Evolution to IP
Background
The evolution towards Next Generation Networks (NGNs) or IP-based fixed and mobile networks provides for many exciting opportunities, such as the launch of new innovative services, and enhanced Quality of Service (QoS) capabilities. It also provides an opportunity for improvements in economic efficiency and customer welfare, with supply more closely matched to customer demand and the application of society's limited resources to their most beneficial use.
Capturing these potential gains is immensely valuable. But this can only be achieved if the wholesale arrangements that underlie NGN retail services are aligned with economic efficiency considerations. Efficient IP interconnection is therefore fundamentally important in enabling NGNs to rise and prosper. It represents a critical leverage point for future gains - and importantly - for the making of investment decisions that will make those gains possible.
Study
Regulatory authorities are increasingly demonstrating an interest in the subject of IP Interconnection, as part of their overall review of the impact of the evolution to NGNs.
Given the importance of this subject, the GSM Association have commissioned economic consultancy firm CRA International and law firm Gilbert+Tobin to carry out an extensive study on IP Interconnection. It addresses:
- Why large efficiency and welfare gains beckon: how IP interconnection works today, and why it can work much more efficiently in future.
- How IP interconnection can help these gains be captured: why welfare and efficiency depends on the underlying interconnection arrangements, and how to assess what the right interconnection model might be.
- What the policy implications are and how best to ensure that IP interconnect will support efficient outcomes.
Findings are presented in a summary Whitepaper, as well as a detailed Report.
Recommendations
The study concludes that there is no "one-size-fits-all" IP interconnect charging model that delivers superior efficiency in all situations. Because NGNs will carry high traffic volumes, bringing together a diverse range of services, it would jeopardise efficiency and innovation to limit the kinds of wholesale arrangements that will underlie retail pricing. These risks are greater in an NGN environment than for traditional networks, due to the greater variety of services and greater variety of interconnecting operators. Going forward, operators will need more freedom to negotiate interconnection charges that appropriately reflect their situation, rather than less.
The study therefore makes the following five key recommendations:
- Proceed cautiously: Regulators should be very cautious in mandating IP interconnection charging models for the unfolding NGN IP environment.
- Don't mandate a single charging model: Even if a particular charging model develops considerable commercial currency, it does not follow that this model would be an appropriate "one-size-fits-all" model for regulators to mandate.
- Don't assume bottlenecks will be replicated: A regulator should not assume that currently perceived bottlenecks would be replicated in an NGN environment.
- Use existing regulatory frameworks: In any event, existing regulatory frameworks, based on objective tests of market power, are likely to be adequate to resolve problems should they arise.
- Employ consumer welfare analysis: In circumstances where regulators identify market failure, or are requested to resolve disputes, their intervention should be based on sound analysis and applied only as broadly as necessary to solve the problem.
More information
For more information about IP Interconnection, please visit the microsite
Contact
If you have any questions or comments on the Whitepaper and Report, or if you wish to discuss the activities by the GSM Association on the subject of IP Interconnection in further detail, please contact Jeanine Vos.
Download the white paper here:
summary whitepaper
detailed report |
