantle the wireline public switched telephone network (PSTN) will deliver a mixture of financial benefits and costs to incumbent carriers and also jeopardize longstanding legislative and regulatory goals seeking ubiquitous, affordable and fully interconnected networks. Even if incumbent carriers continue to provide basic telephone services via wireless facilities, they will benefit from substantial relaxation of common carriage duties, no longer having to serve as the carrier of last resort and having the opportunity to decide whether and where to provide service. On the other hand, incumbent carriers may have underestimated the substantial financial and marketplace advantages they also will likely lose in the deregulatory process. Legislators and policy makers also may have underestimated the impact of no longer having the ability to impose common carrier mandates that require carriers to interconnect so that end users have complete access to network services regardless of location.This paper will identify the potential problems resulting from prospective decisions by National Regulatory Authorities (NRAs), such as the United States Federal Communications Commission (FCC), to grant authority for telecommunications service providers to discontinue PSTN services. The paper also will consider whether in the absence of common carrier duties, private carriers providing telephone services, including Voice over the Internet Protocol (VoIP), voluntarily will agree to interconnect their networks. The paper will examine three recent carrier interconnection issues with an eye toward assessing whether a largely unregulated marketplace will create incentives for carriers to interconnect networks so that consumers will have ubiquitous access to PSTN replacement and other broadband services.The paper concludes that private carrier interconnection models and information service regulatory oversight may not solve all disputes, or promote universal service public policy goals. Recent Internet interconnection and television program carriage disputes involving major players such as Comcast, Level 3, Fox, Cablevision and Google point to the possibility of increasingly contentious negotiations that could result in balkanized telecommunications networks with at least temporary blockages to desired content and services by some consumers.     

Regulatory legacy,VoIP adoption,and investment incentives

The introduction of VoIP telephony raises concerns about current regulatory practice. Access regulation has been designed for PSTN and the liberalization of the PSTN market. This paper explores the effects of access regulation of PSTN networks on consumers’ adoption of a new technology in the form of VoIP. It also discusses the link between access regulation and the incentives to invest in VoIP.     

Competition in a pure world of Internet telephony

From the angle of competition policy, voice-over IP looks like a panacea. It not only brings better service, but it also increases competitive pressure on former telecommunications monopolists. This paper points to the largely overlooked downside. In a pure world of Internet telephony, there would be no charge for individual calls, nor for telephony, as distinct from other services running over the uniform network. Specifically, establishing property rights for either of these would be costly, whereas these property rights were automatic and free of charge in switched telephony. Giving voice-over IP providers classic telephone numbers would enhance systems competition with switched telephony. But this would make it more difficult for clients to swap providers. The anti-competitive caller-pays principle would extend to IP telephony.     

Internet telephony: Costs,pricing, and policy

This article analyzes Internet Service Provider costs and regulatory and policy issues raised by Internet telephony. Transport and non-technical items such as customer service, sales and marketing, represent a substantial portion of an ISP’s costs with Internet telephony. Pricing models and yield management techniques supporting Internet voice services might be employed for other Internet differentiated services as well. An integrated regulatory framework will be required, because of convergence, to formulate policies for multimedia services. We conclude that governments should develop appropriate policies without introducing economic and technical distortions into the nascent Internet telephony market.     

Distinctive arrangements for international interconnection?

An issue of growing importance in telecommunications policy is the relationship between interconnection for domestic and international telephony. While international telephony's need for international transport is an inherent distinction, that factor will not determine distinctions in interconnection arrangements. Under the existing pricing structure for telephony, cross-border rent shifting is the key issue. Innovations in the pricing structure for telephony, whether through Internet telephony or other avenues, offer the potential for changing the structure of interconnection negotiations and eliminating distinctions between international and domestic telephony interconnection.     

Moving targets: Introducing mobility into universal service obligations

Structural changes in the economies of developing countries are leading to increased mobility of work and family life, and so an accommodating set of universal service obligations (USOs) implies new goals that extend beyond wireline telephone penetration and access. Wireless telephony penetration frequently exceeds wireline penetration in developing countries, and digital wireless platforms can incorporate Internet technology. This paper evaluates the history of telecom development in Mexico that has led to wireless telephony becoming the new consumption norm. The study takes the eMexico project as a case study of diversified USOs beyond wireline telephony. It considers potential obstacles to incorporating mobile phone and Internet (“Wireless Web”) services into Mexico's diversified universal service policy, including economic barriers to political mobilization over issues of telecom policy.     

Why is the international accounting rate system in terminal decline, and what might be the consequences?

This paper looks at the incentives and opportunities existing in the provision of international telephony and argues that the present accounting rate system is unsustainable. The paper also provides a framework within which current or proposed regulations governing trade in international telecommunications services can be analysed. The enormous profits available in this sector, together with developments in digital and fibre optic technology, are resulting in a breakdown of the Implicit cartel arrangements which have largely prevented operators from on-selling services (a type of arbitrage). However, liberalization by only part of the world will give rise to a potentially serious new problem—monopoly opportunism by operators in non-liberalized countries. The paper analyses this and other potential problems that can be expected to arise in the future.     

Convergence and new regulatory frameworks: A comparative study of regulatory approaches to Internet telephony

As an archetype of convergence, Internet telephony has been questioning the continuing appropriateness of the current telecommunications policy and regulation. This article examines how policy makers and regulators in the US, the EU, Japan and Singapore have responded to the challenges brought about by Internet telephony. Their common approach seems to apply the existing regulatory framework to this new service. The authors argue that those responses will not be aligned with the dynamically changing communications environment and explain two key shifts taking place in the communications industry that should be taken into account to form more appropriate regulatory frameworks.     

Can open internet access be imposed upon European CATV networks?

Broadband over cable television networks has become a growing force on the retail market in the EU. Thus, a debate has always been raised whether cable television networks should also be subject to open internet access obligations as PSTN and fibre. This article aims to share its view from a legal perspective. In order to do so, it conducts a survey of the current regulatory measures on broadband over cable television networks within the 27 EU Member States, and then carries out an in-depth legal analysis on Member States that attempted to regulate broadband over cable television networks. The conclusion is that broadband over cable television networks is currently deregulated, and will probably remain so in the future.     

Can information and communication technologies be pro-poor?

There is over 20 years of accumulated cross-country evidence on the link between telecommunications provision and economic growth. Looking at micro-studies from a range of countries including Bangladesh, Botswana and Zimbabwe, there is also some evidence that provision of telephony has a dramatic effect on the income and quality of life of the rural poor. This paper examines cross-country evidence to discover if teledensity (the number of telephones per capita) has a pro-poor growth impact—fostering increased average incomes while reducing inequality. It also examines the impact of telecommunications rollout on quality of life variables including infant mortality and literacy. It finds that, historically, telecommunications rollout has had a positive and significant impact on increasing inequality and little impact on quality of life variables. A reason for this is tested and preliminarily confirmed that rollout has (historically) only benefited the wealthy. The paper will then turn to emerging evidence on the role of the Internet in poverty relief and statistics on the access gap in provision between rich and poor, suggesting that this new ICT will also be a force for income divergence. Using the results of the cross-country analysis on telecommunications, the paper will conclude with a discussion of potential policy responses (such as sector reform and universal access programs) to turn telecommunications from a source of growth that also increases inequality to a source of growth that diminishes it.     

Triple play: How do we secure future benefits?

Recent technological developments make it possible to provide all telecommunications services (TV, telephony and internet) via the TV cable and fixed telephony network. Moreover, a new infrastructure based on optical fibre (to the home) is emerging in some places, which may in the future replace both existing networks. Making use of the available economic literature, the paper analyzes some of the consequences of the emergence of one electronic communications market. It focuses on two policy issues: the consequences of convergence of technologies and competition between networks for regulation in the short and medium runs, and the role of public investment in the rollout of optical fibre. It concludes that the present state of regulation may have some undesirable effects in the face of convergence and that public investment in a new general purpose infrastructure may have important advantages.     

Falling through the cracks: International accounting rate reform at the ITU and WTO

Heightened attention to international accounting rates at the ITU and the WTO has led some observers to conclude that carriers soon will impose cost-based termination charges. This article concludes that while accounting rates have declined on some routes, many incumbent carriers can and will delay or thwart progress. The article examines the FCC's unilateral regulatory initiative as evidence of a growing schism between governments keen on immediate progress and those that fear a ‘free fall’ in accounting rates and a quick end to settlement surpluses. The article also considers technological innovations like call-back and Internet telephony with an eye toward assesssing whether and how widespread accounting rate reductions will occur.     

International telephony revenue settlement reform

The method preferred by the majority of carriers for revenue settlement in international telephony is the Accounting Revenue Division Procedure (ARDP). It was developed for a monopoly environment, and it is becoming less suitable in an increasingly competitive global environment. This paper presents a model to relate the ARDP to revenue settlement in a free economy. We conclude that, in general, cost-oriented accounting rates cannot exist, that symmetrical settlement rates are likely to benefit carriers of developed countries, and that policies intended to adapt the ARDP to a competitive environment, cannot succeed unless it is recognized that accounting rate reductions must go hand in hand with the modification of the 50/50 revenue sharing principle of the ARDP.     

Bill-and-keep and the economics of interconnection in next-generation networks

As telecommunications networks are being transformed into all-IP, next-generation networks (NGNs), interconnection is attracting renewed regulatory debate. Next-generation features suggest that interconnection regimes developed for the internet or for traditional telephony networks are unlikely to be suitable in most NGN contexts. Efficient NGN interconnection will take advantage of NGNs’ technical possibilities (e.g., session control), facilitate their operational requirements (e.g., quality-of-service differentiation) and accommodate their service versatility. We discuss the application of alternative interconnection charging models (with a particular focus on bill-and-keep) by applying the main lessons from the interconnection literature in a framework designed for the practical needs of regulators. We show that in NGNs – as well as in other networks – there is no single interconnection charging model that maximizes economic efficiency in all circumstances. Finally, we discuss the implications for regulatory policy towards NGN interconnection.     

Fast Internet: An analysis about capacities,price structures and government intervention

While about 20% of all private households in the US had access to the Internet in 1997, the Internet penetration in Western Europe was significantly lower with little more than 5%. A key factor to explain the different penetration levels in the US and Western Europe is the pricing policy. In the US the pricing is heavily influenced by regulation. The flat rate pricing for local service stimulated rapid growth of the Internet. However, the regulatory regime that helped the Internet to succeed is now threatened by the same success. A comparison of the Internet in the US and the videotex systems deployed in France and Germany in the 1980s reveals an astonishing number of similarities. But there remains one significant difference, the pricing policy. Today, the telephony access network is perceived as a bottleneck by Internet users. Users demand more speed. Given the expected growth of the Internet and the demand for speed, the US telecommunications industry invests heavily in the local loop and sets up another four national long-distance networks. These investors do believe that demand for capacity will make a quantum leap.     

Regime complexity and state competition over Global Internet Governance

This study focuses on regime complexity and state competition over global Internet governance (GIG). By conceptualizing and mapping international regime complexity, the actors in international issues concerning GIG are identified and studied and the dynamic interactions between states related to GIG are explored. In particular, the 2012 amendments to the International Telecommunication Regulations are used in our analysis of the factors that have contributed to the creation of disputes and cooperation among states in the GIG regime. The empirical study shows that the influence of powerful states, such as the US and China, can affect other states’ decisions on GIG. Furthermore, the findings reveal that democratic states with fewer regulations on business are more likely to support the Internet Corporation for Assigned Names and Numbers over the International Telecommunication Union.     

Development of telecommunication and broadcasting infrastructure indices at the global level

The importance of information and communication technology (ICT) in economic development has been increasing rapidly along with the Internet and mobile telecommunication networks. ICT development is becoming a main growth factor of many countries. As they realize the importance of the ICT industry, developing nations work to catch up with established economies. Therefore, many nations are formulating an ICT-enhanced policy. This paper introduces a number of telecommunication and broadcasting sub-indices, which include the fixed telephone network, the Internet, and mobile networks, which are aggregated into a composite Telecommunication Index (TI). The indices are computed using principal component analysis and human development type index methods. The country rankings, by different ICT-related indices, help identify the strengths and weaknesses of infrastructure development such that each country can foster economic growth. The performance of TI is compared with several other indices, such as the digital access, human development, and ArCo technology indices. The type of indices affects the country ratings. Results suggest that the parametric index approach may be preferred over those methods in which the subjective weighted summation of normalized variables used (non-parametric indices).     

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.     

Australian Residential Telecommunications Consumption and Substitution Patterns

Better telecommunications pricing decisions are able to be made when more complete information concerning relationships among services is available. This study analyses residential fixed-line and mobile telephony, and Internet access and usage demands in an encompassing framework. The discrete-continuous framework allows for service interaction within and between service portfolios. Model estimation is based on the examination of data collected from a country-wide survey of Australian households. In particular, observed service portfolios (household consumption patterns at prevailing access prices and estimated average service usage prices), income and demographic characteristic data are collected. These data also allow the modelling to potentially identify market segments based on income and other household characteristics.JEL Classifications: D12, L11, L69     

Mobile phones,the Internet and the institutional environment

This paper empirically investigates the determinants of the Internet and cellular phone penetration levels in a cross-country setting. It offers a framework to explain differences in the use of information and communication technologies in terms of differences in the institutional environment and the resulting investment climate. Using three measures of the quality of the investment climate, Internet access is shown to depend strongly on the country's institutional setting because fixed-line Internet investment is characterized by a high risk of state expropriation, given its considerable asset specificity. Mobile phone networks, on the other hand, are built on less site-specific, re-deployable modules, which make this technology less dependent on institutional characteristics. It is speculated that the existence of telecommunications technology that is less sensitive to the parameters of the institutional environment and, in particular, to poor investment protection provides an opportunity for better understanding of the constraints and prospects for economic development.