NGNs: what regulatory challenges lie ahead?

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May 22, 2007

… regulatory policies and processes must be reviewed and adapted. Failure to act may lead to new network access bottlenecks in incumbent-controlled NGNs and potentially the end of competition in the emerging new services market.

Emerging NGN networks and services represent a fundamental change from the conventional technologies and architectures of the PSTN. Services such as NGN voice telephony reside at a higher network layer, meaning that new services and applications can be defined without considering the underlying transport and network capabilities. As a result, new services can be implemented in the customer equipment (for example a telephone handset or personal computer) using local or remote network intelligence. Competing vendors can sell services directly to the end user, with the operator generating revenue from the underlying wholesale services. Not surprisingly regulators are dispensing with the old rule-books and facing up to a host of new issues.


The question of interconnect is possibly one of the more important issues that regulators will need to monitor or address. Most importantly, different operators will migrate to their NGNs at different rates: one operator may be operating an NGN while another is still running a legacy TDM (time division multiplex) network. Issues likely to be raised are:

  • will the new technology cause compatibility issues between networks? Any interconnect format that is not of a relatively common standard may encumber the operators with undue costs
  • the locations of points of interconnect (POIs) are likely to move after a migration to NGN. Will there be fewer POIs or more? Will repositioned POIs cause assets be stranded?
  • with operators migrating to NGN technologies at different rates, interconnect is likely to change from being between two TDM networks to being between an NGN and a TDM network, to eventually being between two NGNs. What additional costs will be incurred by the intermediate step, and which operator carries the cost of that additional step?
  • at what layer should interconnect access be provided, for both the interconnect of billing functions and network intelligence?

Critical infrastructure and security

In many jurisdictions, public network infrastructure is a key component or supplement to the telecommunications used by critical service organisations, including military and police. It is important that migration to NGN does not affect the ability of these services to access and control network capacity and connectivity. In addition, national security often requires the capability to legally intercept communications of all kinds. The huge range of potential modes of communication and encryption capabilities of systems using an NGN make future legal intercept a far greater challenge.

Market power and migration of customer demand

The development of the NGN infrastructure and new NGN-based services may:

  • lead to the removal of some current network access bottlenecks (such as some forms of backhaul)
  • result in the decline in demand for currently regulated services as they are replaced by new alternatives (such as conventional partial private circuits).

It is important that regulators are aware of changes in markets and market power that are likely to affect consumer behaviour and the need for certain legacy regulation.

Services for people with disabilities

Development of the NGN provides both potential difficulties as well as new opportunities for people with disabilities, such as the hearing impaired. Many current telecommunications facilities designed for the disabled have been based on the functionality and features of the legacy PSTN (such as a clear 64kbit/s channel to transport voice), and will no longer operate on an NGN unless supported with specialised gateway equipment. This is likely to be a transition issue affecting reducing numbers of users as legacy devices are replaced with new NGN terminals.

Jurisdiction and extraterritoriality issues

With the growing capability of third party providers to provide services over the NGN, some or many services may be supplied by foreign companies, who are not subject to local laws. Any solutions to this, such as requiring foreign companies to operate through local subsidiaries, may affect the costs and the time taken to roll out the services.

Internet governance issues

Designed to be a “best effort” network, the Internet is traditionally a free-for-all, where end users make use of bandwidth and services if and when they are available. In an NGN environment, the operator potentially has the ability to discriminate charging for carriage of types or sources of Internet traffic, and even to block or degrade traffic if it desires.

The net neutrality movement believes that there needs to be national undertakings from carriers and international agreements to protect the Internet from commercialisation. The expected development of the Internet to a broadband free-for-all, supporting video and voice services is clearly not compatible with a operator’s need to charge and discriminate prices in their various domestic and international markets.

Quality of service

Operators have discovered that one of the most difficult aspects of implementing an NGN is the development of the capability to control quality of service (QoS) over the IP access and backbone links (IP was not originally designed to support QoS). This capability and the related capability to be able to bill for services based on user-selected QoS must be in place before an NGN is commercially launched. Well defined QoS protects the value of premium business services from being eroded by Internet grade services, which would otherwise steal spare capacity and give the impression of being as good as the high cost service. Such precise control of QoS on a service-by-service basis may lead to potential abuse of market power, where:

  • wholesale services exhibit poorer performance characteristics than services delivered by the incumbent’s retail arm
  • Internet-style free services (such as Skype) are inhibited or disabled to force usage of commercial services.

Migrating an existing regulatory framework to NGN

A key issue with any network migration is the time taken to effect the change and support for legacy services during and after migration. Regulators must be aware of the costs involved with supporting legacy services in an NGN environment, especially when this involves retaining or integrating legacy operations and service management into the NGN systems and processes. In general, where legacy services must be retained using legacy infrastructure, the expected operational cost savings from implementing NGN cannot be realised.

NGNs: the end of the world as regulators know it?

So, as NGN technologies and services begin to replace conventional telecommunications infrastructure, regulatory policies and processes must be reviewed and adapted. Failure to act may lead to new network access bottlenecks in incumbent-controlled NGNs and potentially the end of competition in the emerging new services market.